The Government has introduced COVID-19 business schemes which are designed to help businesses in these unprecedented times. Some of the schemes, such as the ‘Eat Out to Help Out’ scheme, designed to support pubs and restaurants, have been well publicised – and to help, we explain the details of some other popular business schemes.
Furlough & SEISS Scheme
One of the most talked about schemes introduced by the Government has been the ‘furlough’ scheme for employed staff. This scheme covers 80% of a furloughed employee’s wage (up to £2,500) until the end of July. From August 2020, the level of the government grant will be limited, and an employers’ contributions will rise – with the scheme coming to an end in October.
For those who are self-employed, the Government introduced the Self-Employment Income Support Scheme (SEISS). SEISS was delivered in the form of a cash grant which equals the average 3 month net profit, from the previous 3 accounting years as calculated by the HMRC, with a maximum grant payment of £7,500. The SEISS grant received is part of your business income and is therefore taxable income.
A word of warning to those self-employed businesses that have claimed the SEISS - HMRC has announced that you must have ‘all records’ in line with normal self-employed record keeping requirements including how much you have claimed from SEISS and your claim reference number. These records must be kept for at least 5 years after the 31 January tax return deadline or if later 4 years after you file your tax return.
HMRC have published examples of what they are looking for as evidence that your business has been adversely affected by Covid-19 and includes scaling down or temporarily ceasing
to trade due to your supplies/suppliers being interrupted and/or your customer base reduced or your staff not being able to come to work.
You should also consider recording what you believe your trading position would have been if the COVID-19 pandemic had not struck, including customer names, addresses, and the usual levels of business income.
The SEISS scheme has been extended. If you were eligible for the interim grant and can confirm to HMRC that your business has been adversely affected on or after 14 July 2020, you’ll be able to claim a final grant from 17 August 2020, with the maximum final grant is reduced to £6,570. However, you can claim the final grant if you’re eligible, even if you did not claim the interim grant. Do not forget the SEISS grants are taxable income!
Other COVID-19 Schemes
Other COVID-19 Government help has been provided through local authority grants – such as the Small Business Grant Fund (SBGF) and the Retail Hospitality & Leisure Grant Fund (RHLGF). The money received from both grants is taxable, and therefore as with the SEISS scheme, should be included in a business’s trading income on the date it is received.
There has been some confusion as to whether the SBGF & RHLGF grant money received by businesses is taxable. There should be no confusion as the SBGF & RHLGF grant money received is taxable and should be included in the business’s trading income on the date it is received.
As regards VAT the grant money received from SBGF & RHLGF should be treated as ‘outside the scope of vat’. It is not ‘exempt income’ and if recorded as such may restrict your claim for input vat recovery. So please make sure that the person in your business completing your Vat Returns is aware of the correct vat treatment for the grant monies received from SBGF & RHLGF.
COVID-19 Scheme Support Services
We at HaesCooper can help to ensure that your COVID-19 ‘hit’ business has the appropriate business records to ensure that HMRC will be satisfied with your claim for SEISS or the employee furlough scheme. To learn about how we can help, contact us.