COVID-19 financial support scenarios UK (October update)

Background

The Professional Golfers’ Association is aware that self-employed PGA Professionals use a variety of business models in order to deliver their services. Almost every PGA Professional is currently affected by business interruption due to the COVID-19 emergency, while government advice and support is evolving almost daily.

Against this background, the Association is keen to provide some clarity to members on what government support is currently available under a number of scenarios, depending on how their individual businesses are constituted, and how this support might be accessed. This information is for guidance only. It is not intended to be prescriptive and legal and accounting/tax advice should be sought where appropriate.

These scenarios are relevant as of October 2020.

When government support was announced at the start of the pandemic, he was able to take advantage of the Self Employment Income Support Scheme (“SEISS”) since his trading profits for the years 2016/17, 2017/18 and 2018/19 represented more than 50% of his total income. His average trading profit per annum for these three years was £40,000.

Joe was also able to furlough his qualified Assistant, an employee, under the terms of the Coronavirus Job Retention Scheme.

When golf restarted, he worked alone for the first few weeks to provide support to his Club in whatever ways he could while playing opportunities were restricted to two and then three balls, and to club members only. As visitors started back, four balls were reintroduced and interest in playing golf increased, he brought his Assistant back from furlough so that the right level of service could be provided.

Joe and his Assistant worked many hours in the next few months in an effort to claw back some of the business that was lost during lockdown, but for the last few weeks a Tier 2 local lockdown has been in place, visitor numbers have dried up and the footfall at the Club and in the shop has dwindled as a direct consequence of coronavirus restrictions.

Because Joe had previously been eligible for the SEISS first and second grants, and is actively trading, albeit at a reduced level, he will be in a position to claim the third SEISS grant which has become available under the Self Employment Income Support Scheme Grant Extension which covers the months of November 2020 to January 2021.

Joe is therefore likely to be entitled to the third taxable SEISS grant of up to 40% of his monthly average trading profit. His average monthly profit is £3,333 (40% of which is £1,333) so Joe’s grant will be restricted to £3,750 in total for the three months to January 31, 2021, in line with the government's cap.

Joe is also likely to be able to take advantage of the fourth SEISS grant which will cover the period February to April 2021.

He does not need to contact HMRC at this stage to claim the third grant, since information on claiming and applying for the third and fourth grants will be advised in the coming weeks.

As with the first and second SEISS grants, this one will form part of his taxable income for tax year 2020/21, is also subject to National Insurance, and will need to be declared in his self-assessment tax return which is due to be submitted to HMRC by January 31, 2022.
 
Joe has also been giving some consideration to whether he needs his Assistant to be working full time given the current lockdown restrictions, and has concluded that, while he needs some support, there is not sufficient work to keep the Assistant busy for his full contracted 35 hours a week.

His first idea was to put the Assistant back on furlough, but that option is not available to him, with the cessation of the Job Retention Scheme at the end of October, and he was becoming concerned that he may have to consider making the Assistant's post redundant.

After seeking advice, he became aware of the new government support, the Job Support Scheme (“JSS”), which, although not as generous as the furlough scheme, could potentially be used to protect jobs in businesses like his which can operate safely but are facing a lower demand in the winter months due to COVID-19. This scheme starts on November 1, 2020 and requires a blend of the employee working reduced hours, and both the employer and the government paying a proportion of wages for the hours not worked by the Assistant.

Because his local area is currently in tier two, his business can operate safely, albeit at a reduced level, and he meets the other criteria for being enrolled for PAYE Online and having a UK bank account, Joe could be entitled to claim “JSS Open” in respect of his Assistant.

Following discussions, they agreed, in writing, that the Assistant would work for 40% of his contracted hours for as long as the tier two local lockdown continues to impact the business.

The Assistant normally works five days a week and earns £1,400 per month. When he works 40% of his hours, Joe will pay him £560 per month, and for the 60% of the hours he is not working, he will be paid 66.67% of his wages for those hours, a further £560. His monthly pay will therefore be £1,120 or 80% of his normal wages.

