Business Support

The insolvency measures to help prevent businesses unable to meet debts due to the impact of Coronavirus to continue trading and not be forced to file for bankruptcy have been extended. It was confirmed that the temporary suspension of wrongful trading liability during the pandemic will now continue until 30 June. The measure was initially set to expire on 1 June 2020.

This means that company directors can keep their businesses going without the threat of personal liability. This measure allows directors of companies to pay staff and suppliers even if there are fears the company could become insolvent due to the Coronavirus outbreak.

The Department for Business, Energy and Industrial Strategy (BEIS) also confirmed that temporary measures to give companies and other bodies flexibility regarding Annual General Meetings (AGMs) and other meetings will be made retrospective to 26 March 2020.

The BEIS and the Financial Reporting Council (FRC) have also jointly published a Q&A document containing further clarifications. The document confirms that the government intends to introduce the necessary legislation as soon as the Parliamentary timetable allows and that the measures will apply retrospectively from 26 March.

However, it is important to note a caveat within the document stating that 'while it is our expectation that the legislation passes into law and applies retrospectively, we cannot guarantee this outcome. Therefore, companies and other bodies will need to take their own view on how to proceed.'

Under the proposed legislation, companies will have until the end of September 2020 to hold their AGMs. This date will be extended if necessary. The measures will also apply to general meetings or other meetings of members that are required.

The Self-employment Income Support Scheme (SEISS) opened for applications on 13 May 2020. HMRC has confirmed that by midnight on 17 May there had been a total of 2 million claims with over £6.1 billion claimed. The scheme will provide grants of up to £2,500 per month based on 80% of average profits to qualifying applicants.

The initial grant is for the three months, from 1 March through to the end of May 2020. The government has not yet confirmed whether this scheme will be extended, past the current expiration date of 31 May.

The self-employed can only make a claim if their business has been adversely affected by Coronavirus. For most claims, the grant will be based on average trading profits over the tax years 2016-17, 2017-18, 2018-19. To be eligible, trading profits must be no more than £50,000 and at least equal to non-trading income.

HMRC will assess eligibility for the grant based on trading profits and non-trading income from Self-Assessment tax returns. Trading profits are calculated as the profits from self-employment or partnership tax calculation after deducting any allowable expenses. HMRC will not deduct any losses brought forward from previous years or the personal allowance.

Most companies will have fairly healthy accounts up to the middle of March 2020 when the lock-down of activity to control coronavirus started.

Since that date, many firms will have struggled to maintain profitability even with the support of the various government programmes.

If we do manage to extract ourselves from lock-down without re-awakening COVID-19, it will probably be the end of this year before we can start to show modest profits once more.

Accordingly, the last nine months of 2020 will likely ring-fence our COVID losses.

There are three issues arising that are worth contemplating:

1. Profits up to 31 March 2020 will create tax payments early 2021 when our cash flow will be at its lowest ebb due to any COVID losses to the end of 2020.
2. How will credit reference agencies react when the COVID losses start to be filed next year?
3. Is there a strategy to extend accounting periods to absorb part of the COVID losses? For example, extending 31 December 2019 year ends to 30 June 2020, or 31 March 2020 to 30 September 2020? This would help to reduce tax payments next year but risk an earlier adverse reaction by credit reference agencies.

Credit reference agencies are already adding COVID risk indicators to their reports. Being one step ahead of these issues makes sense. 

There is no one-fix solution. We suggest that business owners contact us to discuss these options and to find a best-fit option for their business. 

For less than you would spend on tea milk and coffee each month, you can acquire the use of cloud-based accounting software.

Why bother?

Computerising your accounting routines in this way has a number of benefits for your business; of crucial concern if we are to survive the current COVID disruptions.

Benefits for individual businesses will vary but may include:

• Improved credit control
• Automated bank reconciliation process – links your bank accounts to your accounting software
• Profitability and solvency can be monitored in real time
• Links to your payroll software and online filing
• Automated VAT return production and online filing

And of increasing importance to all businesses at present, the ability to forecast and manage cash flow. Usually, this particular function is provided by a specialist APP that is bolted on to your accounting software.

