With insolvency on the rise due to the COVID pandemic-related lockdowns in the UK, it is important for businesses to do everything possible to keep cash flow stable. It is estimated that around 23% of insolvencies in the UK are due to late payments causing cash flow problems. This will only get worse if not addressed, especially after the events of this year. Read our latest article below to find out the latest on incoming legislation...
Could you be eligible?
Eligibility is the most important factor. If you were not eligible for the first and second rounds of funding, you will not be eligible for the third round and need not apply. However, if you are eligible, you can still apply even if you did not make a claim during the first and second rounds of funding.
The third round of funding is for those impacted by coronavirus from 1st November 2020 onwards. This could be a new impact or issues which have continued from earlier. You are expected to make an honest assessment as to whether coronavirus will cause a significant reduction in profits.
How much could you be eligible for?
Similar to the furlough scheme put in place for employees, the grant is calculated at 80% of your average monthly profits from trading. It is taxable and capped at £7,500 in total. If approved, you will receive three months' worth in one lump sum. The grant does not require repayment, but it must be reported as taxable income on your 2020-21 self-assessment tax return.
Only those who are self-employed or working as part of a partnership can claim. The grant is not open to limited companies or those trading through a trust. You must also have been trading during the two tax years to 5th April 2019 and 5th April 2020 and you must have submitted your 2018-19 tax return by 23rd April 2020.
In order to be eligible for the grant, you must be able to demonstrate that you are either continuing to trade but have reduced demand due to the coronavirus, or that the coronavirus has meant you need to stop trading temporarily. You must also make declarations that you will continue to trade either at reduced demand, or once you are able to do so again after ceasing temporarily.
You must also declare that you have reasonable belief your profits will be significantly reduced, and you should collate evidence to support this. The evidence should show how coronavirus has impacted your business and could be in any format which shows this appropriately.
HMRC will not decide whether your profits will be significantly reduced as a result of the coronavirus, this is up to you since you know your business and its wider context better than anyone else. However, you must still provide evidence to support your claim since you are expected to show that you have reasonable belief of a negative impact on your profits. You are not required to take previous income grants into account when considering your profits and deciding whether you reasonably believe that they will be significantly reduced. HMRC has some examples on its website to help with your decision.
Could your application still be denied?
Certain circumstances can affect your eligibility, and these are listed on the HMRC website. Generally, your eligibility may be affected if you have received payments from other schemes or if you submitted any returns late. You can also check how your circumstances might affect your eligibility on the HMRC website. Once you have made your checks and gathered your evidence, you can claim for the third round of grant online. You must claim by 29th January 2021.
A fourth grant will be made available for the period from February 2021 to April 2021 and further details will follow in due course. As with the third round, if you have been eligible for earlier rounds of funding you are likely to be eligible for this new fourth round, if your business continues to be impacted by coronavirus.
We can support you!
We understand the difficulties businesses are facing during the pandemic, and have invaluable knowlege to help support you. Get in touch with us today and let us help you and your business during these difficult times. Contact our Director, Nick Bonnello, directly on 0115 964 8860 or email him at email@example.com to find out how we can help you across all areas of your business.
The views provided in this article are for general information purposes only. Nothing in this article represents advice of any nature whatsoever. Accordingly, RWB CA Limited does not accept any liability or responsibility for the information contained in this article or any decision or other action that may be taken in reliance upon the information contained within it. RWB CA Limited accepts no responsibility for any errors of fact or opinion and assumes no obligation to provide you with any changes to its assumptions.