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This post will be vital for small businesses affected by coronavirus. The truth is the whole world is feeling the effects of the current unprecedented economic strain caused by the coronavirus pandemic. Small businesses are particularly struggling. This post was last updated at 11.30am on 2nd April 2020.

In this article, we’ve looked at the information out there and compromised a valuable guide on how to best manage at this difficult time.

In the recent budget announcement, the government, working with the Bank of England, announced several steps to try and protect and promote businesses in the UK. The Chancellor Rishi Sunak has now announced a further package of £330bn in loans and £20bn in other aid to help shore up the economy.

The Modus Accountants team can assist you with some of the measures that have been put in place.

Coronavirus Job Retention Scheme

Under the new Coronavirus Job Retention scheme, government grants will cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis. The scheme, open to any employer in the country, will cover the cost of wages backdated to 1st March 2020 and will be open before the end of April. It will continue for at least three months and can include workers who were in employment on 28th February.

To claim under the scheme employers will need to:

  • designate affected employees as ‘furloughed workers’, and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
  • HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.

HMRC is working urgently to set up a system for reimbursement, we understand existing systems are not set up to facilitate payments to employers. Also, further details behind the scheme will be clarified which will be keeping close tabs on.

VAT Payments

Businesses Affected by Coronavirus can get a deferment of VAT.

Although VAT Returns are still required to be filed on time, Businesses can defer VAT payments until 30 June 2020. Businesses will then have until the end of 2020-21 tax year to settle any liabilities that have accumulated during the deferral period. No application or verification is required. VAT refunds and reclaims will be paid by the Government as normal.

Income Tax payments

Income Tax Self-Assessment payments due on the 31 July 2020 will be deferred until the 31 January 2021. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.

HMRC Time to Pay Scheme

HMRC’s Time to Pay scheme can enable firms and individuals in temporary financial distress as a result of Covid-19 to delay payment of outstanding tax liabilities. HMRC’s dedicated Covid-19 helpline provides practical help and advice on 0800 0159 559.

Self-Employed Support

Self-employed workers can apply for a grant worth 80% of their average monthly profits. The average will be taken from over the last three years.

Eligibility:

– Have submitted your self assessment tax return for year 2018/19. If you are yet to do so, there is 4 weeks to get this done!

– Traded in the tax year 2019/20 and have at least have 1 full year of accounts.

– Trading profits less than £50k for the tax year 2019/20 or an average of less than £50k over tax years 16/17, 17/18 & 19/20.

– More than 50% of your income needs to be from self-employment.

– You do not pay yourself a salary AND a dividend. Those that do will not be covered under this scheme and will instead be covered for your salary under the Job Retention Scheme if operating through PAYE. 

If you do qualify for this scheme, you will be entitled to a taxable grant of 80% of profits up to a maximum of £2,500 per month. This will be receive as a lump-sum payment at the beginning of June. 

No action is required to claim for this scheme at present. HMRC will invite those eligible to apply.

Business rates discount

No rates are payable for the 2020-2021 tax year for any business in the retail, hospitality or leisure sectors.

On top of this, the following cash grants are available from your local Council provided you are eligible.

GrantEligibility criteria
£10,000Any business eligible for Small Business Rates Relief (SBRR) and Rural Rates Relief (RRR)
£10,000A retail, hospitality and leisure business with a rateable value of up to £15,000
£25,000A retail, hospitality and leisure business rateable value of over £15,000 and less than £51,000
NilBusinesses with a rateable value of £51,000 or over are not eligible for this scheme

It was originally thought that Councils would be contacting eligible Businesses to arrange payment, however some Councils have an application form on their website that needs submitted so it’s worth checking.

There will also be an update on the Business Interruption Loan very soon, keep checking this post for details.

Statutory Sick Pay (SSP) reclamation

Employees who follow the Government advice on self-isolating will be eligible for Statutory Sick Pay (SSP) from day 1.

Businesses with under 250 employees will be able to reclaim the cost for any employee, who for a period of up to two weeks, has claimed SSP because of coronavirus. This includes self-isolation.

As existing systems are not set up to accommodate employer refunds of SSP, the government is working to set up a mechanism. This means that there is likely to be an unquantified delay in receiving the refund and therefore it is crucial that businesses keep records of phone calls or emails from employees confirming the reason for sickness.

