A range of organisations, including the Institute of Chartered Accountants in England and Wales (ICAEW), have released fresh warnings about the risk of cyber-attacks during this already challenging period.

Reports are being released that suggest that cybercriminals are targeting businesses via the use of phishing emails that seem to be from HM Revenue & Customs (HMRC) offering support to businesses.

According to the ICAEW, one such email, proclaiming to be from HMRC chief executive, Jim Harra read: “Dear customer, we wrote to you last week to help you prepare to make a claim through the Coronavirus Job Retention Scheme. We are now writing to tell you how to access the COVID-19 relief.

“You will need to tell us which UK bank account you want the grant to be paid into, in order to ensure funds are paid as quickly as possible to you.”

The rise in fraud and scams as a result of COVID-19 has been dramatic. The National Cyber Security Centre (NCSC) is understood to have already removed more than 2,000 online coronavirus scams over the last month, including 471 fake online shops selling fraudulent coronavirus-related items, 555 malware distribution sites set up to inflict significant damage to visitors and 832 advance-fee frauds.

Fraud is of considerable concern to HMRC and it has asked that people forward suspicious emails claiming to be from HMRC to phishing@hmrc.go.uk or by texting 60599.

As millions of freelancers and contractors struggle to find sufficient financial support during the Coronavirus crisis, the Small Business Minister, Paul Scully, has announced that he intends to “work up a scheme to present to the Chancellor.”

Mr Scully has told The Financial Times that he is searching for a solution that better supports individuals that pay themselves a salary and dividends through their own limited company, who may be ineligible for some of the support currently on offer.

Directors who work through their limited company, many of whom are contractors, are not eligible for the Coronavirus Self-Employment Income Support Scheme (SEISS), while the Coronavirus Job Retention Scheme (CJRS), which they may be eligible for, could see their income significantly reduced.

The CJRS will cover 80 per cent of PAYE earnings (capped at £2,500 per month), but for those low-salaried contractors who top up their earnings by drawing dividends, it may mean they see a drastic decline in income.

What’s more, the SEISS allows recipients to continue working and receiving the grant, whereas the CJRS requires a director to be furlough, preventing them from doing any work that may generate revenue for the business.

The Small Business Minister, who has run a number of small businesses himself, has admitted that he used to also pay himself in dividends and that he understands the frustrations of directors.

IPSE, the trade body for contractors and independent professionals, has conducted a study that found that 69 per cent of limited company contractors do not think the Government’s measures are enough to sustain them.

They have welcomed Mr Scully’s comments and made suggestions to the minister on how contractors could be better supported.

They feel the easiest solution would be to include dividends in the CJRS. Alasdair Hutchison, Policy Development Manager at IPSE said: “It is very welcome that Mr Scully is looking at ways to plug the gap for company directors.

“One way to do this would be to include dividend income in the Government’s Job Retention Scheme, which company directors are eligible for. This would enable many limited company contractors who pay themselves through dividends to make full use of the scheme.”

IPSE has stressed that time is very much of the essence and urged Mr Scully and the Chancellor to “act quickly to extend their support package to this vital and varied section of the workforce”.

Despite Mr Scully’s comments and an encouragement from the Chancellor Rishi Sunak that “all ideas are welcome”, The Financial Times has reported that the Treasury has indicated that there are “no plans to change the existing arrangements”.

In light of the current plight of contractors, a petition has been launched calling on the Government to include limited company contractors in the COVID-19 support package, which has been signed by more than 340,0000 people. To sign this petition, please click here.

The rather ironically named Hot Water Comedy Club in Liverpool was raided by police after someone accidentally reported that a live show was happening during the Coronavirus lockdown when instead the club was streaming old shows on social media.

Around 20 police officers showed up to the venue expecting to find a show in full swing but instead found the doors locked and the club empty.

The Hot Water Comedy Club had been streaming a previous show from the 7th March, which showed a packed audience, which one online viewer clearly mistook for a live show.

Under the COVID-19 ‘Stay at Home’ guidance released by the Government, large gatherings and events are not permitted.

Paul Blair, one of the owners of the club, told Sky News that the event – hosted by comedian Paul Smith – had been “clearly” advertised on social media as having already taken place.

He said he was only made aware of the raid when his brother and co-owner had alerted him to what happened. Paul said: “I was really surprised. The first we heard about it was when we got a call from the convenience store next door, saying a full police squad had turned up at the club. I looked at our CCTV and saw about 20 police officers outside.”

CCTV Footage from the raid can be found on the club’s twitter feed by clicking here.

