Business Support

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.
 

Up to the lock-down, most business owners were fully engaged in running their businesses and chasing new sales opportunities. The opportunity to take time out to consider longer-term issues: expanding your business, planning for a business exit or retirement, were fanciful strategies that may have crossed our minds in the second before we slept or when stretched out on a beach towel.

In the present lock-down hiatus perhaps we have an opportunity to find space for this sort of planning?

Clearly, the Coronavirus outbreak has had a global effect – we are all in the same boat – so we are not looking at local changes in isolation. The world markets for the exchange of goods and services have been severely challenged and disrupted, accordingly, the world post COVID-19 is likely to be different to what we have come to expect in the past.

Taking time out now, while there is time, may be a productive use of our grey cells.

The questions we need to ask could include:

• How could we tap into the emerging online market and adapt our services and product ranges to better suit this approach?
• What financial effect is the present hiatus having on our Balance Sheets?
• What will our business forecasts look like if we factor in a slow or fast exit from lock-down?
• Do we need to seek out new capital to plug any hole left by weeks of reduced or no activity?
• What opportunities are there to restructure to cope with the new economic realities?
• And beyond COVID-19 related disruption, how will our impending exit from the EU add to this mix?

If you are interested in this process we can help. Please call any time to discuss your options. None of us will be exempt from the challenges ahead.
 

The Scottish Government has announced a new £100 million package of additional grant support for small and medium sized businesses (SMEs) and newly self-employed people.

The money is allocated to three separate funds. The funds opened for applications on 30 April 2020 with the first funds expected to be paid out in early May. The funds are being administered by local authorities and Scotland’s enterprise agencies.
 
The funds comprise the following:

• £34 million Hardship Fund for the newly self-employed, managed by Local Authorities. The newly self-employed may not be eligible for UK support (as they became self-employed since April 2019) but are facing hardship never-the-less. Grants offered to this category amount to £2,000 per claim.
• £20 million Creative, Tourism & Hospitality Enterprises Hardship Fund, managed by the Enterprise Agencies with support from Creative Scotland and VisitScotland for small and micro creative, tourism and hospitality companies who are not in receipt of business rates relief. Businesses in this category will receive grants of up to £25K.
• £45 million Pivotal Enterprise Resilience Fund managed by the Enterprise Agencies providing bespoke grants and wrap around business support to viable but vulnerable SMEs who are vital to the local or national economic foundations of Scotland.

In addition, the Scottish Government is also providing £1 million to top up Creative Scotland’s Bridging Bursaries in the not-for-profit sector.

The Coronavirus Job Retention Scheme allows employers to claim cash grants of up to 80% of wages (capped at £2,500) for furloughed workers.

In the most recent update to HRMC’s guidance there is a clarification relevant to directors that are paid annually. The guidance confirms that company directors who are paid annually are eligible to claim, as long as they meet the relevant conditions for the scheme. A number of directors (usually sole directors / shareholders) of small businesses pay themselves a salary just once a year.

The scheme is set-up to allow back-dated claims to 1 March 2020 and is currently running from 1 March 2020 to 30 June 2020. To claim, directors must have been on the PAYE payroll on or before 19 March 2020. This means that the directors annual pay must have been notified to HMRC through an RTI submission on or before 19 March 2020 in relation to a payment of earnings for the 2019-20 tax year.

However, the financial support offered to directors under the scheme is based only on their salary, not salary plus dividends. Most sole directors of limited companies take a small salary and top up with dividends to extract the majority of their income. In order to furlough themselves directors must also play no active role in their businesses, apart from being allowed to complete limited statutory duties.

The Bounce Back Loans scheme first announced by the Chancellor, Rishi Sunak, in late April was launched on 4 May 2020. The new scheme allows small businesses to borrow between £2,000 and £50,000 and access the cash in most cases within 24 hours of approval.

The loans come with a 100% government guarantee and businesses can apply for a loan of up to 25% of their turnover. The government will also pay the interest on these loans for the first 12 months and no repayments will be due during this time. Just prior to the launch of the scheme, the Chancellor confirmed in a letter to accredited lenders that an affordable flat rate of 2.5% interest will be charged on these loans. 

The scheme is available through a range of British Business Bank accredited lenders including the five largest banks. Banks will not perform any forward-looking test of business viability or other complex eligibility criteria for these loans. Businesses can instead apply for a loan online using a short and simple online form, with only seven questions.

Eligible companies will be subject to standard customer fraud, anti-money laundering (AML) and Know Your Customer (KYC) checks prior to any loan being made. Some State Aid restrictions may apply to applications. Any business that has already taken out a Coronavirus Business Interruption Loan of £50,000 or less can apply to have these switched over to the Bounce Back Loans scheme.