Government Support During Covid

2020 has been a year most of us will never forget - the world has come to a standstill and the majority of businesses, and their employees have found their income affected. 

The government has set out a number of schemes and grants to support income, but there are lots of rules and regulations associated with applying - the APARI team have put together a breakdown of the different schemes and how they affect different members of the public, and businesses.

The Job Retention Scheme (Furlough) 

The job retention scheme (also referred to as furlough) was brought in by the British government during the COVID 19 crisis to support those who were not able to work because of the lockdown, or the restriction put into place by the government.

The scheme promised to pay employers 80% of their employees salary, as long as they stayed home and did not work.

The amount was paid gross to employers, inclusive of Employers National Insurance & Pension Contributions, but was taxable when redistributed to employees. The employer was by law required to pay out the full amount of the furlough claim to the relevant employees.

As the furlough payment is paid to employees in the same way that they would receive their salary, tax, national insurance & pension contributions will be deducted and shown on the employees payslip - therefore the employee should not have to show furlough payments on a tax return.

From August 2020 employees were able to go back to work on “flexi-furlough” with employers being able to claim furlough for any employee who had previously been furloughed, for the days that they were not able to work - i.e on a part time basis.  If the employee was not a part of the furlough scheme before August, they could not be a part of the flexi-furlough scheme.

Also from August employers were required to pay the employees and employers national insurance and pension contributions as a contribution towards the furlough payments.  Employers MUST pay for the time that the employee is in work.

From September 2020 employers were required to make a 10% contribution towards the furlough scheme

From October 2020 employers were required to make a 20% contribution towards furlough.

Although the furlough was originally due to end on the 31st October 2020, the announcement of a second lockdown on the 5th November 2020, meant that the furlough scheme was extended.

The extension of the furlough scheme would be for the same amount as the initial rollout - 80% of the employees salary, up to a cap of £2500 p/m, paid gross, with no employers contribution.

For employers who have claimed furlough payments, when entering into your chosen record keeping method it can be posted as income into net wages. 

Furlough income is not currently applicable for MTD.

The government had promised that for every employee furloughed, that you continue to employ the 31st Jan 2021, you will be able to claim a £1000 cash bonus, however following the extension of the furlough scheme, this was withdrawn.

For Sole Traders, and the Self Employed

If you are self employed or a member of a partnership and your business has been affected by COVID-19 then you may have been eligible to apply for a grant through the “Self Employment Income Support Scheme” (SEISS) however this was dependent on a strict set of criteria;

• You must not be trading through a limited company or a trust

• You must have traded in the 18/19 tax year and have submitted your tax return on or before 23 April 2020 for that year

• You must have traded in the 19/20 tax year

• You intend to trade in the 20/21 tax year

• Your trading profits for the 18/19 tax year must be no more than £50,000 and at least equal to your non-trading income

• If you are not eligible for the grant based on your 18/19 SATR then the government will take into consideration returns from previous years.

The grants were originally brought in up until the 13th July 2020, but they were then extended to October 2020.

Then following the announcement of a second lockdown, SEISS was once again extended, in the form of two additional grants, each available for three month periods covering November 2020 to January 2021 and February 2021 to April 2021

The grant does not need to be repaid, but it is subject to PAYE & NI contributions.

Bounce Back Loan Scheme

The scheme helps small and medium sized business to borrow between £2000 and up to 25% of their turnover.

The maximum loan amount is £50k

This is a 100% government guaranteed loan - with no fees or interest to pay for the first 23 months - after 12 months the interest is 2.5% p/a.

To be eligible for the bounce back loan you must be;

• Based in the UK

• A business established prior to 1st March 2020.

• A business which has been adversely affected by coronavirus.

Businesses in any sector can apply, unless they are insurers (not including brokers) banks, or state funded (i.e primary schools).

If you have already received funding of up to £50k you can transfer this to a bounce back loan up until 4 November 2020.

Although there are a number of schemes set out to help business and employees, there have been a few gaps identified.

If you are a director of a limited company, then it is likely that you declare dividends rather than a salary - although this is a legal and often advised way of taking an income out of a company, it does mean that furlough would not be eligible. Many people have raised this concern with the government - after all even if the staff are on furlough, if there is no actual company to come back to, then the long term affect on the economy could be devastating.

If you are not eligible for either furlough or SEISS then you may be able to claim universal credit. However this is likely to not be even close to a livable wage.

A group of business and advisors have recently developed the Directors Income Support Scheme (DISS), an easy to follow and implement set of parameters, created to help support company directors who have fallen through the COVID-19 support gap - the scheme has been set in front of the treasury and the government for consideration, with the hope that an official support package will be rolled out.

With a spending review happening today (25th November) we hope that we will have an update to this soon.