The UK government has introduced a number of support packages to aid businesses affected by the Coronavirus pandemic. Provided they meet the eligibility criteria agri-business owners may be able to avail of assistance through these unprecedented times.
These financial support schemes that could be relevant to your farm business are detailed out below by CAFRE Business Technologist Allen Hall and Dairy Advisers Alan Hopps and Michael Verner.
1. Self Employed Income Support scheme
This scheme provides direct financial support to self-employed individuals including farmers who are affected financially by Coronavirus. This is in the form of a taxable grant worth 80 percent of your trading profits, capped at £2,500 per month. It will be paid for three months, backdated to March 2020, in the form of a lump sum in June.
The grant is only open to those with total average trading profit over the past three years below £50,000 and where those earnings account for more than half of their total income. For those farmers claiming farmers’ averaging relief, HMRC will use the amount of profit before the impact of the averaging claims to work out, if you can claim the grant and how much grant you will receive.
Farmers can avail of this scheme if you’re a self-employed individual or a member of a partnership and you:
• Have submitted your Self-Assessment tax return for the tax year 2018 to 2019.
• Traded in the tax year 2019 to 2020.
• Are trading when you apply, or would be except for coronavirus.
• Intend to continue to trade in the tax year 2020 to 2021.
• Have lost trading profits due to coronavirus.
Applicants will need to confirm to HMRC that their business has been adversely affected by coronavirus.
HMRC currently plan to contact self-employed individuals in mid-May 2020. They will use existing information to check potential eligibility and invite applications once the scheme is operational. The grant will be subject to Income Tax and National Insurance Contributions but does not need to be repaid, however, eligibility conditions do apply. Those who pay themselves a salary and dividends through their own business are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.
2. Income Tax Deferral for the Self-Employed
Support is being provided to businesses during the coronavirus pandemic by deferring self-assessment for the self-employed for six months. This applies to the second payment on account for 2019/20 due on July 31, 2020. This is now deferred until January 31, 2021, and no interest or penalties will be charged during the deferral period. No application is required for this as it is mandated automatically.
HMRC has also scaled up its Time to Pay arrangement, which is a method of spreading your business tax payments over a longer period of time in a more affordable way. It is available to all businesses and individuals who are in temporary financial distress as a result of Coronavirus and have outstanding tax liabilities.
To discuss any related issues you can contact the HMRC Coronavirus Helpline on 0800 024 1222.
3. Coronavirus Job Retention Scheme
If you cannot maintain your current workforce because your operations have been severely affected by coronavirus (COVID-19), businesses can furlough employees and apply for a grant that covers 80 percent of their usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance Contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay.
This is a temporary scheme that was initially set in place for three months starting from 1 March 2020, but it may be extended if necessary and employers can use this scheme anytime during this period. It is designed to help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees.
To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation or any linked or associated organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to the usual income tax and other deductions.
The scheme can be applied for, on the GOV.UK website. You will need a Government Gateway ID and password and an active PAYE enrolment to make a claim.
4. Coronavirus Business Interruption Loan scheme
This scheme involves loans up to £5 million guaranteed by government over a period of up to six years. Businesses can access the first 12 months of that finance interest-free and fee-free, as the government will cover the first 12 months of interest payments and any lender charges.
There are a number of eligibility criteria that need to be met to avail of this scheme. These include:
• Be UK-based in its business activity.
• Your application must be for business purposes and the business must have been adversely impacted by the Coronavirus (COVID-19).
• Have an annual turnover of no more than £45 million.
• Your business must generate more than 50 percent of its turnover from trading activity.
• Have a borrowing proposal which the lender would consider viable, were it not for the COVID-19 pandemic and believes will enable you to trade out of any short-term to medium-term difficulty.
To borrow £30,000 or more, confirmation is needed that the business wasn’t classed as a business in difficulty on December 31, 2019.
The full rules of the Scheme and the list of accredited lenders that applications can be made through is available on the British Business Bank website.
The following link gives a step by step guide through the application process: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/for-businesses-and-advisors/
5. Retail, Hospitality, Tourism & Leisure scheme
This grant may be relevant to farm businesses who have diversified. This scheme has been provided to support businesses that are currently experiencing financial hardship as a result of the pandemic. Businesses in the tourism, hospitality, leisure and retail sectors will receive £25,000 if they have a rateable value of between £15,001 and £51,000 and comply with the remainder of eligibility criteria. Registration is now open for businesses to apply with the closing date for scheme registrations on May 20, 2020.
6. Bounce Back Loan Scheme
The Bounce Back Loan scheme is designed to help small and medium-sized businesses affected by Coronavirus to borrow between £2,000 and £50,000. Loan terms can be up to 6 years and will be delivered by accredited lenders. The government will guarantee 100% of the loan and again businesses can access the first 12 months of that finance interest-free and fee-free. No repayments will be due during the first 12 months. It has been stated that the government will work with lenders to agree on a low rate of interest for the remaining period of the loan.
Again, there are a number of eligibility criteria which must be met in order to benefit from this scheme:
• The business is based in the UK.
• The business has been negatively affected by coronavirus.
• The business wasn’t an ‘undertaking in difficulty’ on December 31, 2019.
The scheme was launched on May 4, 2020, further details are available on
https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan
It is important to note that applications cannot be made if already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS). Full details of all schemes in relation to eligibility criteria, requirements and how to apply can be found on the HMRC website, British Business Bank website and NI Business Info website.
Now more than ever financial planning and forecasting for your farm business are key. It is therefore important to seek professional advice from your accountant. CAFRE advisers are also available for technical support with contact details available through the attached website link https://www.cafre.ac.uk/covid-19/support-for-producers-growers-and-processors/
CAFRE senior advisers Ciaran Hamill and Alan Hopps have produced a very useful business management video in conjunction with Cormac McKervey from Ulster Bank on this topic and more on CAFREtv. The video can be viewed below.
