COVID-19 Business Measures - job retention and tax deferrals
As the coronavirus (COVID-19) pandemic continues to cause major disruption to businesses, and the UK moves into lockdown, the government has responded with measures to mitigate damage to the economy.
This is a fast-moving area and UK Government is publishing details of further measures.
Below we set out a summary of the salary support and tax deferral schemes that were announced on 20 March 2020.
The Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme is available to all UK employers giving them access to support so they can continue paying part of their employees' salary during the coronavirus crisis. The aim of this scheme is to protect the jobs of employees who would otherwise have been laid off during this crisis.
Under the scheme HMRC will reimburse 80% of the wage costs of a worker who has been 'furloughed', up to a cap of £2,500 per month. A furloughed worker is someone who will not be working but kept on the payroll rather than being laid off. The Chancellor has stated that employers can top up salaries further if they choose to.
Eligibility and access
All UK businesses are eligible for the Coronavirus Job Retention Scheme. To apply they will need to:
designate affected employees as furloughed workers and notify the employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will confirm further details on what information is required in due course.
HMRC has said it is working urgently to set up a system for reimbursement as existing systems to facilitate payments to employers do not yet exist.
The Coronavirus Job Retention Scheme is specifically aimed at supporting jobs through reimbursing salaries. Businesses that require short term cashflow support may be eligible for a Coronavirus Business Interruption Loan.
The government is also deferring all VAT payments for three months from 20 March 2020 until 30 June 2020.
The scheme will be automatic, applying to all UK businesses with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020/21 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will continue to be paid by the government as normal during this time.
Income tax deferral for self-employed
In addition, income tax payments due on 31 July 2020 under self assessment will be deferred to 31 January 2021.
The scheme only applies to individuals who are self-employed. It is automatic, with no applications required, and no penalties or interest for late payment will be charged during the deferral period.