General issues to consider with coronavirus aid and funding

Individuals who have previously stopped claiming child benefit due to income being over £50k may wish to consider reinstating a claim. Whilst they may have to pay this back through self-assessment, the immediate extra cash may just help.

Written on April 6, 2020 by Xeinadin Group

Directors of their own companies on small salaries/dividend remuneration strategies need to be careful about claiming SSP for themselves during the current pandemic as it could have auto-enrolment pension implications. With one-man band companies operating as above they will likely have been classed as “non-employers” for autoenrolment purposes thus avoiding the obligation. A claim for SSP runs the risk of creating an implied contract of employment which could leave you in breach of auto-enrolment obligations.

An application for universal credit usually means that HMRC is released from any existing time-to-pay arrangement and the tax debt is transferred to The Department for Work and Pensions. The tax debt is then reduced via a reduction in universal credit payments. It is hoped, but by no means certain, that this policy isn’t enforced during the current pandemic, but nothing has come out yet to say the position will alter.

VAT Error Correction – HMRC will temporarily accept Error Correction Notices by email. Completed VAT 652s should be sent to: [email protected]. The email inbox should only be used to submit VAT Error Correction Notices (VAT652) and is not for general use.

Government Help and State Aid Issues: The EU state aid rules are complex but, in essence, they are designed to prevent member states introducing measures which may otherwise distort competition within the single market. Broadly, a measure will constitute state aid if it is an advantage granted by a member state on a selective basis that could distort competition and trade in the EU. That includes grants, loans or tax breaks only available to businesses of a certain size, or to certain sectors or industries. Some of the current Covid-aid fall under the state aid banner with the following implications.

Could impact on the availability of the employment allowance if sufficient State Aid has been received in the previous three years (very broadly speaking 200,000 euros – although lower levels apply to certain business sectors).

  • Could turn an SME R&D claim into an RDEC claim. However, this can only be in point if the receipt of Covid related funds is earmarked for an R&D project. For example, payment of furloughed wages shouldn’t impact on a claim as those wages cannot be said to be R&D wages as the relevant employees shouldn’t be working. Receipt of a Corona Virus Business Interruption Loan that relates directly to an R&D project will prohibit an SME claim and a move over to the less favourable RDEC scheme.

Where possible any Covid-aid received from the Government should be earmarked as for “general business use” as opposed to for a specific purpose.

  • SEIS funding could also be restricted through receipt of the various Covid-aid packages out there.

The above are just a few examples, and usually when any sort of tax break that requires State Aid considerations, there are questions around this on the relevant application.

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