Self-employed individuals (including partnerships) who have overclaimed the Self Employed Income Support Scheme (SEISS) must pay back the overpayment to HMRC. The rules for repaying HMRC state that you must tell HMRC if you were not eligible to have claimed the grant.
- for the first or second grant, your business was not adversely affected
- for the third or fourth grant, your business had not been impacted by reduced activity, capacity or demand or inability to trade in the relevant periods
- you did not intend to continue to trade
- you’ve incorporated your business since 5 April 2018
You must also tell HMRC if you:
- received more than we said you were entitled to
- amended your tax return on or after 3 March 2021 in a way which means you’re entitled to a lower grant than you received
If you have overclaimed you must tell HRMC within 90 days of receiving the grant or face additional penalties. If the amount in question is £100 or less then there is no requirement to notify HMRC or pay back any grant received.
All qualifying self-employed businesses can continue to claim SEISS grants until 30 September 2021, if they continue to be adversely affected by the coronavirus pandemic. A fourth grant covers the period from 1 February 2021 to 30 April 2021 and a fifth and final grant will cover the period from May onwards.
The fourth grant will provide support covering 80% of average trading profits, up to a maximum of £7,500 for those who meet the eligibility requirements. The fifth and final grant will see those whose turnover has fallen by 30% or more continuing to receive the full 80% grant whilst those whose turnover has fallen by less than 30% will receive a 30% grant.
As lockdown measures begin to be eased, a new package of support measures to help high streets and coastal areas across England has been announced by the Communities Secretary Robert Jenrick. The support will be delivered via a new £56 million Welcome Back Fund.
The new funding will help councils boost tourism, improve green spaces and provide more outdoor seating areas, markets and food stall pop-ups – giving people more safer options to reunite with friends and relatives.
The funding can also be used by councils to:
- Boost the look and feel of their high streets by investing in street planting, parks, green spaces and seating areas to make high streets as beautiful and welcoming as possible
- Run publicity campaigns and prepare to hold events like street markets and festivals to support local businesses
- Install signage and floor markings to encourage social distancing and safety
- Improve high streets and town centres by planting flowers or removing graffiti
The Communities Secretary also announced that the government would allow pubs and restaurants to erect marquees and provide more outdoor space throughout the summer rather than for the 28 days currently permitted.
The government also published its response to the Parking Code Framework which will curb unfair tickets and tackle cowboy parking firms through a new, simplified appeals process. This is expected to herald the return of more motorists to high streets and town centres.
A new Business Rates relief fund will provide a £1.5 billion tranche of support to businesses outside the retail, hospitality, and leisure sectors affected by COVID-19.
Retail, hospitality and leisure businesses have not been paying rates during the pandemic as part of a 15 month-long relief which runs to the end of June this year. Many businesses that were banned from applying these reliefs have been appealing for discounts on their rates bills, arguing the pandemic represented a ‘material change of circumstance’ (MCC).
The government has rejected these claims for relief on the basis that market-wide economic changes to property values, such as from COVID-19, can only be properly considered at general rates revaluations, and will therefore be legislating to rule out COVID-19-related MCC appeals.
The government will instead provide a £1.5 billion pot that will be distributed to businesses in England affected by the pandemic and not on estimates of the impact on a property’s value. This method is designed to ensure the support is provided in the fastest and fairest way possible.
The funding will be allocated to local authorities based on the stock of properties in the area whose sectors have been affected by COVID-19. Local Authorities will use their knowledge of local businesses and the local economy to make awards.
The government’s £500 million scheme to kickstart film and television production entitled the Film and TV Production Restart Scheme, helps UK film and TV productions struggling to secure insurance for COVID-19 related costs.
The Scheme allows TV and film productions that have been halted or delayed by a lack of insurance to get started or restarted. Productions can receive compensation from the scheme for coronavirus related losses including filming delays from illness amongst the cast and crew.
Claims made under the Scheme can be backdated to 28 July 2020, the date the Scheme was first announced. The Scheme is available to both pre-existing eligible productions and to new eligible productions.
The funding is available to all qualifying productions made by companies where at least 50% of the production budget is spent in the UK. There is a fee to participate in the Scheme and a limit to the maximum claim allowable.
The deadline for productions to register for the Scheme and restart shooting has been extended until 31 October 2021. Claims will need to be submitted by 31 March 2022 for losses incurred up to 31 December 2021. HMRC’s guidance on the scheme has been updated to include payment terms.
HMRC’s guidance makes it clear that any business that makes an error in making a Coronavirus Job Retention Scheme (CJRS) claim must pay back any amount overclaimed. Any claims based on inaccurate information can be recovered by HMRC.
If you’ve overclaimed a grant and have not repaid it, you must notify HMRC by the latest of
- 90 days after the date you received the grant you were not entitled to
- 90 days after the date you received the grant that you were no longer entitled to keep because your circumstances changed
It is important to note that there may be interest and penalties if overclaimed grants are not repaid within the stated timeline.
The CJRS claim form allows businesses to advise HMRC if they have identified previous errors and over-claimed. If you use this form to confirm that your business has been overpaid, the new claim amount will be reduced to reflect this overpayment.
If you have made an error in a CJRS claim and do not plan to submit further claims, then you should request a payment reference number and pay HMRC through their card payment service or by bank transfer.
The same options can also be used by employers who would like to make a voluntary repayment because they do not want or need the CJRS grant.
Having to repay HMRC is unlikely to be a cost that employers will have thought about, so it is important to ensure that all claims made for furloughed employees are accurate. Employers are required to keep full records relating to any CJRS claims (including adjustments) for a period of six years. HMRC has said that they will not be actively looking for innocent errors in their compliance approach.
Now we are getting used to the idea that the various vaccines will provide some defence against COVID outbreaks, what would a vaccine for our businesses attempt to prevent?
We have listed below a few strategies that you might like to consider that would help you survive any more periods of lockdown that governments may be forced to consider.
If you are fortunate and can reopen your business as lockdown restrictions are eased, and you manage to re-establish profitability, try and hang on to some of those profits.
Retained profits (after tax is paid) are the fat on the bone of your business. If retained profits are growing this must mean that your business assets are increasing. Should a further period of lockdown or similar reductions in trade be experienced, these retained profits may provide you with the resources to weather any downturn in trade.
Don’t take this advice literally. What we mean is try and save some of your hard-won profits in your bank.
During periods of low activity these cash reserves will help to maintain liquidity, and during times of rapid increases in turnover, they will insulate you from the down-side of overtrading – when money due from customers does not come in fast enough to meet payments to suppliers and settle other overheads.
These two simple tactics are worth considering as the regional UK governments take steps to ease current lockdown restrictions. And while they are unlikely to immunise your business against all aspects of COVID disruption, they may offer you the resources to fight-off the worst effects.
Although it cannot be understated, that COVID has resulted in widespread personal tragedies and business hardships, there are stories circulating of businesses that have managed to buck the downward trend.
Very often this is due to being in the right sector to take advantage of growth opportunities opening-up, more often, it is down to careful planning.
- An online personalised cake company that has seen its sales of cakes by post triple during the last year.
- A wholesaler of greeting cards to the retail sector saw a massive drop in orders as lockdown closures of retail premises started to bite. So, they switched to becoming online retailers – direct sales via internet sales platforms – and doubled their profits during 2020-21.
This effect, of migrating to online sales platforms, is likely to continue as consumers become used to the variety of products on offer and the speed with which they can be sourced from a five minute search on the internet.
It’s an approach that is worth exploring if your customer base is compromised due to COVID restrictions.
A new temporary extension to the eligible carry back period for trading losses has been announced. This will allow trading losses to be carried back for three years (rather than one). The extension to the relief applies to both incorporated and unincorporated businesses and is subject to a £2,000,000 cap.
The relief will apply for company accounting periods ending between 1 April 2020 and 31 March 2022 and for tax years 2020-21 and 2021-22 for unincorporated businesses.
The new relief is designed to help businesses who have suffered increased losses as a result of the coronavirus pandemic. Carrying back a trading loss may allow businesses to generate tax repayments from an earlier profit-making period.
The extension will apply to a maximum £2,000,000 of unused trading losses made in each of the tax years 2020-21 and 2021-22 by unincorporated businesses. The £2,000,000 maximum applies separately to unused trading losses made by incorporated companies, after carry-back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and a separate maximum of £2,000,000 for periods ending between 1 April 2021 and 31 March 2022.
The £2,000,000 cap will be subject to a group-level limit, requiring groups with companies that have capacity to carry back losses in excess of £200,000 to apportion the cap between their companies.
In respect of Income Tax, the current restrictions to carry back losses from a trade against general income will remain.
One of the Chancellors key announcements in the Budget last week was to replace the government guaranteed Bounce Back and Business Interruption loans – due to end for new applications from 31 March 2021 – with a new Recovery Loan Scheme (RLS).
The RLS is similar to the lapsed schemes in that it includes a government pledge to underwrite lenders risks and therefore reduce the borrower’s risk.
In a nut-shell, the government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses. The scheme launches on 6 April 2021 and is open until 31 December 2021, subject to review. Loans will be available through a network of accredited lenders that will eventually include most of the major high street banks.
Businesses that need credit to survive the continuing disruption should consider the advisability of taking on these loans by undertaking a rigorous planning exercise. This should aim to:
- Ensure that there is a real possibility that future resumption of trade will create sufficient cash flow to meet loan repayments as they become due.
- That if there is a dip into insolvency – liabilities exceed asset values – that this is just a temporary situation.
- Demonstrate that the expected gradual easing of COVID lockdown restrictions will enable the business to return to profitability, and more importantly, to start retaining profits and restoring stability to their balance sheets.
Please call if you feel there is a need to apply for funding under the new scheme. We can help you consider your options.
In our previous newsfeeds we have described how you can calculate the level of turnover you need to create in order to meet all your costs whether they be fixed costs (rent, rates etc.,) or variable costs (goods you need to buy to convert into goods you sell).
Unfortunately, you will need to make this calculation each month to have any certainty that you have a realistic estimate of your breakeven turnover.
Over time, you could probably place more reliance on any underlying trend in the numbers you calculate.
The main factors that will change your breakeven calculations are increases or decreases in:
- The amount you pay for any direct costs, to purchase goods or labour to convert into the products you sell.
- The amount you pay for fixed costs – that do not tend to increase or decrease based sales volume. For example, premises costs, professional fees and admin support costs.
And what if you need to invest in your business? If you do not have retained funds to meet investment costs you may need to borrow to fund the investment. This will increase your costs (interest charges) and require that you produce enough retained profits, as a result of your investment and general trading, to meet lending repayments.
We can help. Call if you need help to consider your planning options. To find a way out of the present difficult trading conditions we may all need to do more than just breakeven.