How has COVID-19 affected your business?

It may sound like an obvious question, especially if you are in the retail of hospitality sector, however it is important to document the impact of Covid-19 on your business.

Below we will discuss why it is important and the type of information you may want to record.

The need for documentation

Many businesses will have made use of the government support offered during the Coronavirus pandemic, be it in the form of the Coronavirus Job Retention Scheme (CJRS), claiming statutory sick pay (SSP), the Self-Employment Income Support Scheme (SISS) or a government grant.

Sadly, there will be unscrupulous people trying to exploit the support on offer and therefore we can expect that HMRC will review and potentially challenge some claims. With reports that nearly a quarter of all British employees have been furloughed there will be millions of CJRS claims alone therefore there could be a lag time of at least months if not years before reviews commence.

As mentioned, it may seem obvious at the moment that your business has been adversely affected by Covid-19, and for some businesses e.g. bars and restaurants there will be no question of the impact.

However, if HMRC conduct a review of your business in two years, will you recall exactly how you calculated your SSP claim and why certain staff were deemed to not be required during the pandemic and were therefore furloughed?

Hopefully some business will see an upsurge in trade once social distancing measures are eased and may not see annual revenue as adversely effected as they might have thought. It would be prudent to document the impacts on your business now to provide in case of any future review by HMRC.

What should I document?

Statutory Sick Pay claims

The enhancement of paying SSP from day 1 for up to 2 weeks per employee applied from 13 March 2020. Records that should be kept in relation to SSP claims include:

  • the reason why an employee could not work i.e. they themselves were showing symptoms or a member of their household was;
  • details of each period when an employee could not work, including start and end dates;
  • details of the SSP qualifying days when an employee could not work;
  • National Insurance numbers of all employees who you have paid SSP to; and
  • A GP note or an isolation note from NHS111 where available.

You'll have to keep these records for at least 3 years following your claim.

Self-Employment Income Support Scheme claims

This scheme was introduced to support self-employed workers and funds 80% of their trading income up to £2,500 per month.

HMRC contacts individuals that they believe are eligible for the scheme, however it is still advisable to keep a summary document of why you met the eligibility criteria including:

  • that you were self-employed or in a partnership at the time of the claim;
  • that you traded in the 19/20 tax year, for example make a note of significant trading activity undertaken prior to Coronavirus pandemic;
  • that you intended to trade in 2020/21, for example add a copy of any business plans or projections that you had made or agreements with prospective customers;
  • that you have lost profits due to Covid-19. Document the dates that your business had to close to the public if you were effected by enforced closures, or detail the decline in revenue versus your projected revenues or the revenues from the same time last year; and
  • calculations to show:
    • trading profit was less than £50,000 either in 2018/19 or averaged over the last three tax years 2016-2019
    • trading profits must be more than half of total income
    • what 80% of your trading profit was.

Additionally, you will have to accurately record the amounts received under SSIS as these will be treated as taxable income in your 2020/21 tax return.

Coronavirus Job Retention Scheme

With reports that nearly a quarter of all employees have been furloughed, many employers have taken advantage of the CJRS.

For each claimed made employers should keep a record of:

  • the number of employees furloughed, their names and National Insurance numbers
  • claim period, start and end;
  • amount claimed including the supporting calculation for example if employees are on flexible or zero hours contracts and had been employed for a full 12 months use the higher of the same earnings for that month from previous year or the average monthly earnings for 19/20, if employed less than 12 months use monthly average since they started; and
  • why certain staff were deemed to not be required. Again, for some business that were forced to close this may be self-explanatory but for those businesses who continued to trade but with less trading activity, how the decision was made to furlough the staff.

Again, all monies received under CJRS will be treated as taxable income and therefore must be recorded as such in your business accounts.

In summary, it is prudent to document the impacts of Covid-19 on your business now rather than attmepting to recreate events in years to come if there is a review by HMRC. If you need any assistance with any of the above claims then please contact your local GMP office.

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