Amidst a global pandemic, many businesses in the UK are temporarily halting their operations as per government compliance. The situation might seem grim, but the businesses still can offer the usual services and make the most out of relief packages from the government.
As the COVID-19 wreaks havoc to small and big businesses, the government has laid out thoughtful measures to minimize the economic damage. Here are some of the job retention and tax deferral schemes businesses should be aware of:
What’s in the Package?
Mainly, the announced packages from the government will facilitate businesses with their cash flow impact in the middle of COVID-19. Primarily, the initiatives include the Deferral Scheme (VAT) and JRS or Job Retention Scheme.
COVID19: Job Retention Scheme
The Retention Scheme pertaining to COVID19 is accessible to all UK business owners who can gain support from the government. The idea is to help businesses continue paying a portion of their workers’ salaries throughout this nightmarish crisis. Ultimately, the objective is to safeguard the jobs of workers who would typically have faced termination.
As per the new HMRC scheme, businesses can get 80% reimbursement on the wages of a furloughed worker. Additionally, there’s also £2,500 each month. Remember, a furloughed is an individual who won’t be able to work but will receive the salary without being laid off. In fact, employers have the free hand to increase salaries if they want to.
Self-Employed: Income Tax Deferral
As per the new initiative, income tax deferral payments that were due on 31 Jul. 2020 will now defer to 31 Jan. 2021 under self-assessment. It is vital to understand that the self-employed scheme is automatic and requires no applications whatsoever. In addition, there will be no interest or penalty for late payment during the entire deferral period.
All VAT payments now have deferral for three months (i.e., 20 Mar. 2020 – 30 Jun. 2020). Consequently, taxpayers will get a new timeframe at the end of 2020/21. The government will continue to pay reclaims and VAT refunds as usual throughout this crisis.
All businesses operating in the UK are practically eligible when it comes to the COVID19 Job Retention Scheme. Some of the guidelines you should be aware of include:
Submit complete information related to your employees that are “furloughed” and as well as their earnings online. Businesses are required to notify the affected employees about the new change.
When it comes to changing the employees’ status, you should still follow the contract rules and laws. Nevertheless, business owners should keep in mind that reimbursement of salaries is the primary purpose of the COVID19 Job Retention Scheme. In fact, businesses that need the support of short-term cash flow can qualify for the COVID19 Business Interruption Loan.
The COVID19 pandemic is going to be a bumpy ride for businesses in the UK. The economy is looking at the possibility of a recession. However, you should follow the guidelines set forth by the HMRC and contact your tax authority in these dire times.
The government and financial regulators have advised British banks to continue to lend to businesses throughout the Coronavirus emergency to make sure companies don’t fail. And that’s why the temporary package targets measures that businesses and people use to avoid disruption triggered by COVID-19.
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Disclaimer: We don’t take any responsibility for actions taken based on above information. Please speak to our consultants if you need more information. This guide was written specifically for Smart Accounting clients. Some of the information contained in this guide might not be applicable if you do not have a business managed by Smart Accounting. By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details are correct at time of writing.