Over the last number of weeks, the impact of COVID-19 on UK businesses has been very evident. From mid-March, all UK businesses will have felt some type of disruption, some more so than others but it’s fair to say that everyone has had to very quickly adapt in at least some way to the changing circumstances.

The UK government has held daily press conferences updating the public on the impact of COVID-19. They have also used this forum to announce a number of measures (both tax and non-tax) which have been designed to support businesses and individuals in coming through the crisis.

Outlined in this article is a high level overview of some of the key tax measures that have been introduced by the UK government including:

• Tax Deferrals
• The Coronavirus Job Retention Scheme
• Statutory Sick Pay
• Business Rates Relief

The measures have been evolving over the last number of weeks and guidance continues to be issued in respect of the practical application of the measures, however, the information contained in this article is correct at the date of writing (5 May 2020).

Tax Deferrals

A number of tax deferral measures were introduced by the UK government, some of which are automatic whereas others require businesses to interact with HMRC in advance of payments becoming due.

It’s important to note that, notwithstanding the deferral of any tax payments, any filing obligations must continue to be met and therefore it’s important to maintain a focus on timely filing of tax returns.

Where a deferral is automatic or has been agreed with HMRC, businesses will need to ensure that direct debits are cancelled in order to prevent the funds automatically being remitted to HMRC.

VAT

It was announced that there would be an automatic deferral of VAT meaning that payments due from 20 March to 30 June 2020 would be deferred until the end of the financial year. If your business is in a VAT repayment position, you should continue to file returns as normal in order to obtain your repayments.

The automatic VAT deferral does not include Import VAT and/or Duty Deferment. For these taxes if your business requires a deferral, it is necessary to liaise with HMRC in advance.

HMRC has also confirmed that the deadlines for the soft landing periods on Digital Links for VAT under the Making Tax Digital regime have all been moved to 1 April 2021. This means that both the 1 April 2020 and 1 October 2020 deadlines are now merged and have been moved until 1 April 2021.

Income tax

The UK government has also confirmed that self-assessment payments on account which would have been due on 31 July 2020 are now automatically deferred until 31 January 2021.

Other taxes – including Corporation Tax / PAYE / NIC / Import VAT and Duty Deferment

For those taxes for which payments have not been automatically deferred, HMRC has set up a dedicated COVID-19 helpline to enable businesses to speak to them in respect of agreeing deferrals of tax (https://www.gov.uk/government/organisations/hm-revenue-customs/contact/coronavirus-covid-19-helpline). Through discussion with HMRC, arrangements will be tailored to specific circumstances on a case-by-case basis.

Notwithstanding the dedicated helpline, HMRC has confirmed that if your business has a Customer Compliance Manager (“CCM”), your first port of call should be that contact. CCMs will have knowledge of your business and have been instructed to work with taxpayers in this regard.

Prior to COVID-19, HMRC would, in certain limited circumstances, agree “Time to Pay” arrangements with businesses which were having difficulty meeting tax payments, effectively enabling businesses to defer tax payments. Given the nature of the COVID-19 impact in the UK, HMRC is likely to be more helpful now than they might otherwise have been, but is not offering formal guidance. The usual strict information requirements under this regime will be relaxed somewhat in light of COVID-19, but there will be a review process of historic tax payments and compliance in order for HMRC to agree to a deferral.

Careful consideration of the business’ forecasted cash expected inflows and outflows will be required in advance of discussing with HMRC and it is important that any requests to HMRC do not come across as alarmist so that they do not act quickly to protect their position ahead of insolvency.

Deferring tax payments is designed to assist with challenges around liquidity but, in advance of agreeing such a deferral, HMRC will also want to see that other options have been considered and will request evidence to support this. To the extent an agreement is reached with HMRC, you should retain evidence of the information provided to and discussed with HMRC along with a note of any calls.

Coronavirus Job Retention Scheme (“CJRS”)

The CJRS is a temporary measure currently available to all UK employers between 1 March and 30 June 2020. The scheme has already been extended by one month and may be extended by the Government again, if necessary*. The CJRS scheme is designed to support employers whose operations have been severely affected by COVID-19, to retain their employees and protect the UK economy. The scheme opened for claims on Monday 20 April.

Since the introduction of the scheme, there have been a significant number of important updates to HMRC’s guidance and employers must familiarise themselves with the requirements and check their eligibility before making an application for the grant.

Under the CJRS, employers are able to apply to HMRC for a grant to cover part of the normal wage costs of employees that have been placed into “furlough”, i.e. employees that have been given a leave of absence for reasons associated with the COVID-19 pandemic).

