COVID-19 – Our advice and guidance for business owners

Updated 1.6.2020 re the new CJRS rules (see below)

The last few weeks have seen an unprecedented set of events and circumstances around the world. Maybe not since the Cuban Missile Crisis in in 1962 or the Spanish Flu outbreak of 1918 have the lives of everybody been turned upside down so quickly and worryingly.

The level of concern in the UK has been increasing since the start of February leading to a budget focused on providing support to our economy. Only a matter of days later, Chancellor Rishi Sunak, was standing next to the Prime Minister and Chief Medical Officer outlining another series of initiatives designed to help business with the promise that “we will do whatever it takes” and he’s made even further announcements since, all aimed at supporting business and the economy.

“There is genuine concern and worry amongst the business community. We’ve spent the last few weeks helping clients, some of whom are in a real crisis, find solutions to help them.”

Whilst the primary concern of any organisation is the well being and safety of their employees  every business needs to put a plan in place now to ensure there is a sustainable base to operate from as the crisis is navigated and then left behind.

What FIVE actions should you be taking right now?

One : Improve cash flow

Putting together a 13-week cash flow to help estimate what the future cash position might be is a vital first step. Cash is the life blood of any business and it needs to be protected. You should start by mapping out what you would have expected your cash flow to be and then make adjustments for either; (a) mitigating actions, like not paying your next VAT bill, reducing payments to suppliers and reducing overhead costs or (b) receipts of cash grants and loans. You should also consider what might happen to cash receipts which will more than likely reduce significantly or in some cases stop altogether if the business has had to close temporarily. Read our guide detailing how to build a cash flow

Two : Understand how to defer tax liabilities 

VAT : One of the key government measures announced relates to VAT. Any VAT liabilities due to be paid from 20 March to 30 June are deferred. Any liabilities that fall due in this time (February, March and April VAT returns) not paid will need to be settled with HMRC by 5 April 2021.

It is important that you cancel your direct debit if you settle your liabilities in that way.

Income Tax : HMRC have also agreed to defer self-assessment payments due at the end of July until 31 January 2021. This is an automatic relief and no application is required.

Read our guide to deferring VAT and income tax liabilities 

Other tax liabilities (PAYE and Corporation Tax) HMRC are also allowing taxpayers to defer other tax liabilities such as PAYE and Corporation Tax. As there is a lot of uncertainty they will allow you to defer payment until the end of May or June providing you call them and let them know when you will go back to them with a proposal of how you intend to pay them back. The number is 0800 024 1222 although please be aware waiting times are long.

Read our updated news on how to defer other tax liabilities

Three Consider : “furloughing” your workforce

“Many businesses who had to close were worried about the significant wage costs that they would still incur. Understanding the resources you need to carry on trading is vital.”

The Job Retention Scheme was announced to deal with this specifically. The broad points of the scheme are that the Government, through HMRC, will provide a grant of the lower of 80% of the employee’s wage costs or £2,500. This will cover an employee’s costs of employment provided they are placed on furlough leave.

The scheme is being amended from 1 July 2020 to make it more flexible and also to start employers contributing to the cost the scheme. See the image below which details the changes or our updated news item on the changes.

Rishi Sunak Twitter Feed 29/5/2020

Furloughed leave is new but essentially means that employees retain their employment but do not work. An employee must be furloughed for a minimum period of three weeks for the grant to apply. Employment Law still applies to them and the process of furloughing and therefore it is essential that advice is taken before you proceed with this measure to ensure that you follow the correct procedure.

Our HR Advisory team are standing by to help you with these difficult decisions whilst our payroll team are on hand to help complete calculations and submit them to HMRC (when the portal is active).

UPDATED NEWS 29 May news The CJRS is being extended read a summary here 

Read our guide to the Job Retention Scheme and also our employment specific FAQ’s

UPDATED 4 April 2020 news (including information on Director/ Shareholders of small limited companies. 

UPDATED 9 April 2020 The HMRC portal will open on 20 April.

Four : Apply for a cash grant

One of the first schemes announced related to Rates relief. There are two schemes that businesses can qualify for.

For small businesses that don’t pay rates because they qualify for small business rates relief or rural relief a grant of up to £10,000 is available.

For businesses in the Retail, Leisure and Hospitality sectors with a rateable value of between £15,000 and £51,000 they will receive a grant of £25,000 and will not have to pay rates for 2020-21.

For businesses with a rateable value in excess of £51,000 in the Retail, Leisure and Hospitality sectors they will receive a rates holiday for 2020/21.

Five: Discuss a rent break with your landlord.

New rules have also been introduced to help commercial tenants by providing a three-month window from April to June where Landlords can not take action to evict for non-payment. It’s important to remember that the rent will become due on 1 July and therefore it is recommended that tenants come to a commercial agreement with their landlord for the repayment. A common approach seems to be spreading the accrued liability across the period from July 2020 to March 2021 in equal instalments.

Read our guide on deferring commercial rent payments.

The important action is to take action

Business owners need to take action and take it quickly to ensure they protect their businesses. Developing a longer-term plan is important but to help deliver it cash will be needed and therefore protecting it now is vital.

The team at Nicholsons are happy to talk to any business owner worried about the impact the current situation is having on their business. Whilst our offices are closed we can be contacted on 01522 81 5100.

Support for the Self Employed

The Chancellor Rishi Sunak has announced the measures the UK Government is to take to help self-employed business people cope with the financial impact of the Coronavirus.

This announcement came a week after the financial assistance package for employed workers was announced, but clearly any scheme to help the self-employed was bound to be more complicated due to the variations in business profits from year to year.

Providing you qualify the scheme will fund up to 80% of the average monthly earnings calculated with reference to the previous three years from 2018/2019 backwards.

