Author Archives: Peggy Nightingale

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WE ARE ON YOUR SIDE!

Our UK200Group has been working collectively to assist our 150,000 SME clients through the current difficulties. I am a member of our Public Policy Group which meets regularly to see how we can influence the government to provide support for everybody. Last Friday, we submitted a letter to the Chancellor of the Exchequer which is attached and it is now also being sent to the newly appointed shadow Chancellor and other political parties.

Whilst we await a reply, we will be publishing press releases that are of urgent concern to all our clients as I believe that the government has a considerable amount more to do to safeguard our futures.


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UPDATED – CORONAVIRUS BUSINESS SUPPORT GUIDE

Navigating the crisis

The Coronavirus (COVID-19) pandemic and associated shutdown has significantly affected many businesses. We know you may be suffering in terms of cash flow and face enormous uncertainty about the future for your business. We will do all we can to help you.

In the newsletter below we have brought together what you need to know about the Government help available for small businesses. HMRC is automatically deferring the next VAT and Income Tax bills, and it will agree extra time for you to pay Corporation Tax and PAYE, but those terms need to be negotiated individually.


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Clarification on temporary changes to holiday entitlement

Given the government’s recent announcement in respect of the provision to carry forward holiday to the next 2 holiday years there seems to be some confusion or misunderstanding as to what this actually means. The Working Time (Coronavirus) (Amendment) Regulations 2020 amends the Working Time Regulations 1998 to create a further exemption relating specifically to COVID-19. Where it is not reasonably practicable for a worker to take some, or all, of the holiday to which they are entitled due to the coronavirus, they have a right to carry the 4 weeks under regulation 13 into the next 2 leave years.

Under the WTR, workers are entitled to 5.6 weeks’ paid annual leave per year (pro-rated for part time employees). This is made up of 4 weeks required under European law (Basic Leave), and an additional 1.6 weeks permitted under domestic legislation (Additional Leave). This entitlement includes bank holidays and is prorated in the year of joining. Some employees are entitled to more holiday under their contract of employment.

The WTR provides that workers must use their 4 weeks’ Basic Leave entitlement in the leave year in which it is due, otherwise the entitlement will be lost.

The government’s latest announcement applies to the 4 weeks’ Basic Leave. The government will amend the WTR so as to allow workers to carry-over up to 4 weeks’ holiday into the next two holiday years. This provision will apply where at the end of the year it has not been “reasonably practicable” for a worker to take some or all of this leave as a result of the effects of Coronavirus. Holiday in this case means taking a break from work and not the ability to use that time in any particular way i.e. travelling as opposed to staying at home.

The legislation previously prevented employers from allowing employees to carry forward unused basic statutory holiday entitlement to the next year.  Whilst the relaxation in the law is intended to enable employers to allow the carry forward for key essential workers to ensure they can continue the important work in hospitals, supermarkets or keep supplies flowing without losing the crucial time off they are entitled to it does apply to everyone. The “not reasonably practicable” requirement means that coronavirus will need to have had a genuine impact on the individual worker’s ability to take their leave for the carry over to apply, so this should not be used as a carte blanche by all employers to refuse or cancel holiday requests for the foreseeable future particularly if they are not significantly affected by the pandemic. The new rules do not make it an employee’s right to carry forward unused holiday but a relaxation in the law to enable employers to ensure key workers do not lose the essential time off which they have been unable to take due to the coronavirus outbreak or prevent the employer having a significant number of employees amassing holiday to take at a later date unless this is absolutely necessary.

The interplay between holiday and furlough leave under the government’s Job Retention Scheme is not clear. The Government guidance on the Coronavirus Job Retention Scheme confirms that employment rights still accrue whilst on furlough therefore we take this to mean that holiday will therefore continue to accrue however clarification is still awaited on this point.


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ICAEW:

COVID-19: Directors on PAYE can furlough

31 March: Company directors that receive salaries through PAYE can be furloughed and apply for a grant of 80% of their salary during the coronavirus pandemic, ICAEW understands.

