All posts by Richard Hallsworth

Top Tips for making a CBILS application

With the shock and emotion of this crisis behind us we’ve been talking to a lot of business owners about cash and in particular how to fill gaps in cash flow.

Most business owners are taking advantage of the various measures and schemes put in place to support them. But what’s next ?

For most a dip in liquidity will need to be funded by a cash injection. Whilst a small number of businesses may be eligible for a quasi equity loan the majority will turn to the governments’ flagship scheme CBILS (Coronavirus Business Interruption Loan Scheme).

For a recap on the scheme please read our guide and initial thoughts, here.

Here’s the problem though…

On the 15 April The Guardian reported that 6,020 loans had been issued under CBILS worth £1.1bn. A week later according to UK Finance a further 9,000 applications had been approved worth a another £1.45bn. Whilst this is great news for those accessing funding there were according to the Guardian (at 15 April) more than 300,000 informal inquiries, seeking out more information. This isn’t a surprise either since most business owners are currently working their way through cash flow models to identify how much funding might be needed to survive.  The majority of applications will be made in the weeks ahead.

At least 8/10 business owners that I am speaking to are reporting a significant “cash drain” that will need plugging with cash through CBILS.

The problem is obvious. Whilst the banks are doing a great job in dealing with applications as CBI economist Rain Newton-Smith said “…while the pace is picking up, many firms are still missing out. More loans must get out the door faster for the businesses facing distress, especially smaller businesses.”

We need to find a faster way for small businesses to access cash

It was therefore great to hear the announcement by the British Business Bank on 17 April that Funding Circle had been accredited under CBILS. As Funding Circle put it themselves on their website they are “Revolutionising a broken system”. They do this by deploying technology into the lending process meaning that they can process applications quickly through their platform.  Maybe this kind of approach was what Rain Newton-Smith meant when he said …

“Finding quicker and simpler routes for smaller firms to access cash, and extending repayment schedules to encourage more businesses to take them up are two ways that could make a difference.”

I was therefore surprised to hear local Relationship Managers caution small businesses about Funding Circle at a recent event. Whilst I appreciate that Funding Circle’s debt collection process could be described as “proactive” clients with Funding Circle loans that have needed to reschedule debt have always been able to.

That aside though if CBILS is to be successful banks need to accept that they need some help processing applications from smaller businesses and that through Funding Circle there is a way to achieve this leaving them available to deal with more complex funding requests.

Top tips if you are thinking about funding through CBILS

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/ lender than general conversations around support.

Lenders 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).

If you are making a Funding Circle application you will also need copy bank statements for the last six months as detailed below:-

Impact of the Coronavirus Crisis

In your narrative you should be ready to outline the impact the coronavirus crisis has had on your business dealing with facts and figures within the narrative. It will be vital to ensure the lender understands the impact on the business the crisis has had.

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.

From early discussions with local Relationship Managers across the four main high street banks each lender is adopting a slightly different interpretation of what constitutes “viable” and whilst I have sympathy, given the constant changing CJRS guidance, it’s not helpful when you are trying to write an application for funding. Your narrative here needs to focus on the success you had prior to the crisis and why you were viable and sustainable before.

In their appraisal of the business plan, lenders 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.

Go for the maximum amount of funding

CBILS  is not very flexible in how you draw down cash. We’ve run a few cash flow models that show two peaks where funding is required. Ideally the scheme would offer an overdraft now to cover the short term variability in cash and then a medium to long term loan covering off (1) the debt pile built up over lock down, (2) the costs of re-opening and (3) the losses that may be encountered as sales are developed after fully re-opening.

It doesn’t allow for this flexibility though so you need to make one application that covers both and then repay what you don’t use. Not ideal but with interest payments being covered by the Government for twelve months and no early repayment penalties the scheme is flexible enough for you to do this.

The CIBLS is going to be an important measure for any business looking to plot a course to safety out of the current crisis. Key to a good application will be the narrative and cash flow forecasts. If you have any doubts over these or would like our assistance in generating them please contact funding specialist Stephanie Smith or Director Richard Hallsworth on 01522 81 5100. 


