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FAQs from members in practice and business

We have collated the many questions and queries we have received from members through insights, webinars, and enquiries relating to the coronavirus pandemic. Here you will find guidance and information to support the most frequently asked questions. This will be regularly updated.

Audit reports

Is there standard wording for a qualification in an audit report regarding COVID-19?

There is no standard response to COVID-19 with regard to audits or disclosures in the accounts. The impacts on the audit report and the financial statements will be specific to individual businesses and will need to be considered on an entity-by-entity basis. The Financial Reporting Council (FRC) have confirmed in a recent ICAEW Audit and Assurance Faculty webinar relating to the FRC’s March 2020 COVID-19 Bulletin that they will not be providing boilerplate wording to be used in audit reports in respect of the coronavirus pandemic and stressed the importance of the auditor ensuring any disclosures they do make are entity-specific and useful to users of the financial statements. The ICAEW Audit and Assurance Faculty recording of its recent webinar which discusses the FRC’s March 2020 COVID-19 Bulletin. Please see the additional guidance designed to help investors and other users of audit reports to better understand the different types of audit report wordings used by auditors, and their significance. 

Business rates

Business rates holiday - Are accountants, solicitors and mortgage advisers eligible for a cash grant?
Yes, if they are eligible for small business rate relief they should receive the £10,000 cash grant. Professional services firms are not eligible for the broader support offered to retail, hospitality and leisure businesses.
Can businesses get a rates holiday AND a grant?
Yes. Businesses in the retail, hospitality and leisure sector can benefit from both. Cash grants of £25,000 are available to each hereditament with rateable value between £15,000 and £51,000 (in England), subject to a maximum grant of €800,000 per business. These hereditaments will also pay no rates for 2020-21.
A client is renting office space in a building. They pay rent but not rates. Presumably rates are included in rent, which are then paid by landlord. Would the client be eligible to the £10,000 grant?
The grants are given to the ratepayer, who would presumably be the landlord in this case. Unless the rateable value of the hereditament is less than £15,000 (in England) the landlord would not qualify for the grant. The landlord would in any case need to decide whether to pass on any grants received.
Does the business rates holiday apply to factories who are supplying retail?
No. The premises must be accessible to visiting members of the public.
Is there any grant support for businesses based out of co-working space/serviced office and therefore without rateable business premises?
The grants are given to the ratepayer, who would presumably be the landlord in this case. Unless the rateable value of the hereditament is less than £15,000 (in England) the landlord would not qualify for the grant. The landlord would in any case need to decide whether to pass on any grants received.
Do state aid rules apply to the business rate relief and grants?
Yes. The maximum amount of grant that can be claimed is €800,000. A state aid decision has not be made yet for the business rates holiday.
How does the relief relate to empty property relief being claimed for a similar period?
If empty property relief is already being claimed then the 100% discount for retail, leisure or hospitality will not increase the value of the relief in tax year 2020/21. However, the 100% discount is for 12 months, while empty property relief only lasts for 3 months for commercial premises. Equally if the local authority had been notified that the property was empty and unused between 1 January and 31 March 2020 then relief from the 2019/20 rates bill would be available for this period.
How is a company defined as being hospitality or leisure?

Local authorities have been provided with guidance on who qualifies for the extended retail discount. However, they have some discretion in how they interpret this.

If a business occupies premises under license and does not pay rates directly to the LA, how do they get the grant?
Grants are given to the ratepayer. It is possible that a business is listed as ratepayer, but makes payments through a managing agent or landlord. In this case the grant should be passed on to the business listed as ratepayer.
Is there any rates relief for an MOT centre/repairs garage?
Yes. This should qualify as retail premises.
My client runs a cafe but has been in negotiations with the council for several years over a lease, meaning she does not yet pay business rates and therefore not in receipt of small business rates relief. How can she access grants or help sooner other than waiting until June for the self employed assistance?
The guidance says that all 'hereditaments' eligible for small business rate relief should receive the grant. The business should approach the local authority at the soonest opportunity, as they will make the determination. Appeal is possible to the local government ombudsman, although clearly this would take some time.
We are a private members' club that has bars, restaurants and accommodation / private golf club which accepts public green fees / recreational coarse fishery. Will we be entitled to the business rates holiday?
This is likely to be a matter for the local authority to decide. The guidance says that premises must be accessible to visiting members of the public.
What is the position if your rateable value is below £12k so the business gets full rates relief?
Businesses eligible for small business rates relief, including taper relief up to a rateable value of £15,000 (in England), will receive the £10,000 cash grant.
Where is the list of eligible/non-eligible businesses for the business rates holiday and grants?
You can find the guidance here.
Would a sports club, eg, a rugby club, qualify for the rates holiday?
Yes. Sports grounds and clubs are intended to be included, as long as they are accessable to visiting members of the public.

