On this page we are collating questions that some of our clients are asking us to provide help for their businesses following the coronavirus pandemic.
We will be updating this page on a regular basis and we will post NEW (date) next to each post to help you keep track of these changes. Please find our responses to FAQs we have been asked to date:
I have a question from one of our Company Car drivers –who is in lockdown (since March 23rd) under the vulnerable category. He hasn’t used his company vehicle (for business or personal) nor is he likely to in the near future. Is he/we still liable for his BIK tax?
A company car benefit can be reduced where the car is unavailable for periods of 30 consecutive days. However, this only applies in situations where the car cannot be used due to being broken down or under repair, or where the employee is unable to gain access to the car due to not having the keys and not having the authority to direct the person who has them to hand them over.
It is about whether the vehicle is available to be used, regardless of whether it is actually used. Usually if other factors mean that the car will not be used this is irrelevant.
However specifically due to the current situation regarding the pandemic HMRC have released a relaxation to the rules as detailed below:
Company car ‘availability’
Your employee may have been furloughed or is working from home, because of coronavirus, and provided with a company car which they still have. You should treat the car as being made ‘available for private use’ during this period even if your employee is:
- instructed to not use the car
- asked to take and keep a photographic image of the mileage both before and after a period of furlough
- unable to physically to return the car or the car cannot be collected from the employee
Where restrictions on movement applies because of coronavirus and prevents the car from being handed back or collected, HMRC will accept that a company car is unavailable in the following circumstances:
- where the contract has terminated – from the date that the car keys (including tabs or fobs) are returned to the employer or to a third party as instructed by the employer
- where the contract has not been terminated – after 30 consecutive days from the date that the car keys (including tabs or fobs) are returned to the employer or to a third party as instructed by the employer
The return of keys means that a car cannot be driven in any circumstances even if it is still in the possession of your employee.
We also recognise that following relaxation of coronavirus restrictions, it may take some time to collect cars where contracts have been terminated. As long as your employee continues to have no access to the keys until the car is collected from them, HMRC will still regard the car as being unavailable.
This currently enables employees to ‘virtually’ hand back the car by posting keys etc. to the employer so that they are unable to use it.
Accordingly, if the company were to request the employee to post his keys etc. back to the business address, taking proof of the fact they have been sent to substantiate this, and he did not have access to them for at least 30 consecutive days then he would be able to reduce his benefit in kind and therefore the tax and National Insurance due from himself and the Class 1A National Insurance due from the company, even though the car will remain physically parked at his residence.
What is the Coronavirus Job Retention Scheme?
For updated details on the CJRS please visit our dedicated Coronavirus Job Retention Scheme page.
Furloughed workers and annual leave
How will I manage staff annual leave entitlements when they all return to work and have accrued the full holiday and bank holiday entitlements?
Coronavirus has had a significant impact on everyone and none more so than small businesses. Many of these businesses are currently closed and the staff have been furloughed. It seems ever more likely that this will be the case for a good number of weeks and possibly longer for some businesses. Many clients are now growing a concern for how they manage the accruing holiday rights of staff, so that when they return to work, they have a full team of staff to manage the business.
While the government have made announcements about the ability to carry unused holiday over a longer period, many small businesses are worried about being able to honour this in the future, or staff maybe leaving or still resulting redundancy and a sizeable holiday allowance needing to be paid.
There is legislation that does allow employers to require staff to take periods of holiday when a formal request by the employer is made. This would be subject to employment law and advice should be sought by the business owner as to how they could go about taking these measures.
2 April 2020
Is my business too young to receive a Coronavirus Business Interruption Loan (CBIL)?
We recently reached out to Andrew Craddock, Director, Commercial Finance Solutions UK Limited in order to answer one of our client’s concerns about accessing the Coronavirus Business Interruption Loan. They were concerned that they would not be eligible for the loan as their business was too new.
Andrew was able to clarify the following for our client,
“The scheme is based on maximum 25% of 2019 turnover or twice the annual wage bill, whichever is the largest (minimum £25,001). So, if the company hasn’t traded longer than a year it might be prevented from this on ‘age’ of the business”. Andrew Craddock can be contacted at email@example.com if you would like to speak to Commercial Finance Solutions UK Limited about how they can help your business
New: 23 March
Please see out updated details on our Coronavirus Hub page where we are posting further information and links as these may also help answer your questions. If in doubt then please do not hesitate to contact your local MFW office.
Coronavirus Job Retention Scheme
Is the Coronavirus Job Retention Scheme paid by government directly to that person ?
No it’s a grant claimed by the employer. There will be a cash flow impact as you pay staff and reclaim the grant.
Does employer make up the difference or does employee have to ” make do ” ?
