COVID-19 Business Support and Advice

March 22, 2020

In light of the latest information regarding the Coronavirus outbreak, we want to provide our expert financial support and advice to UK businesses facing COVID-19 challenges.  There is a lot to take in and much detail that we haven't gone into in this blog.  Please feel free to get in touch if you would just like to chat through any of this.

Every Thursday at 6 p.m. we take part in a panel discussion and Q&A via Zoom video conference. It aims to assist and help business owners in these difficult times. On the panel we have a restructuring and insolvency expert (us!), an accountant, a corporate solicitor, an HR specialist, a marketing adviser, an IFA and a business consultant. We usually have approx 30 small business owners joining the sessions where they pose specific questions to the panel about how to access Government help schemes, how to tackle real problems they are coming up against, planning for the future etc. If you would like to join any of these free video sessions please just let us know.

If, like us, you’d like to keep up-to-date with the latest developments, we’ve found a few useful government resources with business-glasgow.co.uk , guidance for employers and businesses in the UK , COVID-19 support for businesses in Scotland and www.gov.uk/business-coronavirus-support-finder

Latest Government Legislation

On the evening of Friday 20th March, the Chancellor of the Exchequer announced supportive measures to help businesses and people during this unprecedented period. The support package included:

  • The introduction of a Coronavirus Job Retention Scheme that will see the Government cover up to 80% of wage costs backdated to the 1st of March for a period of three months or possibly longer (HMRC portal opens Monday 20 April - see below for how to apply)
  • Support for self employed people now announced, similar to the Job Retention Scheme for employees.
  • The introduction of the Coronavirus Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank (a complete damp squib so far we're sorry to note).
  • Deferring the next quarter of VAT through to the end of June on top of income tax payments being deferred to Jan 2021 for the self employed.
  • A statutory Sick Pay relief package for small and medium sized businesses (SMEs).
  • Suspension of the minimum income floor for the self-employed: the self-employed can now access Universal Credit at a rate equivalent to Statutory Sick Pay for employees.
  • Standard allowance of Universal Credit to increase by £1000 over the next 12 months.
  • A 12-month business rates holiday for all retail, hospitality, nursery and leisure sector businesses in England.
  • Small business grant funding of £10,000 for all businesses in receipt of small business rates relief or rural rate relief.
  • Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000.
  • A new lending facility from the Bank of England to help support liquidity among larger firms to help their cash flow through government loans.
  • The HMRC Time to Pay Scheme.

 

COVID-19 Guidance and Advice for Businesses - What can I do?

Although this whole situation is outwith our control, there’s always steps that can be taken right now to ensure you’re doing the utmost to support your business and your employees through the next couple of months.

Below we’ve highlighted some of the steps you can implement into your business to make sure you come out the other end of this in good shape!

Cash Flow Management

Good Cash Flow forecasting and monitoring is essential. It doesn't need to be fancy or complicated - a simple Excel spreadsheet of expected/forecast inflows and outflows for the next 12 weeks, broken down into weeks which you keep amending every day and use to inform your business decision making.

Let's look first at the expenditure side of this cash flow management, as this is the part you cannot easily control.

Staff Payroll (inc Job Retention Scheme)

When we start to see deficits on the horizon, our gut reaction/panic is to slash these costs at any means necessary. But, at what long term business and indeed human cost does this come at? This pandemic will be relatively short term (although it may not feel like it right now) and we will emerge from this.

Your greatest resource is your staff - all that knowledge, experience, skill. It took a lot of time and effort to put that skilled and experienced team together. Before this pandemic we were at full employment with Brexit only likely to worsen staff shortages. If you get rid of them, how are you going to drive your recovery when things normalise without staff and trying to recruit in a tight labour market.

With the government's latest business support announcement, there’s plenty of options to consider regarding staff - the key though is to have an open and honest discussion with them:

  • Talk openly to staff about the issues.
  • Ask staff to take their holidays now - whilst this might not save money right now it will mean that once back to some level of normality you will have all your staff working and none off on holiday during the first few months back.
  • Ask staff to take unpaid leave.
  • Negotiate to defer a portion of salary or a temporary pay cut.
  • Ask staff to go part time/shorter working week.
  • Consider the UK Government's Job Retention Scheme - HMRC will pay 80% of an employee’s salary (capped at £2,500 per month) for the next three months rather than have them made redundant. Keep an eye out for its introduction as you will need to register your business on it (portal possibly not available till end April) . Employees (this doesn't include contractors) with no work to do due to COVID-19 may previously have been considered for redundancy. Now instead you can designate them as "furloughed" (with their agreement) and notify HMRC on the coming soon portal. As of 6 April the portal still hasn't been released and comments from Government ministers yesterday indicated the cash might not actually be paid until the end of April (albeit backdated to 1 March).
  • 30 March update -

    Directors who are employees are eligible for this scheme subject to certain conditions

inc only covers amounts paid as salary through normal payroll (doesn't cover dividend income) up to normal £2,500 cap and              company must have ceased normal trading due to Covid-19.  All that directors are allowed to do is comply with directors                    admin duties but not trading.