Every business has different requirements and so selecting the right software is critical. We have our preferred suppliers and would welcome the opportunity to discuss your options with you.

If you already use cloud accounting software and would like to extend functionality to manage cash-flow, we can help. There are various APPs on the market that offer various levels of complexity.

The Chancellor, Rishi Sunak has today (12 May 2020) announced significant changes to the Coronavirus Job Retention Scheme, now commonly referred to as the furlough scheme. The scheme had been due to run until at least 30 June 2020. The Chancellor has now confirmed to the House of Commons that the furlough scheme will be extended for a further 4 months until the end of October and kept open for all sectors. By the end of October, the scheme will have been running for an astonishing eight months.

The Chancellor promised that the scheme will continue in its current form until the end of July. From 1 August until 31 October 2020, there will be greater flexibility added and employers encouraged to bring back furloughed staff part-time. However, employers will be asked to pay a percentage towards the salaries of their furloughed staff. We are told that further details on the changes to the scheme and information about its implementation will be published by the end of May.

The Chancellor was keen to stress that workers will continue to receive the same level of overall support of 80% of their current salary, up to £2,500 until the end of October. From August, employer payments will help to substitute the contribution the government is currently making in paying their employees. These measures should help to gradually encourage employees back to work and avoid the cliff-edge cut-off that has worried many businesses. 

It was also revealed that the scheme has so far supported over 7.5 million furloughed workers and almost 1 million businesses. More than £10 billion has been claimed.

There are a number of important conditions that must be met in order for an employee to be classed as a furloughed worker. These conditions will continue to apply until the end of July 2020. 

This includes the following:

• Employees must be notified that they have been furloughed.
• Employees must be furloughed for a minimum of three weeks.
• The employee cannot do any work for the employer that has furloughed them.

It was also rumoured that the Chancellor would announce changes to the support measures for the self-employed. However, no changes or extensions to the Self-employment Income Support Scheme were announced. 

New statistics were also published that show businesses have benefitted from over £14 billion in loans and guarantees to support their cashflow during the crisis. This includes 268,000 Bounce Back Loans worth £8.3 billion, 36,000 loans worth over £6 billion through the Coronavirus Business Interruption Loan Scheme, and £359 million through the Coronavirus Large Business Interruption Loan Scheme.

The government also published the much talked about roadmap (11 May 2020) to help provide more information on the process of coming out of the lockdown without risking a second wave of infection. The roadmap discussed the development of new safety guidelines that set out how each type of physical space can be adapted to operate safely. This includes places of work that are beginning to reopen as restrictions are lifted. 

The Department for Business, Energy & Industrial Strategy also published new guidance on 11 May 2020, titled ‘Working safely during Coronavirus (COVID-19)’. 

The guidance provides information on making workplaces as secure as possible from the Coronavirus threat. This guidance applies to those who work in or run offices, contact centres and similar indoor environments and includes requiring employers to carry out risk assessments before they can reopen.

The guidance seeks to ensure that as many people as possible are able to safely follow social distancing guidelines at their places of work. Special consideration will also be given to those who are at higher risk or who need to self-isolate. The guidance further considers minimising the number of unnecessary visits to offices, cleaning workplaces, the use of PPE and face coverings, handling the workforce and goods entering and leaving work sites. 

The Department for Transport has issued new guidance on how to make journeys safely in England during the Coronavirus outbreak. It provides guidance for walking, cycling, using private vehicles (for example cars and vans), and travelling by taxis and public transport (for example trains, buses, coaches and ferries). The guidance makes it clear that people should avoid using public transport where possible and instead try to walk, cycle or drive. 

In many parts of the country, this may be easier said than done. 

If you are self-employed and qualify for the Self-employment Income Support Scheme you could receive a cash grant from HMRC based on 80% of your profits, up to £2,500 per month. The initial grant is for the three months, from 1 March through to the end of May 2020, but this measure could be extended. You can only make a claim if your business has been adversely affected by Coronavirus. For most claims, the grant will be based on average trading profit over the tax years 2016-17, 2017-18, 2018-19.

