Financial Advice for Small Businesses Impacted by Coronavirus
Recently the Chancellor stood in 10 Downing Street and announced some new support for small businesses due to the financial impact of Coronavirus nationwide. They can be summarised as the following:
Coronavirus Job Retention Scheme
We want to update our clients on the new guidance for the Coronavirus Job Retention Scheme (when you furlough staff). This applies to anyone with employees.
You can access the full guidance here.
We still don’t know whether there will be legislation brought out or if this will be the only guidance.
We have summarised the key points for you:
- The scheme is open to all UK employers that had a PAYE scheme in place on 28 February 2020.
- Any organisation with employees can apply, including charities, recruitment agencies and public authorities; however, the government does not expect public sector employers to use it as long as central government continues funding wage costs in the normal way. With agency employees, the scheme is only available for agency employees who are not working.
- Employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month, plus (not including) the associated employer NICs and minimum auto enrolment pension contributions on that wage. Fees, commissions and bonuses are not included.
- An employer can choose to top up to 100%, but does not have to (subject to employment law and renegotiating any contractual entitlements).
- Employers can only claim once every three weeks, ie they cannot get weekly reimbursement. Claims can be backdated to 1 March 2020.
- For employees whose pay varies, the employer can claim for the higher of (i) the same month’s earning from the previous year (eg earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year.
- Individuals are only entitled to the minimum wage for the hours they work. So if they are furloughed and do not work, and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working. However, they are entitled to be paid National Minimum Wage for any time spent training.
- To be eligible, the employee must have been on the payroll on 28 February 2020. If they were hired later, they are not eligible. Anybody who was on the payroll on 28 Feb and has since been made redundant can be rehired and put on the scheme.
- Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding.
- There is nothing in the guidance which prohibits rotating furlough leave amongst employees, as long as each employee is off for a period of at least three weeks.
- The employee must not be working at all. If they do admin tasks or work for even an hour (presumably during their entire three week furlough period), they are not eligible. However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer.
- When agreeing changes in hours (and acceptance of 80% pay), assuming the contract does not already allow for that, normal employment law applies. The employer must be careful not to discriminate in deciding who to offer furlough too.
- Employees on sick pay or self-isolating cannot be furloughed, but can be furloughed afterwards. Employees who are shielding can be placed on furlough.
- Employees on maternity (or similar) leave can continue to draw SMP (or similar) payments. The guidance does not prohibit women on maternity leave agreeing to return to work early and then being furloughed, or electing to change to shared parental leave and then being furloughed.
We have been informed the scheme will be live by the end of April. Once we know the mechanics of actually claiming the grant we will be in touch.
VAT and Income Tax Deferral
You will not have to pay any VAT until at least 30 June 2020 and then any unpaid VAT must be paid by 5 April 2021.
The self-assessment tax payment you should be making on 31 July 2020 has been deferred until 31 January 2021. To reiterate these are deferrals not write offs, so both the tax and the VAT will still be payable.
Time to pay
The Time to Pay helpline has fallen over a number of times this week and has been unable to cope, so this relief is something that was already happening in practice anyway.
Support for businesses through the Coronavirus Business Interruption Loan Scheme
The interest free period on loans under this scheme was extended from 6 to 12 months. As far as we can see all the rest of the reliefs have stayed the same.
Review your overheads
If you are predicting cash flow difficulties it is sensible to review your overheads in the business and pause any spending you feel may not be necessary at this time. The first thing to do is categorise expenditure (both personal and business) into “essential” and “nice to have”. Once you have those numbers you can better appraise your situation and we can support you further with short term cash flow forecasts.
Your own Bank
Contact your own bank, either your dedicated manager if you have one or your business call centre to discuss your options should you need a new or increased overdraft limit, asset finance, credit cards or other forms of temporary finance.
Other potential funding sources
Please note these are only a few of the options available to you and these do not form a recommendation by Smooth Accounting:
- Capital On Tap – https://www.capitalontap.com/en/
- Funding Circle – https://www.fundingcircle.com/uk/
- Iwoca – https://www.iwoca.co.uk
- NatWest Rapid Cash – https://rapidcash.natwest.com/
- Satago – https://www.satago.com/
Turning now to the Government support…
In the Budget 2020, the Chancellor announced that a ‘Coronavirus Business Interruption Loan Scheme’ (CBILS) will temporarily replace the Enterprise Finance Guarantee (EFG), becoming available over the coming weeks.
It will operate in a similar way to EFG and be provided by the British Business Bank, but will offer more attractive terms for both businesses and lenders, with the aim of supporting the continued provision of finance to UK businesses during the Covid-19 outbreak.
As it stands, we do not know any more than this.
More information will be available in the coming days and weeks, please click on this link for updated advice.
HMRC and Time to Pay
HMRC have launched a helpline to help businesses concerned about paying their tax due to coronavirus (COVID-19). Again, this appears to be a “work in progress”. You will find more details below, but if you have any concerns about making payment to the tax authorities please contact Smooth Accounting immediately for support.
- Tax helpline to support businesses affected by Coronavirus
- Support for those affected by Coronavirus
The HMRC Coronavirus helpine: 0300 456 3565
Statutory Sick Pay SSP Support
To support businesses experiencing increases in costs or financial disruptions:-
- The government will bring forward legislation to allow small and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19.
The eligibility criteria for the scheme will be as follows:-
- This refund will cover up to two weeks’ SSP per eligible employee who has been off work because of COVID-19. Employers with fewer than 250 employees will be eligible.
- The size of an employer will be determined by the number of people they employed as of 28 February 2020. Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19.
- Employers should maintain records of staff absences, but employees will not need to provide a GP fit note.
- The eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to self-isolators comes into force.
- The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible. Existing systems are not designed to facilitate employer refunds for SSP.
The information above has been taken from this www.gov.uk source.
Again, it is unclear how this will be organised and how quickly the payroll software will catch up with the situation.
Talk to Smooth Accounting for Advice
We are more than happy to discuss your individual circumstances and advise on the best way forward. We appreciate these are unprecedented and challenging times to be in business and we all face a period of uncertainty. No one can predict the future but we believe we can all pull together as businesses and support each other.
The Smooth team are here to help you. If you need a sounding board, some advice or a steer in the right direction, then please don’t hesitate to get in touch via our contact form or call during office hours.