The impact and disruption coronavirus has caused in all our lives is clearly huge – the world has virtually ground to a halt. I have come to loathe the word ‘unprecedented’ or the use of ‘unprecedented times’. Ironically ‘that word’ defines our government’s list of financial assistance schemes, to help us through COVID-19 perfectly!
Some can apply to all of us
We can all benefit from taking mortgage repayment, personal loan, credit card, store card, or catalogue credit holidays. Your credit rating will not be affected but interest will continue to build during this period, so you pay higher costs in the longer term. It will, however, buy everyone some breathing space if income is reduced.
So what other measures could benefit you? Business owners, you have a choice of 2 government guaranteed loan options
1 Coronavirus bounce back loan scheme
Launched on 4th May, you can apply for a bounce back loan if your business is:
- Based in the UK
- Has been negatively affected by the coronavirus
- Was not ‘undertaking in difficulty’ on 31 December 2019
This scheme is aimed at small to medium-sized businesses and facilitates borrowing between £2,000 and £50,000. The government guarantees 100% of the loan and there will not be any fees or interest to pay for the first 12 months.
There is a max loan term. The loan will be up to 6 years with no repayments due during the first 12 months. The government does promise to work with lenders to agree on a low rate of interest for the remaining term of the loan.
2 Support for businesses through the coronavirus business interruption loan scheme
Your business is eligible for this scheme if:
- Your business is UK based, with a turnover of no more than £45 million per year
- Your business meets the other British Business Bank eligibility criteria (*see link below for further details)
The temporary coronavirus business interruption loan scheme offers loans, overdrafts, invoice finance, and asset finance of up to £5 million and for up to 6 years. The government will pay the interest payments for the first 12 months and any lender-levied fees. The government provides lenders with a guarantee of 80% on each. The scheme will be delivered through commercial lenders including the main banks, backed by the government-owned British Business Bank.
Importantly you cannot apply if you’re already claiming under the coronavirus business interruption loan scheme (CBILS).
However, if you have already received a loan of up to £50,000 under CBILS and would like to transfer into the bounce back loan scheme as you feel it is more suitable, you can switch through your lender until 4 November 2020. No details about how to apply have been issued as yet – so watch this space!
* For further details of both of these loan schemes go to: Coronavirus Business Interruption Loan Schemes and Fund
3. HMRC help
Self-employed locums, or dentists with a private practice.
The Self- Assessment payment on account, which is ordinarily due to be paid to HMRC by 31 July 2020 may now be deferred until January 2021. This is optional and if you are still able to pay your second self-assessment payment on account on 31 July 2020 you should still do so.
HMRC have also scaled up their Time to Pay offer (agreed extra time for companies and individuals who could not pay their taxes on the due date) to all firms and individuals who are in temporary financial distress as a result of coronavirus and have outstanding tax liabilities.
4. (COVID-19) Self-employment income support scheme
This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month and is available for the next 3 months. This may be extended if needed. You do not need to stop working in order to benefit.
To benefit you MUST have:
- Submitted an Income Tax Self-Assessment tax return for the tax year 2018-19
- Traded in the tax year 2019-20
- Are trading when they apply, or would be except for COVID-19
- Intend to continue to trade in the tax year 2020-21
- Have lost trading/partnership trading profits due to COVID-19
Your self-employed trading profits must be less than £50,000 and more than half of your income must come from self-employment. Obviously, self-employed income is not a linear thing year on year. So if you have trading profits/partnership profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income, and have average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000, plus these profits constitute more than half of your average taxable income in the same period then you qualify.
If you have fewer years trading than this they will work with what you have. Of course, this probably discounts most dentists and many locums but there will be some assistance there for some.
Grants will be paid no later than June 2020, but it will be backdated from 1 March 2020.
HMRC will contact the business if they are eligible for the scheme and invite them to apply online. Once HMRC has received the claim and checked the eligibility for the grant, they will contact the applicant to tell them how much they will get and the payment details.
No guidance has been issued to date but it is possible that when you complete your 2020-21 tax returns (including this taxable grant), you could be asked to repay some of this grant if your average earnings show that they did not lose any revenue. This is just speculation at this time but a possibility.
5. Are you a limited company director?
Some dentists are Directors of their own companies. This has been a very efficient way of managing tax historically but where does it leave you now?
Company directors can be furloughed at 80% of salary capped at £2,500 where the business has temporarily ceased to operate. This may cause issues if you are only drawing a small salary. It would be wise to discuss this with your accountant.
As furloughed directors, you are not permitted to generate fees but may undertake the statutory duties usually attributed to you as a director.
You could choose to take on another position under PAYE whilst under furlough.
To avoid fraud, there are expected to be some cross-checks between the applications for grants against PAYE records for each employer.
6. VAT Registered companies and individuals and deferment of VAT payments
Currently, VAT payments are deferred until 30 June 2020. However, if you have an automatic direct debit set up you need to cancel it or the money will still leave your account.
Although not confirmed, it seems you will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period, i.e. 05 March 2021 (unincorporated businesses) or 31 March 2021 (companies).
7. Small business grant funding
The government is providing additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBRR), rural rate relief (RRR), and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.
This is unlikely to be something applicable to most dentists and locums given the eligibility criteria below but worth a mention just in case.
To be eligible your business needs to:
- Be based in England** and
- Receive small business rate relief or rural rate relief as of 11 March, and
- Your business occupies a property
Businesses who think they qualify should contact their relevant local authority.
** N.B. Some aspects of business support are devolved. For business support, Wales go to: Business Wales
This area is evolving pretty rapidly and many are falling between the gaps so it pays to keep up to date on the government’s daily news briefing to keep abreast of any new options that arise.
There is a wealth of information out there on the internet, although options for help can seem confusing. It can make sense to speak to your accountant, primarily to help you out, or a financial adviser to guide you through this maze.
Have you been left confused by all the government financial schemes? Not sure which suits your circumstances? Let us know by adding a comment below.