The grant that employers can claim is the lower of:

• 80% of the usual monthly wage costs of the furloughed workers, or
• £2,500

plus the associated Employer NIC and minimum pension contributions (up to the level of the automatic enrolment employer pension contributions).

This means the maximum grant may be higher than the £2,500 headline. Employers can top up the remaining 20% of earnings if they choose, but there is no obligation to do so.

There are a number of important things to bear in mind in advance of making the decision to furlough employees and making a claim under the CJRS. Some of these include:

• A furloughed employee cannot work for the employer (or another linked or associated company) throughout the period of furlough although they can work for another employer, do voluntary work or complete training.
• The minimum furlough period is 3 weeks and this must be a continuous period of absence.
• Employers must discuss the terms of furlough with their staff and make any changes to their employment contract by agreement. In some cases employers may need to seek legal advice on the process as the CJRS scheme does not infer an automatic right for an employer to furlough workers or reduce their pay without agreement. HMRC’s position is that employers must confirm in writing to their employees that they have been furloughed saying “if this is done in a way that is consistent with employment law, that consent is valid for CJRS. There needs to be a written record, but the employee does not have to provide a written response”. Employers must ensure that their communications with employees meet this test as a minimum.
• Employees can also take holidays during the furlough period but the employer will have to top up their pay above the amount covered by the grant, to ensure that holidays are paid at their full contractual rate.

There were calls for similar measures to be put in place for self-employed individuals and therefore a Self-Employed Income Support Scheme was also created. This will pay affected persons a taxable grant worth 80% of their average monthly profits over the last three years, up to £2,500 a month. The scheme is due to open for claim on 13 May with the first payments expected to be made by the end of May. Guidance on the scheme is available at https://www.gov.uk/government/news/self-employed-invited-to-get-ready-to-make-their-claims-for-coronavirus-covid-19-support.

Statutory Sick Pay (“SSP”)

Eligible employees will qualify for SSP from day one instead of day four. Businesses can reclaim SSP paid to employees for up to two weeks sickness absence due to COVID-19. Eligible employers are those with a workforce of less than 250 employees on 28 February 2020 (subject to connected companies and charities rule).

Business rates holidays

Mainland UK

In England, Scotland and Wales, it was announced that all companies in the retail, hospitality and leisure sectors would benefit from a 12 month business rates holiday, irrespective of rateable value.

It was also announced that a £25,000 cash grants would be available for retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.

Small Business Rates Relief was extended and expanded to grant of up to £10,000 (was previously announced as £3,000) available for small businesses to help meet ongoing costs, regardless of business sector or property usage (excluding council tax payers, i.e. residential property).

Northern Ireland

In Northern Ireland, the approach has been different and has not targeted specific sectors. In Northern Ireland, all businesses (except public sector and utilities) will benefit from a 3 month business rates holiday.

Cash Grants

It was also announced that a £25,000 cash grant would be available for retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.

A small business grant of £10,000 is available for small businesses to help meet ongoing costs, regardless of business sector or property usage.

Maximising tax relief

This article has outlined a number of UK government tax measures which have been introduced to assist businesses in weathering the COVID-19 storm from a cash flow perspective.

Considering other ways in which businesses can maximise cash in these unprecedented times is also important and therefore, businesses should ensure that they are revisiting or accelerating Research & Development Tax Relief claims and ensuring they have maximised their entitlement to Capital Allowances.

Conclusion

The range of measures introduced by the UK government is unprecedented and, as noted above, has been changing with pace over the last number of weeks. Everyone is still learning how these measures will operate in practice so it is critical for businesses and individuals to be able to keep up to date with those changes and what it means for them.

One way in which you can keep up to date is through the PwC COVID-19 website (https://www.pwc.co.uk/issues/crisis-and-resilience/covid-19.html). This contains up to date information on the measures discussed in this article. The site also provides a range of information on the non-tax measures (for example funding support available to businesses) and broader guidance on areas organisations should be considering in these uncertain times.

There are also a number of reliefs and measures which are being put forward by global governments in response to the pandemic. Businesses should review these for each of the territories they operate in to ensure they maximise support and reliefs. PwC globally has created a website for COVID-19 (https://www.pwc.com/gx/en/issues/crisis-solutions/covid-19.html). This contains a significant amount of information which may be of interest to multinational organisations.

Sarah Fitzgerald is a Senior Manager with PwC and a Chartered Accountant and Chartered Tax Adviser.

sarah.a.fitzgerald@pwc.com

+44 7889 642668

* On 12 May 2020, HMRC announced it was extending the scheme through to October 2020. More details are expected on the terms of the extension in May 2020 but no changes are anticipated in the scheme until the end of July after which employers will be able to bring employees back on a part time basis with some sharing of the associated 80% of employment costs currently being picked up by the Government.