Business Support

One of the consequences of recession, such as the present downturn in activity caused by the Coronavirus outbreak, is the likelihood that many will face redundancy as employers try to manage the process.

In the past, this shake out process seems to reawaken dreams of not placing all your income eggs in one basket and instead, dusting-off those long-desired plans to run your own business.

There are sound reasons for doing this. For example, a business with 100 customers has 100 separate sources of income. Employment usually requires that you secure all your income from one source.

However, starting a new business – even in times of buoyant economic activity – is fraught with risk. To mitigate these start-up risks we suggest that you:

• Try and use your past experience and skills.
• Talk to other business owners, especially those that have made a success of their business and that are willing to share about their experience of starting a new venture.
• Take professional advice. There are probably a whole bunch of considerations that you need to work through before you open your business. It is what you do not know that will catch you unawares. Professional advice before you start will mitigate these uncertainties.

Add to these normal considerations the added uncertainties occasioned by the Coronavirus outbreak – and Brexit – and the need for cautious and thorough planning are self-evident.

If you are considering a new business start-up, please get in touch as we can help.

The Self-Employment Income Support Scheme (SEISS) was extended for a second and final three-month period from 1 June to 31 August 2020. The maximum grant available for the three-months is £6,570 (Previous quarter £7,500) paid in a single instalment. The application process for the SEISS extension will open from 17 August. Claims for the first quarter (1 March – 31 May 2020) closed on 13 July 2020.

The second grant will be open to self-employed individuals or members of a partnership whose business has been adversely affected by Coronavirus on or after 14 July 2020. It is possible for a qualifying self-employed person to claim for the second grant even if they had not claimed for the first grant.

The following points list some of the most important eligibility criteria for the scheme:

• Applicants must be self-employed or a member of a trading partnership, voluntary work, or duties as an armed forces reservist.
• Carry on a trade which has been adversely affected by COVID-19.
• Have filed a tax return for 2018-19.
• Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID-19) and intend to continue to trade in the tax year 2020-21.
• Have trading profits of no more than £50,000 and more than half of total income from self-employment.
• Individuals can continue to work, start a new trade or take on other employment including voluntary work, or duties as an armed forces reservist.

After the schemes launch, the government widened the remit of the SEISS. This allowed parents, including mothers, fathers and those who have adopted, who took time out of trading to care for their children within the first 12 months of birth of the child or within 12 months of an adoption placement, to use either their 2017-18 or both their 2016-17 and 2017-18 Self-Assessment returns as the basis for their eligibility for the SEISS.

There are businesses that have benefitted from the current COVID disruption. Particularly, those that can deliver goods and services online.

There are far more that have not benefitted.

Before COVID-19 reared its disruptive head businesses were exhorted to make profits. This was the way most firms created surplus cash-flow and value in their businesses.

Since the initial, national lock-down – March 2020 – profitability has been the experience of the few rather than the many.

Government grants, and in particular the furlough scheme, have enabled businesses to mothball activity and keep some semblance of financial credibility. But for a significant number of firms, making profits has been replaced by strategies to minimise losses.

Government backed loan schemes with favourable interest and repayment terms have provided liquidity, but at some future date, borrowers will need to repay loans and absorb interest charges.

Presently, businesses will need to manage a sustained period of loss making to ensure they do not drift into insolvency. Realistically, they will need to plan to at least breakeven – cover their costs – in order to halt any decline in net assets.

Breakeven turnover – the level at which costs are covered – is a fairly easy figure to calculate, but unfortunately, this indicator will need to be exceeded if and when you have to make repayment of loans or create additional working capital.

Again, these options need to be considered in some detail. Planning is key. If you have concerns about your longer term ability to breakeven please call, we can help you crunch the numbers and consider your options.

£20 million worth of new government grants have been released to help small and medium sized businesses across England recover from the effects of the Coronavirus pandemic. These grants will provide businesses between £1,000 and £5,000 to help them access new technology and other equipment as well as professional, legal, financial or other advice.