IR35 Private Sector

The Government have announced that they are delaying rolling out of the new private sector IR35 regime until 1st April 2021. This could release those large companies who have not yet or are in the throes of issuing Status Determinations from having to do so.

Coronavirus Business Interruption Loan Scheme

These are available from Monday 23rd March and are delivered by lenders that partner with the British Business Bank, including all the major banks. The lender receives a guarantee of 80% of the loan amount from the government.

To be eligible for a facility under CIBLS, your business must:

  • Be UK based in its business activity with annual turnover or no more than £45m
  • Have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty
  • Smaller businesses can apply for the full amount of the facility.

No interest will be charged for the first 12 months.

How to apply?

Businesses should approach their own provider in the first instance, ideally through their website as phone lines are likely to be very busy. It may also be worth approaching other lenders if this is unsuccessful.

We can assist in the application for loans and we are currently offering you a free health check.

Can’t find a suitable time? You can also;

  • Call our office (01993 225030)
  • email our office (hello@modus-accountants.co.uk) to book a time slot.

Mortgage and rent holiday

Mortgage borrowers can apply for a three- month payment holiday from their lender. Both residential and buy-to-let mortgages are eligible for the holiday. It is important to remember that borrowers still owe the amounts that they don’t pay as a result of the payment holiday. Interest will continue to be charged on the amount they owe.

Tenants can apply for a three-month payment holiday from their landlord. No one can be evicted from their home or have their home repossessed over the next three months.

Cashflow

Modus understand that cashflow will inevitably be an issue for businesses in the coming weeks. It is important that you plan your cashflow carefully and where shortfalls are predicted we can assist with these.

Things to consider:

Invoicing

  • Issue invoices more regularly and consider invoicing upfront or sending interim bills
  • Look at offering discounts, for example, 5% if payment is made within 7 days to bring forward receipt of the money.
  • If taking on any new customers ensure you use a credit check report for example, Experian

Debt collection

If you use a cloud-based accounting package, look at the possibility of automating your debt collection system (eg Chaser).

  • If you have debts beyond your payment terms look at placing the invoice with a debt collection company
  • Look at financing your debtors using invoice discounting
  • If you have individual large sum invoices look at single invoice finance
  • If customers are struggling to pay, be flexible and allow a payment plan by way of monthly direct debit

Stock

  • Look at your various stock lines and operate a just in/just out system

Payment to creditors

  • Contact your suppliers to discuss extending terms or agreeing to a payment plan
  • If offered an early payment discount by individual suppliers, look at settling their invoices first

Capital expenditure

  • If considering purchasing capital equipment, investigate leasing the equipment rather than purchasing.
  • Purchase any new equipment via a hire purchase agreement
  • Extend the term of the hire purchase agreement to reduce the monthly payments

Cash

  • Transfer any excess cash into a deposit account

We understand that this is a highly stressful time but, we can assure you that we are on hand to support you – as we are to all of our clients. Try not to panic and do not rush into any long-term decisions without speaking to us first.

4 Responses to COVID-19 as an Employer

1.Review Your HR Policies

Establish policies for sick-leave absences specific to the pandemic, including policies on when a previously ill person is no longer infectious and return to work protocol after the illness. These policies must  be guided by the latest Government advice.

2. Discuss insurances

Have discussions with your insurers about possible business impacts of the pandemic. Be absolutely sure you understand what you are and aren’t covered for.

Businesses that have cover for both pandemics and government-ordered closures should now be covered, on the grounds that the government and the insurance industry have confirmed the advice given on 17th March would make the claim valid.

3. Be aware of fraud

During a crisis, it is easy for people to forget best practice. They may no longer take normal precautions and fall for email phishing or other types of fraud. This is a good time to remind and educate staff on internet scams. In addition, the physical security of offices should be properly maintained while staff are working remotely.

4. Explore financial support options for your business

Free Financial Health Check for Small Businesses Affected by Coronavirus

Things are changing every day and we will keep this article updated, however, if you’d like to know more book in a free 15-minute health check with one of our ACCA accredited and a Certified Chartered Accountants. We’ve already helped many small businesses affected by Coronavirus.