Protecting you, your business and your employees

Protecting you, your business and your employees

As each day passes, the Government announces new measures to support the economy.

An added complexity for Welsh businesses has been waiting for the Welsh Government to match or back up national support measures. This has now largely been confirmed. However, we still face the problem that announcements of support are being been made without any detail on how they will be implemented.

However, we are now receiving some clarity on the mechanics, so we are providing you with an update on the position as of Monday 23 March 2020.

What you need to do 

As a business owner, you should be planning your cash flow and forecasting all scenarios to determine what course of action is needed. Some businesses have shut down, albeit most hopefully temporarily.

The biggest issue facing most businesses is a lack of demand creating cash shortage. All of the support mechanisms are designed to plug the hole and preserve cash. The pressure on cash will more than likely get worse. There have been some novel ways of stimulating demand in the short term but many will not be able to do this.

As demand falls then direct or material costs associated with that demand should naturally drop. Careful management of existing debtors and creditors is also needed- don’t forget everyone is likely to be in the same position and will be happy to talk.

It is then a case of managing cash outflow on overheads and any debt repayments. Landlords should be contacted and all non-essential supplies/services should be curtailed. Creditor discussions are vital. Keeping in touch will create good relations fostering understanding and help. We have seen banks take a very sensible view, some deferring loan repayments in full. However, you must speak to them. All the major banks have their own new loan schemes and they should be contacted directly. We are happy to help with this.

Even after this has been done then there is still likely to be a cash outflow and the need to support your staff.

Both these are considered next.

Additional cash support

The Temporary Coronavirus Business Interruption Loan Scheme 

Loans of up to £5 million are available to SMEs under this scheme and no interest will be due for the first year. Company turnover must be less than £45 million.

The scheme is slightly misleadingly advertised as delivered by the British Business Bank. To access these funds you should talk to your own bank. Other banks and providers will also offer this.

Full details on the scheme have not been published despite it being rolled out on Monday 23 March. However, we understand it will work in a similar way to the old EFG loan scheme. Whilst the Government will back 80% of the loan, the lenders will take a commercial view as to whether they want to take a risk themselves. This means you will need security to cover the 20% difference and this may be a problem. If a business is struggling it is unlikely the commercial banks will take this risk. That means they will want a personal guarantee but it is likely this will be unsupported as we don’t think they will take residential homes as security.

We also think this is unlikely to provide quick funds as there will be an application process and credit committee decisions to be made, plus a likely requirement for cash flow forecasts to support an application.

We are here to help if you feel you need this support.

Larger companies

The Bank of England has announced that they will offer short term debt in form of the purchase of commercial paper from companies. Details can be found here.

Paying Tax Liabilities

The Government has announced the deferment of all VAT liabilities from 20 March 2020 to the end of June 2020. This is an automatic deferment; there is no need to apply. Businesses will have until 5 April 2021 to pay any deferred liabilities. VAT refunds and reclaims are running as normal.

Any self-assessment tax payments due on 31 July 2020 have been deferred by six months so payments will now be due on 31 January 2021. This again is automatic with no need to apply. No penalties or interest for late payment will be charged in the deferral period.

All other tax liabilities can be deferred under HMRC’s Time to Pay (TOP) service. This mean you will be able to defer payment of PAYE and Corporation Tax or any other unpaid taxes where you cannot pay these on time. It makes sense to use this facility.

You have to call 0800 0159 559 to use this facility. Where we have your authority in place, we can call on your behalf, but we are finding that HMRC are more receptive to businesses calling up themselves.

Don’t forget that where a company has been undertaking Research and Development activities, cash could be accessed under the R&D tax credit scheme. Ask us if you are unsure if you qualify.

The Self-Employed

Help for the self-employed appears to be limited at the moment but there is growing pressure for more help. The key aspects are:

  • Income tax payments have been deferred, as above
  • The introduction of IR35 has been delayed until 6 April 2021
  • The ability to claim SSP

We expect further announcements today.

Business Rates Reductions and Cash Grants

Rates have been scrapped for certain business premises with a rateable value of under £51,000.

There is a 12 months business rates holiday for all retail, hospitality and leisure businesses for 2020/21.

There are also plans for business rates holiday for nursery businesses that pay business rates.

These changes are automatic and will be included in next month’s rates bill.

In addition, a £25,000 local authority grant is being provided to all retail, hospitality and leisure businesses for rateable values between £15,000 and £51,000.

A grant of £10,000 is being given to those businesses in receipt of small business rate relief (less than £15,000). This £10,000 grant will be paid to all small businesses that receive small business rate relief.

Local authorities will pay these directly.

Business Grants

 The Welsh Government has suggested that it will announce a new business grant scheme. Currently there are no further details on this. We will monitor this and let you know when details are released.

Insurance Claims

Check if you have a policy that covers a business interruption claim. Some businesses with policies with pandemic and government-ordered closure clauses are likely to be automatically covered. You should contact your insurance broker directly to see if there is cover in your policy.

Your employees

Sick pay

There is help for those companies who pay sick pay. Your employees’ contracts of employment may dictate what you have to do initially but the key points are:

  • SMEs can reclaim sick pay for absence due to Covid-19 currently for a two week period
  • Employers with less than 250 employees at 28 February 2020 are eligible
  • Employers can reclaim expenditure for any employee who has claimed SSP due to Covid-19
  • Employees will not need to provide a GP fit note

Coronavirus Job Retention Scheme

A key announcement made last week was the guarantee of employed workers’ salaries. Where workers are likely to be made redundant, then if a business makes them ‘furloughed’ instead (temporally laid off), then the Government will cover part of their wage costs. The key points are:

  • Where you designate employees as furloughed and keep them on the payroll, instead of making them redundant, you can contact HMRC for a grant to cover the cost of their wages
  • Grants will cover 80% of the gross salary up to £2,500 per month. Employers can top up salaries if they wish
  • The scheme is being backdated to 1 March 2020, covering workers who were in employment on 28 February 2020, and will apply for at least 3 months
  • The scheme will be open before the end of April 2020 with no limit on funding

We are waiting for details from HMRC on how to apply and confirmation of which employees will qualify.

It appears that this will be run through an online portal which businesses can use to provide details of furloughed workers.

Summary

Government advice changes daily as the situation develops. We will continue to notify you of key changes. Please call us even if it is just to talk through your own circumstances. We are here to help you through this.