Commenting on the announcement, the minister for regional growth and local government, Simon Clarke MP, said:

'We have always said that we would stand behind our businesses and communities as we rebuild following the Coronavirus pandemic. This new funding does exactly that.'

The support will be fully government funded with no obligation for businesses to contribute financially. The support will be delivered from the England European Regional Development Fund and distributed through Growth Hubs, embedded in local areas across England.

To establish a viable grant programme, the government has set a minimum of £250,000 for all Local Enterprise Partnership areas. The allocation of resources will be reviewed as the grant fund is delivered. The funding is being provided to address immediate needs and all grants must be awarded by 28 February 2021 and all activity fully completed by 31 March 2021.

The Competition and Markets Authority (CMA) launched a COVID-19 taskforce back in March 2020 to identify any commercial practices that adversely affect consumers and to consider appropriate responses to help businesses comply with the law and protect consumers' rights.

One of the areas where the CMA received reports of unfair practices concerned the early years sector (nurseries and childcare providers). The main areas of concern related to payments and cancellations in the context of COVID-19 lockdown restrictions. This prompted the publication of a statement by the CMA on 30 April 2020, on how the law applies to consumer contracts, refunds and cancellations. On 28 July 2020, the CMA published an open letter.

The letter does not introduce any new laws but does set out in detail how the current law applies in the present circumstances. The CMA was clear that the vast majority of providers were striving to reach fair arrangements.

However, the CMA identified the following three main problem areas:

1. Providers requiring full or excessively large fees for services which are not being carried out due to the pandemic public health restrictions and government guidance.
2. Providers relying on unfair cancellation terms, such as requiring unreasonable notice to be given, or high cancellation fees in cases where the business is unable to provide the service.
3. Providers putting unfair pressure on consumers to agree to make payments by threatening that the child’s place will be lost or the provider will go out of business.

The CMA’s view is that consumers should not have to pay for services that cannot be provided and should also be offered a refund where services are paid for in advance but do not take place as agreed in the contract. In addition, contract terms requiring consumers to pay providers who are not providing the services agreed in the contract are likely to be unfair and unenforceable.

The letter confirms that the CMA will not be taking any action against the early years sector at this stage but will continue to monitor the sector. For the time being, the CMA is asking providers to consider their contracts and arrangements with consumers and take any necessary steps to ensure they comply with the law. Individual consumers will, of course, still have the option of pursuing a claim against businesses for alleged breaches of consumer law.

The government has announced that more small businesses will benefit from the Coronavirus Business Interruption Loan Scheme (CBILS). Under the scheme, borrowers can apply for up to £5 million in finance in the form of loans, overdrafts, invoice finance, and/or asset finance. The government will guarantee lenders 80% of the loan value, as well as covering the first 12 months of interest payments and fees.

Under EU State Aid rules, small firms that were classed as 'undertakings in difficulty' were unable to make use of the CBILS. Following a considerable amount of UK Government and industry lobbying, the European Commission has now relaxed its State Aid rules. This means that effective 30 July 2020, 'micro' businesses with a turnover of less than £9 million and fewer than 50 employees will be exempt from elements of the 'undertakings in difficulty' test and can apply for a loan under the CBILS.

Chris Wilford, Head of Financial Services Policy, CBI said:

'This is an important step that will help more businesses get the critical support they need. These eligibility hurdles have been a real stumbling block for many firms across the UK throughout the crisis. These were put in place to avoid governments bailing out failing companies, but those rules were established in normal times.'

HM Treasury has also made clear its expectation that all accredited CBILS lenders will implement the changes, noting the consequence that businesses whose CBILS applications they have previously declined may now be eligible.

