We are in the midst of challenging and confusing times, both for us personally and for our businesses.
The government has responded with a raft of ever-changing guidance, alongside other groups and industry bodies, to help us navigate the rocky road back to normality. We will get there, however long it takes.
To save you having to sift through the copious emails, newsletters and social media posts, this page will feature the highlights of all available advice, as cherry-picked by Paul and the team at Cornish Accounting Solutions.
As ever, if you need bespoke advice for your business, or if you’re unsure what applies to you, please contact us. We are now working virtually and would be delighted to assist.
We will be keeping this page up-to-date as new guidance emerges. Of course, if you find something that you think the business community would find useful, let us know on social media and we’ll try to include it.
On Friday 20th March the government announced even more help for businesses. This is an evolving situation so to get the most up-to-date advice please visit the government website page: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses
The big changes announced by the government on Friday were:
In the rest of the article, I will summarise the help available for small businesses. There is likely to be a grant or loan which your business can use to help during the Coronavirus Crisis.
Long and very detailed guidance on eligibility and what you can claim for can be found here
But, these are some of the key points you may like to know:
The government is in the final stages of testing a portal for businesses to submit their claims for wages for furloughed employees under this scheme. This is believed to potentially go live on the 20th April and first payments due from 30th April. Until then, you need to pay your Furloughed employees, and then claim back money from the government.
The Coronavirus Retention Scheme: ALL UK businesses are eligible
For any affected employee you need to designate them as “furloughed”. In other words, they are laid off temporarily. What this means explicitly is the employee is not paid for a temporary period but retain their employee benefits. The employee is not expected to do anything work-related while they are “furloughed”. The scheme is being applied retrospectively, i.e. from 1st March. The current view is the scheme will be open for 3 months (March – June), but may be extended if required.
HMRC will shortly open a portal for all small businesses to input details of their furloughed employees. We believe that reimbursement will happen shortly.
All small businesses (less than 250 employees) can get the following help:
If your business is eligible for small business rate relief OR rural rate relief:
If you are a retail, hospitality or leisure business:
Universal credit: can you claim this?
Universal Credit is a monthly payment to help with your living costs. It is available for anyone, even if you are self-employed. But as always you need to meet fairly specific criteria; namely you are on a low income or out of work. If you’re expected to look for and be available for work, then it needs to be identified whether you’re ‘gainfully self- employed’.
Gainful self-employment means that:
As you would expect, you must provide evidence about your business and what you are earning through your business.
If you’re gainfully self-employed, your Universal Credit payment may be calculated using an assumed level of earnings, called a Minimum Income Floor. It’s based on what an employed person on minimum wage would expect to earn in similar circumstances. If you earn more than this, then your Universal Credit amount is based on your actual earnings. If you earn less, the Minimum Income Floor is used to work out how much you can get. You may need to look for additional work to top up your income.
To check if you are eligible for Universal credit go to: https://www.gov.uk/self-employment-and-universal-credit
From 17th March you can ask for up to a three-month repayment deferment on your mortgage to give you some breathing space. This deferment applies to homeowners and buy-to-let landlords, to allow them to pass on the payment reduction or deferment to their tenants. It will not affect your credit score. However, you must agree your repayment deferment with your bank, otherwise you may skip a payment and it will show a default on your credit score. Please speak to your bank if you want to organise a deferment on your mortgage.
Lastly, a dedicated Helpline has been set up to help businesses & self-employed in financial distress and with outstanding tax liabilities. Call this helpline to be able to agree a bespoke Time to Pay arrangement with HMRC. This is where you agree with HMRC a bespoke payment plan for your outstanding tax liabilities. If you are concerned about being able to pay your tax due to COVID-19, talk to us first as we can help you plan your call to HMRC’s dedicated helpline on 0800 0159 559.
You may well have already seen the information announced by the government about deferring VAT payments but in case you haven’t we wanted to let you know. HMRC will not be taking Direct Debits for any payments due within the period 20 March 2020 – 30 June 2020. So this will include the VAT quarters ending 28th February 2020, 31st March 2020 and 30th April 2020 as the payment for these quarters would be due to be paid in to be paid within this deferral period. This deferral period will mean that any VAT due for these quarters will not actually need to be paid until 5th April 2021. The VAT return for this quarter will still need to be filed by the usual deadline.