Joe will pay his Assistant in the normal way, and claim a government grant of £518 (61.67% of the hour not worked ). As the employer, he is required to pay the balance of £42 (5% of hours not worked), along with the Employers’ NICs and auto enrolment pension contribution on the £42.

Joe would like to top his Assistant’s earnings up to his normal level, but is unsure whether that will be possible given his current level of trading and cash flow. The Assistant is, however, relieved to have his employment retained and appreciates the support which is being provided.

In summary, at this time it seems likely that Joe will be able to take advantage of the third SEISS grant and keep his Assistant on the payroll for the coming months through grant funding from the JSS Open arrangements.

He took a salary of £35,000 from the business to give him a secure regular income, sometimes topping it up, as he felt necessary, by declaring a small dividend should cash flow and profitability allow.

Michael provides a retail service and attracts the normal retainer and commission mix, while employing a qualified assistant professional and a trainee professional who assist him in providing the services.

During lockdown, he furloughed his staff in order to keep them on the payroll ready to restart trading when restrictions allowed. In addition, as a salaried employee of his own company, he himself was also able to be furloughed under the terms of the Coronavirus Job Retention Scheme, returning to work when golf was given the green light to start up in mid-May.

Michael’s golf club is now in a tier three local lockdown area, which is in the 'very high' category in England. While his club members and more local visitors can continue to play regularly, in compliance with the 'rule of six', he is able to keep his shop open but the level of his income and activity has been badly affected by the absence of both  members and visitors from outside his local area because travel into and out of tier three areas is discouraged by government.

Michael does not think that he will be able to keep both members of staff fully employed as the current restrictions take hold, but has contacted his accountant for advice on what government support he could take advantage of to protect their jobs since his business can operate safely but faces a lower demand in the winter months due to COVID19. He was pointed in the direction of the Job Support Scheme (“JSS””) which starts on November 1, 2020 and requires a blend of the employee working reduced hours, and both the employer and the government paying a proportion of wages for the hours not worked by employees.

Because non-essential shops remain open no matter which of the three tiers of local lockdown in England they fall under, Michael is unable to claim the Job Support Scheme (“JSS””) Closed grant.

However, because his business is being adversely impacted by the coronavirus pandemic, he can make a claim for the JSS Open grant in the event that he agrees reduced hours of work with his employees. Each employee will need to work a minimum of 20% of their normal hours for Michael to be eligible for the grant, which becomes available with effect from November 1, 2020.

Michael considered how best to staff the business in the winter months, taking into consideration the negative impact of the pandemic, and reached agreement in writing with the staff that he would work for 40% of his hours, the qualified assistant for 60% of his and the trainee for 50% of his normal hours. The assistant has been taking on more responsibilities in the past year so Michael is happy to give him the higher share of hours to maintain as high an income as possible.

The effect on the business and the staff would be as follows:

Michael should be in a position to secure grant income of £1,720 per month while the staff are working reduced hours, out of a total salary cost for the reduced hours of £4,335 per month. He has been able to balance this with maintaining salary payments of 80% and over for all employees, and he is happy that he has sufficient cash in the business to pay the staff in the normal way, prior to being able to claim the grant when the government portal for processing claims effective from November 1 becomes available on December 8, 2020.

This government support, following on from the furlough scheme, is much appreciated by Michael and his staff, and Michael may also be in the position to further support by way of the Job Retention Bonus, if his staff are continuously employed until January 31, 2021 and are paid a minimum of £1,560 gross (£520 per month) over the three month period from November 2020 to January 2021.
To qualify for this bonus of £1,000 per employee, staff will need to have been paid in each of the following three time periods:

• November 6 to December 5, 2020;
• December 6, 2020 to January 5, 2021; and
• January 6 – February 5, 2021.

Since Michael’s staff are paid on the 28th of each month, these criteria should be met and he should be eligible for the Job Retention Bonus. Claims for this support can be made between February 15 and March 31, 2021.