Business Support

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.

As we have written previously, if you are self-employed and qualify for the Self-employment Income Support Scheme you will receive a cash grant from HMRC based on 80% of profits, up to £2,500 per month. The initial grant will be for the three months, from 1 March through to the end of May 2020, but could be extended for a longer period. You can only make a claim if your business has been adversely affected by coronavirus.

When the scheme was launched, HMRC said that it would invite those who met the eligibility criteria to apply online. HMRC expected to begin contacting those eligible by mid-May 2020. However, in a news release published by HMRC we are told that HMRC began contacting taxpayers who may be eligible for the scheme on 4 May 2020.

You, or your agent can also go online and check your eligibility for the scheme at www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference

In order to receive a quick confirmation from the eligibility checker, you will need your Unique Taxpayer Reference, National Insurance Number and bank account details to hand. You will also need your Government Gateway user ID and password and will need to confirm your details are up to date. If the checker confirms your eligibility, you will be given a randomly allocated date between 13 and 18 May when you can first use the online system to make a claim.

The online claims service will also open ahead of schedule on Wednesday, 13 May 2020. If you are eligible you will be able to claim a taxable grant worth 80% of your average trading profits up to a maximum of £7,500 (equivalent to three months’ profits for March, April and May), paid in a single instalment. The claims are expected to be paid within six working days of submitting a claim. 

On 30 April 2020, HM Treasury published its Direction to HMRC giving statutory footing for the Self-employment Income Support Scheme (SEISS). The document makes it clear that one of the conditions for using the scheme is that the self-employed must have been adversely affected by reason of circumstances arising as a result of coronavirus or coronavirus disease, in order to apply.

When the scheme was launched it was made clear that HMRC will use data on 2018-19 returns already submitted to identify those eligible for the SEISS. The relevant tax return should have been filed by 31 January 2020, but HMRC exceptionally extended this deadline until 23 April 2020 to allow the self-employed some additional time to get their house in order and to be able to benefit from the scheme.

The Treasury instructions to HMRC also makes it clear that the condition that the 2018-19 return must have been filed by 23 April 2020 is also extended to any other relevant tax years. To qualify, the self-employed also need to have traded in 2018-19 and 2019-20 and intended to trade in 2020-21. 

There are other qualifying conditions that must be met including that self-employed trading profits must be less than £50,000 and more than 50% of income must derive from self-employment.

The Coronavirus Job Retention Scheme will now be available until at least 30 June 2020. Payments under the scheme can be backdated to 1 March 2020 for employees who met the eligibility criteria on that date.

The scheme is designed to help employers furlough their employees with significant government support. Employers can claim cash grants of up to 80% for eligible furloughed wages to a maximum of £2,500 per month, plus the employer National Insurance contributions and minimum auto-enrolment employer pension contributions on that 80%.

There are a number of important conditions that must be met in order for an employee to be classed as a furloughed worked. 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.

The application process for the scheme was officially launched on 20 April 2020. The Chancellor, Rishi Sunak told the House of Commons on 27 April 2020 that the first grants have already started to be paid. Payments for claims made on Monday 20 April will be in the employers’ bank accounts by 28 April and are taking a maximum of 6 working days. When the Chancellor spoke, more than 500,000 claims had already been made and over 4 million jobs had been furloughed. Over 5,000 HMRC staff are working on delivering the scheme including those manning phone lines and webchat services.

If you are self-employed and qualify for the Self-employment Income Support Scheme you will receive a cash grant from HMRC based on 80% of profits, up to £2,500 per month. The initial grant will be for the three months, from 1 March through to the end of May 2020, but could be extended for a longer period.

There has been little additional information published since the scheme was first announced at the end of March. The online service is not currently open for applications and HMRC is aiming to contact those eligible to use the scheme by mid-May 2020. Those eligible will be invited to apply online when the portal opens. You will only be able to claim using the GOV.UK online service. The first grants are expected to be paid out at the beginning of June.

If you are self-employed you may be able to make a claim for Universal Credit whilst awaiting the grant. Government figures have suggested that many have already applied for help, but this option remains available if you qualify. When the grants are paid these should be recorded as part of your self-employment income, and it may affect the amount of Universal Credit paid. This will not affect Universal Credit claims for earlier periods.

HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before 23 April 2020 deadline in the usual way.

To be eligible your self-employed trading profits must be less than £50,000 and more than half of your income must derive from self-employment. This is determined by at least one of the following conditions being true:

• having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
• having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period.

The government has announced the introduction of temporary new measures to protect commercial tenants on UK high streets from aggressive rent collection and closure during the Coronavirus pandemic.

These measures will see statutory demands and winding up petitions issued to commercial tenants to be temporarily voided. There will also be changes made to the use of Commercial Rent Arrears Recovery, building on measures already introduced in the Coronavirus Act. Existing measures include a moratorium on commercial landlord evictions for at least three months that was announced in late March.

The government is encouraging landlords and investors to work collaboratively with high street businesses unable to pay their bills during COVID-19 pandemic. In many cases, this is happening, but some landlords have been using aggressive tactics to recover rent due.

These measures will help to safeguard the high street and millions of jobs by protecting businesses from permanent closure during this time. However, while landlords are urged to give their tenants the breathing space needed, the government is also calling on tenants to pay rent where they can afford it or to pay what they can in recognition of the strains also felt by commercial landlords.

The new legislation to protect tenants will be in force until 30 June 2020 and can be extended in line with the moratorium on commercial lease forfeiture.

The Chancellor, Rishi Sunak has today (27 April 2020) made a statement to the House of Commons on the government’s economic response to the Coronavirus outbreak. The Chancellor confirmed that the Office of Budget Responsibility (OBR) has said that the Coronavirus will (not surprisingly) have significant negative impacts on the UK and global economy.

The most important announcement made by the Chancellor concerned the launch of the new Bounce Back Loans scheme. The launch of this scheme will help many small and micro businesses that appeared to have fallen through the cracks and were ineligible for most of the support measures that had previously been announced.

The new scheme will allow small businesses to borrow between £2,000 and £50,000 and access the cash, in most cases, within 24 hours of approval. The loans will have 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.

The Chancellor said that banks will not need to perform any forward-looking test of business viability or other complex eligibility criteria and that businesses will be able to apply for a loan online using a short and simple form. The new scheme will open for applications at 9am next Monday, 4 May, and firms will be able to access these loans through a network of accredited lenders.

The Chancellor has received many representations looking for the Coronavirus Business Interruption Loan Scheme (CBILS) to have a 100% government guarantees (rather than 80%) but resisted doing so saying he remained unconvinced that it was necessary to make such a move. However, many businesses are reporting difficulties accessing finance as banks are refusing to lend.

The Chancellor said:

'Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis. This is in addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support hundreds of thousands of small businesses.'

It was also confirmed that over 1.5 million new claims have been made for Universal Credit. More than 500,000 claims have been made for the job retention scheme since it was officially launched and over 4 million jobs have been furloughed. The Chancellor also suggested that, without government interventions to assist, a quarter of businesses may have stopped trading as a result of the Coronavirus pandemic.