If planning on furloughing staff and utilising this scheme you must properly record what you have agreed with your employees and have them sign a letter to this effect.

Furlough agreements

Any furlough agreements should be in writing. It's a good idea to include:

  • the date furlough starts
  • how much the person will be paid
  • when it will be reviewed
  • how to keep in contact during furlough

HMRC will reimburse 80% of furloughed workers' wage costs to employers, up to a maximum of £2,500 per month. Payments will be made every 3 weeks. This is because 3 weeks is the shortest period a furlough can last.

HMRC Portal

The online portal for making claims under the Job Retention Scheme should be available on the 20th April.

In order to make a claim under the scheme employees must to furloughed for a minimum period of three weeks, employees cannot carry out any work during this period.

The information need to make the claim is as follows –

  1. Bank Account name, sort code and account number ( the account must be held with a UK Bank)
  2. Your business Unique Taxpayer Reference & online PAYE reference numbers
  3. Names of the employees, employee numbers and their National Insurance Number
  4. The furlough period and the amount being claimed

HMRC ‘Time to Pay’ Scheme

When cash flow problems arise, it’s inevitable that businesses are going to struggle to pay their Corporation Tax, VAT and/or PAYE on time.

The Time to Pay scheme is essentially a payment plan with the HMRC that allows businesses to pay back their outstanding tax through a series of affordable installments over a period of time.

At the recent budget, it was announced that the existing Time to Pay scheme would be extended throughout the Coronavirus pandemic which gives businesses additional time to settle their taxes.

Eligible businesses must:

  • Pay tax to the UK government.
  • Have outstanding tax liabilities.

If you have missed a tax payment or you might miss your next payment due to COVID-19, you can call HMRC’s dedicated helpline: 0800 0159 559.

Quarterly VAT bill

Your next VAT bill is already deferred for three months. This is automatic and there is no need for a business to apply for this deferral. However, this is all new so I might suggest you ensure your VAT direct debit instruction has been amended just in case HMRC accidentally call it as normal. Whilst they will refund such a mistake who knows how quick this might be with undoubted staff shortages and a huge workload. Update - HMRC has now specifically told businesses to cancel their direct debit as if not the payment is likely to still be taken automatically.

Self Assessment Tax bill in July

If you are self employed you would normally be due to pay your next self assessment tax in July. This has now been deferred to January 2021. This is automatic and there is no need for a self employed person to apply for this deferral.

Self-employed income support scheme (for sole traders and partnerships)

This scheme will allow the self-employed to claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.

One issue for business owners is that dividend income is not covered by any of the Government schemes.

However, as of 30 March update it does appear directors are eligible to be furloughed as employees (but only for the amount being paid through payroll and not dividends).

  • It will pay out 80% of the average of your profits of the three previous tax years, but capped at £2500 per month.
  • The newly self-employed are unable to qualify if they do not have trading profits in any of the previous three tax years.
  • Your profits need to have been less than £50,000 in the 2018/19 tax year, or an average of less than £50,000 for the three tax years 2016-17, 2017-18 and 2018-19.
  • The business needs to have traded in 2019-20 and be currently trading when the application is made (or would be, except for COVID-19) and intend to continue to trade in the 2020-21 tax year.
  • The grant will cover three months and be paid in a lump sum.

You do not need to contact HMRC, rather HMRC will identify potential claimants and contact you from early June.

Suppliers

You are likely to have to prioritise which suppliers you can pay and which may have to be deferred for a while. You will need to draw up a list and allocate an order of priority based on your own business needs right at this time. If at all possible we would suggest that you try to pay smaller companies/business on time as they will be most at risk during these difficult times.

Coronavirus Business Interruption Loan Scheme (CBILS)

Banks/Finance companies

Talk to your bank about extending overdraft/loan facilities or asking for a repayment holiday.

The Government has announced the Coronavirus Business Interruption Loan Scheme (CBILS) for SMEs whereby the Government will guarantee 80% of any loan provided under this scheme to encourage banks to lend to businesses struggling at this time. This will provide loans to SMEs of up to £5m. Think of this as the old Small Firms Loan Guarantee Scheme on steroids. Loans under this scheme will also be interest free for the first 12 months (very recently increased from 6 months) and the Government pays the associated fees.  In the first week of CBILS the level of lending was very disappointing as most Banks asked for personal guarantees and first tried to offer their own normal commercial loans.

