Business Support

Many will remember the empty shelves in supermarkets when lock-down commenced March 2020. In particular, the absence of toilet rolls…

Compare this with supplies of TVs and other luxury goods where there was no noticeable absence of supply.

These examples point to a basic economic theory; that a product with few substitutes (toilet rolls) and where demand is constant, is inelastic.

Products where there is no immediate, compelling need, chocolates or a new iPad, are said to be elastic from a demand perspective.

Why does this matter?

If you sell products that are demand inelastic – toilet rolls for example – there will be less resistance to price increases if supply becomes an issue. Witness the prices we all had to pay for loo-rolls when available earlier this year.

You might like to consider the range of goods and services that your business sells from this perspective.

If most of the goods you sell are demand elastic, price increases will tend to result in a lower volume of sales: customers will simply defer buying until prices reduce.

Alternatively, if supplies of inelastic goods start to reduce, sellers will be able to pass on price increases more effectively, as demand will remain constant. 

It is worth considering these basic facts of economic life when you next consider the range of goods you offer.

This may seem to be an odd question. They buy because you offer what they want at the right price?

But is that the only consideration?

For faceless organisations like the larger online retailers, customers benefit from the huge range of goods on offer, easy payment options and reviews from previous buyers.

Competing on these terms is difficult for smaller businesses which prompts the question, what can we offer our customers aside from providing what they need at the right price?

One point of difference is that smaller businesses have an opportunity to develop person to person relationships that are not available on a larger scale. Prior, to the recent lock-down, proprietors will have met their customers face-to-face. They will have shared experiences of working in their local business community; they will get to know their customers, how they run their businesses, which goods and services they need.

Micro-sized businesses should exploit this ability to know their customers as larger organisations cannot compete at this level.

What we are discussing in this article is about developing working relationships with your clients that make them feel at home when they pick up the phone to buy from you. You will know their name, their back-ground, their previous buying patterns. Larger organisations may be able to duplicate some of this familiarity by automating past order processes, but there is no substitute for that person to person exchange that builds business friendships and locks-in goodwill.

And so, the next time a customer rings, take an extra minute to ask a couple of open questions: how are you, how is business? And pick-up on past conversations, did you manage to sort out that job you discussed last month?

As long as you get the basics right, supplying goods and services at the agreed price and delivery date, then your relationship with your customers will encourage loyalty and help you build and retain a solid client base for your business.

The government has confirmed that the next business rates revaluation in England will be postponed until April 2023. The government has previously announced that the revaluation that was due in 2021 would be delayed due to the coronavirus pandemic but no date had been announced. The revaluation in April 2023 will be based on property values on 1 April 2021.

The new revaluation date means that business rates will be based on property rental values that better reflect the impact of the pandemic. As with any revaluation there are winners and losers and this delay will benefit some businesses and hinder others. 

The revaluation of business rates usually happens every 5 years and is necessary to reflect changes in the property market. The last revaluation came into effect in England and Wales on 1 April 2017, based on rateable values from 1 April 2015. The revaluation does not raise additional revenue for the Exchequer as the multiplier applied to the property value is reduced accordingly. The downside of this delay is that rate bills will continue to be based on now historic 2015 values until April 2023.

The government has also launched a call for evidence on reforming the system. The government is aware that many businesses and stakeholders may need extra time to pull together a full response to all of the issues and so is seeking responses in two phases.

Phase One is asking for views on the multiplier and reliefs sections, as well as any other areas of pressing concern. These need to be submitted by 18th September followed by responses on all other sections by 31 October. The review is expected to conclude in Spring 2021.

Most retail, leisure and hospitality occupiers are currently receiving 100% Retail Rate Relief as part of the government support measures to help the economy cope with the effect of the pandemic. However, it is not known what if any reliefs will be announced from April 2021.

The Prime Minister, Boris Johnson, has announced the gradual reopening of indoor theatres and other live performance venues from 1 August 2020. The venues will need to follow strict social distancing measures and perform to a limited audience.

This announcement marks the move to stage 4 of the government’s 5-stage road map for the return of professional performing arts. The next stage will see a further increase in the audience numbers allowed at indoor venues.

Although for many venues it will not be financially viable to open with a reduced audience this is nonetheless a positive step forward for the arts and culture sector.

