Running a business can be stressful at the best of times. The challenges many small business owners are facing in light of the ongoing Coronavirus crisis, however, can start to feel completely overwhelming.
It has therefore been reassuring to see the speed and quality of the Government response in terms of support for businesses and their employees. Chancellor Rishi Sunak said that he would do ‘whatever it takes’ to protect the interests of UK businesses and the initial range of support measures are now being rolled out.
The response to Coronavirus is fast-moving, and new information is coming out every day. We aim to provide a quick guide to the key areas that could be helpful to business owners facing challenging times. But first a few facts;
- At the start of 2019, there were 5.82 million small businesses (with 0 to 49 employees). SMEs account for 99.9% of the business population (5.9 million businesses).
- SMEs account for three-fifths of UK employment and around half of the turnover in the UK private sector.
- Total employment in SMEs was 16.6 million (60% of the total), whilst turnover was estimated at £2.2 trillion (52%). (Source: Federation of Small Business)
The fabric of the UK economy is founded on the success of small businesses, and whilst the current crisis is primarily a healthcare one, it is vital that everything possible is done to preserve and protect these companies and their staff.
Here’s an overview of the different support strategies available now;
Coronavirus Business Interruption Loan Scheme
As a result of the restrictions brought in, many businesses face a sudden and severe reduction in their revenue and therefore their ability to pay the bills, suppliers, and staff. To help, the Government has launched the Coronavirus Business Interruption Loan Scheme.
This temporary Scheme offers support to UK businesses with an annual turnover of less than £45 million. It will provide access to loans of up to £5 million for up to 6 years. The Government will also cover the cost of the loan interest for the first 12 months, as well as any fees.
Coronavirus Job Retention Scheme
To support companies that would have to otherwise let staff go during the crisis, this new scheme has been launched for all employers who operate using the PAYE scheme. It applies to workers who have been asked to stop working but are being kept on the payroll.
Now referred to as ‘furloughed workers’, HMRC will reimburse the business for up to 80% of pay, up to £2,500 per month, and so will prevent employers from having to make their staff redundant.
The scheme is initially expected to run for three months. It will then be reviewed and possibly extended. The system to manage payments has not yet been activated but is expected to be live by the end of April and will be backdated to March 1st, giving employers and their staff, much-needed comfort around their finances.
The government has announced that next quarter's VAT payment for all business will be deferred automatically. There is no need to submit an application, but you do still need to file your VAT return on time.
This will be of major assistance to many businesses that are worried about cash flow. The pub and restaurant sectors, in particular, will be massively helped, as they pay VAT on sales, but they do get charged VAT on many of their costs too like food supplies and wages. Other sectors will benefit significantly as well.
You will have until 31st December 2020 to repay the VAT. Our understanding is that this will be an automatic deferral and no application will be necessary; you file your VAT return as normal and pay it when you want to, up to 31st December 2020. This is essentially nine months credit; a truly big facility to all businesses.
The above measures are very helpful - they offer a real safety net for people in jobs at the moment and allow their employers to avoid hard choices and keep amazing teams of employees together. They also mean the current quarter of VAT, which will include a lot of pre-crisis level trading, is deferred for 9 months. We have no doubt that HMRC will keep things under review, if and when the need arises.
Self-Assessment (Income Tax)
The Government is deferring all self-assessment payments due on 31st July 2020 until 31st January 2021. No application is required, and it is automatic and interest-free.
It will provide a helpful cash flow advantage to business owners, particularly if they have large incomes - but please do plan for the end of the deferral and have funds to make payment in January 2021.
Extra support for retail, leisure, and hospitality businesses
Businesses in these sectors, such as bars, restaurants, cafes, pubs, hotels, and cinemas will not have to pay any business rates in 2020/21. No action is required, and local authorities will write to the relevant businesses to confirm.
This will be a useful respite for many, particularly high street venues such as pubs and restaurants who have been struggling with the recent increases in business rates prior to the current crisis.
Some businesses in these sectors can also qualify for a cash grant of up to £25,000 paid by the Local Authority. If you’re unsure of the details of your Local Authority, this Government webpage can help you identify the contact details.
For business owners struggling to make tax payments falling due soon, HMRC has confirmed that they will be as flexible as possible through their ‘Time To Pay’ scheme. To discuss your specific details, get in touch with HMRC directly or through this website.
There are a couple of other more minor areas of support for specific types of business and your accountant can provide details of what’s available.
This crisis has the potential to engulf people and businesses if they panic. The key is to remain calm. We have a government which does appear to be putting its money where its mouth is and the support already on offer seems to be real and tangible - and it is happening today not tomorrow. These measures will get thousands of small businesses - the lifeblood of the British economy - through this crisis.
The most important thing is to remain calm, take advantage of the measures where you can and where you need to, make sensible decisions to keep teams together (you will need them when you are through this), pay bills on time where you can and discuss bills with suppliers where you need to. At the end of this, businesses will recover and those that make it through will be stronger, more resilient and primed for success in the years ahead.
Good luck to each of you, and if you’d like to discuss any aspect of this briefing or any other matter related to your business or personal finances, do give us a call. We’re here for you.