Coronavirus – preparing for the recession and financial crisis

simon

Simon Misiewicz

19th March 2020

Updated Monday 24th March 2020

In this article, we will answer the following question from anyone that is affected by coronavirus

Weekdays at 8pm  – Live Q&A – Preparing for the Coronavirus financial impact

If you just missed my YouTube live session – Coronavirus Financial impact Wednesday 18th March: 

Join me live 8pm Thursday 19th March: 

 

Coronavirus update from the government:

Please do keep up to date with the government coronavirus updates

Fraud prevention of tax-payers taking advantage of government schemes

It is investible that people will try and make good of the government, HMRC and local authority grants. This is why the government has set up a department called  Fraud control in emergency management. The government, HMRC and local authorities are tasked to ensure the validity of claims that are being presented by tax-payers before payments are made. As a claimant, you need to be mindful that questions will be asked and you will be expected to complete an application form for each and every grant funding.

Business Support – Business Interruption loan scheme

See more details from The British Bank about Coronavirus Business Interruption Loan Scheme to see what financial support the government may p[rovide to your business.

Government support, loans, and grants, eligibility 

The government will provide small/medium businesses, charities and not for profits with financial support as a result of the coronavirus. This will provide 2 million businesses with up to £2 billion to cover the costs of large-scale sick leave. The government will provide the following:

– Loans up to £5m

– Interest-free for 12 months

The purpose of the loan is to pay for:

– 14 days Statutory sick pay

Eligibility of the coronavirus business interruption loan

– Fewer than 250 employees

– Be UK based, with a turnover of no more than £41 million per annum

– Operate within an eligible industrial sector

– Be able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years

– Have a sound borrowing proposal, but insufficient security to meet the lender’s requirements

The loan application will start from 23rd March 2020

Employees and how to cope with Coronavirus:

Please read up and keep up to date with the Government guidance to employers and employees in regard to Coronavirus: It is also worth keeping abreast of the ACAS employer/employee guidance:

Those who follow advice to stay at home and who cannot work as a result will be eligible for statutory sick pay (SSP), even if they are not themselves sick.

Employers should use their discretion and respect the medical need to self-isolate in making decisions about sick pay.

Anyone not eligible to receive sick pay, including those earning less than an average of £118 per week, some of those working in the gig economy, or self-employed people, is able to claim Universal Credit and or contributory Employment and Support Allowance.

For those on a low income and already claiming Universal Credit, it is designed to automatically adjust depending on people’s earnings or other income. However, if someone needs money urgently they can apply for an advance through the journal.

Employees are entitled to time off work to help someone who depends on them (a ‘dependant’) in an unexpected event or emergency. This would apply to situations related to coronavirus (COVID-19). For example:

– if they have children they need to look after or arrange childcare for because their school has closed

– to help their child or another dependant if they’re sick, or need to go into isolation or hospital

Employers and how to cope with Coronavirus

There’s no statutory right to pay for this time off, but some employers might offer pay depending on the contract or workplace policy.

Employers should support their workforce to take these steps. This might include:

– agreeing to more flexible ways of working whilst remote calling clients/customers where possible, for example using video or conference calling technology

– If an employee still does not want to go in, they may be able to arrange with their employer to take the time off as holiday or unpaid leave. The employer does not have to agree to this.

– If an employee refuses to attend work without a valid reason, it could result in disciplinary action.

Furlough employees rather than making them redundant

The government has initiated a new scheme to keep people employed in the UK due to Coronavirus. It has been called the job retention scheme

We have just seen the government announcement on the furlough process of employees. Employers are encouraged not to make people redundant but to keep them on the books. The furlough process means that employees will continue to be an employee but will be paid by the government as below

Payments made by the HMRC grand funding will be the lower of:

– £2,500 per month per employee

– 80% of their gross monthly wage (commissions and bonuses must be ignored for this calculation)

In addition to the above employees will also be able to claim via the grant, Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. The maximum claim that can be made on the pensions contributions is just 3% of the minimum mandatory level.

The following types of employees may benefit from this grant funding:

– full-time employees
– part-time employees
– employees on agency contracts
– employees on flexible or zero-hour contracts

The employee in which claims are made against must have been employed on or before 28th February 2020. To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to the usual income tax and other deductions.

Legal considerations to Coronavirus and the furlough process

Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

How to make a furlough claim

It is envisioned that the portal and the grant funding will be up and running by the end of April 2020. We suspect this means that payments will be made by HMRC in May 2020.

To claim, you will need:

– your ePAYE reference number
– the number of employees being furloughed
– the claim period (start and end date)
– amount claimed (per the minimum length of furloughing of 3 weeks)
– your bank account number and sort code
– your contact name
– your phone number

Self employed Income Support Scheme

The government announced an income support scheme package to help those that are forced to work. This scheme will allow self-employed persons to claim a grant worth (the lower of)

– 80% of their trading profits

– £2,500 per month

You can apply if you’re a self-employed individual or a member of a partnership and you:

– have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
– traded in the tax year 2019-20
– are trading when you apply, or would be except for COVID-19
– intend to continue to trade in the tax year 2020-21
– have lost trading/partnership trading profits due to COVID-19

How much money would a self-employed person receive under the income support scheme?

Self-employed persons will get a taxable grant which will be 80% of the average profits from the tax years (where applicable):

2016 to 2017
2017 to 2018
2018 to 2019

It will be up to a maximum of £2,500 per month for 3 months.

Criteria when claiming the self-employment income support scheme

The self-employed person must:

– Have less than £50,000 profit from their last self-assessment tax return

– 50% of their total income is driven by their self-employment income

If you claim tax credits you’ll need to include the grant in your claim as income.

