Law and regulation of Covid-19 tax relief in the UK

Value Added Tax

  • All VAT payment for next coming quarter is deffered. This means no business will pay UK VAT before  June 2020.
  • See “Time to Pay” arrangements in additional comments.

Corporate Income Tax

  • No special measures. Businesses should try to meet their tax compliance obligations to avoid penalties, as no relaxation on tax filing deadlines has been announced.
  • Next income tax payment date is now deffered from 31 July 2020 to 31 January 2021. See “Time to Pay” arrangements in additional comments.

Social Security Contributions or Payroll Tax

  • PAYE
    • HMRC has verbally confirmed to CMS that PAYE due to be paid for month 11 (i.e. March 2020) can be deferred for two months, subject to specific agreement with HMRC.  No guidance is currently available for month 12 (i.e. April 2020).
  • Statutory sick pay (“SSP”)
    • Reimbursement to employers with less than 250 employees (as of 28 February 2020) for up to two weeks’ SSP for each employee absent due to self-isolation as a result of COVID-19. 
  • UK Government guidance is awaited on how businesses will claim reimbursement and how long such claims will take to be processed. 

Other relief measures

Business rates relief

The business rates holiday is extended to all businesses in the retail, hospitality and leisure sector for the next 12 months irrespective of rateable value.

The business rates holiday for any business with retail property with a rateable value of less than £51,000 for the 2020/21 period is:

  • extended to the leisure and hospitality sector;
  • increased from 50% to 100% for the next 12 months; and
  • complemented with an up to £25,000 cash grant for these smaller businesses.
New Coronavirus Job Retention Scheme

Any employer (small or large) will be eligible to contact HMRC for a grant equaling 80% of wages of staff who are unable to work but are kept on payroll. Capped at £2,500 per month per employee. This measure will be backdated to 1 March 2020 and open for at least three months, without a funding cap.

Government debt support

UK Government-backed and guaranteed loans of £330bn will be made available. Both of the following schemes are expected to be up and running by next week:

  • a new Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, enabling businesses with a turnover of no more than £41 million to apply for a loan of up to £5 million, with the UK Government covering up to 80% of any losses with no fees. First 12-month will be interest free;
  • for larger firms a new lending facility has been agreed with the governor of the Bank of England, to be provided through low cost easily accessible commercial paper.

Additional comments

“Time to Pay” arrangements

HMRC sometimes agrees specific tax payment arrangements with taxpayers on a case-by-case basis (ordinarily for those in significant financial distress). Businesses will be able to access this scheme to help manage cash flow difficulties that COVID-19 may impose.   

HMRC has not indicated the extent to which a business would need to be affected by COVID-19 to qualify for a “Time to Pay” arrangement.

However, an additional 2,000 experienced HMRC call handlers have been made available to support taxpayers during COVID-19, showing a willingness on HMRC’s part to assist taxpayers.