Guidance for the performing arts published earlier this month also sets out further measures to support the safe return of audiences, including:

• Reduced venue capacity and limited ticket sales to ensure social distancing can be maintained
• Tickets will be purchased online and venues encouraged to use e-tickets to reduce contact and help with track and trace
• Venues should have clearly communicated social distancing marking in place in areas where queues form and adopt a limited entry approach
• Increased deep cleaning of auditoriums
• Performances should be scheduled to allow sufficient time to undertake deep cleaning before the next audience arrives
• Performers, conductors, musicians must observe social distancing wherever possible

This announcement follows the launch of a new £1.57bn government support package aimed at protecting the futures of venues including museums, galleries, theatres, independent cinemas, heritage sites and music venues. The support will be made available using a combination of emergency grants and loans.

The Eat Out to Help Out scheme to help encourage the struggling restaurant sector was announced as part of the Chancellor’s Summer Economic Update earlier this month. The scheme is designed to help restaurants recover from the effects of the lockdown. The scheme officially launches on 3 August 2020 and will be available every Monday, Tuesday and Wednesday until 31 August 2020.

A new restaurant finder service is also being launched to help find local restaurants that are participating in the scheme.

Meals that are eaten in at any participating restaurant on the designated days will be 50% off up to a maximum discount of £10 per head including children. The discount will also apply to non-alcoholic drinks but cannot be claimed on alcoholic drinks or service charges. You can use the scheme multiple times and there is no minimum spend. Diners at a participating restaurant will not require a voucher to use the scheme and can use it at the same time as other offers and discounts.

All restaurants, pubs and bars can apply to take part in the scheme and display posters showing they are part of the scheme. Restaurants need to register online in order to participate. Once registered, they will discount your meal and claim the money back from the government. The specified days for using the scheme are typically the quieter trading days of the week so this should further help boost restaurants takings.

High Street retailers will have watched with dismay as competitors take their market share – not by businesses in their local business community – but globally, as consumers in the UK switch their attention from shopping trips to online retailers.

In the coming months, and perhaps longer term, footfall is unlikely to increase due to social distance restrictions and reluctance on the part of shoppers to step outside their protective family bubbles.
And this trend could spread to other business sectors.

Businesses selling goods or services might be advised to revisit their websites and see what can be done to improve or introduce online order and payment facilities. There are countless eCommerce solutions out there.

Obviously, you need to be selling something that is desired. You need to be competitively priced and have a delivery solution that moves your goods to your customer rather than waiting for your customer to collect.  

Enhancing your online footprint is almost always a win-win investment. Speak to your website developer. If they are reluctant to embrace the online shopping idea speak to a developer that is…

And if you are concerned by the cost of the improvements by all means call so we can help you crunch the numbers and consider what funding requirements you could consider.

If you are self-employed, as a sole trader or in partnership, the profits from your business are treated as part of your income for Income Tax and self-employed National Insurance purposes. As a consequence, the amount of tax payable on your self-employment is difficult to define in isolation and is why your trading accounts do not include a calculation of Income Tax and NIC payable.

Accordingly, if you are self-employed, any balance on your capital account (the amount of money you have introduced plus profits less any drawings made) is most likely overstated as you will need to pay any taxes due as increased drawings in the following accounting period.

Contrast this with limited companies. 

Companies pay Corporation Tax (CT) on company profits. Company profits are not added to shareholders’ income to determine tax due. Which is why company accounts do include a charge for CT in the year end accounts.

In most cases, this computation of CT is made annually, at the end of each trading year, but it is perfectly possible to estimate CT monthly and include those estimates in your management accounts. In this way you can keep an eye on CT liabilities and how they affect your company retained profits position. 

You can also use the estimates to consider how you will pay these future CT liabilities. 

The Chancellor, Rishi Sunak continued with his campaign to support the business and jobs community today, 8 July 2020, as firms engage with the disruption caused by the coronavirus outbreak and the measures taken to control infection.

The main thrust of his announcements during his Summer Economic update concerned his nominated Plan for Jobs 2020, details are listed below.

He also announced measures to support the hospitality and tourism industry including a novel voucher scheme and a temporary reduction in VAT. Again, details are provided in the following update.

In an attempt to boost the flagging property market Stamp Duty is being temporarily reduced in England and Northern Ireland. Separate announcements on this topic are awaited for Scotland and Wales who have their own Stamp Duty regimes.