The process to receive the self-employment income support scheme

Self employed persons cannot apply for this scheme yet. HMRC will contact those people that are eligible for the scheme.

Individuals do not need to contact HMRC. Doing so will only delay the urgent work being undertaken to introduce the scheme.

Residential property tenants – how to cope with Coronavirus

Speak with tenants. I have already had to let go, two tenants, because they knew they were going to struggle after being made redundant. As landlords, we may need to be sympathetic and let tenants go early.

NLA – Guaranteed rental income insurance:  to help you with the issue of tenant nonpayment of rent.

Help and guidance from the National Landlords Association on how to deal with Coronavirus and tenants

Check your property insurance for buy to lets to see what their policy is on tenants failing to pay because of Coronavirus

Speak with utility companies to out in place payment plans for gas, electricity etc especially if you own HMOs

Landlords and tenants will be expected to work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances.

Government support to tenants by putting in place a non-eviction of tenants for a three month period

Commercial property tenants – how to cope with Coronavirus

The government announced that commercial property tenants will not be forced out even if they are unable to pay their rent for a three month period.  This update is included in the emergency Coronavirus Bill currently going through Parliament. Commercial tenants will still be liable for the rent after this period, the government is also actively monitoring the impact on commercial landlords’ cash flow and continues to be in dialogue with them.

The change will come into force when the Coronavirus Bill receives Royal Assent. It will last until 30 June, with an option for the government to extend if needed.

Retail and hospitality Grant Scheme – Business rates

You may be entitled to a government grant to help you pay for business rates on your commercial property. This was outlined in the government support initiative due to Coronavirus. There is a criteria that you must meet as follows:

£10,000 government grant to pay for business rates

– Mst be in the retail, hospitality or leisure sector

– Must be based in England

– The business rateable value is less than £15,000

£25,000 government grant to pay for business rates

– Mst be in the retail, hospitality or leisure sector

– Must be based in England

– The business rateable value is more than £15,000 and less than £51,000

You will not be eligible for the retail and hospitality grant funding if you have a rateable value of over £51,000

How to apply for the retail and hospitality grant?

The grants are issued by your local authority. They will write to you directly to inform you of the eligibility and if you meet their criteria. It is at that point that you will apply for the retail and hospitality grant. You will need to be aware of whom your local authority you belong to. You can do this by searching the “find my local authority” tool.

Delay payment of income tax, VAT and corporation tax

Government guidance about tax liabilities and payment options due to coronavirus

If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline

– Self Assessments tax on 0300 200 3822

– Nominated partners in business partnerships can negotiate time to pay with HMRC on behalf of the partnership or individual partners.

– Other personal taxes on 0800 0159 559.

Delay of IR35 for one year. The onus remains the liability of the employee/contractor. The delay does not mean that HMRC will not enforce the tightening of tax legislation to determine if individuals are an employee or a supplier. If you are deemed to be an employee you will still be personally liable for the income tax and employee national insurance.

VAT deferment due to Coronavirus

HMRC is allowing taxpayers to defer the VAT payments that were due to be made between 26th March and 30th June 2020.

You do not need to inform HMRC if you wish to defer payment. You can opt in to the deferral simply by not making VAT payments due in this period. If you pay by Direct Debit you should cancel this with your bank.

You should do so in sufficient time so that HMRC does not attempt to automatically collect on receipt of their VAT return.

Any VAT deferred payments need to be paid by 31st March 2021.

Loans, credit cards, mortgages etc

The Bank of England will reduce the interest rates to 0.1%, which was announced on 19th March. This would be a good time to start thinking of fixing buy to let mortgages and home mortgages.

Payment Holidays: Both capital repayments and interest payments for:

– Credit cards: if you need to cut existing debt costs via 0% balance transfers do it ASAP.

– Loan providers. See what personal loans may be frozen or even extended in these troubling times.

– Home mortgages. Speak with your bank to see what holiday payments are open to you or at least to delay the capital repayment.

– Buy to let mortgages: speak with your broker/bank to see what payments holiday options are open to you. I have negotiated with NatWest a repayment of the capital element of my mortgages and a freeze on future periods for six months

See Martin Lewis’ website to see which banks are providing financial guidance to the Coronavirus

 

Direct debits/standing orders, review and cancel

– Gym memberships (cant go anyway)

– Hair & beauty treatments may be closed anyway

– Online educational support/marketing materials

– Postpone projects that are not business-critical

– Sky Sports aren’t refunding customers at the moment, even though most sport in the UK has been suspended. However late on Tuesday 17 March, it said it would now allow customers to ‘pause’ their subscription.

– BT Sport also won’t refund customers. It says it will “keep the situation under close review”.

– Fitness company ClassPass emailed members today telling them: “Starting now and until 1 June, we will be rolling over all unused credits at the end of your cycle to ensure you have the flexibility you need to take proper precautions. No credits will expire before 1 June; after 1 June we will return to our standard rollover policy where up to 10 credits can be rolled over into your next billing cycle.”

– PureGym is letting members freeze your membership for free for one month. This means that members do not have to cancel and won’t need to pay a joining fee when they restart their membership.

– Odeon, which has now closed all its UK cinemas “until further notice”, said those paying for an Odeon Limitless membership would have their payments stopped automatically until the cinemas re-open. Odeon says that it can take 48 hours for the payments to be paused – but if your next payment does go through, this will be refunded automatically.

 

Holidays and special events: Review, cancel and insurance

– Wedding venues, honeymoons

– Business events and trips

– Get refunds from airlines, trains and hotels that are now closed. Do this as soon as possible before these companies are inundated with requests.

 

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