Over the past few weeks, the UK Government has announced a number of unprecedented measures to protect British businesses and employees as governments and health organisations around the world struggle to contain the outbreak of COVID-19.
These previously announced measures did not provide any support to the more than 5 million self-employed people in the UK who contribute around £300 billion to the UK economy annually. After coming under much pressure, the UK Government has today announced the Self-Employed Income Support Scheme to provide income protection to the self-employed.
Under the scheme announced this evening by the Chancellor of the Exchequer, Rishi Sunak, self-employed workers who are unable to work as a result of interruptions caused by COVID-19 will receive a grant from the UK Government of up to 80% of their average monthly profits over the last three years, up to a maximum of £2,500 per month.
The scheme will be available to self-employed workers who made trading profits of up to £50,000 in the 2018/19 financial year, derive a majority of their income through self-employment, and are already self-employed as shown in their tax return filed for the 2018/19 financial year. The UK's taxing authority HMRC will contact eligible individuals directly.
The scheme is expected to run for at least three months following the Chancellor's announcement, with payments of grants expected to be made by HMRC at the beginning of June.
The scheme is expected to benefit up to 95% of majority self-employed individuals across the UK.
These measures are supplemental to a number of existing initiatives set out in the UK Government's unprecedented stimulus package unveiled by the Chancellor on 17 March 2020, and proposed emergency legislation, which include the following:
- Job Retention Scheme:
All businesses in the UK are eligible to participate in the government's newly created "Job Retention Scheme" under which employers shall be entitled to designate certain of their employees as "furloughed employees" and submit information about such employees and their earnings to HMRC. HMRC will then reimburse 80% of furloughed employees' wages up to a cap of £2,500 per month. Employers will have the option to top-up the government's scheme with the remaining 20% of their employees' salaries.
The scheme is expected to run for three months from 1 March 2020, but may be extended if necessary. A system for processing reimbursements is currently being developed by HMRC with first payments expected to be made before the end of April.
For more information about the Job Retention Scheme please see PH COVID-19 Client Alert Series: Unprecedented Government Help for U.K. Employers.
- Statutory Sick Pay (SSP) Relief:
The UK Government is planning to introduce legislation which will allow all small and medium businesses in the UK which employed fewer than 250 employees as at 28 February 2020 (SMEs) to reclaim up to two weeks statutory sick pay (SSP) per eligible employee who has been absent from work as a result of COVID-19.
In order to reclaim under this scheme, businesses should maintain a record of staff absences and all payments of SSP to their employees.
The UK Government has advised that a rebate scheme is currently being developed, details of which will be announced shortly.
For more information about Statutory Sick Pay relief please see PH COVID-19 Client Alert Series: Unprecedented Government Help for U.K. Employers.
- Coronavirus Business Interruption Loan Scheme:
Businesses based in the UK with annual turnover of less than £45 million are eligible to apply for a loan under the British Business Bank's "Coronavirus Business Interruption Loan Scheme" giving qualifying businesses access to loans, overdrafts, invoice finance and asset finance up to £5 million. The government will guarantee 80% of all loans granted under the scheme and will fund all bank fees and interest payments due within the first 12 months of the loan.
For more information about the Coronavirus Business Interruption Loan Scheme please see PH COVID-19 Client Alert Series: U.K. Government Funding for Companies.
- Covid Corporate Financing Facility:
From 23 March 2020, the Bank of England will acquire short term debt in the form of commercial paper from all qualifying non-financial companies to allow them to minimise any cash-flow disruptions caused by COVID-19. Eligible companies can either sell existing commercial paper or make a new issuance.
Any commercial paper acquired by the Bank of England under the Covid Corporate Financing Facility scheme shall: have a maturity of one week to twelve months; have a credit rating of A-3 / P-3 / F-3 / R-3 from at least one of the big credit rating agencies (Standard and Poor's, Moody's, Fitch and DBRS Morningstar) as at 1 March 2020; and be issued directly into Euroclear and/or Clearstream.
Qualifying companies shall include: UK incorporated companies with significant business in the UK (including those businesses with foreign parents); companies with significant numbers of employees in the UK; businesses headquartered in the UK; and businesses which either derive material revenues from the UK, serve a large number of customers in the UK, or have a number of operating sites in the UK.
For more information about the Covid Corporate Financing Facility please see PH COVID-19 Client Alert Series: U.K. Government Funding for Companies.
- Retail and Hospitality Grant Scheme:
Under the UK Government's "Retail and Hospitality Grant Scheme", the UK Government will provide additional funding to local authorities to make grants to eligible businesses in the retail, hospitality or leisure sectors (e.g. shops, restaurants, cafes, bars, cinemas, concert venues and hotels).
Businesses in England with a rateable value of less than £15,000 will receive a one-off grant of £10,000, and businesses with a rateable value of between £15,000 and £51,000 will receive a one-off grant of £25,000.
No action is required and local authorities will contact relevant businesses which are eligible for the grant.
- Grant Funding for Small Businesses:
The UK Government will provide additional funding to local authorities to make a one-off £10,000 grant to small businesses in England which pay little or no business rates under the government's existing small business rate relief (SBBR) scheme.
- Deferred VAT Payments:
From 20 March 2020 to 30 June 2020 all VAT payments will be deferred and all businesses in the UK will be given until the end of the 2020 to 2021 tax year to pay any VAT liabilities accumulated during the deferral period.
This VAT relief will apply to businesses in the UK automatically and no applications will be required.
For more information about deferred VAT payments please see: PH COVID-19 Client Alert Series: U.K. Tax Implications.
- Business Rates Relief:
The UK Government has introduced a business rates holiday for the 2020 to 2021 tax year for all businesses based in the UK which operate in the retail, hospitality or leisure sectors ((e.g. shops, restaurants, cafes, bars, cinemas, concert venues and hotels.
No action will be required on behalf of the relevant businesses to benefit from this tax relief.
For more information about business rates relief please see: PH COVID-19 Client Alert Series: U.K. Tax Implications.
- HMRC Time to Pay Scheme:
HMRC has established a "Time to Pay" service under which it will provide support and bespoke arrangements to businesses which are unable to pay outstanding tax liabilities as a result of the COVID-19 outbreak.
For more information about the HMRC Time to Pay scheme please see: PH COVID-19 Client Alert Series: U.K. Tax Implications.
- Insolvency Laws:
In light of the exceptional disruption to ordinary course business caused by the outbreak of COVID-19, the UK Government is actively working to enact emergency legislation to impose a temporary moratorium on winding-up petitions against companies, and to relax the risk to directors for wrongful trading if they continue business during this period.