The needs of contractors and freelancers seem to have been somewhat ignored in the Government’s economic support package for the Coronavirus pandemic.

We appreciate that those working in this sector may have many questions and queries that need answering, which is why we have prepared a helpful Q&A below:

Can I apply for the Self-Employed Income Support Scheme?

The Self-Employed Income Support Scheme (SEISS) will pay self-employed individuals an amount equivalent to up to 80 per cent of their average monthly trading profits, capped at £2,500, to cover at least the three months from March.

People who pay themselves a salary and dividends through their own company will not be eligible for the scheme.

HMRC has said that self-employed people will have to confirm that their trading has been adversely affected by Coronavirus. To assess this the tax authority will use a ‘risk-based approach’ to compliance.

If I am not eligible for SEISS, what are my other options?

The Coronavirus Job Retention Scheme is likely to be your best option at the moment. It is a temporary scheme open to all UK employers until at least the end of June that is designed to support employers whose operations have been severely affected by coronavirus (COVID-19).

Employers can use the HMRC portal to claim for 80 per cent of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

Unfortunately, this is calculated via salary income and does not take into consideration dividends.

Any UK organisation with employees can apply for the scheme including:

• businesses
• charities
• recruitment agencies (agency workers paid through PAYE)
• public authorities.

However, you must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account to access the scheme.

Does the scheme apply to directors? 

Yes, directors of a company can be furloughed. The guidance provides an exemption for company directors who are also furloughed employees to carry out duties “relating to the filing of company accounts or provision of other information relating to the administration of the director’s company…”. This may include Companies House submissions and other statutory duties.

During this period directors should be careful to avoid anything that could be mistaken for work, including posting promotional material on their social media feeds.

We operate in the public sector, how does the CJRS apply to the current IR35 rules?

It may be appropriate to furlough IR35 contractors deemed employees “in a small number of cases”.

Public sector organisations have to confirm this with both a contractor’s Personal Service Company (PSC) and the fee-payer and agree between the parties that the contractor will not carry out work for the organisation during the period of furlough.

The fee-payer – usually the agency that pays the PSC – will have to apply for a furlough payment of 80 per cent of the monthly contract up to the £2,500 cap and the employer National Insurance Contributions (NICS).

The fee-payer will then need to pay the furlough payment in respect of wages to the PSC via PAYE and make the necessary tax and NIC deductions.

The PSC will have to report the payment to the contractor as deemed employment income via PAYE using box 58A on the PAYE Real Time Information return.

If a contractor opts to furlough themselves as an employee or director of their PSC, and they are still receiving an income from a public sector organisation, including through the CJRS, they must deduct this income from their reference pay for the CJRS.

Work has completely stopped, I am on the CJRS, but because I am mainly paid via dividends, is there any other financial support available to me?

The Government has indicated that those who cannot access sufficient support via the measures on offer should apply for benefits to supplement their income. The amount you can receive will depend on your income and the number of dependants in your family. If you feel that you need this support it is recommended that you visit the Governments dedicated webpage here.

Can I seek support via a Coronavirus Business Interruption Loan?

The Coronavirus Business Interruption Loan (CBILS) is available to all businesses with a turnover below £45 million. If you operate via a Personal Service Company, the business may be eligible.

However, remember that the business will remain 100 per cent liable for the debt. An 80 per cent guarantee offered by Government is simply to provide some recourse for the lender in the event of a borrower defaulting on their debt in future.

Rejected applications should not affect your businesses credit rating, but non-payment of an accepted loan will.

You are strongly advised to seek advice before seeking a CBILS finance facility to ensure it is appropriate to your needs.

Would a Bounce Back Loan be more appropriate?

The Government has announced another new loan scheme, that will work alongside CBILS known as the Bounce Back Loan scheme (BBLS).

This offers finance of between £2,000 and £50,000 to all businesses if they are struggling as a result of the pandemic.

Unlike CBILS, these loans are 100 per cent backed by the Government, which should mean they are easier to access and that money can be released sooner.

Can I defer my self-assessment payment?

Income Tax Self-Assessment payments due on 31 July 2020 will be deferred until 31 January 2021 for self-employed individuals.

Again, this is an automatic offer and it is not necessary to apply to benefit from it. No penalties or interest for late payment will be charged during the deferral period.

I am not self-employed but I still report other income via self-assessment, can I seek a deferral?

Yes, you can delay making your second payment on account. If you choose to delay, you’ll have until 31 January 2021 to pay it.

Can I defer VAT as well If I am VAT-registered?

