UPDATE: Coronavirus Support Measures

As we experience the (hopeful) continuation of relaxation of COVID 19 measures, we thought it would be helpful to provide an update on the current status of some of the key financial measures and points to consider as many begin to reach their conclusion.

Early Corporation Tax Repayment

HMRC have revised their guidance on claiming corporation tax relief on the carry-back of losses in response to the anticipated impact of Coronavirus on current year results.

Under normal circumstances where a company pays tax in one year and suffers a loss in the next the relief against prior year profits only becomes available on completion and submission of the return for the later loss-making period.

HMRC have updated their stance on this such that anticipated losses in the current year are able to included and carried back against profits of the prior year before the completion of the loss-making year. Any adjustment to reflect the actual position on completion of the later period can then be made once that year is completed and the results confirmed.

For example if a company made a taxable profit of £100k for the year ended 31 December 2019 there would be a corporation tax liability due on that profit of £19k by 1 October 2020.

If that company anticipated a £100k taxable loss for the year to 31 December 2020 it would ordinarily only be able to carry back that loss to eradicate the prior year’s tax charge post-1 January 2021 (and likely much later once the accounts and corporation tax return had been prepared and completed).

Under the revised guidance the company could claim that £100k anticipated current year loss early to counteract the profit and accelerate the tax relief and avoid making the £19k payment.  

Job Retention Scheme

At present (in the month of August) the percentage contributed by the government towards furloughed employees (flexible or otherwise) remains at 80%, but with the employer liable for the Employers’ NI and Pension contributions thereon.

From 1 September and 1 October the percentages contributed by the government reduce to 70% and 60% respectively, with the employer making up the difference to reach the 80% the employee remains entitled to throughout (in addition to the Employers’ NI and Pension).

The scheme remains on course to cease on 31 October with flexible furlough remaining available until then.

Job Retention Bonus

From February a one-off bonus payment of £1,000 per furloughed employee will become available to employers who retain those employees in continuous employment and earning on average £520 per month for the period from 1 November to 31 January.

Self Employment Income Support Scheme (SEISS)

The application process for the second and final round of the SEISS scheme (paying 70% of average monthly self employed profits over the 2017, 18 and 19 tax years for three months) opened on 17 August.

The window for the first round of applications has now closed, and the period for second round claims ends on 19 October.

Bounce Back Loans

A measure that has proved extremely popular, Bounce Back Loans of up to £50k (or 25% of turnover up to £200k) are currently available until 4 November.

In summary the loans of up to 6 years are fully guaranteed by the government, interest and capital-free for the first year and the cash is generally delivered within 24 hours of application.

CBILS

The precursor to Bounce Back Loans, CBILS offers loans of up to £5m with 80% of the facility guaranteed by the government (with the remainder requiring personal guarantee). Like the Bounce Back Loans they can be up to 6 years, are interest and capital-free for the first year.

Applications for CBILS loans must be submitted by 30 September, however an extension has been granted for consideration and approval of cases submitted by that date to 30 November. 

VAT Deferral

The government offered an automatic deferral of any VAT payments falling due between 20 March and 30 June 2020.

These deferred liabilities must be paid to HMRC on or before 31 March 2021. HMRC have not yet produced guidance on the practicalities and process in terms of paying the deferred balances, but we will provide that information as soon as we have it.

Hospitality VAT Reduction  

The reduced rate of 5% applicable to supplies of food and non-alcoholic drinks by restaurants, pubs, bars, cafes and similar introduced from 15 July will continue until 12 January.

This also applies to the supply of accommodation by hotels and similar, and to admission to certain attractions.

Eat Out to Help Out

The Eat Out to Help Out scheme, which provides a government-funded 50% off food and soft drinks on Mondays to Wednesdays at qualifying establishments, has (as somewhat expected) also been extremely popular.

The scheme is only currently intended to run for the month of August, therefore remaining days are Monday 24 – Wednesday 26 August and Monday 31 August.

If you have any questions regarding this or anything else please get in touch, and for regular updates, announcements and news please check our website (www.dsaprospect.co.uk) and make sure you’re following our LinkedIn page: https://www.linkedin.com/company/dsa-prospect-ltd