The below link explains this further, it says in the link it is an automatic offer and you don’t need to apply/register for it but when we spoke to HMRC to check about this they did say it may be best to cancel the direct debit with the bank if you don’t want the direct debit to be taken. It is up to you whether you choose to use this deferral period but we wanted to make you aware it is an option, we are generally advising clients to take this deferral option to help preserve cashflow in the current climate.
Let’s start with the Coronavirus Job Retention Scheme:
In terms of the clarified advice on the Coronavirus Job Retention Scheme, we have learnt:
Further details can be found here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
A quick summary of the grant being made available for self-employed individuals:
Self-employed individuals will be eligible of a taxable grant up to £2500 per month for at least 3 months, which will be equal to 80% of their profits. And the self-employed can carry on working to access this grant. So far so good. But with all these things there are caveats, namely:
You may be thinking, but I’m self-employed but get paid as a mixture of dividends and salary. Why can’t I access this scheme? The government may have put IR35 back for a year for the private sector, but they do seem to be making a point here!
Full details of the scheme can be found here: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme
How will HMRC work out what I can claim?
HMRC will take your trading profit for the last 3 years you have traded, then divide by 3 and divide by 12 to get your average monthly profit.
Example: Dave is a self-employed plumber who has been trading for 3 years. In his self-assessment tax returns he declared a profit of £48 000, £35 000 and £45 000. His average monthly profit is: (48 000 + 35 000 + 45 000)/(3*12) = £3 556. This means he would be eligible to claim for £2500 per month of grant.
Example: Sarah is a mobile hairdresser and started trading in May 2019. Her self-employed income was 20% of her income for the year, so she is not eligible for the scheme, as her trading profits in tax year 2018/2019 was not more than half of her taxable income for 2018/2019.
Example: Rishi is a taxi driver and started trading in April 2018. His trading profit in 2018/2019 was £20 500. He got all of his income from self-employment in 2018/2019. He would, therefore, be entitled to £20 500/12 = £1708.33 of a monthly grant.
How do I make a claim?
If you are eligible, HMRC will be in touch.
What help is available to me as someone who is self-employed but operates through a limited company and doesn’t have premises?
In this scenario then you may be able to access a grant via the Coronavirus Job Retention Scheme. I.e. if you pay yourself a salary through payroll, then you may be able to get 80% of this salary. However, you would need to prove you are no longer working and have Furloughed yourself to access the scheme.
We don’t have full details yet, but we wanted to let you know that the Coronavirus Business Interruption Loan (CBIL) Scheme is going to be revamped after it has come under considerable criticism.
And this is very positive news for small businesses. As a firm we were personally very disappointed with how the CBIL was being offered and administered by the banks. We believe the following changes will now be implemented (but will confirm in due course)
The loans are available to businesses who have not been refused a commercial loan
The interest rate of the loan after the 1st 12 months interest free are likely to come down from some of the eye-watering rates we had seen quoted. (30%!!!!) But there is still no cap on interest rates from the banks for these loans.
For loans up to £250,000, business owners will not have to supply personal guarantees against their own savings or property.
If you are thinking of accessing the CBIL scheme or a commercial loan scheme or any other type of borrowing, please get in touch as we can help you through the process.
As with any kind of formal borrowing, you will need:
Your books fully up-to-date
Up-to-date management accounts
Projections and forecasts for the business
The link below offers a checklist from an online financing app we use. It lists the items they suggest should accompany any application. If you are applying to your own bank then you wont need to include any bank statements. If you are not successful with your own bank please contact us and we can apply via the Capitalise portal which has access to 40 lenders.
The banks seem to have not got the memo from the government to lend to businesses sadly. The government has recently intervened and some of the requirements to access these loans have been removed, namely:
However, the banks are struggling to turn around applications quickly right now. So, we recommend that if you want to access this scheme that you try your current business bank first. We can help you get all the paperwork together, such as providing before COVID-19 and after COVID-19 forecasts, management accounts etc.