Details of these announcements follow:

1. Job Retention Bonus: employers that bring back an employee that was furloughed, and continuously employ them through to January 2021, will be paid a £1,000 government bonus per employee retained. Employees must be seen to be gainfully employed during this period and be paid at least £520 a month, on average, from November 2020 to January 2021. All furloughed employees returned to employment in this way will be available for the £1,000 bonus. 
2. Kickstart scheme: this new scheme will cover the wages (plus associated costs) of new jobs created for any 16 to 24-year-old – at risk of long-term unemployment – for six months. These will have to be new jobs, of at least 25 hours a week and paid the National Minimum Wage. Employers will need to offer kickstarters training and support to find a permanent job. Employers can apply to be part of this new scheme from next month – August 2020 with first jobs starting in the autumn. Government has made an initial £2bn available for this scheme, but there is no cap on the number of places made available.
3. Apprenticeships: for the next six months government will pay employers to create new apprenticeships. The amount payable will be £2,000 for each apprentice. A new bonus to take on apprentices aged over 25 has also been announced. This will amount to £1,500 per appointment.
4. Green jobs initiatives: as an incentive to create jobs in the green jobs’ market a number of new grants have been announced. From September 2020, homeowners and landlords in England will be able to apply for a grant to make their home more energy efficient. The £2bn Green Homes grant will cover at least two-thirds of the cost up to £5,000 per household. For low income households these grants will cover all costs up to £10,000. There will also be a further £1bn allocated to make public buildings greener.
5. Boost for the housing market: Presently, in England and Northern Ireland (different amounts apply in the regions) no Stamp Duty Land Tax is payable on residential property purchases below £125,000. From today – for a temporary period to 31 March 2021 – this threshold is increased to £500,000. It is projected that this will reduce the average stamp duty bill by £4,500. Regional variations may apply. Purchasers buying a second residential property will still have to pay the 3% Stamp Duty Land Tax for property purchases up to £500,000.
6. VAT reduction for hospitality and tourism: for the next six months VAT charged on food, accommodation and attractions (such as eat-in or takeaway food in restaurants, cafes, pubs, cinemas, theme parks and zoos) will see VAT reduced from 20% to 5%. This will apply from 15th July 2020 until 12th January 2021.
7. Eat Out to Help Out discount: for the month of August 2020, meals eaten at any participating business Monday, Tuesday or Wednesday, will be 50% off up to a maximum discount of £10 per head including children. To access the discount businesses will need to register and can do so through a website to be opened next Monday, 13 July 2020. Businesses will be able to claim the money back weekly with the money in their bank accounts within 5 working days. 

As we manage the cautious steps to emerge from lock-down, still wary of COVID-19, the new incentives announced by Rishi Sunak should be welcomed.

As more details emerge on the various schemes announced today they will be published accordingly.

HM Treasury has published a further Treasury Direction made under the Coronavirus Act 2020, ss. 71 and 76, which modifies and extends the effect of the Self-Employment Income Support Scheme (SEISS).The Direction mainly deals with the expansion of the SEISS for a final three-month period to 31 August 2020, officially referred to as the SEISS extension. The eligibility criteria remains largely unchanged.

The SEISS extension grant will be calculated based on 70% of eligible earnings (previous quarter 80%). This will result in a maximum grant for the three-months of £6,570 (Previous quarter £7,500) paid in a single instalment. The application process for the SEISS extension will open from 17 August 2020 and close on 19 October 2020. The revised guidance provides further details on the amended rules for new parents and reservists.

It is also important to note that claims for the first grant for the quarter March-May 2020 closes on 13 July 2020. In order to claim the first grant, the business in question must have been adversely affected by the pandemic on or before 13 July 2020. Likewise, in order to claim the SEISS extension (June-August 2020) the business must have been adversely affected by Coronavirus on or after 14 July 2020. A self-employed person can claim for the second grant, to August 2020, even if they had not claimed for the first grant.

It may be some time before we could state with some certainty that it was back to business as usual; usual being the business environment before the arrival of Coronavirus.

What has changed?

The major change has been the dampening of demand due to lock-down and other government interventions aimed at job retention and support for businesses hardest hit. For example, the hospitality sector.

Food retailers, supermarkets and the online shopping platforms have prospered as we have met our needs for goods by internet shopping from home.

Pubs, restaurants and hotels have been closed and are only recently re-opening.

Social distancing is still making demands of all businesses that need footfall, that need customers through the door. Table covers are much diminished, there are queues to access most stores and sanitation points are demanded to control the spread of infection. As recent events in Leicester have demonstrated, Coronavirus has not gone away. And if there are local flare-ups, the Government will quickly intervene to reintroduce local lock-downs.

As we have previously posted, all of these new demands on businesses need to be considered. At one end of the scale the disruption has been too much, and businesses have closed and will not be reopening. At the other extreme, businesses that have thrived – there are a few – will need to plan in order to avoid the possibility of overtrading.

To survive in this new normal, Coronavirus period planning for best use of business resources is critical. The assumptions that we have taken for granted in the past, for example free movement of customers to access our goods and services, may no longer apply and the costs of adapting (on revenue, costs and cash flow) need to be factored into our business planning.