After examining HMRC guidance ICAEW believes that individuals who are directors of their own family companies and who are themselves paid via PAYE should be eligible for the coronavirus job retention scheme, although the same rules will apply as to other businesses and their employees.

Under the scheme, businesses are able to apply for government grants for employees’ salaries up to the lower of 80% of an employee’s regular wage and £2,500 per month for three months from 1 March. The scheme could run for longer if the restrictions in movements to halt the COVID-19 pandemic remain in place.

We are awaiting full details of how the scheme will operate from HMRC, including for directors paid via PAYE but not receiving a consistent, regular monthly salary. We understand the intention of the scheme is to include those on irregular earnings, but full details on how the amount of the grant will be calculated for these individuals have yet to be released.

As with other businesses, such directors would need to have been on the payroll on 28 February 2020 and they cannot work while they are on furlough leave. We do not yet know the extent to which minor directorial duties would be disregarded, or whether the requirement that a furloughed employee should do ‘no work’ would prohibit this.

https://www.icaew.com/insights/tax-news/2020/mar-2020/covid19-directors-on-paye-can-furlough



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Help Announced for the Self-Employed and Partnerships

The Government have recently extended the help available for those self-employed traders that have been affected by Covid-19.

For those that are eligible, the self-employment support scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 for the next three months.

Those eligible for the grant are:

  1. Submitted an income tax self-assessment return for the tax year ended 5th April 2019.
  2. Traded in the current tax year. (2019/20)
  3. Are trading when applying for support or would be if had not lost trade due to Covid-19.
  4. Intend to trade in the 2020 to 2021 tax year.
  5. Have lost trading profits due to Covid-19.
  6. Your trading profits must be less than £50,000 in the 2018/19 tax year or average less than £50,000 for the past three tax years.
  7. Your self-employment income must form more than 50% of your overall income.

The above support does not apply to directors or owners of limited companies and for those that started trading after 6th April 2019. 

How to apply:

HMRC will be writing to those that they identify as eligible from your tax return submissions with detail on how to make a claim.

Once the application has been made, HMRC will pay the grant direct into your bank account as one lump sum.

HMRC has suggested that they hope to open the claiming procedure by June 2020 but as yet no indication of when payments will be issued has been provided.

Please note, any grant received will be taxable and will need to be included in your income and considered for tax credit purposes.

If you are not sure if you are eligible for a grant, please contact our tax manager, Fran, who will be happy to assist.

Please note that If you are not eligible for the above, please remember your second payment on account due to HMRC by the 31st July 2020, can be deferred. Secondly, you may wish to consider applying for Universal Credit during this period of disruption. Please note that the above support does not apply to directors or owners of limited companies and for those that started trading after 6th April 2019.



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Protection from eviction for commercial tenants

Businesses will struggle to pay their rents & rates – this will be a difficult time. The government states;

Commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction.

These measures will mean no business will automatically forfeit their lease and be forced out of their premises if they miss a payment up until 30 June.

There is the option for the government to extend this period if needed.

This is not a rental holiday. All commercial tenants will still be liable for the rent. Commercial tenants are protected from eviction if they are unable to pay rent.

This obviously presents a problem for the landlords & the expectation is that the banks & other lenders will be expected to be flexible to assist getting through this situation.

A similar view is being taken with residential properties where tenants evictions will not be possible due to non-payment of rent.

It is worth both landlords & tenants discussing options to try and work through this together to avoid as much disruption as is possible.


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Template letter for putting your staff on furlough

In order to put your member of staff on furlough, you are required to obtain their written consent and set out the terms and conditions of the furlough arrangement. We are attaching below a letter which you can adapt to your circumstances which will cover the majority of cases. However, if your staff earn more than £36,000, the exact wording may not be appropriate because the maximum recovery of £2,500 per employee also includes Employers NI and pension contributions.

If you want particular advice as to how to deal with employees on a salary above this level, who you intend to put on furlough then please do not hesitate to contact us.

Please note that we accept no financial responsibility or otherwise can be accepted in respect of this letter. It is simply intended to be a guide for you to place staff on furlough correctly given the fact that the status has only been in existence for a week and other documentation is not yet available.


