Last updated: April 03, 2020

Live page: Accounting advice during business disruption

As the situation changes we'll be updating this page to keep you up to date with the latest developments. We'll cover all of the different financial support measures introduced by the government, as well as advice to help you manage your finances during business disruption.

Disclaimer: Government advice is changing on an hourly basis. We're doing our best to keep this page as up to date as possible, however please refer to government sources for the latest guidance. You'll also find information on when this page was last updated at the top of this page.

This page does not constitute professional financial advice and Inform Accounting cannot be held liable for any actions you chose to take as a result of this guidance. If in any doubt please speak to an independent financial advisor or your accountant.

 

Webinar: Managing cash flow during business disruption

There's no getting away from it, the current COVID-19 pandemic will impact the cash flow of many small businesses.

However, there are several financial options organisations can use to smooth this cash flow gap and ease the pressures placed on them by the temporary slowdown in economic activity.

So, in this webinar we invited Fluidly to explore some of these options, and what situations each is most suitable for.

We also touch on the different measures put in place by the government, which should support any businesses' attempts to mitigate disruption.

 

Available to watch now

WEBINAR RELEASE DATE Watch now
Managing cash flow during business disruption Available now Watch now

 

 

Is finance still available in the UK? 

Unlike in the 2008 financial crisis, the current slow down in spending has been caused by a drop in demand. As Boris Johnson eluded to recently, there are no systemic issues within the financial system. We're hoping that this means as soon as restrictions are lifted, spending returns to normal levels quite quickly.

As a result, lenders are still providing finance to those that need it. However, be prepared for higher levels of scrutiny in the application process - especially if you are in a highly impacted sector such as hospitality, leisure, retail or tourism.

 

 

Claiming on insurance

If you're in the leisure, hospitality or retail industry, you should check your insurance policy to see if you're covered for pandemics and government-ordered closures - unfortunately most businesses are not.

The government and insurance industry has confirmed the recent closure of pubs, and advice to avoid theatres etc is sufficient to make a claim if you have this type of cover.

 

 

How is the UK government supporting businesses? 

The UK Government is offering considerable support to UK businesses to help them through this period of disruption.

1. Coronavirus Job Retention Scheme

To help organisations keep their staff during the pandemic, the government has offered to reimburse 80% of "furloughed" workers salaries up to a cap of £2500 per month.

A furloughed worker is described as somebody you otherwise would have had to lay off. Furloughed workers are not allowed to work during this time.

Is my business eligible?

Any business in the UK - large, small, charity etc will be eligible for the scheme.

When can I access the scheme?

The Chancellor has said that the scheme is planned to be ready for the beginning of April, and wages will be backdated to 1st March 2020. Although, the portal is not expected 

Steps to take now

  1. You will need to designate affected employees (i.e. those unable to work and put on leave) as ‘furloughed workers’, and notify them of this change in status. Please note, this is subject to employment law and employment contracts - always speak to an employment law specialist to ensure you are complying with the law before making changes.

  2. HMRC will launch a new online portal for employees to submit information about their furloughed workers. It is not yet known what information will be needed, and HMRC will release further information in due course. However, you can expect to need employees names and earnings as a bare minimum.

How much will I be eligible for?

The scheme will cover 80% of wages up to £2,500 per worker. The full £2,500 is only available to workers earning £37,500 or more per annum. For a worker earning the full-time minimum wage of £19,250*, the amount received from the government to cover wages would be £1,285 per worker.

The wage subsidy will be paid via HMRC, but details of the scheme are yet to be finalised and this could change. Please refer to the government website (linked below) for further details.

Director-only Businesses

There is currently some uncertainty as to the eligibility of businesses operating as ‘Director only’ businesses, and we are working with employment law specialists and regularly checking for updates on this issue.

Is it available now?

The government is currently working on setting up a system for reimbursement and submission of furloughed workers details. Clarification on the details you will need to submit will also be made available in due course. We will update this page as soon as we have further guidance.

*9 hours at £8.21 per hour (Monday - Friday)

  • More detailed information can be found on the ICAEW website here.
  • Full details released by the government can be found here.
 

