There is plenty of official advice readily available from many different sources so we intend only to concentrate on matters relevant to businesses.
– Business Finance Support
* New Government Grants and Business Rates Relief
* New Government Coronavirus Business Interruption Loan Scheme
* Taxes – Discuss Time to Pay Arrangements with HMRC
* Suppliers – Consider Ability to Pay
* Landlords – Consider Ability to Pay
* Finance Providers – Discuss Repayment / Interest Holidays
* £330bn Backed Loans
– Capital Expenditure – consider deferral
– Revise Cashflow Forecasts – identify any potential shortfalls
– Directors’ Responsibilities – Available Funds
Employers will be facing an increasingly challenging environment with reduced sales/orders and/or an increasing need for employees to stay at home. Ensuring HR Policies are up to date and circulated to staff will be important considering homeworking provisions and sick pay requirements. Consideration will also have to be given to mitigating issues caused by staff who may need to self-isolate during the period. Unfortunately, redundancies may need to be a real consideration. Redundancy payments would need to be made to employees with over 2 years’ service, with the amounts payable being up to £15,750 for older staff with 20 years’ service. HR advice will of course need to be taken during this process as you would want to avoid falling foul of employment law during this process. Statutory sick pay (SSP) is payable at £94.25 per week for up to 28 weeks to employees who are unfit for work. It has recently been announced that this is being extended to cover those self-isolating or have family members self-isolating and is expected to cover children if schools are closed. The government have announced that they will refund the first 2 weeks of COVID-19 related SSP per employee, for employers with fewer than 250 employees. The refund mechanism for this has yet to be confirmed but the government will be working to get this set up as soon as possible.
BUSINESS FINANCE SUPPORT
This has come from a range of sources, some more surprising than others and the chancellor has pledged that more can be provided if needed. Business rates will be removed for 12 months for all businesses in retail, leisure and hospitality sectors. Additionally, businesses in these sectors operating from premises with a rateable value between £15,000 and £51,000 could be eligible for up to £25,000 in grant funding to help improve their cash flow during this difficult period. In any sector, if you already receive small business rate relief you will be eligible for a grant of £10,000. The new government coronavirus business interruption loan scheme (CBILS) should be available from the week commencing 23rd March and will allow borrowers to receive facilities up to a maximum of £5m, with no interest payments becoming due in the first 6 months. Eligibility criteria and further information will follow. High street banks have announced £billions of support for their customers in the form of extra loans, repayment and interest holidays so if you envisage difficulties the first port of call should be your current finance providers. This applies to personal lending as well as business lending. A further £330bn to be made available was announced by the chancellor yesterday, which represents 15% of the UK economy, and will be made available via the CBILS mentioned above as well as directly from the Bank of England for larger firms. Finally, in an unexpected move, Facebook has announced that it will be making $100m in grants to 30,000 small businesses across 30 countries.
TAXES – TIME TO PAY ARRANGEMENTS
The government has announced that businesses struggling to meet tax liabilities due to the outbreak can discuss matters on a dedicated helpline (0800 0159 559) and make applications for payment in instalments. Historically, the best chance of achieving these arrangements have come for those who have no previous late payment history and where applications are made before the due payment date rather than after. Now might be a good time to consider whether you can afford to pay your upcoming tax bills, in particular your PAYE bill that is due in the coming days or any VAT due by the 7th April. Payment holidays have also been offered by HMRC to clients in certain circumstances.
SUPPLIERS AND LANDLORDS
If you are going to struggle to pay suppliers/ Landlords on time, approach them in advance and explain your position to see whether they will accept payment by instalments, whilst explaining that you will be making an application for a government loan to enable payment in full. Most suppliers would prefer some payment, rather than no payment and would prefer open discussions rather than being unaware and having to chase payment once it falls due. Landlords may also be able to take advantage of 3 month mortgage payment holidays should this leave them in a difficult situation.
Equally some, or all, of your customers will be facing the same concerns and problems as you. Many of those customers who you support through these difficult times will show loyalty to you in the future. Think in advance about how you might deal with extended credit requests, ensure that the terms are clear and that payment mechanism makes on time collection easy (e.g. direct debit or post-dated cheques). Suggest payment by credit card so that your own cash flow is not impacted, be clear that extended payment terms must be adhered to and that further orders will need to be at least part paid in advance (to cover your costs).
Many Businesses rely on their own cash flow forecasting to work out any cash shortfalls or to discover pinch points where things may become tight. These will need to be revisited as the changing circumstances will of course bring about a change in results. An up to date forecast will allow you to make important business decisions, including whether you need additional finance etc. as mentioned in the points above. DIRECTORS’
Whilst this is an unprecedented situation, normal insolvency rules continue to apply. Whilst you may never have previously needed to consider the possibility of your own company failure we are very much entering the unknown in economic terms. This must therefore be considered as a possibility and steps taken to protect your personal assets as well as the company. Many directors draw dividends during the year on account of the annual profits. If this short term disruption means a period of reduce profitability there may not be adequate reserves to maintain current drawing levels leaving directors with an overdrawn directors loan to repay in the case of a liquidation or be taxed in a continuing business in absence of repayment. Where this is considered to be a real problem, Directors should consider reducing the amount drawn in the forthcoming months to the minimum possible. Should the company become insolvent during this period, there are strict rules for directors to follow. In short, directors need to be able to demonstrate that they can trade out of this position or risk becoming personally liable for unpaid creditors. It is therefore, as important than ever that you know your financial position. Where directors, or friends and relatives are introducing loans to the company consideration should be given to taking formal security over the assets of the company. In this way if the funding is unsuccessful and the company fails the director will not lose everything in his attempts to support it.
If you are in the fortunate position of having surplus funds sitting in your bank account remember that guarantees in the event of bank failures is limited to £85,000 per individual and some small companies. Whilst this may seem unlikely, it has happened before and it may therefore be worth considering splitting funds between unconnected banks and spouses to maximise the cover.
Businesses should check their cover with their insurers. Reports suggest that most companies will not have business interruption insurance in place that covers closure by the authorities as generally this cover relates to damage to property and the cost to mitigate that disruption. However, extensions can be found in some business interruption policies and therefore the wording of the policy must be checked carefully to see what is and isn’t covered. As you might expect, should you decide to close your premises with caution in mind, rather than specifically being ordered to do so, you would not be covered by any insurance policy. OUR ROLE Never before has it been so important to have up to date financial information available. Getting your accounting records up to date and get records to us sooner rather than later could see the business benefit from being able to plan more robustly for the coming weeks and months.
Particular advantages will include:
* Having information available should it be needed for funding purposes.
* Awareness of tax and other liabilities in advance, so that payment plans can be explored
* Up to date figures allowing for business decisions to be made quickly and accurately.
* Ability to remain in control during these challenging times. More than ever, we want our clients to know that we are here to help in the face of the ever changing landscape with regards to COVID-19.
Should you require assistance with anything mentioned above then you can contact us in Nantwich on 01270 623 731 or in Wilmlsow on 01625 416380.