In view of the current coronavirus crisis we thought it would be helpful to offer some useful information and links.
You will be aware that the government has introduced a range of measures in an effort to support business over the coming months, and these are summarised below. We know of companies that have lost most or in some cases all of their revenue, and it is likely that many SME’s as well as some large corporates will not survive. On the other hand we know of businesses that are flourishing as they seek out opportunities, for example to help with home-working, information security or where their services are in normal circumstances carried out remotely.
Either way we believe now is a time when we need to work together, look for ways to collaborate and support, share information and also to try where possible to sew the seeds for the time when things, as they inevitably with do, return to normal. Now is a good time to make use of social media such as LinkedIn, Twitter etc., and make sure that people know you are still open for business.
The key support offering from government includes:
Cornonavirus Job Retention Scheme which pays 80% of employees wages up to £2,500 per month whilst they are furloughed. The scheme initially ran for 3 months from 1st March 2020, was then extended to the end of June and has now been further extended to the end of October. However from August the government plans to introduce 'flexibility' in order to encourage people back to work, as follows:
In June and July the government will continue paying 80% of employees wages up to £2,500 per month, as well as National Insurance and pension contributions. Employers are not obliged to pay anything but can top up salaries if they wish to
In August the government will pay 80% of wages but employers will be expected to pay the National Insurance and pension contributions
In September government will pay 70% of wages up to £2,187.50 per month. Employers must pay 10% of wages plus National Insurance and pension contributions (to make them up to 80%) up to total cap of £2,500 per month
In October government will pay 60% of wages up to a cap of £1,875. Employers will pay National Insurance and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500 per month
From 1 July businesses will be given the flexibility to bring furloughed employees back part time. This is a month earlier than previously announced to help support people back to work. Individual firms will decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them - and will be responsible for paying their wages while in work.
Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked. Employees who believe they are not getting their 80% share can also report any concerns to the HMRC fraud hotline.
Note that furloughed staff must not do any work for you whilst you claim this support and must have been on the payroll at 19th March 2020. Employers may choose to top up the employees' salaries to 100% of their normal pay but this is not mandatory. For more information click here
To make a claim click here
Benefits – enables you to retain staff until things improve rather than lay them off and lose them and potentially incur redundancy costs. Payments will be available from the end of April and the portal is now in operation.
Issues – if you furlough staff you clearly don’t have the use of their services so you need to make a decision as to who you keep and who you furlough, which can be difficult. High paid staff may feel that the maximum of £2,500 per month is insufficient for them.
Deferring Tax Payments can really help short-term cash-flow. The government says that if you have Vat payments due between now and June 30th you can defer this and you will have until the end of the financial year i.e. 31st March 2021 to pay it. If you pay be direct debit you must cancel the direct debit with the bank. You do not need to tell HMRC that you will be deferring payment. See here for further information.
If you have a second self-assessment tax payment due in July you can defer this till January 2021. See here for information.
We would recommend taking advantage of these options but if possible retain the due funds, perhaps in a separate account, and only use as and when it is really necessary.
A time-to-pay scheme is also available for commercial taxes but these are to be dealt with on a case by case basis so you will need to contact HMRC to get agreement.
Benefits – can radically help short-term cash and requires no effort other than to cancel your direct debit.
Issues – this simply defers the debt so it’s important to bear in mind that payment will still need to be made. Currently the deferred VAT support is only available on Vat to June but it maybe extended. However once support ends normal payments need to be made on time in addition to clearing the debt.
Business Interruption Loan Scheme is available to eligible SMEs at favourable rates. In theory the loan is interest free for the first 12 months, with no set up charges as these costs are covered by the government. Up to £5m is available and this can be in the form of loans, overdraft or invoice discounting. The government offers the banks an 80% guarantee over the loans, which can be taken over up to 6 years. There are 40 accredited lenders – see here for details of accredited lenders. Government have now instructed lenders not to take any personal guarantees or to use property as collateral. You will be required to provide up to date management information, cash-flow projections , information on how the funds will be used and in some cases a business plan, just as you would if applying for a standard loan. See here for more details and eligibility.
Benefits – Raising an interest-free loan could tide the business through until things return to normal. No up front costs also represent a saving on standard loans.