All VAT payments, apart from import VAT and VAT MOSS, have been deferred by three months from 20 March 2020 until 30 June 2020. During this period, businesses will not need to make VAT payments to HM Revenue & Customs (HMRC).

Businesses will have until 31 March 2020 to pay any liabilities that have accumulated during this period. The deferral is automatic and businesses do not need to apply to be able to benefit from it.

However, you must cancel any direct debit manually with your bank immediately to make use of this deferment or HMRC will continue to take payments.

Can I still reclaim VAT during this period?

HMRC will continue to process VAT reclaims and refunds as normal during this time.

I am struggling with my commercial rent, what can I do?

As part of the Government’s Coronavirus Act 2020 (the Act), new measures were introduced to protect commercial tenants. Section 82 of the Act bans the forfeiture of commercial leases until 30 June 2020 for non-payment of rent, thus preventing evictions.

Although landlords are unable to evict tenants, they are permitted to take several other steps including Commercial Rent Arrears Recovery (CRAR), making a debt claim, issuing a statutory demand, or commencing winding-up proceedings.

I am unable to keep up with credit card payments, is there any support on offer?

The Financial Conduct Authority (FCA) has fast-tracked new measures that force banks to freeze loans and credit card payments for up to three months to help those individuals whose finances are affected by the Coronavirus outbreak. This includes:

• A three-month repayment freeze on loans;
• A temporary freeze on credit card and store card debt up to three months; and
• Zero-interest for three months on up to £500 for customers affected by Coronavirus using an arranged overdraft for up to three months.

The FCA wants to ensure that “consumers are no worse off and not paying more than they would have under previous prices.”

It is recommended that you speak with your lender to ensure you can make use of these facilities.

I cannot afford to pay the finance on company vehicles, what are my options? 

Businesses and individuals currently repaying finance on vehicles are to be granted a payment holiday under new measures from the Financial Conduct Authority (FCA).

The financial watchdog is currently consulting with motor finance firms to grant a three-month freeze, which is expected to come into force sometime after 24 April 2020.

Motor finance companies have also been asked to halt repossessions and not end loan agreements with customers who are “experiencing temporary financial difficulties due to coronavirus”.

Here to Help

If you are struggling to get to grips with the new financial measures introduced by the Government and other organisations then our team at Cogent are here to offer a helping hand.

We are sure you will have many more questions in the coming months and we will be here to provide you with the answers you need.

GET IN TOUCH AND LET US HELP YOU

Although it has been confirmed you can furlough your PAYE pay, under the Coronavirus Jobs Retention Scheme (CJRS), no official scheme has been announced for directors of limited companies, even if they’re just one (wo)man bands, and we do not believe one is coming, though many are lobbying for it.

It has however been confirmed by the Treasury that limited company directors, even if they’re the only employee, can furlough their PAYE income – i.e. get 80% of salary up to £2,500/month. This is not likely to be a huge help as most earn more via dividends (and there’s no help there), but it is something, and you can combine it with universal credit.

Unfortunately, unlike the self-employment scheme, if you do this, technically you cannot then work for the firm, but you can continue to perform your statutory director’s obligations, e.g. official legal filings.

It is important to note that directors of a limited company are not classed as self-employed and are therefore not eligible for the Self-Employed Income Support Scheme.

The CJRS is open to all PAYE employees on the payroll on 28 February 2020 who have since been ‘furloughed’. This means that if you pay yourself through PAYE and you designate yourself as ‘furloughed’, you will likely be eligible for a grant covering 80 per cent of your usual salary plus Employers’ National Insurance Contributions (NICs) and minimum employers’ automatic enrolment pension contributions.

However, being ‘furloughed’ means that you cannot undertake any of your employment duties. Moreover, the scheme is not expected to begin paying out until late April.

It is important to remember the scheme will not cover any dividend income you would normally receive or any other performance-related pay you may receive.

The Coronavirus Jobs Retention Scheme and employers’ National Insurance and Pension contributions

Much of the coverage of the Coronavirus Jobs Retention Scheme (CJRS) has focused on the Government’s commitment to cover the cost of 80 per cent of the usual wages of ‘furloughed employees’ – those who remain on the payroll but are not working.

In fact, the CJRS will pay employers more than 80 per cent of an employee’s gross monthly salary while furloughed, because it will also meet the cost of Employers’ National Insurance Contributions (NICs) and the minimum automatic enrolment employers’ pension contributions that are attracted by the 80 per cent figure.

If you choose to top-up a ‘furloughed’ employee’s salary to 100 per cent, you will also need to meet the additional costs in terms of the NICs and pension contributions attracted by the additional 20 per cent payment. Employees will pay Income Tax and their own NICs from their gross salary as usual.

