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How HMRC is Supporting Businesses in Light of COVID-19

PWC has outlined the specific steps HMRC is taking to support businesses in response to COVID-19, and has highlighted some of the potential ways your business can improve your cash tax payment profile in this context. Read their full report below:

All businesses are looking very carefully at their working capital management and Tax is an important component of that. Acknowledging this, HMRC and the Treasury have outlined a number of proposals to ease the burden on taxpayers at this very difficult time.
We recommend that businesses review their strategy in the light of these proposals, and reflect on potential actions companies may wish to take to manage cash tax payments proactively, as part of their wider working capital management.
We have brought together some key materials in more detail below for your ease of reference. In summary, some of the key options to consider include (refer sections in the main body below):
•    Reviewing tax instalments and ensuring all repayments are expedited, liaising with your CCM where appropriate -  section 1
•    In cases of approaching financial distress, contacting HMRC to seek to defer tax payments under Time To Pay - section 1
•    Considering the applicability of Government-backed Loans and Business Interruption Insurance  - sections 2/6
•    Reviewing the impact of the deferral of IR35 reform until April 2021 and statutory sick pay concessions - section 3
•    Identifying opportunities to manage VAT and pensions cash-flow - sections 3/4
•    For SMEs, reviewing business rates and statutory sick pay concessions- sections 3/5  
•    Particular concessions for  hospitality and leisure - sections 3/4
•    Considering other international reliefs - section 7
We also attach some materials (section 6 below) from our Business Restructuring team on broader working capital management as well as strategies for addressing COVID-19 more generally.     
1. HMRC support generally
We have set out below some of the measures that HMRC has put in place to support businesses, many of which are targeted at SME's, but a number have wider application. Businesses should revisit tax instalments, ensure they recover tax overpayments and, where they are approaching financial distress, consider accessing HMRC's Time To Pay regime to defer future payments.
As these measures were only introduced a few days ago, and HMRC consider support requests on a case-by-case basis, it is unclear what the uptake is but we are continuing to gather feedback from clients and from HMRC contacts dealing with deferral requests.

HMRC helpline

The helpline allows any business or self-employed individual who is concerned about paying their tax due to coronavirus to get practical help and advice. Up to 2,000 experienced call handlers are available to support businesses and individuals when needed.
All businesses and self-employed people in financial distress and with outstanding tax liabilities may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. HMRC has set up a helpline to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus (COVID-19).  The number is 0800 0159 559.

The above has been set up by HMRC through which the arrangements would be considered on a case-by-case basis and tailored to individual circumstances and liabilities.
HMRC has indicated that they are adapting a less stringent approach to the provision of detailed backing information required to benefit from tax deferral arrangements (Time To Pay). It will still be necessary for businesses who wish to benefit from these arrangements to demonstrate that they have looked at other means (discussions with banks, review of working capital processes, etc.).  At this stage, formal guidance is not expected but we will keep this area under review. Our team of specialists can help support discussions with HMRC where helpful.
In addition HMRC has indicated that they are looking to be more flexible in terms of tax repayments (for example in terms of automatic offsetting), and we suggest you contact HMRC (either your CCM or the Helpline) if you believe you are entitled to a repayment.  
Instalment Payments  
All businesses will be looking to manage cash tax payments more broadly.  In terms of short-term options, we would encourage you to carefully review your instalment payments in the light of updated business forecasts to ensure they remain accurate.
It will also be important to ensure you are seeking to maximise reliefs more generally wherever possible - examples include R&D or Patent Box claims for early submission where these may result in a tax repayment.  

2. Government Backed Loans - Large Businesses and SMEs
On 17th March, the Chancellor unveiled a package of financial measures to assist businesses against the coronavirus impact. These are in addition to the provisions introduced in last week's Budget.

The measures announced include a £330bn package of government-backed and guaranteed loans at attractive rates.  This support will be delivered through two main schemes:
•    To support liquidity amongst larger firms, a new lending facility with the Bank of England to provide low cost loans.
•    To support lending to small and medium (SMEs) sized businesses the Business Interruption Loan Scheme announced at the Budget last week will be extended and will now provide loans of up to £5 million rather than the £1.2m originally announced, with no interest due for the first six months.
Both of these will launch next week to support businesses in accessing bank lending and overdrafts, e.g. to pay rent, suppliers, staff or purchase stock.  
The Chancellor added that ministers will work with trade unions and the industry to develop a “bold and ambitious” package of “employment support”.

3. People Matters

IR35 deferral
A key development is the Government announcement that, as part of its package of support to business and individuals in light of COVID-19, IR35 reform for medium and large sized businesses in the private sector will be delayed by one year to April 2021.
Please note the Government remains committed to this piece of legislation and we must stress that this is only a deferral and not an abolition of the reforms.
Refund of Statutory Sick Pay (SSP)
Small- and medium-sized businesses and employers with a workforce of less than 250 employees can reclaim SSP paid to employees for up to two weeks sickness absence due to COVID-19. Eligible employees will be eligible for SSP from day one instead of day four. Timing of repayments are not yet clear.

Defined Benefit Pensions

For businesses with defined benefit schemes, they will want to keep in close contact with their pension trustees to keep on top of the situation and consider all appropriate options that impact on cash-flow.  This is a specialist area - one of our experts can talk through options if appropriate.

4. VAT matters

We have developed an open page on globalvatonlin, our online VAT resource, to keep you up to date on global developments from the tax authorities in relation to COVID-19.

5. Business Rates reduction

Targeted at SME's, for one year the business rates discount for retail properties (cafe's, Bars etc.), cinemas, and music venues will be increased to 100% for properties with a rateable value of less than £51,000. This 100% discount will now be expanded to include all hospitality and leisure businesses. A £5,000 business rates discount for pubs with a rateable value below £100,000 will apply in England for one year from 1 April 2020.
6. Business Interruption Insurance

It has also been confirmed that certain hospitality and leisure locations (pubs, clubs, theatres etc.) may be able to claim under business interruption insurance (which have appropriate pandemic clauses).  

7. International Dimension

We attach below a summary of reliefs and measures, which are being put forward by global governments in response to the pandemic.

8. Broader Business Response Strategy
For reference, please see attached the materials we have been preparing to assist clients as they develop their strategy to deal with COVID-19.  I am sure you have developed a strategy to address this already, but I attach for reference our suggested approach.
The spread of coronavirus is a continually developing situation and understandably, there are many concerns and questions about the best way to protect your employees, and what impact it could have on your business. Please see a link to our dedicated website page on this matter, for the latest developments.
In particular, we’re seeing a number of organisations experiencing significant operational, financial and liquidity challenges. In order to ensure these challenges can be addressed, the number one concern aired has been how they can manage their cash pressures to ride out the crisis.. The attached document on managing cash pressures outlines some potential strategies and actions to address this.

Published: Monday, March 23, 2020

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