Coronavirus update for businesses

Coronavirus update for businesses

The majority of clients and businesses affected by this outbreak have been planning well and managing their cash but many are now starting to think ahead as signs appear that the general economy might start opening up. As business begins to emerge, the challenge will be to utilise or source working capital to match demand. We think you should be preparing for this and ensuring you have put yourself in the best position to make this transition.

It’s worth a recap of the key support mechanisms that can be used to maintain or create working capital and to highlight some recent changes.

Time to Pay

In most cases you should not be paying taxes at the moment. This scheme covers all the main taxes such as PAYE, VAT, self-assessment payments and CT but not others such as Landlord Transaction Tax and CGT although the filing deadline for new gains has been extended to 31 July before penalties are charged. Our clients have seen no resistance in getting payments deferred. The key telephone numbers are 0800 024 1222 or 0800 0159 559.

This is a big cash saving opportunity but it will have to be repaid at some point. The Government will want to  rein deferred payments back in at some time, but we think it’s highly unlikely they will make immediate demands. However you should start to plan now how you will cover any deferred payments in the future.

R&D Tax Scheme

Many of you are aware of the cash and tax benefits that this Government Scheme brings. If you have used it before you will know it does require detailed consideration but is easier to implement now compared to historic claims. It has been a vital source of cash for many businesses.

If you are unaware of this or don’t know whether you qualify please call Stephen Williams on 01633 653174. We can deal with the whole of your claim on your behalf with minimal impact on you.

Latest developments

Coronavirus Job Retention Scheme (CJRS)  

The scheme has now been extended to the end of June 2020. A reminder of the key practical points:

  • An employer must have agreed with an employee that they are a “furloughed” worker.
  • The furlough must be for a minimum of 3 weeks without working.
  • The claim is 80% of wages up to a maximum of £2,500 per month plus NIC.
  • It covers employees who were on the payroll on or before 19 March 2020 (an RTI submission notifying payment must have been made before this date).
  • The scheme for claims is up and running. What you need to do to make your claim is shown here.
  • You can register your claim if you expect to make a claim within 12 days of making an RTI submission.
  • Directors can be furloughed and make a claim for their salary element but dividends are not taken into consideration. 

Help for the Self-employed 

The self-employed can claim support for 80% of their average monthly income up to £2,500 per month. The self-employed (including partnership members) will qualify for the scheme if:

  • They have made at least one tax return showing a year’s worth of trading income.
  • Their annual profits are no more than £50,000 in 2018/19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.
  • They have submitted their self-assessment tax return for 2018/19 (those who have yet to submit their return must do so by 23 April 2020).
  • They earn more than 50% of their annual income from self-employment (not rental income.)
  • They were trading during 2019/20 and will carry on (when the Covid-19 crisis is over) and have lost income as a result of the crisis.

Individuals who commenced self-employment after 5 April 2019 will not be able to apply for the scheme as they have no tax records on which payments can be calculated.

The scheme will operate for a minimum of three months but it is not expected that HMRC will be able to make payments to individuals until the beginning of June 2020 (when the three month grant will be paid as a lump sum).

Individuals who are already registered as self-employed will be contacted by HMRC and will be asked to complete an online claim before payments are made.

Coronavirus Business Interruption Scheme (CBILs)

The success of this scheme is still under scrutiny as funds have been slow to roll out, however, it should work in certain situations. A recap on the key points:

  • The scheme is open for 6 months.
  • The maximum loan is £5m for a SME.
  • The maximum term is 6 years for loans.
  • Government pays the interest and lender fees in first year of loan.
  • No personal guarantees for facilities less than £250k. Security likely for facilities above £250k but Principal Private Residence can’t be used.
  • Applications will need financial data including cash flows.

At the time of writing the Government is still resisting underwriting these loans from 80 to 100%.

In the last few days the scheme has been enhanced to cover large companies and also small companies who are part of a larger group. The loan periods for the larger loans are 3 months to 3 years. If you are part of a group then group turnover and maximum loans are:

  • Loan of £5m for SME/group turnover less than £45m.
  • Loan of £25m for large company/group turnover of between £45m to £250m.
  • Loan of £50m for large company/group turnover above £250m.

Welsh Government Economic Resilience Fund

The key points are:

SME Loan Fund

The loan fund administered by the Development Bank of Wales (“DBW”) fund was heavily oversubscribed. The team at DBW are now working through applications. It may be that some of those applications are rejected, in which case unused funds may become available for those who have not applied in the next few weeks. We suggest you keep a watching brief on the Business Wales website (businesswales.gov.wales) for any further announcements.

Grant Fund

The application process for non-repayable grants for SMEs went live last week. It’s working on a first come first served basis but at the time of writing it is still open. Whilst the application process takes a few hours it’s reasonably straightforward. It’s aimed at those who have not found financial support elsewhere. It is likely that some claims will be rejected on this basis so if the fund closes it may well reopen at some stage.

Other funds

Funding covering a variety of purposes such as working capital and property development is still available from the DBW. The link to funding is here.

Innovation Scheme Funding 

There is a new funding scheme to support innovative UK businesses, which is due to launch in May 2020.

A new £500m Future Fund will provide government loans to UK-based companies ranging from £125,000 to £5 million provided that match funding from private investors is at least equal to the loan. To be eligible, a business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third party investors in the last five years.

These loans may be a suitable option for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme.

There is also £750 million of targeted support for small and medium sized businesses focusing on research and development through Innovate UK’s grants and loan scheme.

We will continue to monitor this situation closely and provide updates as they happen. In the meantime, Please call us for specific advice on your circumstances – 01633 810 081 or email us at info@kilsbywilliams.com