Difficult times - financial support for small business owners during Covid-19 lock-down

by  Kim Jones

Coronavirus Summary – 23rd March 2019

The daily briefing by the Government brings new challenges with varying impact for each of us in society. We are all affected by the changing circumstances and as businesses we are already experiencing the effects of the pandemic. Our priorities are staying in business, keeping our clients served and our people employed, and safely weathering the crisis.

The Treasury Fact Sheet of the18th March updated today outlines the financial support for all businesses affected by COVID-19. Our priority is that everyone stays safe and manages to get through this as well as they possibly can.

• The measures that Government is now putting in place,

• Practical steps that businesses can take now to protect themselves economically as much as possible.

Government Support

Many of the measures mentioned below are new, some already exist or have simply been extended.

Please do not hesitate to contact us – by email to hello@hgkc.co.uk or any of us specifically, by calling 0117 332 1002, or through our website contact page here www.hgkc.co.uk/contact-hgkc" class="redactor-autoparser-object">www.hgkc.co.uk/contact-hgkc - if you would like help in making an application or to find out more detail on what you need to do.

Business loans

Small and medium sized businesses (turnover under £12.9 million and 250 employees or less) can now apply for loans of up to £5 million under the coronavirus business interruption loan scheme (CBILS). This is delivered by the British Business Bank through 40+ lenders. More details are expected from 23.03.20 here: https://www.british-business-bank.co.uk/.

Coronavirus Job Retention Scheme

Under the scheme all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that otherwise would have been laid off during this crisis. HMRC will reimburse 80% of furloughed workers wage costs, up to £2500 per month. Criteria for eligibility include designating employees as “furloughed workers”, informing them of this change and submitting information through a new online HMRC portal.

Deferring VAT

VAT will be deferred for 3 months. The deferral will apply from 20 March 2020 – 30 June 2020. This is an automatic offer; businesses are not required to make a VAT payment during this period. Any liabilities accumulated in the deferral period will be payable at the end of the 2020 – 2021 tax year.

Time to pay (TTP) arrangements

HMRC has reintroduced TTP. Businesses and the self-employed who are struggling financially and have tax liabilities to meet can call the HMRC dedicated helpline to discuss a TTP arrangement on 08000 159 559.

Business rates holiday

There will be a one-year business rates holiday for the retail, hospitality and leisure sector. This is automatically in place and being administered by the local authority who you pay rates to.

Business grants

Businesses that are entitled to Small Business Rates Relief or Rural Rates Relief are now set to receive a grant of £10,000, administered by the local authority to whom they apply for the relief, without the need to make an application for the grant.

A £25,000 grant for retail, hospitality leisure businesses operating from premises with a rateable value of between £15,000 and £51,000. Your local authority will write to you if your business is eligible for this grant. For guidance enquire via your local authority.

Statutory sick pay

Statutory sick pay will be extended to cover from day one of someone being off sick due coronavirus for a period of two weeks without the need for GP sick note. This will be recovered by businesses through their PAYE and National Insurance monthly returns.

Employment allowance (EA)

EA is available for employers with a total qualifying employer’s (secondary) Class 1 National Insurance Contributions (NICs) of over £3,000 and less than £100,000 per year. The EA was £3,000 for 2019/20 but has been increased to £4,000 for 2020/21. A business with secondary Class 1 NICs of £3,000 will therefore have none to pay in 2020/2021 and will instead receive £1,000 from the Government.

EA is administered as de minimis state aid so anyone in a sector that already receives state aid needs to check the amount of aid they are receiving and their de minimus threshold/ ceiling to ensure that they qualify.

Practical advice

What can businesses do to help themselves during this difficult time?

Sell well

Hold your prices and sell less, discounting may cost you more in the long term. Excellent advice from Robin Waite in this recent Linkedin post :

https://www.linkedin.com/pulse/3-simple-effective-ways-save-money-your-business-robin-waite.

Set up voucher schemes

Retail, hospitality, services, experience, etc. opportunity to sell vouchers for the provision of goods and services in the future provides a much needed injection of cash, however, this is an obligation created as a deposit paid and the buyer is looking for assurance that these will be redeemable at a future date. There are also VAT considerations for registered business so ensure follow the rules on this.

Start with your people and ask for their help

These are the full and part-time employees who, generally, will have to be paid whether they work or not. Tell them the truth about the position and affordability and work with them to agree the options such as unpaid leave and short working. It will take time for the government schemes to become available even if backdated. Ensure you know what benefits are available to help them as individuals and make information available to them.

Take advice before laying off staff

It is always an option to seek to lay off staff or place them on short time to reduce the cashflow burden, however, care should be taken with such measures and specialist employment advice taken first as employees can acquire a statutory right to redundancy if they are laid off or placed on short time. Redundancy obligations could increase the burden on cash flow rather than reduce it.

Keep records of sickness due to Covid-19

The new measures include the ability of SMEs to reclaim statutory sick pay from 13 March 2020 for any staff absent due to coronavirus for up to two weeks. There is a need to keep records, but GP fit note is not required.

Other costs

Services and supply contracts

If a business is closed during the coronavirus outbreak, then management need to look closely at all the service and supply arrangements and only pay for those which the business is bound into and which are necessary.

Arrangements with landlords

Rent is often the biggest expense for any business so, if you have concerns about being able to meet your rental obligations speak to your landlord before you fall into arrears. Most leases require any variations to be agreed in writing and signed by all parties so please ensure that any arrangements you agree with your landlord are properly formalised in accordance with the terms of your lease to ensure you are fully protected.

Any necessary supplies and services where the business is not bound into a contract should be reviewed and renegotiated to minimise the ongoing cost. Remember, your suppliers are in the same position as you and will wish to preserve their own cash inflows as much as possible.

Conclusions

First and foremost, please don’t panic. If you need help or advice please feel free to contact us; we are here to help, that’s our business. Remember that this is affecting the whole country, so everyone is in a similar position to you.

Keep safe.

Kim Jones – kim.jones@hgkc.co.uk

Peter Quintana – peter.quintana@hgkc.co.uk

James Short – James.short@hgkc.co.uk

High Growth Knowledge Company

www.hgkc.co.uk 0117 332 1002

Categorised: Business Risk

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