The Government have moved quickly to announce a plethora of support for workers affected by the current COVID- 19 crisis and a lot of information has been released in a relatively short space of time. Understandably people are keen to know the detail of what might be available to them and it is this detail that has taken a little longer to come through and is still being finalised. What we do know right now is that most of the measures announced to assist Limited company contractors are designed to improve cash flow by the deferral of tax payments rather than support through grants and subsides. Whilst organisations like Orange Genie and FCSA continue to lobby government at the unfairness of the help on of offer, we have to assume that you need to start making plans on what we know, in case nothing changes.

Guide to Coronavirus Support for Ltd Companies and the Self-employed. Click here to download>>

Can you carry on working?

If you are lucky enough to be undertaking an assignment that is continuing and can be carried out from home, then you should continue to work as usual. You would be well advised to continue taking a salary from your company, in case in the future you make a claim for the Coronavirus Job Retention Scheme. Whether you continue to take dividends to the same extent as you have in the past is personal choice, but it may be a good idea to build a war chest in case your current contract is terminated early. None of us know how long this is going on for.

Cash is King

During this difficult time, cash flow will be critical for all contractors in or out of contract. Now is the time to make sure you are completely in control of your finances both business and personal.

• Ensure that you have invoiced for all outstanding work and talk to your customers to ensure you will be paid on time
• Review regular expenditure. Is there any that can be cancelled in the short term to assist with cash flow?
• If you don’t have one, create a simple budget. Consider the minimum income you need to cover your bills. Remember there may be some cost savings during this time, for instance travel and eating out costs are likely to fall considerably. Do you have income and or savings that will cover this?
• Do you have Key Man or Income Protection policy? Now would be a good time to check the terms and see if the policy will pay an income to your business, or you.
• If you are a homeowner, approach your mortgage lender for a three-month holiday.
• If you are a tenant, talk to your landlord. The Government have promised that if you are unable to pay your rent due to Covid-19, you will not face the threat of eviction for at least 3 months. Landlords and tenants are expected to work together to establish an affordable repayment plan, taking into account your individual circumstances.
• If you pay your Council Tax over 10 months, many local authorities are prepared to move your April and May 2020 payments to February and March 2021.
• If you have outstanding personal finance or credit card bills talk to your lender. The Financial Conduct Authority (FCA), have called on lenders to use flexibility in their rules to support customers, depending on individual circumstances.

Coronavirus Job Retention Scheme (CJRS)

If you find yourself with no work available you may qualify for the CJRS. The scheme provides a grant to pay employees’ wages, up to 80% of salaries (with a cap of £2,500 per month). It is important to understand that this scheme is only available for your payroll or PAYE earnings, your dividend income is not covered by this or any other scheme. The scheme can be backdated to 1 March 2020.

In order to qualify, you must have had a PAYE scheme set up on or before 19 March 2020, and you must have reported a salary payment through RTI on or before that date.

In order to prevent abuse of the system there are explicit rules covering how to calculate qualifying salaries. If you pay yourself a consistent salary each month, the figure used will be the actual salary as reported in the last pay period prior to 19 March 2020. If your pay varies then the average monthly earnings for the 2019/20 tax year will apply. If your salary has been consistent over the last 12 months, topping up your salary in March 2020 will not increase your entitlement. Remember: HMRC have access to RTI information, meaning they have an electronic copy of you and your employees’ historic monthly payslips.

To claim the grant, you must formally designate yourself as having been “furloughed”. Once you are furloughed you cannot undertake any revenue generating work, but you can carry out the duties of a director such as ensuring books and records are up to date and accounts are filed.

Once you’ve designated yourself as furloughed you will be able to submit information about your earnings to HMRC via a new online portal. Initially the grant will cover 80% of your gross pay and associated Employers NIC and pension costs. This will apply for all periods of furlough up to and including the 31 July 2020. From August 2020, employers will be expected to fund the Employers NIC and pension costs. The Governments contribution will reduce from 80% to 70% in September and 60% in October.

Statutory Sick Pay

If you find yourself unwell or self- isolating because advised to do so, you are able to claim statutory sick pay (SSP) through your Limited company if you have run a payroll. The Government will refund the cost to small businesses. The refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19. The amount payable is £94.25 per week.

The usual requirements to provide proof of illness are relaxed in these circumstances and SSP will begin from day 1 of the sickness period and not the usual day 4.

Tax Payments

In or out of contract, fit or unwell the Government have introduced tax deferral options to aid contractors cash flow. Tax monies currently saved within your company can be temporarily used to cover your daily overheads. You should be aware that these are deferrals of tax liabilities rather than grants. The tax will need to be paid in the future..

VAT payment deferral

Any VAT payments due between now and the end of June can be deferred until the end of the tax year (April 2021). This is a useful, quick means to improve cash flow but the measure is designed for businesses facing distress. If you are able to pay your VAT without putting yourself into distress, we recommend that you do.

The deferral is available now, and no application is required. You can simply hold back any VAT payments due over the coming three months. If you pay your VAT by direct debit you should cancel this immediately. You should still file your VAT return as normal to ensure you do not receive any penalties and also assist in helping you plan for future payments when this tax must be paid.

Self-Assessment payment on account deferral

July 2020’s payment on account will be deferred until January 2021. You probably only made your last self-assessment payment in January so it may be of limited use, but depending on how much more you have saved, any monies you’ve set aside for July 2020 could be useful today.

This scheme is available automatically, and you don’t need to apply. You can simply skip your July 2020 payment on account and no penalties or interest will be applied.

We would recommend that you complete your Self-Assessment for April 2020 as soon as possible. If your income is lower than expected your accountant may be able to help reduce or even remove any need for a payment on account. If you do have a tax liability due on January 2021, you may need time to plan how you will cover that cost.

HMRC Time to Pay

If you’re facing financial distress and you have an outstanding tax liability, HMRC’s Time To Pay (TTP) service may be beneficial. TTP is a long-established means for HMRC to support businesses who are unable to meet tax payment deadlines. With TTP, HMRC will discuss your business’s finances and – should they approve – they will allow you to pay any outstanding tax liabilities as monthly instalments. These payment plans are agreed on a case-by-case basis.

HMRC are receiving a high volume of calls. You should only contact them if you have missed, or are about to miss a tax payment. If your next tax payment is some time away, you should contact them closer to the time to help manage demand for the service. When calling HMRC make sure you have all the relevant information to hand, wait times are high and you don’t want to have to call back.

You will need:

• Payment reference numbers (Company UTR, self-assessment UTR, VAT number, PAYE accounts office reference number)
• Details of the outstanding tax liabilities
• How much you think you can realistically pay now, and each month
• Expect to be asked about your businesses and your personal income and expenditure, and assets such as bank accounts and savings. It is likely that HMRC will want to establish if your business is still viable.

You can call HMRC’s dedicated helpline: 0800 0159 559. The helpline is open Monday to Friday 8am to 8pm and Saturday 8am to 4pm.

Facts are emerging on a daily basis and things are changing rapidly. Whist we are not able to provide all the answers right now we have a team here watching carefully and we will bring you further detail as we have it. If you are a client of Orange Genie Accountancy we will keep you up to date with all significant changes as they happen.

If you have any questions or if we can help in any way please call our expert team on 01296 468 483 or email info@orangegenie.com.