What a week that was! End of week summary from team Nicholsons

This week has been extremely busy for the team at Nicholsons as we worked with over 100 clients to complete their CJRS claims on the portal. With guidance changing rapidly and the people working from home it was a great team effort.  A lot of the team are looking forward to a break in the sun this weekend!

To keep you up to date with the latest developments on Coronavirus related to you and your business we have prepared a roundup of the latest measures and actions taken by the Government.

If you have any queries relating to any of the points covered in this update or you require support with any matters, please speak to a member of our experienced team early next week. They can be contacted on 01522 81 5100.

Administering the Coronavirus Job Retention Scheme

We appreciate that you are probably hard at work making the necessary arrangements and sourcing the required information for the Coronavirus Job Retention Scheme (CJRS) at the moment.

The portal went live this week and can be accessed by clicking here. Initial reports suggest that there are been a huge number of claims so far.

To help you make sense of the CJRS and the application process, we wanted to share some useful documents and calculators with you:

Step-by-Step Guide 

HM Revenue & Customs (HMRC) has created a useful step-by-step PDF guide to help with the application process, which can be downloaded and followed here. Please also check out our tips here

CJRS claim calculator 

To help calculate your claim and check it, the Government has designed a dedicated calculator. This is useful for calculating a basic regular salaried claim but is not able to calculate complex claims involving TUPE, top-up payments or pension contributions made outside of auto-enrolment, so please be aware. The calculator can be accessed here.

Webinar

HMRC has also created a 25-minute webinar that covers the CJRS basics and how applications can be made. This can be accessed here.

What we are learning from those who are applying for the scheme is that this isn’t a one size fits all process and certain employees or businesses will have requirements that are outside of the usual parameters of the scheme.

You should prepare all of the necessary information for the application beforehand, including calculations for those staff members that have been furloughed to make administering this task easier.

We thoroughly recommend that you seek advice if you are struggling to apply for the scheme or if you need help calculating your payroll.

Government announces Future Fund for fast-growing businesses

The Government has announced a new scheme to help businesses with the impact of Coronavirus. The Future Fund is aimed at rapidly growing businesses that typically rely on equity investment.

These businesses are often pre-revenue or pre-profit and have been unable to access existing schemes, such as the Coronavirus Business Interruption Loan Scheme (CBILS).

The scheme will provide loans from the Government worth between £125,000 and £5 million, which must be at least matched by private investors. There is also a requirement to have raised funds via equity in the past too.

Loans under the scheme will automatically convert into equity on a firm’s next qualifying funding round or if the funds have not been repaid by the end of the loan period.

The scheme will be delivered in partnership with the British Business Bank and full details of how to apply are expected to be announced shortly.

Government launches Business Support Finder tool

With an increasing array of Coronavirus business support measures available to different types and sizes of business, the Government has launched a new Support Finder tool to help businesses identify what support packages they could be eligible for.

The new tool asks for some basic information about a business, including turnover and the number of people it employs, before highlighting packages that could be suitable.

These include measures such as:

  • The Coronavirus Job Retention Scheme (CJRS), which allows employers to furlough eligible staff and claim a grant in respect of up to 80 per cent of their usual wages, capped at £2,500 a month, plus employer National Insurance Contributions (NICS) and minimum automatic enrolment pension contributions.
  • The Coronavirus Business Interruption Loan Scheme (CBILS), which enables businesses with a turnover of up to £45 million to access Government-backed loans of between £1,000 and £5 million.
  • A three-month VAT payment deferral.
  • A range of business rates breaks and grants.

The Business Support Finder can be found at: https://www.gov.uk/business-coronavirus-support-finder.

Supporting the wider business community 

Whilst the team have been focused on processing CJRS claims we have also been reaching out into the wider community to help spread the word about support available to Lincolnshire businesses.

In addition to taking part in a panel discussion around funding we have also supported Lincolnshire Chamber of Commerce webinars on the Job Retention Scheme (CJRS) too. If you haven’t taken part in any of these please do check out the list of future events as they are very good. They can be found here. 


Self Employed Income Support Scheme (do you qualify?)