The Government has said that before the scheme goes live this month, it will issue guidance on calculating claims for Employers’ NICs and minimum automatic employment pension contributions.

The Coronavirus Business Interruption Loans Scheme (CBILS) is a potential option if you need funds to be able to pay yourself until the CJRS pays out in late April.

Facilities are available under CBILS £1,000 to £5 million, subject to a lender’s criteria. CBILS will be interest-free for the first 12 months, as the Government has guaranteed to cover these payments during this period.

CBILS may also be an option if accessing the CJRS is not appropriate in your circumstances.

1. To access the scheme, decide which form of finance you require and identify which accredited lenders can offer it. This can be done by using the British Business Bank’s filter tool by clicking here.
2. This filter allows you to put in the region where your business is based and the type of loan you require and will provide you with a list of suitable lenders.
3. Research what each lender is offering via their website and decide how much funding you require.
4. Collate all necessary information to make an application, including an up to date business plan, detailed management accounts and cash flow/financial forecasts.
5. Make an application with your chosen lender that suits your requirements. The loan application process is likely to differ from lender to lender.

The British Business Bank has indicated that it may be beneficial to seek finance first through a lender that you have an existing relationship with.

Some lenders have advised that they may require personal guarantees from directors against any loans, although this cannot include your main residence.

The Government has announced that existing rules around annual leave will be relaxed to allow workers who have not used their statutory annual leave entitlement this year due to COVID-19 to carry it over into the next two years.

Most full-time British workers are entitled to 28 days holiday each year, including bank holidays.

However, unless allowed for within an individual’s existing work contract or an employer’s workplace policies, this entitlement cannot normally be carried between leave years (the 12-month period during which holiday time is recorded), which means that a worker can lose their paid holiday time if they do not use it.

Employers are required by law to try and ensure their workers take their statutory entitlement in any one year, with penalties issued against those who fail to do so.

The new measure introduced by the Government will allow workers to carry up to four weeks of unused leave into the next two leave years, thus reducing the chance of an employer being penalised and freeing up the time for employees in key sectors.

It is hoped that this change will allow staff to continue working as part of a national effort against the Coronavirus without them losing out on missed holiday.

The changes amend the existing Working Time Regulations that apply to almost all workers, including agency workers, those who work irregular hours, and workers on zero-hours contracts.
Despite the change, there remains an obligation on an employer to ensure that their workers have an adequate opportunity to take their holiday.

This holiday cannot be replaced with a payment in lieu unless the worker is leaving their employment.

The Government has announced important changes to UK insolvency law that suspends director liability for wrongful trading.

Seeking to provide reassurance to business directors in light of the ongoing COVID-19 pandemic, the Government has retrospectively suspended restrictions around wrongful trading from the 1 March 2020 for three months

Under English law, where a company continues to trade, even in the face of unavoidable insolvency, the company’s directors can be found personally liable for the losses suffered to creditors as a result, potentially leading to a court-ordered contribution to the assets of the insolvent company.

By suspending the rules, directors of struggling business who continue to operate, in the full knowledge that they face the prospect of insolvency, will not be penalised for doing what they can to keep their business operational.

Business Secretary Alok Sharma announced the changes and said they would offer a ‘breathing space’ for companies undergoing a rescue or restructure process to help them avoid insolvency.
On top of this suspension, the Government will also introduce new emergency legislation that will:

• Create new restricting ‘tools’, including a moratorium, for companies giving them a holiday from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure.
• Introduce a new restructuring plan, that binds creditors to that plan;
• Allow companies to buy essential supplies while attempting a rescue or restructure.

The Government hopes that by taking these measures they can reduce the number of contract cancellations, supply chain issues and a wide range of other issues that are affecting the UK economy.

HM Revenue & Customs (HMRC) has announced that the second phase of Making Tax Digital for VAT will now be postponed until 1 April 2021.

The first year of MTD was subject to a one-year “soft-landing period”, which has seen HMRC holding back from pursuing businesses that should have signed up.

Similarly, HMRC has taken a lenient approach in cases where businesses that have signed up to MTD have had problems with making their first returns for whatever reason.

However, from 6 April this year, this soft-landing period was due to come to an end. The latest announcement from HMRC in response to the COVID-19 pandemic means that businesses now have until their first VAT return period starting on or after 1 April 2021 to put the necessary digital links in place and comply with the MTD rules fully.

The change also means that penalties for failing to report VAT via MTD will also be postponed. These fines could have been up to £400, depending upon the size of the business.