To read more about this important measure to support the self employed please read our guidance.

Coronavirus Business Interruption Loan Scheme (CBILS)

UPDATED (3/4/2020) Please also read our updated advice on CBILS 

When Rishi Sunak stood up and announced the new Coronavirus Business Interruption Loan Scheme (CBILS) and the £330 billion he was putting behind initiatives it sounded as though this was going to be the magic bullet that businesses needed to be confident there was a longer term solution to help them through the economic crisis caused by the Coronavirus.

Not the magic bullet we expected

It was very clear that banks were not prepared for this and have been working extremely hard behind the scenes to catch up. Over the past week we have started to hear more from the clearing banks about their policies and at Nicholsons we have spent time talking to our banking contacts to understand local policies.

The CFN, of which we are a member firm, has assisted to lobby banks to remove the requirement for a Personal Guarantee for loans under £250k and this was confirmed by the main lenders on 26th March. However, for loans higher than this, PGs from any director owning more than 10% of the business, and a debenture from the Company, will be required in most cases. We have also been informed that CBILS is now open to sole traders and partnerships, not just limited companies

We have always worried that the scheme will not be suitable for all SME’s and when it is will take a long time to access. Notwithstanding the pressure local Relationship Managers are under it’s unlikely that valuers are going to visit sites during lockdown and the number of applications will undoubtedly be overwhelming.

Add to this that it is likely that the mainstream banks will only welcome applications from existing customers and the fact that many of the other funders in the list of 40 lenders are not close to having products ready we are encouraging clients to focus on other funding and measures first.

Things to consider

There will come a time when thinking about a bank loan application is right and we thought we’d share a few tips on what to consider before talking to your bank about funding.

Don’t lose focus  

In our cash flow post we outlined other practical steps that you could take aimed at helping you manage cash. This should be a priority as self-help will have immediate results.

  1. Agree rent free periods with your landlords. The Government has included a three month commercial rent moratorium in their measures, which prevents eviction.
  2. Agreeing payment holidays on business loans and other credit payments, such as hire purchase and asset finance.
  3. Explore whether “spot invoice” financing could help top up cash whilst debtors are being a little slower at paying.
  4. Looking at assets that the bank won’t be too interested in losing from their debenture and see if you could raise finance on them, for example stock.

Be prepared

It might be obvious, but we think that well thought through and structured applications will be seen in a more positive light by the bank than general conversations around support.

Banks will assess applications in the same way they always have (because they will use the same process, systems and people) and therefore management accounts, a business plan and forecasts will be essential parts of the application. You might also keep an analysis of creditors, debtors and time to pay arrangements with HM Revenue & Customs (HMRC).

Structure your argument

In your business plan, you should focus on the strength of the business before the crisis, its trading performance and ability to generate cash.

You should also outline the path back to this position making clear the steps you are taking and the time frames you are working to.

In their appraisal of the business plan, banks will want to understand management capability and whether there are any long-term implications of the economic fallout on the business or industry it operates in.

Look towards other funders

There is no doubt that other funders, alternative and second tier, will be looking to fill the gaps left by the banks. We understand that peer-to-peer lenders are trying to be included in the plans announced by the government. Alternative lenders may offer to fund but their fees, terms and interest rates need to be checked carefully.

And finally

Don’t be afraid to ask for advice and support. There is a lot of information out there, some of it confusing and some contradictory, so if you are unsure about anything or just want to sense check your plans please don’t hesitate to call either Richard Hallsworth, Emma Murray, Jo Brown or Richard Grayson on 01522 81 5100.

Directors duties and compliance!

Whilst for lots of business owners survival has been the number one priority it’s important to not forget the additional duties that Directors of companies must comply with. These duties are never so important as when your company may be in distress, so we are going to provide some guidance so that you don’t inadvertently breach them.  For more information on your duties as a Director please read our guide.

Companies House have also been quick to help business owners meet their Companies statutory deadlines. They have

released new guidance on what to do should you feel that you might not be able to file your company’s accounts on time. Whilst their line is very much that accounts and other documents such as the annually filed Confirmation Statement must still be filed they do advise that if immediately before the filing deadline it becomes apparent that accounts will not be filed on time they will accept an application to extend the period allowed for filing.

The key message is to act now and not leave it until the filing deadline has passed. Make an application early as they a likely to be inundated with extension requests and their team is likely to be disrupted too.

Companies House have provided a simple process to do this which can be accessed here.

It’s important to keep talking to customers and employees

Marketing to the outside world 

Your customers will want to know that there is someone there who cares about their business, they will also want to know whether you are still ‘open for business’. However, email traffic is currently full of companies communicating their COVID-19 policies, this will soon lose impact and will be ignored/deleted.

Over the next few days, ensure you have emailed or spoken to all of your customers, if this is not possible – contact your key customers first and gradually work through the list. Where possible, provide reassurances about your resilience and ways in which you can help them or avenues in which you can collaborate to overcome economic difficulties.

Most importantly, do not use this as an opportunity to sell. If you can, send the emails yourself (bearing in mind GDPR regulations) and do not use generic marketing or ‘contact us’ emails if you are asking your marketing team/others to help with this.

Internal Communication 

It is vital to know the facts and communicate proactively with all employees-using clear, compassionate, and understandable messages. This not only demonstrates leadership, but also provides reassurance and instils a sense of trust among employees.

An internal communication plan should be established (if you haven’t one in place already), or updated, as a means of reaching employees through combinations of emails, intranet postings, flyers/ posters, manager talking points, FAQs or a website hub. The plan should identify simple, key messages, along with a reliable process for providing continual updates and collecting feedback from employees.

Read our guide on internal communications