I’ve said on several occasions, since COVID-19 lockdown came in force, that we all must have a plan. But I’m still concerned that there are one or two of you that have not got that in place just now. I can understand why, we have all been waiting for that last bit of the jig-saw that helps ‘us’. Well, we’ve waited and waited and it now doesn’t look like likely that any Cavalry is going to come running over the hill anytime soon.
Largely speaking, who is being helped?
Employers – where it is possible to furlough your employees (and them remain at home not working in your business) then you can reclaim up to 80% of the cost of employing them (or £2,500, whichever is the lower). And clearly, if you also pay just 80% of the amount you normally pay them (or £2,500, whichever is the lower) then there will be no cost to you. In most businesses, payroll costs are by far and away the single biggest costs in any profit and loss account and if this can be run as cost neutral then there are significant savings to be made. This is called the Coronavirus Job Retention Scheme.
Businesses that pay little or no rates – if you operate from business premises and pay little or no rates due to Small Business Rate Relief (or Rural Rate Relief), then you will automatically receive a £10k grant from your Local Authority (we have already seen some of these being paid).
If your business is in Retail, Hospitality or Leisure – you will receive 2 things;
– a cash grant of £25k for each property you trade from (with a rateable value £15k – £51k), if the rateable value is under £15k, then the grant is £10k.
– a 12 month holiday with regard to payment of any Rates
The payment is from the Local Authority and automatic.
Businesses that are registered for VAT – any payment of VAT becoming payable between 20 March 2020 and 30 June 2020, can be postponed until 31 March 2021 (as there is no indication of interest or penalties, this becomes an interest free loan).
Individuals who pay tax – if you are due to pay tax (a payment on account) on 31 July 2020, this can be postponed until 31 January 2021 (as there is no indication of interest or penalties, this becomes an interest free loan).
If you are self employed and your taxable income is less than £50k – there are some rules you need to look at, but largely speaking if you were trading as at 5 April 2019, and are still trading, the you will be eligible for a grant equal to 80% of your trading profits (or £2,500, whichever is the lower) – this grant lasts for 3 months, but is not due to be paid before June 2020. This is called Self Employment Income Support Scheme.
All businesses wishing to take out a loan – the Government are backing ‘Commercial Lenders’ (Who?) to make funds available to businesses facing cashflow difficulties due to the impact of COVID-19. The application is made to one of the Commercial Lenders (of the British Business Bank), and the Government have agreed to underwrite 80% of the loan (so the lender is largely protected). There are things you should know;
– you remain 100% liable for the amount borrowed.
– the Commercial Lender is instructed not to ask for any personal guarantee if the loan is below £250k (and if it’s above, your house is specifically excluded). Note personal guarantees are irrelevant if you are a partnership or sole trader.
– the Government will pay the interest for the first 12 months (you will make the monthly loan repayment).
– the loan is available to Limited Companies, Partnerships and Sole Traders.
Directors of Limited Companies – are able to furlough themselves so long as they are not carrying out any fee earning activity or service for the company. More
So, who is not being helped?
I didn’t think I would find myself saying this, but just about all businesses are being helped in one form or another. The trouble is that some help is ‘fairer’ than others. Clearly, anyone in receipt of a grant (that are non repayable) is far better off than those in receipt of a loan (that is repayable, and after 12 months, with interest). So the majority of business owners, or the self employed person who earns greater than £50k, or the one man band Limited Company director (no matter what he or she ordinarily earns) gets no hand out. It’s highly likely that all of these people will need to borrow money, or dip into savings if they wish to take an income to cover both their business expenses and their home expenses. It’s a long way from being fair, and it doesn’t look as if anything is about to change any time soon.
And let us help you.
So my message goes out to all of you in this latter category – have you made a plan? Do you need to borrow money? Do you need to talk these options through? Do you need some help?
If your answer is yes to anyone of these questions, then I urge you to get in contact and let’s make a plan and see how we can help you out. It makes absolutely no difference how big or small your business is, we want you here when all this is over. And if it all looks like you can’t see your way through, then let us try and help you. This picture beautifully sums it up (and I thank my daughter Aimée for sending it to me).
Landline – 01326 660022
Mobile/WhatsApp/Text – 07779799995 – Mike Hutchinson
Zoom ID – 205 677 7765 – Mike Hutchinson