How Your Business Can Survive The Coronavirus Crisis
Action plan to get over the coming months
The key to the survival of your business over the coming months will be your cashflow. So here is our 10 point financial action plan to help you get through. This is not an operational plan so we have not considered the feasibility of home working etc…
- Review workloads and confirm orders. Orders may be cancelled or postponed, so you need to try and get a handle on what work you are expecting in the next three months.
- Prepare a cashflow forecast (it doesn’t have to be complicated), what monies are coming in and going out over the next 3 months will probably suffice. Best case and worse case scenarios should be reviewed. It is essential you identify the pinch points- when will cash run out. It goes without saying to review expenses and see if you can cut or defer non-essential expenditure. A simple cash flow forecast template can be found here. If you need assistance call us.
- Your biggest expense is likely to be your employees. On Friday, 20th March, the Chancellor announced the launch of the Corona Virus Job Retention Scheme. We have prepared a detailed blog to assist business owners to make the necessary claim. The scheme is being introduced to encourage business owners to keep their team together, a measure we strongly support.The government will now provide grants for up to 80% of the employee’s salary up to a maximum of £2,500 per month. The grant will cover all employment costs, so gross salary, pension contributions and employer’s national insurance contributions. If you have laid off employees then these changes should assist. The measures are however unclear as they state that the employee should not undertake work for the employer whilst they are furloughed. This support will help restaurants, pubs and shops which have closed or will close. However, there are many workers who are being asked to work reduced hours and it is possible that these employees will not be able to claim under the Corona Virus Job Retention Scheme.
Until we have clarity our initial advice still remains. First and foremost check your contracts of employment. A good contract will have a lay-off clause whereby staff would only need to be paid the statutory guarantee pay – currently £29 a day, increasing to £30 a day from 6 April. The statutory guarantee pay is however limited to 5 days. In respect of how long the lay off period can be, the basic rule is that it should not be for a period of more than 4 weeks in a row or for more than 6 weeks in total over a 13 week period where the maximum allowed is 3 weeks off in a row at any one time. If you exceed those limits the employee has the right to claim a redundancy payment. Another option is to ask staff to take annual leave. Employers do reserve the right to ask staff to take this at a specific time, but they are obliged to provide notice of at least twice the amount of time as the leave they want them to take. For example, if you want staff to take five days, they would need at least ten days’ notice. If you are obliged to pay your staff full salaries and this is just not sustainable, then we recommend you seek employment advice urgently. Most employees will want to work with you to keep their jobs, will value the support you give them over this difficult period and will probably be supportive, but you must ensure you take legal advice to protect yourself from any claims once things get back to normal. Ultimately, if you do need to make anyone redundant the process for redundancy usually takes a minimum of 10 days unless your business is going under or the employee has worked for you for less than 2 years. Again, please make sure you take legal advice to protect yourself from any claims once things get back to normal.
- Review your trade debtors. If you have been lax on collecting monies then now is the time to get things in order. Please check out our 14 point plan . This was prepared by us in a recent construction industry blog but we believe it applies to all businesses.
- Whether you have a VAT liability or corporation tax liability coming up, the Chancellor announced in the Budget that they have set up a new dedicated phone line with 2,000 extra staff to assist businesses through time to pay (TTP) arrangements. Information can be found here. During the coronavirus outbreak the usual 3.5% annual interest charge on deferred tax payments will be waived. Our only concern will be whether this loan impacts on 7) below. If you need help in getting your TTP arrangement in place call us.
In addition to this, the Chancellor announced on 20th March that all UK businesses can defer any VAT liabilities from 20 March 2020 until 30 June 2020. More details on the VAT deferral can be found below.
Another announcement on 20th March was that for all income tax payers under self-assessment any payments on account due on the 31 July 2020 will be deferred until the 31 January 2021. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.
- Talk to your suppliers and the bank about flexibility in payment terms or extending facilities, but remember that all your suppliers are likely to be in the same boat as you and they, like you, will remember those businesses which are supportive during these difficult times. In respect of the banks, mortgage companies and credit card companies talk to them. Most have announced help in the form of payment holidays on credit cards, loans and mortgages, temporary emergency loans with no fees and overdraft facilities and increased credit limits. Some have dedicated helplines but the first point of call should be your business bank manager or their business teams. It is essential that you first seek any funding from your bank before applying for the Coronavirus Business Interruption Loan. The Coronavirus Business Interruption Loan (CBILS) will be for businesses which have a borrowing proposal that, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.