The online claims service was launched on 13 May 2020, although you may have been given a later date to make your claim between 13 and 18 May. If you are eligible you will be able to claim up to a maximum of £7,500 (equivalent to three months’ profits for March, April and May), paid in a single instalment. You need to make a claim using your own Government Gateway account. The claims are expected to be paid within six working days of submission.

You can also make a claim for Universal Credit if you are eligible. The cash grant may affect the amount of Universal Credit you get but will not affect claims for earlier periods.

The government is also providing the following additional help for the self-employed:

• deferral of Self-Assessment Income Tax and VAT payments
• grants for businesses that pay little or no business rates
• Business Interruption Loan Scheme
• Bounce Back Loan.

The present lock-down has created a raft of employed persons described as furloughed.

One of the criteria that employers and employees are required to abide by to benefit from the Coronavirus Job Retention Scheme – that funds furloughed employees – is that employees cannot work whilst furloughed.

Which begs the question, what do you do when the garden is pristine, all the other household chores are up-to-date and the dog is walked?

One option you could consider is resourced by the National Careers Service who offer a Skills Toolkit.

In the introduction to this service they say:

The Skills Toolkit is made up of free online courses, tools and resources to help you improve your digital and numeracy skills. The Department for Education has consulted some of the country’s leading educational experts and employers to make up a collection of high quality resources to suit a range of interests and skill levels.

This list of resources is not exhaustive and there are many other resources available. We will keep this under review and may update the list from time to time.

There are courses that will give you an introduction to getting confident online to more advanced digital skills for use in the workplace. These are all short courses that can be completed at home, in your own time, at your own pace.
82% of all job vacancies require digital skills. Find out more about why digital skills matter. If you're new to online learning or coming back to it after some time, see our advice on getting the most out of online learning. 

Might be worth considering if you have time on your hands.
 

If your suppliers offer you goods or services on credit, this will have a beneficial impact on your cashflow. You will have had the benefit of using the goods or services supplied, and the funds to pay for them, initially, stay in your bank account.

This benefit can be multiplied if you are able to convert the supplies into cash sales as you could possibly have the funds to pay created by this revenue. In this way your purchases are self-financing.

So, why would you pay these bills early?

Here are a number of options you could consider:

• Would suppliers offer increased trade or cash discounts for early settlement or cash with order?
• Would the goodwill created by settling supplier invoices early mean you could receive priority delivery?
• Good news is hard to come by. Perhaps your suppliers could offer testimonials or promote your business in some way to its other customers?
• You would grow your list of suppliers willing to offer trade references.

What you would definitely receive is their attention. If you have a reputation as a customer that pays their bills early, suppliers will sit up and take notice. If you can factor in some of the possible benefits to your business as listed above these should have a positive impact on your profits.

Its all in the planning. Consider the cashflow and impacts on profits. During the present disruption cashflow considerations may have the upper hand, but if the situation eases, paying early to gain profit wins could be attractive. 

The present lock-down has had a varied effect on UK businesses.

Obviously, firms that operate in hospitality, tourism and retail – where in the main, the no-contact directive means businesses can no longer operate – have more or less stopped trading. Ironically, other businesses that have built their sales online are flourishing.

In between, are countless organisations that have their staff working at home while office space is left vacant.

When the lock-down is eased it is likely that Her Majesty's Government will “suggest” that we continue to observe personal distancing. In an office or factory environment this will likely create issues.

Perhaps a solution will be to maintain a flexible approach; a mix of attendance at the office mixed with working at home?

In this way we could limit the numbers of workers in the office at any one particular time, but still get work done.

This approach would involve planning, but once a routine was established this may allow us to re-establish our business base without jeopardising personal distancing rules.

It will be interesting to see how the Government approaches the easing of the lock-down. Hopefully, what is doing the rounds in the press at the moment will be elaborated on and confirmed this coming weekend.