2. Small businesses can access cash grants of up to £25k

A grant is funding which in most circumstances does not need to be paid back. The government is offering grants of up to £25,000 for those businesses which are most affected.

How much will I be eligible for?

The amount of grant funding you are eligible for will depend on which criteria you meet.

If you're based in England, are paying business rates on a property, are in the retail, leisure or hospitality sectors and operating from a small premises (with a rateable value between £15,001 and £51,000) you should receive a £25,000 cash grant per property.

If you meet the criteria above but your premises has a rateable value of less than £15k, you should receive a £10k cash grant.

What do I need to do?

You do not need to apply for this grant, if you are eligible you will be contacted directly by your local authority.

What if i'm not in the hospitality, leisure or retail sectors?

If your business occupies a property and is based in England but you pay little or no business rates because of SBRR, rural rate relief and tapered relief you may be eligible for a £10,000 grant, regardless of what sector you work in. This will be a one-off grant to help businesses meet their ongoing costs.

Is it available now?

The government has made clear that the funding will be provided to local authorities in early April, and if you are eligible you will be contacted by them directly.

3. Statutory sick pay refunds for small businesses

The government has announced it will refund any statutory sick pay (SSP) paid out as a result of the Coronavirus for all UK-based businesses who had fewer than 250 employees as of the 28th of February 2020.

This will cover 2 weeks sick pay for every eligible employee. The scheme will kick in the day after the SSP is extended to those who are self-isolating - which is expected to come into force within the coming weeks.

Sick notes (or evidence of any form) will not be required to claim the refunds, however the government is advising firms to keep records of any staff absence and payments of SSP.

The government has suggested they will "work with employers over the coming months to setup the repayment mechanism". This suggests that there maybe a delay before any payments will be made. Organisations should consider alternative finance options in the meantime, which may be able to be repaid with any grants or refunds further down the line, assuming no repayment fees.

4. Business rate holidays for retail, leisure and hospitality 

If you are based in England, and your business is in the retail, hospitality or leisure sector you may be eligible for a 12-month business rate holiday. This means you will not pay any business rates in the financial year 2020/2021 - which starts on the 1st of April.

Is my business eligible?

Your property will need to be mainly or wholly used as one of the following; shops, restaurants, cafes, drinking establishments, cinemas, live music venues, hotels, guest & boarding premises, self-catering accommodation or any other property used for assembly and leisure.

What do I need to do?

You do not need to do anything to apply, it will automatically be applied to your April 2020 council tax bill. You can work out how much this will save you with this business rates calculator. If you've already been issued your rates bill, you should receive a reissued bill in the near future.

Please note that the government have issues a warning that venues listed above must remain closed or they risk being fined.

 

5. Spreading your liabilities (Time to Pay Scheme)

Through HMRC's time to pay scheme, if you pay tax to the UK government, you have always been able to apply to spread your VAT and corporation tax liabilities over a more manageable timeframe.

However, the government has now announced that all VAT payments will be deferred for 3 months - between the 20th March and 30th June. All UK-based business do not need to pay VAT in this time if they choose not to do so. Any liabilities accumulated during this time will need to be repaid by the end of the 2020/21 tax year.

What do I need to do?

You do not need to apply for this service, you should simply not pay your tax bill during this period if you do not want to, or are unable to. If you wish to take advantage of this but have an existing DD set up with HMRC to pay your liabilities, we recommend cancelling these otherwise HMRC will attempt to take payment as usual.

However, remember, this tax will need to be repaid by the end of the tax year. So if you are able to pay we highly suggest you do so to avoid further bills down the line.

What if I'm self employed?

If you're self-employed you will not need to pay your July 31st income tax bill until the 31st of January 2021. There is no application criteria, if you are UK-based and self-employed you are eligible. 

No penalty charges or interest will be charged during the deferral period.

Universal Credit

The government has confirmed that self-employed individuals will be able to access the equivalent of Statutory Sick Pay through Universal Credit. From 6th April the requirements of the Minimum Income Floor will be temporarily relaxed. Applications can be made online via the Department for Work and Pensions.

Action required for late filing of accounts

Companies House have confirmed that if the coronavirus (COVID-19) has affected your company and you need more time to file your accounts, you should act before your filing deadline. If you do not apply for an extension and your accounts have been filed late, an automatic penalty will be imposed. To apply for extension, click here for more information.