Coronavirus Business Interruption Loan Scheme (CBILS)

Are subsidiaries within a group eligible for CBILS if the turnover of the subsidiary is less than £45m?

More than one company within the group can be considered for a CBILS facility but only if the consolidated group turnover does not exceed the £45 million annual turnover threshold. The qualifying period is 12 months preceding application.

Is it at an individual bank's discretion whether CBILS covers overdrafts?
CBILS supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities. So this appears to be this particular bank's policy.

Coronavirus Job Retention Scheme

An employee resigned at the beginning of March but has asked to come back and be furloughed. Can the employer make a claim for them?

If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme. This applies to employees that were made redundant or stopped working for you after 28 February, even if you do not re-employ them until after 19 March. This applies as long as the employee was on your payroll as at 28 February and had been notified to HMRC on an RTI submission on or before 28 February 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020 If an employee has had multiple employers over the past year, has only worked for one of them at any one time, and is being furloughed by their current employer, their former employer/s should not re-employ them, put them on furlough and claim for their wages through the scheme.

Can a furloughed member of staff volunteer to come in and assist/attend meetings etc?

A furloughed employee can take part in volunteer work, if it does not provide services to or generate revenue for, or on behalf of your organisation or a linked or associated organisation. Your organisation can agree to find furloughed employees new work or volunteering opportunities whilst on furlough if this is in line with public health guidance.

Can an employee be furloughed who is well but has to self-isolate because a member of their household has symptoms?
If your employee is on sick leave or self-isolating as a result of Coronavirus, they’ll be able to get Statutory Sick Pay, subject to other eligibility conditions applying. The Coronavirus Job Retention Scheme is not intended for short-term absences from work due to sickness, and there is a 3 week minimum furlough period.Short term illness/ self-isolation should not be a consideration in deciding whether to furlough an employee. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee.
Can an employer put on furlough an employee who says they cannot work because they have childcare problems?

Employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed, this would include looking after children. For further guidance on the Coronavirus Job Retention Scheme, and how employers can recover SSP, please see links:

Can an overseas employer of UK staff use furlough?
Any entity with a UK payroll can apply, including businesses, charities, recruitment agencies and public authorities.
Can apprentices go on furlough?
Apprentices can be furloughed in the same way as other employees and they can continue to train whist furloughed.
Can I apportion the £2500 limit for part of the month?
Yes. Grants will be prorated if your employee is only furloughed for part of a pay period.
Can I furlough some employees but not others? Are there any restrictions on furloughing employees? For instance: Employees serving notice; employees in disciplinary procedures; employees in probation; employees on gardening leave?

Employment law matters will arise for employers considering furloughing their employees and employers should seek guidance or advice as appropriate.  Employers will need to consider how to select employees for furlough leave (for instance, seeking volunteers in the first instance). Equality and discrimination laws apply in this context so, for instance, employees should not be selected for furlough leave on discriminatory criteria (for example age) except for where discrimination is justified under employment law. Collective consultation requirements may need consideration (broadly, where 20 or more employees are to be put on furlough leave and would be dismissed if they do not agree to resulting changes in terms of employment) . In most cases, furloughing will require the agreement of the employees (for example, because it involves a reduction in pay) and amendment of contracts of employment. We recommend that employers should be able to demonstrate they have used a fair and reasonable process to decide which employees to furlough, documented by a suitable audit trail.

Can my employer tell me I have to take holiday in the current situation?

