Coronavirus Grants 2.0 - Finding Your Exit - Small Businesses

Two and half months after his first announcement on government help for businesses, on Friday the Chancellor amended and extended the self employed (SEISS) and employee (CJRS) grant schemes to reflect the anticipated gradual exit from the Coronavirus lockdown.

Apart from using the same £2,500 monthly maximum, the two schemes are very different with the self employed now compensated for a maximum of 6 months and employees a maximum of 8 months. This perhaps reflects the fact that the self employed can work as much as possible, but employees cannot work at all or, more likely, the government would prefer employers to take more time to make decisions about redundancies.

What do I need to know?

Self Employed (SEISS)

The current version SEISS 1.0 closes on 13 July 2020 with the new version SEISS 2.0 opening in August 2020.

The maximum drops from £2,500 per month to £2,187.50 per month, rounded up to a 3 month lump sum of £6,570 being 70% of £3,125 or your average profits, as currently calculated, if lower.

You can claim both grants or only one: SEISS 2.0 is NOT dependent on claiming SEISS 1.0.

Presumably if you were adversely affected early on, say in April, where your profits dropped in April, but they have since picked up, you can’t claim SEISS 2.0, but this isn’t yet clear.

Coronavirus Job Retention Scheme (CJRS)

June - carries on as now, except any employee who needs to be in a claim from July, must be in a claim in June. With the 3 week minimum, this is an effective last date for newly furloughed employees of 10 June. All claims for June (and presumably earlier) must be made by 31 July.

July - carries on as now, except employers can choose not to claim for any hours/days employees work paying them their full pay as before the crisis.  

This could be beneficial for shareholder-directors who may be able to generate good profit for their limited companies in a couple of days but pay themselves only their usual small salary.

August – as July, except employers must pay any employer’s national insurance (NI) and pension contributions on furloughed pay.

September – as August, except the government grant to the employer is 70% of pay up to a maximum of 70% of £3,125 = £2,187.50 adjusted for any hours/days worked.

October – as September, except 70% is now 60%, being a maximum 60% of £3,125 = £1,875 adjusted for any hours/days worked.

What are the figures for shareholder-directors who can’t work?

Taking the typical reference salary of £719, the £575.20 current furlough claim will change as follows:

• June £575.20
• July £575.20
• August £575.20 (no NI or pension)
• September £503.30
• October £431.40

Unfortunately, a dividend replacement scheme for shareholder-directors wasn't announced, with the Chancellor reminding us to use other measures such as business bounceback loans, VAT deferral and income tax deferral. HMRC is also being helpful where companies ask to defer corporation tax under general time to pay provisions.

Further details on both schemes will be available on 12 June. In the meantime, businesses are still working their way through this, looking for their way out.

Please ask your usual On The Spot contact for further assistance.