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Some bullet points from the government website about Coronavirus Job Retention Scheme and furloughing employees although nothing about holiday entitlement!

  • Open to all employers who had a PAYE payroll scheme at 28 February 2020.
  • Can cover businesses, charities, recruitment agencies and public sector.
  • Covers full-time, part-time, agency contracts and employees on flexible hours and zero hours contracts
  • Employees have to have been on your payroll on 28 February 2020 – if you made them redundant since then and rehired them they are eligible still.
  • Employees can not work for you while furloughed.
  • The minimum period of furlough leave is 3 weeks and the grant can only be claimed once every 3 weeks even if you pay weekly.
  • Employees will still have tax and national insurance deducted from the payment made to them.
  • Employees can claim 80% (capped at £2,500) plus associated employers national insurance contributions and minimum pension auto enrolment costs.
  • Employers can top up to 80% and pay higher pension contributions but these will not be covered by the grant.
  • Pay for those who pay varies is calculated as:
    • For those with 12 months employment – the higher of the same month’s earnings the previous year or average monthly earnings from the 2019-20 tax year.
    • For those with less than 12 months employment – average of monthly earnings since they started work.
  • Does not include commission, bonus or fees.
  • Can go below national minimum wage or national living wage as they do not apply as employees are not working – but if they do any training while off that time must be paid at NMW/NLW.
  • Employees on statutory sick pay or self-isolating can be furloughed after that.
  • Employee shielding those at higher risk can be furloughed.
  • Employees with more than one job can be furloughed from each job separately and each employer deals with their own claim.
  • Employees on furlough can do Volunteer work or training as long as it does not provide services to generate you revenue.
  • Employees on maternity leave / adoption / paternity / shared parental leave can stay on that – BUT if you pay enhanced payments these are covered and can be claimed under the scheme.
  • Payments received into the business must be included as income in the accounts.
  • No fees can be charged to employees the full grant for the gross pay must be paid to the employee (subject to tax and NI deductions).
  • The scheme is running for 3 months from 1 March.
  • All employment rights continue during furlough.
  • Employees have to be notified in writing and you should keep a copy.

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A message from our insurance broker Joel Davis of Omni Davis insurance

  1. Unoccupied premises;

As mentioned, if insurers are covering any premises, there will always be a condition that the property will be deemed “unoccupied” when a certain period of time has lapsed with the property not being in active use. This is usually 30 days (though sometimes more). When deemed unoccupied the cover is usually reduced or removed altogether.

Insurers Hiscox & Aviva have confirmed that they are extending this to 90 days so as long as all reasonable care is taken to secure properties & all security measures are in use insurers will not reduce cover in the event that your premises are shut down.

Most other insurers will follow a similar change in their stance, but always check with your insurers or broker as I cannot confirm all of the insurers have confirmed this at present.

  1. Instalment payments;

Some finance companies who provide instalment plans for insurance policies will consider what flexibility they can offer. We use Close Premium Finance, for example, and they confirm that they will be willing to discuss any payment plans they hold. There may be the possibility of reducing payments on a temporary basis. However, they were very specific that this will not be possible in all cases and each will be considered individually. 

It is worth checking on instalment plans as all providers will have a different attitude.

In respect to instalment payments directly to insurers we have not had any insurers agree to any payment holidays as they are struggling to remain liquid and the premiums they are collecting are being used to cover their operating costs and to pay ongoing claims.

  1. Reduction or removal of covers;

Some insurers are reviewing if they can or will reduce covers on policies that will then be reflected in premiums. They are not recommending this as a course of action as if there are any business activities ongoing then the cover will still be required & the risk is open ended. Where there is a complete halt to business activities there will likely to be a need to cover buildings or other property against loss or damage.

In respect to policies due for renewal in coming months, it is worth considering whether cover is essential or not. Is it best to lapse the cover with a view to requesting it when we all get back to (as close as we can hope) “business as usual”?  We will be looking for insurers to maintain their covers & premiums as offered if this is the case. However, I would recommend really scrutinising the risk of reducing or removing cover against protecting cashflow.


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