So here we are a year later and what a year it has been. We were introduced to the “Furlough” scheme back in March 2020 and whilst we hoped this would have been a temporary support scheme for Employers, we find ourselves subject to another extension of the scheme until the end of September 2021. This was announced prior to the Spring Budget and I am sure for many employers, this will be a valuable lifeline as they slowly recover from the impact of Covid.
What are the key points for the extended furlough scheme?
- For claim periods on or after 1 May 2021, any employee that has been reported on an RTI submission between 20 Mar 2020 and 2 Mar 2021 can now be furloughed or flexi-furloughed, regardless if they have been previously or not.
- For claims relating to April, May and June – there remains no change at 80% being able to be reclaimed subject to a cap of £2,500 per month. Employers just picking up the cost for Ers NIC and Ers Pens.
- From July 2021, Employers have to make a contribution of 10% of the unworked hours, rising to 20% in August and September.
New Taskforce created to tackle Furlough Fraud
Here is my first warning to all Employers that have taken part in the scheme – HMRC have created a new taskforce to review furlough claims and enquiries have already commenced. Can you confidently say that you have all the necessary paperwork in place that was required? That the calculations have been made correctly and are adequately supported? Most importantly, that none of your employees would say that they were made to work whilst being furloughed?
Support for the Self Employed
The Self Employed also continue to receive support up to the end of September 2021 from the provision of two new tranches of SEISS grant. The 4th grant which covers the period February 2021 to April 2021 and can be claimed from late April until the end of May. This will be based on 80% of 3 months average trading profits, paid in a single instalment and capped at £7,500 (providing taxable income is less than £50k). HMRC will be using the 2019/20 tax return, which must have been submitted to work out if individuals are eligible and the amount that can be claimed. The fifth, and hopefully, final grant covering May 2021 to September 2021 will be determined by how much a business turnover has reduced in the year to 5 April 2021 from the previous year. For those with a reduction of 30% or more, they will receive 80% of 3 months average trading profits capped at £7,500. For those with a reduction less than this – it will be 30% capped at £2,850. I suspect the trading income of less than £50k will remain and further details of the 5th grant will be released later.
The SEISS grant is taxable
So now for my second warning to the Self Employed – the SEISS grant is taxable. This means that at least 25-30% of the grant received may relate to tax and national insurance calculated as if the grant was business profits. Have you been putting this tax aside as it will likely fall due 31 January 2022? Have you incorrectly reduced your payments on accounts for 2021 by excluding the grant income from your estimated income?
Rebuilding business after lockdown
And finally, some continued loan support for businesses as they come out of Covid and start to rebuild their businesses. It is very likely that many of the bounce back loans previously provided have been used by many businesses to survive and therefore they will require further support to restart. Due to it being the year of the acronym, we now have the announcement of RLS (Recovery Loan Scheme) however the title can be misleading as the scheme is not aimed at providing loans but various finance options. In essence, the scheme will ensure that businesses of any size can continue to access loan and other finance up to £10m per business.
It launches in April 2021 and the majority of major high street banks have already indicated that they have signed up to the arrangement. Whilst full details will be released in the coming weeks, the finance can be used for any legitimate business purpose including growth and investment which will help with the new super deduction capital allowances. What is not clear is the application process and I hope that any borrowing will be subject to the right level of scrutiny and is not as easy to obtain as the BBLS – whose 3 minute application process, in my opinion, has very likely resulted in many business owners overstretching themselves.
Prepare for the CBILS and BBLS loan repayments
Here comes my final warning. Any businesses that took out CBILS or BBLS please remember they are exactly this – a loan – and will need to be repaid. Have you looked at your cashflow to ensure that you are ready for the payments that are very likely to be starting shortly?
Lambert Chapman remain committed to supporting businesses to help them recover so if you need any assistance don’t hesitate to contact us.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.