The Intellectual Property Office (IPO) has ended its 'interrupted days' provisions and is now working to its usual deadlines. The IPO introduced extended deadlines, known as interrupted days, on 24 March 2020 as a result of the Coronavirus outbreak. An 'interrupted day' is defined as a day in which the normal course of business at the IPO is not possible. This meant that most deadlines for patents, supplementary protection certificates, trademarks, designs and applications for these rights, which fell on an interrupted day were extended.

Following the IPO’s latest review, the first normal day of operation when all interrupted days deadlines expire was 30 July 2020. The IPO has also announced that it is working on measures to ease burdens on business following the end of the period of interruption.

This includes the following temporary fee changes from 30 July 2020 to 31 March 2021 in relation to patents, Supplementary Protection Certificates (SPCs), trademarks and registered designs:

• fees for extensions of time will be zero
• there will be no surcharge for payment of a patent application fee after the date of filing
• fees to apply for reinstatement and restoration will be zero
• for patents and designs, there will be no surcharge for payment of a late renewal fee
• for trademarks, the surcharge for payment of a late renewal fee will be £1
• there will be no additional fee for late payment of SPC fees

The deadlines for completing actions, requesting extensions of time and paying fees are not affected by these fee changes and must still be complied with. There will also be continued alterations to hearings and Company Names Tribunal’s services.

A new £500 million scheme to kickstart film and television production struggling to secure insurance for COVID-related costs has been launched. This scheme will help TV and film productions that have been halted or delayed by a lack of insurance to get back up and running. The funding will be available to all productions made by companies where at least half of the production budget is spent in the UK and is estimated to cover more than 70% of the film and TV production market to the end of the year.

Last month, the government unveiled a new £1.57bn support package (known as the Culture Recovery Fund) to help protect the futures of venues including museums, galleries, theatres, independent cinemas, heritage sites and music venues.

More details of how organisations can apply for £880 million in grants as part of the £1.57 billion Culture Recovery Fund have also been announced. This fund offers financial support for cultural organisations that were financially stable before COVID-19 but are now at imminent risk of failure.

Unless the Chancellor comes up with replacement funding for the furlough scheme, and there is no sign that this will happen, those businesses that have maintained their workforce by furloughing staff will face difficult choices when the present Coronavirus Job Retention Scheme closes down at the end of October.

Do we keep staff on in the hope that business will improve? Or is this so unlikely that laying staff off is the only sensible alternative?

Much will depend on the market sector in which you trade.

Hospitality, tourism and many high street retailers will be especially challenged by the requirements to socially distance and quarantine as uncertainty regarding secondary waves of infection continue to disrupt attempts at planning for the future.

Ironically, it is planning that is required in order to make post-furlough choices. 

• What will be future demand for your products and services?
• How will your direct and fixed costs be affected?
• Do you need to shelve investment decisions?
• Are prospects so bleak that you need to consider closing down your business?
• And finally, if you can see a way forward, what staffing levels do you need to support the planned activity and what changes – lay-offs – do you need to make?

If you are undecided which way to jump, please call so we can help you consider your options. Sometimes an objective overview is required to see the wood for the trees.

The government has unveiled an important new law that will protect furloughed workers who are made redundant. This will ensure that any employee who was furloughed under the Coronavirus Job Retention Scheme (CJRS) will receive their full basic statutory redundancy entitlement. This amount will be based on their normal wages, rather than the reduced furlough rate. The legislation came into effect on 31 July 2020.

Employees are normally entitled to statutory redundancy pay if they have been working for their current employer for 2 years or more. The exact amount of statutory redundancy pay they are entitled to is dependent on age and length of service (capped at 20 years).

The new law also affects other entitlements, including Statutory Notice Pay which must be based on normal wages rather than employees’ wages under the CJRS, and basic awards for unfair dismissal cases, which will be based on full pay rather than wages under the CJRS. The new legislation does not alter any enhanced redundancy pay provisions as part of an employee’s individual employment contract.

The government has also confirmed that other changes are coming into force that will ensure basic awards for unfair dismissal cases are based on full pay rather than wages under the CJRS.