Government support to small businesses: SRA summary

The UK government has made several announcements of support in the Covid-19 crisis aimed at minimising medium and longer term economic disruption – see:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

The situation is evolving and it although various schemes have been announced in the last week or so, not all measures are yet in place and it may take a little time before claims can be made. These include a range of government or government-backed support with some of the provisions targeted at the self-employed or small businesses (those trading as public or private limited companies or limited partnerships); others more generally. How this this will relate to independents working in and around social research seems likely to depend on their circumstances, and in particular:

• If they are trading as self-employed individuals or as a registered limited company or limited (liability) partnership
• If they have employees – part- or full-time – whose job security is affected by the situation
• If turnover is significantly affected by the direct or knock on effects of Covid-19 and restrictions in the UK, or more widely. 

The measures so far announced by government (at 27 March) include:

Provisions targeted at the self-employed

Self-employment Income Support: This is the measure mostly likely to apply to self-employed independents and was announced on Thursday 26 March. It is available to those self-employed with average trading profits in 2016-17, 2017-18, and 2018-19 (or just 2018-19 if they only started trading in that year) of less than £50,000. It only applies if individuals have traded in the 2019-2020 tax year and are currently trading (or would be except for COVID-19). The focus is on ‘profits’ as this represents taxable income; not total revenue. For individuals who have combine self-employed with some salaried income, this profit level must make up more than half of the individuals average taxable income in the same period. Other requirements are that to be able to claim individuals will have started their self-employment before 6 April 2019 and will:

• have submitted their Income Tax Self-Assessment tax return for the tax year 2018-19 (although late-filers have until 23 April 2020 to do submit their 2018-19 tax return)
• intend to continue to trade in the tax year 2020-21
• have lost trading/partnership trading profits due to COVID-19.
Where all this applies a self-employed independent is eligible for a non-repayable (taxable) grant of 80% of their trading profits from 2016 to 2019 up to a maximum of £2,500 per month for the next 3 months. Unlike other support schemes the impetus is not on individuals to claim; HMRC will contact eligible individuals and then invite them to apply online.

Income tax payment ‘holidays’: For all who pay tax on a self-assessment basis their income tax payments due on 31 July 2020 are now automatically deferred to January 2021.

Self-employed claiming universal credit (UC): One other provision targeted at the self-employed, is that the UC 'minimum income floor' for the self-employed will be temporarily suspended for: “ … everyone affected by the economic impacts of coronavirus”. This is not likely to affect many self-employed social researchers but for those it does it levels up Statutory Sick Pay provisions so that every affected self-employed person can now access Universal Credit at an equivalent rate to SSP for employees.

Deferred VAT payments: To help with immediate cash flow, VAT payments due to HMRC between 20 March and the end of June will be deferred until the end of the FY20-21 tax year. This applies both to self-employed and others trading at limited companies, etc (although only if registered for VAT).

Other business support provisions

These will apply to those trading as public or private limited companies or limited partnerships and include:

Coronavirus Business Interruption Loan Scheme: This is the centre-piece of government emergency provisions for business and is due to start by the end of March. The government has set up this flagship scheme with over 40 lenders (including all the clearing banks) to support businesses affected by Covid-19 by providing a guarantee of 80% of each loan. Loans will be repayable for terms of up to six years and are said to be on ‘attractive terms’ (details unclear as yet). The initial allocation was upped by the Chancellor to £330Bn of lending and with 12 months interest free under a Business Interruption Payment from government (6 months was previously announced; it has been increased). 

Coronavirus Job Retention Scheme (CJRS) is to be set up in the next few weeks to help pay employee’s wages.  This will not be relevant to many independents but may be for those who are PAYE-paid Directors of their own micro-companies or who pay one or more colleagues as employees (ie with contracts of employment not on a ‘fee’s for service contract). CJRS will apply to all employers and will be administered through HMRC by a grant to cover up to 80% of wages of those on payroll but temporarily not working during the coronavirus outbreak. Employees will continue to be paid directly with ‘recovery’ through this grant system and based on actual salary at 28 February 2020.  See the HMRC application pages and as the calcluation is complex be sure to use their Calculator.

The grant will be limited to up to a total of £2,500 per worker each month.  CJRS can be backdated to 1st March and will run up to and including June; it can apply to anyone who was on payroll at 29 February 2020, even if they have subsequently been made redundant (as long as they are reinstated on the payroll). There is more detail on the gov.uk website which includes provisions for how fixed income and variable income employees are treated. 

Statutory Sick Pay (SSP): Where a small business has a contracted employee absent from work due to coronavirus they will be entitled to recover up to 2 weeks’ Statutory Sick Pay (“SSP”) per employee. The eligibility criteria for the scheme are:

• Small employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of Covid-19
• Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note
• Eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to those staying at home comes into force.

The government advice says it will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible.

Other business support provisions: Government has also announced some other provisions – although these are not likely to be relevant to independent social researchers. These include cash grants for small businesses in the retail, hospitality and leisure sectors) and cash grants for any businesses qualifying for the Small Business Rate Relief.

And for those based in Wales please check

https://businesswales.gov.wales/coronavirus-advice 

Helpful resources

Business Continuity Management Toolkit HM Government 

Federation of Small Businesses

Caution: It is important members check details and assess how it might apply to them. If there are any inaccuracies please do let us know. 
We have put this in good faith and from a range of sources but there have been various announcements and others may follow modifying terms.  Please check up to date information via HMRC or filler details (including eligibility) on the Gov. website at: 
https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses