The UK government recently announced a series of further initiatives to support British businesses in the face of the coronavirus (COVID-19) pandemic, including a VAT deferral and business rate holidays.
Key tax and business measures recently announced by the UK government are summarized below. There are likely to be further developments in these and other areas as the situation continues to evolve.
UK VAT Deferral
UK value added tax (VAT) registered businesses will not be required to account for VAT to HM Revenue and Customs (HMRC) in the period March 20, 2020 to June 30, 2021, and will have until April 2021 to settle any resulting VAT liabilities. This deferral will be granted automatically and no claim is required. HMRC will continue to pay refunds and reclaims in the normal way during this period.
Business Rate Holidays
Businesses in the retail, hospitality, and leisure sectors, as well as child care nurseries, will be given a business rates holiday for the 2020–2021 charging period. This holiday will be given automatically and no claim is required.
Business Loans and Grants
The government has announced a package of loans and grants designed to support businesses that includes the following:
- COVID-19 Corporate Financing Scheme, under which the Bank of England will buy short-term debt from larger companies to ease cash flow
- Coronavirus Business Interruption Loan Scheme, under which the government will guarantee 80% of the amount of loans made to small and medium-sized enterprises (SMEs) during this period, up to a maximum value of £5 million (approx. $5.9 million) per loan
- Cash grants of up to £10,000 (approx. $11,765) to smaller businesses in receipt of business rates relief
- Retail and Hospitality Grant Scheme, providing cash grants of up to £25,000 (approx. $29,400) per site to businesses operating in the retail, hospitality, and leisure sectors
Time to Pay Scheme
HMRC already operates a “time to pay” scheme, which allows UK taxpayers struggling to settle their tax liabilities to agree to a payment plan with HMRC. The announcements made are in addition to this scheme, and HMRC has not yet published any detailed guidance on how it will approach applications for time to pay related to COVID-19, other than that additional resources will be allocated to the scheme.
However, existing guidance states that such arrangements will normally be time limited to 12 months save in the most exceptional circumstances. It is important to note that time to pay does not amount to a waiver of a taxpayer’s liability to pay tax to HMRC, and HMRC’s guidance states that it will only agree to a time to pay arrangement where a taxpayer is able to demonstrate that it will be able to pay the taxes included in the time to pay arrangement and meet its current tax obligations.
Job Retention Scheme
The government will reimburse employers up to 80% of the salary of “furloughed workers,” up to a cap of £2,500 (approx. $2,940) per employee per month. This scheme will be administered by HMRC. Details of how it will operate have not yet been released by the government, but see our separate alert on this topic: COVID-19 – Important Additional Considerations for UK Employers.
Deferral of IR35
The government also recently announced the deferral of the introduction of changes to the off-payroll working rules (commonly known as IR35) until April 2021.
Tax Issues for UK Resident Individuals
For more information on tax issues for UK resident individuals, see our alert, COVID-19: UK Government Announces Income Tax Deadline Deferral, Other Measures for Individuals.
Coronavirus COVID-19 Task Force
For our clients, we have launched a resource page to help keep you on top of developments as they unfold.