The Government has now changed the scheme and for loans up to £250,000 Banks are not permitted to ask for personal guarantees, they must offer CBILS first before their own normal commercial loans and the only real criteria should be the business has been affected by Covid-19.  Whilst interest is not charged in the first 12 months there is no cap on what the banks can charge after that period.  The loans will be repayable over 6 years.

As of Monday 6 April many banks have not yet updated their paperwork (and indeed their staff) for these most recent changes.

As of 15 April it would appear very little has been provided to businesses under this scheme as Banks are applying their usual lending criteria and requirements as the Government's headline grabbing 80% guarantee isn't quite as simple and all encompassing as it needs to be.

Mortgage lenders

All the main mortgage lenders have agreed with the UK Government to provide at least 3 months mortgage repayment holidays.

Scottish Government grant funding - Business Support Fund

Coronavirus Business Support Fund (Scottish Government grant up to £25,000)

There is now grant funding available of up to £10k for businesses who have small business rate relief or up to £25k for retail, hospitality, leisure and nursery businesses with a rateable value under £51k. As of 25 March this includes Scotland.

Scottish government has recently released more guidance to this effect and the key points are as follows:

  • two types of grant available to ratepayers:
    • £10,000 grant to ratepayers of business with a rateable value up to £18,000
    • £25,000 for retail, hospitality and leisure business ratepayers with a rateable value between £18,001 - £50,999
  • purpose of these one-off grants is to help protect jobs, prevent business closure and promote economic recovery
  • initially only one grant was allowed per ratepayer regardless of the number of premises held.  Scottish Government announced 15 April that in addition to a 100% grant on the first property, small business rate payers will be eligible to a 75% grant on all subsequent properties.
  • this grant is being administered by Local Authorities on behalf of the Scottish Government. Eligible rate payers should apply to their local authority using the application form e.g. www.glasgow.gov.uk/coronavirusbusinessfund
  • councils will aim to make payment within 10 working days from receipt of a fully completed application
  • the closing date for the fund is 31 March 2021
  • most often asked question for the application form is "what is my rates reference number?".  If you are struggling to find it, it is quoted on your annual non domestic rates bill or you could try www.saa.gov.uk

Reality on the ground

Speak to all your stakeholders and ask them for help.

Our experience so far, albeit early in this situation, is that HMRC, banks etc are pretty much bending over backwards to allow time to pay, deferrals, repayment holidays etc.

Although not formally in legislation, our view is that pretty much no creditor/supplier is going to be able to take enforcement action against a debtor business who is acting reasonably and openly at this time, even if they wanted to. It is likely we’ll see solicitors resisting issuing legal proceedings such as Sheriff Officers not doing non-essential work even if they are still working.

It’s also highly likely the courts, if they remain open, will not be wasting their precious time on actions against businesses for unpaid debts for the next few months.

However, when life returns to normal, and those debts that have been deferred, missed, or loans and grants have to be repaid, it will be far easier for those businesses who were open and honest with all their stakeholders - both their employees and their creditors.

Remote working/staying in touch

Video conferencing with employees and other stakeholders was already around but now we are all going to have to start getting used to these systems.

There are a number of very easy to use and free video conferencing apps such as Zoom and Microsoft Teams or indeed social media tools such as Skype or Facetime.

We've been using both Zoom and Microsoft teams for video conferences and keeping in touch with friends and colleagues. They are extremely easy to use and an average laptop camera and built in microphone offers clear video and audio - just don't all talk at once and mute yourself when you aren't contributing, especially if you're using your Smartphone or are outside (or working from home with your children screaming and shouting in the background!)

Further Information

The COVID-19 pandemic is constantly developing, so it’s imperative to keep up to date and implement further measures to inhibit the spread of Coronavirus. For all the very latest Government information and further guidance for UK businesses, please visit your respective government websites.

As always, our team of licensed insolvency practitioners our on hand to help - simply contact us to see what we can do for you.

Professional Indemnity Insurance – our professional indemnity insurer is Mapledown Royal & Sun Alliance plc , Mapledown Underwriting LLP, The St Botolph Building 138 Houndsditch London EC3A 7AG and policy number is RTT262119/11273. The territorial coverage is worldwide (excluding professional business carried out from an office in the United States of America or Canada) and excludes any action for a claim brought in any court in the United States of America or Canada.


GLASGOW LIVING WAGE EMPLOYERBarry John Stewart and George Dylan Lafferty are authorised to act as insolvency practioners in the UK by the Institute of Chartered Accountants of Scotland. Company Registration Number SC 477598 | VAT Registration Number 192 5146 03 | Data Protection Registration A1056203 | FCA Registration Number 766693 | Registered office: 2nd Floor Suite 148, Central Chambers, 11 Bothwell Street, Glasgow G2 6LY.