COVID-19: Mind the Gap - More money-saving tips to help see you through

David McGinness


COVID-19: Mind the Gap - More money-saving  tips to help see you through

 

Mind the Gap - More money-saving tips to help see you through.

Even the most hardened critics of the UK Government would grudgingly admit that their job retention scheme, introduced with understandable haste, has been a success. As at Tuesday 21st April, 2.2 million employees were registered as benefitting through the scheme.

However, there are noticeable gaps for significant elements of the working population will not receive help that otherwise might.

Firstly, company directors of owner-managed companies, who traditionally have their remuneration paid through a combination of PAYE and dividends. It appears that they are currently eligible to claim for up to 80% of the PAYE element through the Coronavirus Job Retention Scheme, however any dividend element of their remuneration is ineligible. It is understood that this is because from the Treasury’s perspective it is difficult to get visibility on the source of the dividend income on whether it relates to other investment income. The Association of Independent Professionals and the Self Employed, estimate that this problem extends to 710,000 limited company directors.

In addition to assistance to owner managed companies, the Self-employment Income Support Scheme has been introduced for the self-employed or partners in a partnership. However, there are caveats around what information needs to have been submitted to HMRC and crucially your trading profits must represent no more than half your income, and must amount to no more than £50,000 for either the tax year 2018 or 2019. So, if you’ve earned £50,000.01 then you will not be eligible for assistance.

However, there are money-saving options available to everyone which can go some way to mitigating the losses in the short term:

Mortgages

All lenders are offering a 3 month payment holiday, and can be applied for online through the lenders’ website.

Motor finance

For employees with company cars, who are furloughed then they can reduce their tax bill by giving their car back to their employers. If the vehicle is not available to the employee for 30 consecutive days then it ceases to be a benefit in kind. There are various definitions of how to make the vehicle unavailable and employees should contact their employer to agree the best way forward.

For those with personal hire contracts, the Financial Conduct Authority have introduced measures to support clients with Motor Finance and other credit products. Specifically, from 27 April:

  • Firms that provide motor finance are to provide a 3 month payment freeze to customers who are having temporary difficulties meeting finance or leasing payments due to coronavirus. If customers are experiencing temporary payment difficulties due to coronavirus and need use of the vehicle, firms should not take steps to end the agreement or repossess the vehicle.
  • Firms should not alter Personal Contract Purchase (PCP) or Personal Contract Hire (PCH) agreements in a way that is unfair. For example, firms should not try to recalculate PCP balloon payments based on a temporary depreciation of car prices caused by the coronavirus situation.
  • Where a customer wishes to keep their vehicle at the end of their PCP agreement, but does not have the cash to cover the balloon payment due to coronavirus-related payment difficulties, firms should work with the customer to find an appropriate solution. Given the increased potential for disparity between the balloon payment and the value of the vehicle in the current climate, firms should ensure that solutions do not lead to unfair outcomes. For example, refinancing the balloon payment might not be appropriate in the circumstances.

Of course, the definition of “unfair” may depend on which side of the contract the party lies, however this should provide welcome respite for those with high cost monthly contracts.
Other recurring monthly costs can be reviewed also. Gym fees should already have been put on hold. It’s also understood that independent schools are likely to be sympathetic to parents’ financial difficulties. The Scottish Government are also due to unveil their assistance to companies and self-employed in the coming days also.

Once the crisis is passed – and like all crises, it will pass – companies and individuals will need to reset their costs to meet the new reality. For those for whom their turnover or income cannot meet their revised obligations, early restructuring advice is critical to achieving a desirable outcome.

More help on keeping your finances healthy can be found on this separate blog post by clicking here.

Our financial Health Check checklist can also be found by clicking here

Click here to see David's profile and contact details.

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We have various information, useful guides and even templates documents to help companies and individuals navigate the Coronavirus period.

Go to our Help for All hub at www.frenchduncan.co.uk/covid-19 to see them all.

It’s just our way of trying to help.

French Duncan. #thepeopleforyou

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