Please be aware that this guidance is based on advice issued by ACAS in relation to using holiday. We are aware that this is an area the government are due to release further guidance on in the coming weeks but will ultimately be an employment law and contract issue. Employers have the right to tell employees and workers when to take holiday. If the employer decides to do this, they must tell staff at least twice as many days before as the amount of days they need people to take.

Can the employee be in furlough for 2 weeks, then come out of furlough to work, then go back into furlough?

Any employees you place on furlough must be furloughed for a minimum period of 3 consecutive weeks. When they return to work, they must be taken off furlough. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of 3 consecutive weeks.

Can we include shift pay, car allowances or overtime? Are tips included?
You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.
Do you have to lay off agency staff first before going down the furlough route?
Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts to be eligible for the Coronavirus Job Retention Scheme. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
How do bank holidays work when a member of staff is furloughed? If an employee is furloughed do they just receive 80% for bank holiday?

Please be aware that this guidance is based on advice issued by ACAS in relation to using holiday. We are aware that this is an area the government are due to release further guidance on in the coming weeks but will ultimately be an employment law and contract issue. Bank holidays are usually part of the legal minimum 5.6 weeks’ paid holiday.  Employees and workers must get their usual pay in full, for any holidays they take.  Employees and workers may still be required to use a day’s paid holiday for bank holidays, including when they’re furloughed. If bank holidays are given on top of the 5.6 week’s paid holiday, employees and workers should check their contract or talk to their employer about taking this holiday. If employees and workers cannot take bank holidays off due to coronavirus, they should use the holiday at a later date in their leave year.

How much can be claimed for an employee who is returning from maternity leave on basic statutory maternity pay?

Statutory leave includes maternity leave, paternity leave, shared parental leave, adoption leave, sick leave and parental bereavement leave. In line with other employees, claims for full or part time employees furloughed on return from statutory leave should be calculated against their salary, before tax, not the pay they received whilst on statutory leave.

How will HMRC identify whether some employees are receiving 80% gross and others receiving 100%?

The grant does not replace the normal payroll reporting process – these are two separate things. Payroll should be processed in the normal way in accordance with employment law. You should make your claim under the Coronavirus Job Retention Scheme using the amounts in your payroll. For the grant, you will need to calculate the amount you are claiming. HMRC reserves the right to audit all claims though so records should be maintained by the employer.  You should retain all records and calculations in respect of your claims.

I purchased a business on 1 March 2020 and all staff were TUPE'd over. Can I furlough the staff who have been TUPE’d over?

A new employer is eligible to claim under the Coronavirus Job Retention Scheme in respect of the employees of a previous business transferred after 19 March 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.

If a business has someone working a 5 day week but needs to reduce their hours to a 3 day week, will the business receive the 80% support from the government for the two days that the employee will no longer work?

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for the Coronavirus Job Retention Scheme. For further guidance on the Coronavirus Job Retention Scheme:

If employees are furloughed from April to June, can they claim for April to June or is this only for March to May currently?

This is a temporary scheme in place for four months starting from 1 March 2020, but it may be extended if necessary and employers can use this scheme anytime during this period.

If employees have salary sacrifice for employer pension contributions will HMRC pay the full amount of the employer pension contribution for which the pay is sacrificed?
No.The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary. Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the Coronavirus Job Retention Scheme. Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.
If someone is on maternity leave or is about to go on maternity leave, can they still be furloughed?

The normal rules for maternity and other forms of parental leave and pay apply. You can claim through the scheme for enhanced (earnings related) contractual pay for employees who qualify for:

  • Maternity Pay
  • Adoption Pay
  • Paternity Pay
  • Shared Parental Pay
Is it ok to do some training while on furlough?

Furloughed employees can engage in training, as long as in undertaking the training the employee does not provide services to, or generate revenue for, or on behalf of their organisation or a linked or associated organisation. Furloughed employees should be encouraged to undertake training. Where training is undertaken by furloughed employees, at the request of their employer, they are entitled to be paid at least their appropriate national minimum wage for this time. In most cases, the furlough payment of 80% of an employee’s regular wage, up to the value of £2,500, will provide sufficient monies to cover these training hours. However, where the time spent training attracts a minimum wage entitlement in excess of the furlough payment, employers will need to pay the additional wages (see National Minimum Wage considerations).

