The government has announced a package of financial measures to support organisations, including charities, to pay wages, rent, tax and finance repayments.
Here we briefly consider the relevant options available to charities seeking assistance financial assistance during the COVID-19 crisis.
Any employer can apply to HMRC for a grant to cover most of the wages of any worker who remains on payroll but are temporarily not working (furloughed) under the Coronavirus Job Retention Scheme. The government will reimburse employers up to 80% of a worker’s basic pay, up to a maximum of £2,500 per worker each month.
Once the legislation has been passed, small-medium sized businesses and employers can also reclaim up to 2 weeks of statutory sick pay (SSP) paid for sickness absence due to COVID-19. It is important that employers record staff absences and payments of SSP.
Further details of the Furlough Scheme can be found here. For additional information on coronavirus employment measures please take a look at this article, written by Geldards’ employment team.
CASH FLOW PROTECTIONS
UK VAT registered businesses can defer VAT bills incurred from 20th March 2020 to 30th June 2020, until the end of the next tax year. Income Tax payments due in July 2020 under the self-assessment system may be deferred until January 2021. Both measures are automatic, there is no necessary action for your charity to take.
The Coronavirus Business Interruption Loan Scheme can also offer support for small-medium sized businesses with a loan of up to £5 million for up to 6 years. To access the scheme, applications can be sent online where available to one of the 40 accredited lenders.
Further details on the Scheme and relevant legal considerations can be found here.
Tenants who cannot pay their rent because of COVID-19 will be protected from eviction once the Coronavirus Bill receives Royal Assent. This is not a rental holiday; all tenants will still be liable for the rent.
The government will be implementing payment holidays of up to 3 months for those struggling to pay their mortgage. However, organisations must make this arrangement directly with their lender and cannot simply stop making mortgage repayments.
If your charity runs a subsidiary company that pays business rates and operates in the retail or hospitality and leisure sectors, that the subsidiary company may be eligible for a business rates holiday for the 2020-2021 tax year. The company may also be able to claim a cash grant. Your local authority should contact you if you are eligible for the cash grant.
ACTION THAT TRUSTEES CAN TAKE NOW
At this time, trustees may wish to consider taking the following practical steps where necessary:
- Consult your governing document for guidance on what powers the trustees have before making any decisions.
- Focus on cash flow management
- Know what your fixed costs are and when you will need to pay them
- Speak to your utilities and insurance providers or review their website to see if there are any measures in place during the coronavirus pandemic.
- If you are receiving funding, submit any required reports on time to make sure that you receive future instalments on time.
- Talk to your bank and see if they will offer you an overdraft facility (even if you don’t need one already).
- If you have loan repayments, speak to the lender about delaying the capital repayment.
- Implement a recruitment freeze on all vacant posts.
- Charities may be eligible to receive support with their tax affairs through HMRC’s Time to Pay service.
- If your charity’s annual return is due you can email the Charity Commission to request an extension at firstname.lastname@example.org.
- Speak to your existing funders about the impact of potentially having to cancel or delay certain project activities and discuss how they can support the charity during this time.
All finance-related decisions should be taken by the trustees collectively, and significant decisions and action points noted in writing. Information on holding charity meetings during the COVID-19 pandemic can be found here.
If you wish to discuss any legal implications for your charity, please contact Harriet Morgan.
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