Covid-19 Financial Supports Update
Subsequent to our Autumn Dental Newsletter issued on 26 October 2020 the Prime Minister announced a month long national lockdown from 5 November until 2 December 2020. As confirmed by the Chief Dental Officer for England, dental practices should remain open to treat patients, during the lockdown period. The Government provided additional financial support for individuals and businesses which we have detailed below.
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UPDATE ON GOVERNMENT FINANCIAL SUPPORTS
Coronavirus Job Retention Scheme
Workers across the United Kingdom will benefit from increased support with a five-month extension of the furlough scheme into Spring 2021, the Chancellor announced today, 5 November. The Coronavirus Job Retention Scheme (CJRS) will now run until the end of March, for claim periods running to January 2021 employees will receive 80% of their current salary for hours not worked.
The furlough scheme was initially extended until 2 December. But the government is now going further so that support can be put in place for long enough to help businesses recover and get back on their feet – as well as giving them the certainty they need in coming months. Evidence from the first lockdown showed that the economic effects are much longer lasting for businesses than the duration of restrictions.
Eligible employees will receive 80% of their usual salary for hours not worked, up to a maximum of £2,500 per month.
- Employer flexibility: Businesses will have flexibility to use the scheme for employees for any amount of time and shift pattern, including furloughing them full-time.
- Employer contribution: There will be NO employer contribution to wages for hours not worked. Employers will only be asked to cover National Insurance and Employer pension contributions for hours not worked. For an average claim, this accounts for just 5% of total employment costs or £70 per employee per month. HMRC will review the policy in January to decide whether economic circumstances are improving enough to ask employers to contribute more.
- Payment: The extended CJRS will operate as the previous Scheme did, with businesses being able to claim either shortly before, during or after running payroll. Claims can be made from 8am Wednesday 11 November. Claims made for November must be submitted to HMRC by no-later than 14 December 2020. Claims relating to each subsequent month should be submitted by day 14 of the following month, to ensure prompt claims following the end of the month which is the subject of the claim.
- Employee eligibility: Neither the employer nor the employee needs to have previously claimed or have been claimed for under CJRS to make a claim under the extended CJRS (if other eligibility criteria are met). An employer can claim for employees who were employed and on their PAYE payroll on 30 October 2020. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.
- Employees that are re-employed: Employees that were employed and on the payroll on 23 September 2020 (the day before the Job Support Scheme announcement) who were made redundant or stopped working afterwards can be re-employed and claimed for. The employer must have made an RTI submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees.
Full guidance will be published on Tuesday 10 November.
The Job Support Scheme is postponed.
Job Retention Bonus (JRB)
The JRB will not be paid in February and HMRC will redeploy a retention incentive at the appropriate time. The purpose of the JRB was to encourage employers to keep people in work until the end of January. However, as the CJRS is being extended to the end of March, the policy intent of the JRB falls away.
Government increases support for self-employed across the UK
HMRC recently announced an extension of the Self-Employment Income Support Scheme to support self-employed individuals who are experiencing reduced demand or cannot trade due to the effect of Coronavirus. They then doubled the support from 40% to 80% of trading profits for November, which increased the overall level of the grant to 55% of trading profits.
On 5 November, the Government announced that they are increasing the overall level of the grant to 80% of trading profits covering November to January for all parts of the UK. This provides equivalent support to the self-employed as provided to employees through the government contribution in the CJRS. It is calculated based on 80% of 3 months’ average trading profits, paid out in a single instalment and capped at £7,500.
This is £7.3 billion of support to the self-employed through November to January alone, with a further grant to follow covering February to April. This comes on top of £13.7 billion of support for self-employed people so far, one of the most comprehensive and generous support packages for the self-employed anywhere in the world.
HMRC will pay this more generous grant sooner than planned and in good time for Christmas – the window for claiming a grant will open on 30 November, two weeks earlier than previously announced.
The Government has already announced that there will be a fourth SEISS grant covering February to April. The Government will set out further details, including the level, of the fourth grant in due course.
The grants are taxable income and also subject to National Insurance contributions.
To be eligible for the further grants, taxpayers must meet the following: -
- Have submitted a 2018/19 Tax Return within the permitted time frame.
- Have traded in the tax year 2019/20.
- Intend to continue to trade in the tax year 2020/21.
- Have trading profits that do not exceed £50,000 in 2018/19 or an average of 2016/17, 2017/18 and 2018/19.
- Have the majority of income being derived by self-employment.
- Carry on a trade which has been affected by reduced demand due to Coronavirus since 1 November.
Previously, in order to be eligible for the first and second grant, the business had to be ‘adversely affected’ which included being unable to work because the taxpayer is shielding, self-isolating or is on sick leave or has care responsibilities because of Coronavirus. It also included scaling down, temporarily stopped trading or incurring additional costs because:-
- the supply chain has been interrupted
- the business has fewer or no customers
- staff are unable to work
- one or more of contracts have been cancelled, or
- protective equipment was purchased to comply with social distancing rules.
To be eligible for the Grant Extension self-employed individuals, including members of partnerships, must:
- have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants)
- declare that they intend to continue to trade and either:
- are currently actively trading but are impacted by reduced demand due to Coronavirus
- were previously trading but are temporarily unable to do so due to Coronavirus
Businesses required to close in England due to local or national restrictions will be eligible for the following:
- For properties with a rateable value of £15k or under, grants to be £1,334 per month, or £667 per two weeks;
- For properties with a rateable value of between £15k-£51k grants to be £2,000 per month, or £1,000 per two weeks;
- For properties with a rateable value of £51k or over grants to be £3,000 per month, or £1,500 per two weeks.
Business grant policy is fully devolved. Devolved Administrations will receive UK Government financial support which they could use to establish similar schemes.
Mortgage and consumer credit payment holiday extension
Mortgage payment holidays will no longer end 31 October. Borrowers who have been impacted by Coronavirus and have not yet had a mortgage payment holiday will be entitled to a six month holiday, and those that have already started a mortgage payment holiday will be able to top up to six months without this being recorded on their credit file.
Payment holidays will also continue to be available for consumer credit products such as personal loans and car finance. As with mortgages, borrowers impacted by coronavirus who have not yet taken a payment holiday on that product can ask for one of up to 6 months and those that currently have a payment holiday will be eligible to top up to six months without this being recorded on their credit file. Borrowers with high-cost short-term credit products such as payday loans will continue to be entitled to a maximum month payment holiday. The FCA published draft guidance on this on 4 November.
However, it must be appreciated that the payment holidays are a measure to assist those suffering financial hardship due to the Coronavirus pandemic. Providers expect that if you have not suffered financial hardship and have sufficient funds available, to make their payments on time.