Issues – there has been a lot of press regarding banks advising businesses that they do not qualify for the scheme, but offering loans on their normal standard terms, sometimes with high interest rates and a requirement for guarantees. There is some confusion over eligibility given that government tells us that loans are available to ‘good’ businesses. Some banks are tending to look at the business at the present time i.e. having been severely affected by coronavirus, rather than under normal trading conditions. We would advise resisting this and if necessary talking to other accredited lenders. Feel free to get in touch with us if you need help as we are well connected with lenders.
Business Bounce Back Scheme enables small businesses to access loans from £2k to £50k if they have been affected by the Covid-19 outbreak. Application is relatively simple via a 2 page attestation. Loans can be up to 25% of your 2019 calendar year revenue and are interest free for the first 12 months. They are 100% guaranteed by the government. For more information click here or contact your bank
Benefits - fast application process and the banks should be more ready to lend as the government guarantee 100% of the loan. We know of businesses that have received the cash within 3 days of application
Issues - maximum loan is only £50k which may not be enough for some businesses, and for very early stage companies limiting loans to 25% of 2019 turnover may be an issue especially if they started part-way through the year
Business Small Grants Scheme is available as a one-off payment to businesses already paying little or no business rates because of existing rate relief schemes. Grants of £10k are available to eligible businesses via your local authority. In most cases your local authority will contact you directly but we suggest getting in touch with them because some are using an application process.
Benefits – an immediate non-repayable grant that could provide much needed cash for your business
Issues – provided you qualify, we can’t think of any!
Support for Businesses Paying Sick Pay to Employees is available from day 1 of sickness due to coronavirus and a doctor’s note is not required. Claims are available for periods of sickness starting on or after 13th March 2020. Payment is due from day 1 for up to 2 weeks of absence due to sickness. At the time of writing the repayment scheme was not set up but there is a lot of information from government which we recommend you read here
Benefits – the scheme seems flexible and avoids the need for sick notes.
Issues – delay in setting up the scheme means you may have to wait for claims to be paid. Statutory sick pay is only £94.25 per week (increasing to £95.85 in April 2020)
Grants for Retail, Hospitality and Leisure businesses are available with £10k payable to businesses with property with a rateable value of up to £15k, and £25k payable to businesses with a rateable value between £15k and £51k. As with the above rates grant, it’s worth contacting your local authority if you haven’t heard from them as some are operating an application process.
You are eligible for the grant if:
your business is based in England
your business is in the retail, hospitality or leisure sector
your business has a rateable value of under £51,000
Properties that will benefit from the relief will be occupied properties that are wholly or mainly being used:
as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
for assembly and leisure
as hotels, guest and boarding premises and self-catering accommodation
Benefits – an immediate, non-repayable lump sum could be really useful
Issues – again, if you qualify, we can’t think of any, though we are unsure when payments will materialise and it may vary between local authorities.
Self Employment Income Support Scheme is also available to self employed people who have lost income due to coronavirus. The scheme offers a grant of 80% of your trading profits up to a maximum of £2,500 per month for the 3 months from the scheme’s inception. The scheme is to be extended - with those eligible able to claim a second and final grant capped at £6,570.
To be eligible you must have submitted a tax return for the 2018/19 tax year and must have traded in the current tax year and intend to trade in the next tax year. Your trading profits must be less than £50,000 and must represent more than 50% of your income from self employment. For further details and how to claim see here
Other support includes help for nurseries, and a safety net for commercial tenants in that they cannot have their leases forfeited for non payment of rent up to 30th June (this may be extended).
For full details on government support for business visit the government website here
Innovate UK are offering a range of grants and support packages too - see here for details
If you would like to talk through any of these support packages or any business issues then feel free to get in touch
Other Useful Links
Working under Covid-19 - this government website gives information by sector on how to run your business under the current pandemic. See here for access to the site
CIPD have provided a lot of support materials for businesses during the current outbreak such as contingency planning, letters to employees regarding spread of infectious diseases, letters regarding absence due to sickness etc. See here for further details
ACAS also have a lot of useful information for businesses during the pandemic – see here for further details
The NHS has set up a regularly updated site for everybody regarding coronavirus with a great deal of useful information. Click here to access.