Although some agricultural businesses are managing to cope with the current disruption without too many difficulties, this is not the case across the board. In particular, potato farmers and dairy farmers have been hit hard and many farming businesses which have diversified (rental properties, wedding venues, retail outlets etc.) are also being severely impacted. On top of this, most farming businesses will have concerns over either potential disruption to supply chains or difficulties in sourcing labour as the crisis continues.
As most will be aware, there are now a number of government measures in place which are designed to support businesses through this challenging period. Detailed below is a summary of the key measures that are likely to be relevant to farming and rural businesses.
Self-Employment income support scheme
Self-employed farmers and rural business owners whose businesses have been affected by Covid-19 will be eligible for a grant where certain conditions are met. Broadly speaking, in order to qualify an individual’s usual annual trading profits will need to be less than £50,000 and these profits will need to be their main source of income. The grant will cover March, April and May 2020 and will be based on 80% of average monthly trading profit over the last three tax years, capped at £2,500 per month. HMRC has not yet contacted businesses owners who are eligible but have indicated that the online claim system is expected to be available from mid-May and payments should start being made from early June. The claim will be made by the individual rather than the business itself so each partner in a farming partnership will be assessed separately.
Job Retention Scheme
This scheme, which is currently set to run until 30 June 2020, enables businesses to claim a grant of 80% of the normal monthly wages, up to a cap of £2,500 per month, for any employee who is furloughed. Businesses can furlough an employee if Covid-19 has resulted in there being no work for them and one of the rules of the scheme is that the employee cannot undertake any work for the business whilst on furlough. Businesses do not have to top the wages up to 100%, unless they wish to do so. The purpose of the scheme is to help businesses retain their employees during the period where there is no work for them. Although this scheme will not be a huge help to many traditional farming businesses, it is being utilised by those with diversified operations. HMRC are now accepting claims and making payments and our payroll team have already assisted a number of our clients with the process. It is recommended that any business seeking to furlough employees takes appropriate legal advice in respect of the process.
Business Rates and Cash Grants
There are cash grants of up to £25,000 available to businesses in the retail, hospitality and leisure sectors with a rateable value under £51,000. Businesses in these sectors will also benefit from a suspension of Business Rates (irrespective of their size). There are also grants of £10,000 available to all businesses in receipt of either Small Business Rates Relief or Rural Rates Relief. Farm diversifications are potentially eligible for these grants and a number of our clients have already been contacted by their local authorities about claiming them.
Income Tax payments on accounts that are usually due for payment by 31 July 2020 are automatically deferred until 31 January 2021 and VAT payments due between 20 March 2020 and 30 June 2020 can be deferred until 31 March 2021 (please note that the VAT direct debit must be cancelled to take advantage of this and the VAT Return should still be filed). VAT repayments due from HMRC will be paid as normal, which is good news for farmers. In addition to these deferrals, HMRC can also be contacted regarding time to pay arrangements so it may be possible to defer Corporation Tax and PAYE if necessary.
There are a number of other measures available, including Coronavirus Business Interruption loans and Bounce Back loans. Further information on these can be found on our website.
Finally, please remain vigilant – many of these claims are unfamiliar and made online so there are unfortunately fraudsters out there looking to take advantage of this.