For further advice you should call HMRC’s dedicated helpline: 0800 0159 559

 

6. Support for larger businesses

Through the Covid-19 Corporate Financing Facility the Bank of England will buy short-term debt from larger businesses, helping them through short-term funding squeezes.

The scheme is now live and available for all UK-based businesses. Further details will be added here once available.

 

7. Extension to filing deadlines

UK businesses registered at companies house can now apply for a 3 month extension to their filing deadline for statutory accounts. It is worth noting that this extension is not automatic, nor is it guaranteed, and you must make an application online through a fast-tracked online system before your filing deadline.

Companies citing COVID-19 related issues as the reason for extension will typically be automatically and immediately granted the extension. However, companies that have already extended their filing deadline, or shortened their accounting period may not be eligible for extension.

If you don't apply for the extension and your accounts are filed late, an automatic penalty will be imposed.

More information on how to apply for the extension is available here.

 

8. Coronavirus Self-employment Income Support Scheme (CSISS)

Why has it taken so long?

The Chancellor has said the reasons for the delayed measures were down to the complexities of developing a fair system for the self-employed.

Until now, self-employed individuals have only been able to claim benefits to the same value as statutory sick pay i.e. £94.25 per week. In contrast, employees on the PAYE system who have been placed in furlough will receive at least 80% of their salary (up to £2500 per employee per month), paid for by the government.

What support does the scheme provide?

The government has now introduced the Coronavirus Self-employment Income Support Scheme (CSISS) which outlines the support the government has put in place to help self-employed individuals.

The Chancellor has said that the scheme has been developed to distribute wealth fairly to those who are genuinely self-employed. Due to the vast array of earnings within the sphere of self-employment, the scheme will cover 95% of self-employed individuals, those most vulnerable to loss of earnings.

The major effect of the scheme is to treat the self-employed in the same light as employed workers placed on furlough. This means a taxable grant worth 80% of average monthly earnings over the last 3 years will be made available to self-employed individuals, capped at £2,500 for the next 3 months. However, the Chancellor confirmed that, as with the Coronavirus Job Retention Scheme, this will be extended if necessary.

Who is eligible?

To ensure that only those who earn the large proportion of their total income from self-employment, the scheme is only open to those currently self-employed, and with trading profits of up to £50,000 in the last tax year (2018/19), or on average over the last 3 tax years.

To reduce instances of fraud, only those already in self-employment who have a tax return for 2018/19 will be eligible for the scheme. However, there are a number of people who have not submitted returns for this period. To safeguard those who haven’t yet filed their returns for 2018/19, individuals have 4 weeks to file their return in order to benefit from the scheme.

Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

How can the scheme be accessed, and what do I need to do now?

You do not need to do anything yet. 

HMRC will use existing information on their system to identify those eligible for the scheme, and will invite applications. The application will require you to confirm that you meet the eligibility requirements, and once confirmed, the money will be paid straight into your bank account (you’ll need to confirm which account on your application form).

It should be noted, however, that the money, backdated to March, will be paid in one lump sum from HMRC for the full three months, but not until June.

Support comes at a cost

Whilst giving a perfectly democratic answer, the Chancellor has stated that in providing the same support measures for the employed and self-employed, he can no longer justify the inconsistencies in the taxes paid by each group.

This is likely to mean that we can expect to see a reformation of the tax system as we come out of this epidemic, as the Chancellor has said that people should only take out what they put back in.

FAQs

I don’t have 3 years of accounts - am I still eligible?

The Chancellor has stated that where possible, they will look at up to the last three years, but for those that have less, they will have no choice but to go with the information they have.

I am only recently self-employed, will I be covered?

Unfortunately, due to the level of fraud risk being so great, individuals who have only recently become self-employed will not be covered under this scheme. You will have to claim benefits for now, until you are able to continue business as usual.

I can't wait until June, what can I claim now?

The Chancellor has said that those who are self-employed currently have access to the Coronavirus Business Interruption Loan Scheme, as well as being able to claim universal credit, and should receive payment from this within a few days.

Self-assessment individuals may also be eligible to claim a cash grant if paying business rates.

