Practical Guidance Note for the rural and farming community #5
COVID-19: Practical guidance for our rural and farming clients #5
As we write the fifth edition in our series of rural focused client updates, the sun is shining and farmers are busy outside, but though this industry may be more insulated from the issues caused by COVID-19 than other sectors, it’s by no mean immune. The well-publicised short-term challenges in the dairy sector are an obvious example of this.
9th April 2020
Andrew Vickery See profile
We have been dealing with many client questions on COVID-19 and planning for the future. Queries include:
- What if my milk/meat/crop buyer stopped paying?
- What if dairy/beef/sheep faces a drop in price?
- I have a diversification business that now has to close for example wedding venue, tourism etc.
- Tenants cannot pay for letting our offices/units.
We are currently organising an online, live questions and answer session with our rural specialist accountants to explore these questions and the implications of COVID-19 on your finances and farm business strategy. Full details will be sent out shortly, but in the meantime, if you would like to register your interest for this and submit a question please email firstname.lastname@example.org.
A number of changes affecting allowances and payroll for employers came into effect from 6 April, one of the most complex being the revisions to Employment Allowance (EA) itself. This could be particularly important as, under the new rules, we are no longer able to automatically claim the allowance for any client.
Learn more about this and other payroll need-to-knows here.
As the maximum threshold for the agricultural sector is only €20,000 for a three year period, if you are receiving the full EA of £3,000 per annum then, depending on the exchange rate, you may only have a balance of circa £8,000 to cover any other funding which is considered state aid. The Department for Environment, Food and Rural Affairs (DEFRA) State Aid Unit has confirmed that the following grants do not count towards the de-minimis limit:
- Water Environment Grant (WEG)
- Basic Payment Scheme
- Countryside Stewardship
- Countryside Productivity
- RDP LEADER grants
- EU/RDP growth program grants.
The change to this scheme should make it easier for firms to access loans going forward and will also mean more businesses are able to access financial support during lockdown. For further information about the basic principles of the scheme, along with the main changes and links to accessing the grants via each county council visit our article here.
It’s worth reiterating that the loans are not interest free, but that the interest is paid by the government for the first year.
Also, these loans are not to be used to prop up businesses that would otherwise be struggling even without the effect of COVID-19. We have instances of banks asking for evidence of a business cash flow from farming clients with COVID-19 in mind but also wanting to compare that against the business’s cash flow in a normal business environment.
The governments updated guidance from 4 April provides clarity on the Job Retention Scheme due to go live on Monday 20 April and introduces some new provisions altogether.
- Confirms that employees who were on payroll on 28 February but have since left that job for whatever reason (i.e. not just redundancy) can be re-employed by their old employer and placed on furlough
- Confirms that employees can start work for a new employer while furloughed
- Provides clarity on the types of payments which can be included when calculating wage costs (including compulsory commission but not discretionary commission, discretionary bonuses or non-monetary benefits)
- Provides clarity on the types of individuals who will be eligible to be furloughed
- Confirms that employees can be furloughed multiple times, provided each furlough period is for a minimum of three consecutive weeks.
Generally, there is enough work within the industry to negate the furloughing of staff except for those who have diversified into hospitality etc. However, we have seen instances of dairy farmers looking to reduce to once a day milking and furloughing staff thereon. If you are considering this, speak to your Old Mill adviser to discuss your options.
You can also visit the government website here for full guidance.
For information on how to claim for your employees’ wages through the Coronavirus Job Retention Scheme, click here.
We have reported previously that HMRC will pay a taxable grant to self-employed individuals and partners equivalent to 80% of their average trading profits for three months, capped at £2,500 per month. Full details on how to qualify are here.
And remember that if you have not submitted your 2018/19 tax return, you have until 23 April 2020 to submit it in order to qualify for the grant. Penalties for late filing and late payment of tax will apply as normal. Please contact your Old Mill adviser if you need help facilitating this. As ever, we are here to help.