Coronavirus Support Grants – Important Update

Many businesses will have already applied, or be in the process of applying for one or more of the following Government grants:

• The £10,000 grant for small businesses who qualify for the Small Business Bonus Scheme

• The £25,000 grant for businesses in the retail, hospitality or tourism sectors who have a rateable between value of £18,000 to £51,000

• The Coronavirus Job Retention Scheme grant to cover up to 80% of employee salaries of any furloughed employees. This is in place until 31 May 2020 but could be extended.

For the avoidance of doubt, any grants received are taxable and must be included as income in the business accounts in the normal way.  Furthermore, this Government support is classed as State Aid.

It is therefore important for employers to consider any grants already received or applied for before making a claim for Employment Allowance from 6 April 2020.  Employment Allowance is the amount that can be deducted from your Employer’s National Insurance liability and is currently capped at £4,000 per annum.

The State Aid limits are high enough to ensure that most businesses are unlikely to breach these thresholds by claiming COVID-19 grants and the Employment Allowance.  However, it is important to note that Research & Development (R&D) Tax Credits are also classed as State Aid and therefore must also be taken in account when considering the above thresholds.

Payrolls for the month of April 2020

The new tax year started on 6 April 2020 and payrolls have started to be processed for month 1 now, with any PAYE and NIC liabilities payable on 19 May 2020. It is therefore a good time to consider whether to claim the Employment Allowance or wait until further guidance is issued by the Government.

We expect that most businesses will elect to defer their PAYE and NIC liabilities. (Note that if you wish to do this you will need to contact HMRC to agree a time to pay arrangement). In this instance we would suggest that the Employer Allowance is not claimed until the Government provide further clarity.  A claim for the Employment Allowance can be made later in the tax year if necessary.

The State Aid rules do not apply to charities including clubs with community amateur status or to employers supplying personal care.

Initial Guidance on Claiming Job Retention Scheme Grant

The Government has issued new guidance for claiming the Coronavirus Job Retention Scheme grant.

The HMRC guidance now states that to be eligible to make a claim the employer must be enrolled for PAYE online.

We are aware that a number of businesses will not have a PAYE online account set up, particularly if they use an agent, such as ourselves, to run their payroll.  If you do not already have a PAYE online account set up and wish to claim the Job Retention Scheme grant, you should set one up using the following link:

https://www.gov.uk/paye-online/enrol

We suggest that you apply for this as soon as possible as it can take up to 10 days for the necessary activation code from HMRC to arrive by post.  It may take even longer in the current climate, with mail redirections in place for a number of businesses and also because HMRC could be inundated with applications.  A delay could therefore be costly in terms of your cashflow.

We understand that any claim made under this scheme will not be connected to any historical unpaid PAYE & NIC liabilities.  Therefore, if you wish to settle any arrears, a separate payment will be required.

We will of course issue further guidance when it becomes available.

Photo by Aljoscha Laschgari on Unsplash

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.