 

Full details about the scheme can be found on the GOV.uk website.

 

 

Alternative funding options

During this period of disruption it may be necessary to bring on alternative finance - either to smooth the period before government support is available, or to bolster this support.

1. Coronavirus Business Interruption Loan Scheme (CBILS) 

We've included the CBILS loan scheme here as, although it is supported by the government, loans will ultimately be provided by banks. And should therefore be treated in the same way as any form of private finance.

The CBILS helps UK-based SME businesses (with <£45m turnover) access finance, which they would not normally be able to.

The borrower will remain 100% liable for loans through the CBILS, however the government will provide lenders a guarantee of up to 80% on loans up to £5 million. Lenders will not be charged for these guarantees.

Businesses can access the first 12-months of finance interest free as the government will pay any interest during this period. After this period, businesses will be liable to pay interest at the rate set by the lender - whether interest rates will vary between lenders, or whether they will be capped in any way is not yet clear.

The scheme is now live, and you can apply for loans from up to 40 accredited providers, including all major UK banks.

To apply you should talk to your current bank, not the British Business Bank.

For more information about the scheme click here.

 

2. Business bank overdrafts

If you're looking for short term, immediate access to finance you may want to consider extending your business bank overdraft.

Overdrafts often come with higher fees than other forms of lending. However, banks have already pledged to extend support without increased fees - Natwest have offered a £5 billion fund and Lloyds a £2 billion fund.

Be aware though, overdrafts are often one of the first facilities removed by lenders, so this should be considered a temporary solution - until government support or further finance options become available.

 

3. Flexible facilities 

You can set up a short term facility, which in many ways is similar to an overdraft. The only considerable difference is that short term facilities are normally separate from your usual bank. As such, finance will need to be transferred between the two.

The main benefit of this option is that access to finance will be relatively quick, you will also only pay for what you use - providing a comfort blanket that will only cost you if you need it. Unlike loans, which you'll need to repay regardless of whether they are necessary.

Rates for short term facilities can be reasonable, however they should be considered a temporary, short-term solution as lower rate finance is available. 

4. Business credit cards

Access to finance via business credit cards can be very quick, and can often help fill short-term cash flow gaps. However, interest rates are often high, so credit cards should be considered a temporary solution, until lower rate finance or government support becomes available.

5. Invoice Finance

Invoice finance allows you to secure finance against the amounts you are due from customers. Like many of the finance options here, this can provide very quick access to finance - to help you pay staff, suppliers other business commitments etc.

As many businesses have large amounts due at any given time, this option can allow greater access to finance than credit cards or overdrafts. However, rates can sometimes be expensive, so consider this a short-term option until cheaper finance or government support becomes available.

6. Merchant Cash Advance

Merchant cash advances allow you to lend 100% to 150% of monthly takings. This is calculated based on how much is taken through your credit card terminal and has an 80% approval rate.

This makes it particularly relevant for businesses in the leisure, retail and hospitality industries as monthly takings are often high.

 

7. Alternative finance loans

Non-bank, or peer-to-peer lending became popular after the 2008 financial crisis, as businesses and individuals lost trust in banking institutions.

The loans may well become popular in the current situation too - finance is easier to access than through a bank and often have competitive rates

 

Stay safe, stay vigilant! - New HMRC scams emerging

Whilst we keep telling everyone to stay safe, we also want to emphasise the importance of staying safe online. Unfortunately, there are some people in the world who are trying to take advantage of vulnerable business owners during this period, and it appears that there are some new scams surfacing.

HM Revenue and Customs are warning people to remain vigilant and not fall foul to online scams during the coronavirus outbreak. HMRC have advised taxpayers to be on the lookout for emails claiming to be from the department, offering tax rebates. 

HMRC have posted this message on Twitter: 

"We are aware of emails claiming to be from HMRC offering tax rebates as a result of coronavirus. If you receive an email, text or call claiming to be from us that asks you to click on a link or to give information such as your name, credit card or bank details, it’s a scam.Anyone who is unsure as to whether they've received such an email, or anyone wanting to report a scam, should report it online at www.gov.uk/report-suspicious-emails-websites-phishing".

 

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