A lot of the UK wide measures introduced to support businesses during the Coronavirus pandemic will be of use to those with Furnished Holiday Lets (FHL). We have recently highlighted these on an article for those in the hospitality, leisure and tourism sectors. Some will clearly be more useful than others for FHL owners and this article will explore that point further.
Grant funding
In England, a cash grant of £25,000 is available for those with business property that has a rate-able value of between £15,000 and £51,000. There are also cash grants of £10,000 for businesses receiving Small Business Rate Relief (up to a rate-able value of £15,000). Funding is being providing by local authorities. These grants have now started to be paid out.
In Scotland, retail, hospitality and leisure businesses with a rateable value between £18,001 and £51,000 will be able to apply for a one-off grant of £25,000. A one-off grant of £10,000 will also be available to small businesses that get Small Business Bonus Scheme relief and Rural Relief. Self-catering accommodation and caravans are eligible for a grant if they are a primary source of income for the ratepayer (one third or more), and were let out for 140 days or more in 2019-20.
Additional support was also announced by the Scottish Government whereby they are to extend the Small Business Grant scheme to ensure that, in addition to a 100% grant on the first property, small business rate payers will be eligible to a 75% grant on all subsequent properties. Although not exactly comparable with the rest of the UK where 100% of the grant per property remains available, it is a welcome step in the right direction.
These grants are in addition to the 12-month business rates holiday for hospitality or leisure business.
Self Employed Income Support Scheme
The new Self Employed Income Support Scheme will be available to the Self Employed as a taxable grant of 80% of their earnings, based on their average earnings over the last three financial years, up to £2,500 per month. This scheme will be open for at least three months and includes members of partnerships. Unlike the employed scheme, the Self-Employed can continue to work under this scheme too. More information is available here.
In Scotland, a further £100 million fund is also being made available to protect self-employed people and viable micro and SME businesses in distress due to Coronavirus. This fund will be channelled through local authorities and enterprise agencies to target newly self-employed people and businesses that are ineligible for other Scottish Government or UK Government schemes.
The main issue for FHL owners is whether or not they will actually qualify for this support. If, as we suspect, the scheme will be designed to take the information from the self-employment pages of self-assessment tax returns and not the FHL boxes on the property pages, FHL owners are unlikely to qualify. We are awaiting further clarification on this matter.
Coronavirus Job retention Scheme
A new Coronavirus Job retention Scheme has been introduced for all UK employers to continue paying part of employees’ salaries for those employees that would otherwise have been laid off during the crisis. HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. Click here for further information, including a Furlough template letter to give to those staff members you need to Furlough.
Care should be taken as you do still have to consult with your employee and they need to agree to be furloughed, although it does depend on your contracts of employment. The scheme is designed to allow employers to hold on to their staff rather than lay them off and it’s unlikely that a member of staff member would not accept this option if the alternative is to be laid off.
Deferral of tax payments
VAT and Income Tax payment deferral is now available. VAT payments will be deferred for 3 months. Income Tax payments due in July 2020 under Self-Assessment will be deferred to January 2021. For VAT, the deferral will apply from 20 March 2020 until 30 June 2020 and all UK businesses are eligible. This is automatic and no applications are required. VAT refunds and reclaims will be paid as normal. No penalties or interest for late payment will be charged in the deferral period.
The VAT deferral may not be that beneficial for those VAT registered FHL owners if they have made little income in the lead up to the pandemic and are now making nothing. Using HMRC scaled up time to pay arrangements for any PAYE or Corporation Tax liabilities due will still be of benefit to some of course.
Qualifying as an FHL
Due to the impact of the Coronavirus pandemic it’s quite possible that some FHL owners will not meet the occupancy day count tests required to qualify as a furnished holiday letting and the tax advantages that brings. There is however the option to make use of the period of grace election. To make an election, you must be able to show that you had a genuine intention to let the property in the year. For example, where you have marketed a property to the same or a greater level than in successful years, or where the lettings are cancelled due to unforeseen circumstances, such as the Coronavirus.
Contact us
Understandably you will be very concerned about how this pandemic will affect your FHL income and the long term impact of this. Please remember as your trusted adviser, we're with you and are here to help with any immediate planning or questions you might have.
If you'd like to speak with one of our advisers, please call 0808 144 5575 or email covidhelp@armstrongwatson.co.uk.