- Talk to your bank about a Coronavirus Business Interruption Loan. The Chancellor announced in the recent Budget that businesses will be able to apply for a Coronavirus Business Interruption Loan of up to £5 million, with no interest due for the first twelve months. The government will provide lenders with a guarantee of 80 per cent of each loan – subject to a per-lender cap on the number of bad loans it can claim for. We have written a detailed blog on all the latest announcements on CBILS which can be accessed here. If you need help in making a loan application then call us.
- You should check with your insurance provider whether you are covered in the event that your business is forced to close. The current coronavirus outbreak appears to satisfy some definitions of disease now that it has been designated as a notifiable disease and declared a ‘pandemic’ by the World Health Organisation (WHO). Most businesses are unlikely to be covered, as most business interruption insurance policies are dependent on damage to property, which will exclude pandemics. Some businesses may have purchased a specific add on relating to notifiable diseases, but some of these will still specify damage to the building. Some businesses may have purchased supply chain or denial of access cover which may meet their needs in this case.
- The Government also announced that the 700,000 smallest businesses who are already exempt from paying rates will now be eligible for £10,000 grants to help meet their business costs. The businesses entitled to the grants are those with a business property which is currently entitled to Small Business Rate Relief (SBBR) or Rural Rate Relief. In addition those businesses in the retail, hospitality and leisure sectors with units where the business rates is under £51,000 will receive grants of £25,000 to help meet their business costs. It is not yet clear how businesses will access the grants but we understand that they will be issued by Local Authorities. We will be reviewing the position in respect of these grants and let you know as soon as any information is available.
- It is possible that despite carrying out all the above action you may conclude that the business in its current structure cannot survive. If that is the case then please talk to us about your options. We work with a number of insolvency practitioners and more often than not if the underlying business is good they will find a solution.
The statutory sick pay (SSP) announcements will also help, with SSP now being payable from day one of a sickness, or if an employee or someone they live with is told to self-isolate, even if they have no symptoms. The SSP paid by the employer for the first 14 days will also be recoverable, provided you have less than 250 employees. Employees will not need to get a fit note from their GP. Those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website. You should however try to use your internal self-certificate form and ensure you maintain clear records of any absences and the causes for those absences. It is also recommended that you carry out a return to work meeting for all absences, regardless of cause or duration. The bad news is that the mechanism for recovering the SSP has not yet been announced and it could take several months for any SSP to be recovered. We will keep you informed of SSP developments and will be sending out a separate post to all our clients about the information we will need to ensure the maximum claims can be made.
We have written a detailed blog on all the latest announcements on SSP which can be accessed here.
The Chancellor also announced a stream of help for certain businesses paying Business Rates. The retail discount in England is 100% for the 2020 to 2021 tax year for properties below £51,000 rateable value. The relief will also be expanded to the leisure and hospitality sectors in response to COVID-19- e.g. gyms, B&B, small hotels.
Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.
Those businesses eligible for the newly expanded retail discount and/or the new pubs discount may need to apply to their local authority to receive the discount so please keep an eye on what is demanded. A full current list of the businesses which are covered can be found here.
Furthermore the Chancellor announced on 17th March that all retail businesses and those in the leisure and hospitality sectors paying business rates on units with a rateable value above £51,000 will get a rates holiday in 2020/21. That means every single shop, pub, theatre, music venue, restaurant – and any other business in the retail, hospitality or leisure sector – will pay no business rates whatsoever for 12 months. Guidance for these businesses can be found here.
On 25 March 2020 the government announced that estate agents, lettings agencies and bingo halls that have closed as a result of Covid-19 measures to restrict the spread of the virus will now be exempted from business rates in 2020-21. For further guidance see here.
Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority.
If you’re a UK VAT registered business and have a VAT payment due between 20 March and 30 June 2020, you have the option to:
- defer the payment until a later date
- pay the VAT due as normal
It does not cover VAT MOSS payments.
HMRC will not charge interest or penalties on any amount deferred as a result of the Chancellor’s announcement.
Please note that you will still need to submit your VAT returns to HMRC on time!
HMRC will continue to process VAT reclaims and refunds as normal during this time.
If you choose to defer your VAT payment as a result of coronavirus (COVID-19), you must pay the VAT due on or before 31 March 2021.
You do not need to tell HMRC that you are deferring your VAT payment!
If you normally pay by Direct Debit you should contact your bank to cancel your Direct Debit as soon as you can, or you can cancel online if you’re registered for online banking.
VAT payments due following the end of the deferral period will have to be paid as normal. Further information about how to repay the VAT you’ve deferred will be available soon.
If you are experiencing financial difficulties more help is available from HMRC’s Time to Pay scheme.
The content in this blog is correct as at 25/03/2020 See terms and conditions.