Your employer could choose to fund the differences between this payment and your salary, but does not have to.
Does the employer have to pay back any of that money ?
No, it is our understanding that this is a grant.
What staff are eligible full & part time ?
All staff can be considered for furloughing.
Also regarding our business matters with VAT/NI, if we have no staff to process these what protection have we over penalties /fines ?
None currently, your local MFW office may be able to help.
New: 20 March
Do you have any details on the cash grants referred to in the Spring Budget?
There are cash grants, but, as of yet we do not know when these will be available or how they are claimed. There will be business rates relief but having just received our rates bills, clearly this has not yet filtered through to local government.
Mainly, there will be loans, which are not yet available. But, of course, loans have to be repaid.
Some of these grants will only be only available for certain business sectors.
We understand that details on these grants will be announced soon and we will update this area as soon as more information is made available.
The reality is that we are all going to see a serious effect on our businesses. Staff is often the biggest cost and we still have to comply with employment law. Some businesses are trying to negotiate “deals” with staff to protect the business so that there are jobs to go back to when we have reached “the other side” of this pandemic.
It makes sense for businesses to prepare a cash flow forecast for, say, the next six months. This will highlight the magnitude and timing of any cash flow problem and solutions can then be considered. At McCabe Ford Williams, we are able to assist with the production of such cash flow forecasts.
Can we rely on the banks to be safe in such a crisis?
Given the level of support that is being announced for business, it is highly unlikely that the government would allow any bank to fail in these tough times. Whilst unlikely, there are ways to mitigate your exposure to these risks. To this end we remind clients to be aware of the Financial Services Compensation Scheme, which means up to £85,000 in any bank is covered under this scheme, in the event of a bank failing. As before, if you wish to mitigate your exposure, then you need to spread any amounts in excess of £85,000 between different banks to ensure you are covered. Please do pay attention to banking groups, as many banks are under the same overall ownership and this only counts as one level of cover.
We pay our dividends monthly, (which we rely on) would it be a good idea all things considered, for us to go back to PAYE at the moment?
As the company has limited reserves, from April onwards it would be a good idea to go back to PAYE, as your salaries will still be able to be processed. As you rely upon dividends, if the company did not have a level of distributable reserves sufficient to cover the dividends, then any amounts you withdrew via that method would be considered a loan, repayable to the company.
Usually there would be an immediate cash flow impact for tax/NI of switching back to PAYE but with the current situation HMRC have set up a dedicated helpline https://www.gov.uk/government/news/tax-helpline-to-support-businesses-affected-by-coronavirus-covid-19 to talk to people about time to pay arrangements, which would help with that if required.
(Please note that if your company does have sufficient reserves to pay dividends then this does remain a tax efficient method of profit extraction. The above is subject to any future announcements by the Government in relation to covering workers’ pay.)
What if I am not going to be able to get my accounts filed on time?
Companies House have advised that they will allow an extension to filing deadlines of up to 3 months for those companies that have been affected by the Coronavirus. It has been made clear that this is not a blanket extension and each request will be dealt with on a case by case basis.
The appeal for extension must be made before the filing deadline has passed and if approved, an extension will be automatically granted. Law states that they cannot allow more than a 3 month extension.
Late filed accounts will still be handed late filing penalties, so it is vitally important that the request is made in advance of the deadline.
New: 20 March
What if I cannot afford to pay my tax bills?
Back in the Budget, the Chancellor announced that HMRC has set up a dedicated helpline to support anyone who needed to seek a time to pay arrangement, to delay the payment of their tax.
The line is set up to cover most taxes, but the main ones that most will experience problems to pay is income tax, PAYE, VAT and Corporation Tax.
It is advisable that as soon as you realise that you will have a problem in meeting any tax payment that you contact the dedicated line on 0800 0159 559. Do not wait for the payment deadline to have already passed.
When you contact HMRC, please make sure you have a relevant reference for the tax to hand, either UTR or NI Number for an individual and for business the relevant reference for your PAYE scheme, VAT number or UTR number for Corporation Tax. You will need to know the amount of the bill you are looking to defer and at that point, it is important to try and be as realistic as you can be with them and agree to a payment plan that you think you or your business can afford to.
New: 20 March
What will my bank want to support any loan or overdraft extension decision?
All banks will have their own criteria to process decisions on the issuing of loans or overdraft extensions. We have already had discussions with clients who have spoken with their bank managers. The message coming out from banks is that they will be looking for forecasts and the most up to date accounts, in order to support any application.
As noted, all banks will have their own criteria, so this may not be the case for all banks, but should you be making a request for support from your bank and need any support with the application, then please speak to your local office contact.