Must we increase salaries in line with the National Minimum Wage increase from 1st April?
Under the Coronavirus Job Retention Scheme you can claim for the 80% of the employee’s salary, as in their last pay period prior to 19 March 2020. Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW)/ Apprentices Minimum Wage (AMW) for the hours they are working or treated as working under minimum wage rules. This means that furloughed workers who are not working can be paid the lower of 80% of their salary or £2,500 even if, based on their usual working hours, this would be below their appropriate minimum wage. However, time spent training is treated as working time for the purposes of the minimum wage calculations and must be paid at the appropriate minimum wage, taking into account the increase in minimum wage rates from 1 April 2020. As such, employers will need to ensure that the furlough payment provides sufficient monies to cover these training hours. Where the furlough payment is less than the appropriate minimum wage entitlement for the training hours, the employer will need to pay the additional wages to ensure at least the appropriate minimum wage is paid for 100% of the training time.
Presumably a sole director/PAYE employee will need to produce a file note confirming furlough, rather than write a letter to himself?
Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
What about Directors duties during this time?

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

 

What happens if a staff member goes sick after they have been put on furlough?
Furloughed employee retain their statutory rights, including their right to Statutory Sick Pay. It is up to employers to decide whether to move these employees onto Statutory Sick Pay or to keep them on furlough, at their furloughed rate. If a furloughed employee who becomes sick is moved onto SSP, employers can no longer claim for the furloughed salary. Employers are required to pay SSP themselves, although may qualify for a rebate for up to 2 weeks of SSP. If employers keep the sick furloughed employee on the furloughed rate, they remain eligible to claim for these costs through the furloughed scheme.
What if an employee refuses furlough?

An employee does not have to accept furlough if offered, but the employer could then make the employee redundant instead using the usual employment law procedure.

What if we have sessional workers (eg, tutors) who wouldn’t normally work during this time?
This depends on the type of employment contract the sessional workers are under. Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts to be eligible for the grant.
When you notify an employee they are furloughed, can you back-date to when they stopped working? (assuming you didn't send the letter immediately)

Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to confirming their furloughed status.

Where do directors running an annual payroll stand?
As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned. Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

Grants

Are the support grants taxable?
Grants are generally taxable income. No exception has been annouced for these grants.
Are there any sectors not applicable for the SBRR £10k scheme?
No. It is available for all businesses that have hereditaments eligible for business rates.
What support is available to start-up small businesses, who may have little or no borrowings at present, but need to finance growth and sustain itself through this period? With or without existing EFG.
If they have premises they may benefit from the £10,000 cash grant. They can also access the furlough scheme if they have staff. Bank finance may be available through CBILS, although the business would need to evidence its viability.

PAYE Liability Deferral

Is PAYE payable monthly by companies deferred?

There is no automatic deferral of PAYE liabilities due to HMRC. However all businesses in financial distresses, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time to Pay Service. Please refer to the guidance for further details about HMRC’s Time to Pay scheme.

Self-Assessment Payment Deferral

For a taxpayer, paying self-assessment payments on account, but NOT self-employed, so perhaps in receipt of income from properties etc. would the July 2020 instalment of tax also be deferred to January 2021?

Because of coronavirus (COVID-19), you can delay making your second payment on account. If you choose to delay, you’ll have until 31 January 2021 to pay it. No penalties or interest for late payment will be charged on the deferred amount and no application is required. Please refer to the guidance for more information about paying your self assessment tax bill.

VAT Deferral Scheme

Does the VAT deferral scheme apply to payments on account or just quarterly payments? Surely, if VAT returns are made, the direct debit payment will be made according to the continuing mandate?

All payments of VAT to HMRC due between 20 March 2020 and 30 June 2020 can be deferred until 31 March 2021. This includes payment on account due in this period. Businesses can opt into the deferral scheme by simply not making VAT payments due in this period - they do not need to inform HMRC. Businesses that pay by Direct Debit should cancel this with their bank. This can normally be done online and should be done in plenty of time so HMRC does not attempt to automatically collect on receipt of their VAT return.