Now the CJRS has been launched and guidance provided, HMRC are now turning their attention to the SEISS scheme. We will be working through the detailed guidance to provide an update but have produced this flowchart around eligibility.

Notes

  1. * Returns submitted between 1/2/2020 and 23/4/2020 will be subject to further risk assessment, which could delay or prevent a claim.
  2. ** This is determined by either of the conditions below being true:-
    1. Your trading profits in 2018/19 are less than £50,000 and represent more than half of your taxable income.
    2. Your average trading profits from 2016/17, 2017/18 and 2018/19 are less than £50,000 and represent more than half of your taxable income in this three year period.

Holiday Pay Whilst On Furlough Leave

We have been asked lots of question about how annual leave effects furlough and what should be done with bank holidays, etc. Late on Friday 17th April 2020 HMRC updated their guidance and gave us the information to now answer your holiday questions.

Do employees accrue holiday whilst on furlough leave?

Yes employees will still accrue holiday whilst on furlough leave as per their employment contract. You and your employees can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

Can employees carry holiday over into a new holiday year?

The government has introduced a temporary new law allowing employees and workers to carry over up to 4 weeks’ paid holiday into their next 2 holiday leave years. This law applies for any holiday the employee or worker does not take because of coronavirus, for example if:

  • they’re self-isolating or too sick to take holiday before the end of their leave year
  • they’ve had to continue working and could not take paid holiday

You are now able to allow your employees to carry over holiday if they’ve been ‘furloughed’ and cannot reasonably use it in their holiday year.

What happens if employees have pre-booked holiday and have now been furloughed?

Employees can still take holiday whilst on furlough, and still be eligible for the coronavirus job retention scheme at the same time. This would mean calculating there holiday days and paying them at their normal rate of pay as below.

How much do I need to pay my employees if they are on furlough leave and holiday at the same time?

Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.

How much can I claim if my employees are on annual leave whilst furloughed through the coronavirus job retention scheme?

You can claim back 80% of employees salary up to a maximum of £2,500 even if they are on holiday whilst furloughed, but you must top up to 100% for the time they are on holiday.

My employees don’t usually work bank holidays, but they are currently on furlough. What should I do about the Easter bank holidays?

All employees are entitled to at least 5.6 weeks off per year, and many employers include bank holidays within that total. You have two choices with the recent bank holiday: 1) pay the employees at 100% for the two days, or 2) pay them 80% for the two days and then add two days back onto their annual leave allowance to take later in the year.

HMRC have also stated: “During this unprecedented time, we are keeping the policy on holiday pay during furlough under review”

If you’d like to talk through your specific circumstances with our dedicated HR Consultant please contact Lucy Pitfield on 07780 637999 or email: lucy.pitfield@nicholsonsca.co.uk


Important message for those selling or gifting UK residential properties

An important change came into effect on 6th April 2020 which will affect everyone who makes a sale or gift of UK residential property, other than their own main residence, on or after that date. This change may have got lost in the fog surrounding the impact of the coronavirus, and the fact that there are fewer property sales progressing to completion at this time..

If you sell or gift UK residential property on which main residence relief is not available, a return will need to be submitted to HMRC, and the CGT paid, within 30 days of the completion date for the sale. Penalties for late submission will be applied if the deadline is missed, and interest will be charged on late payment. This change affects both UK landlords and non-resident landlords, although non-resident landlords have been have been subject to the 30 day reporting rule since 2015.

If there is a loss, or a no gain/no loss situation, a return will not need to be made.

It remains to be seen whether solicitors will make the return, and retain the money to pay the CGT, but it is likely that they will need to liaise with accountants/tax advisers over the calculation over the gain, so that any available reliefs can be considered. We are not only keen to help all our clients make the reports on time, but would encourage potential sellers to contact us before a sale takes place to make sure that the sale is being organised in the most tax-efficient way.

In addition to the report mentioned above, the gain will still need to be reported on the taxpayers Self Assessment Tax Return as well.

STOP PRESS – we have just heard that HMRC have extended an important deadline of this scheme, due to the impact of the coronavirus. There will now be no penalties for late submission of reports of properties sold in the period from 6th April 2020 to 30th June 2020 provided the reports are submitted by 31st July 2020. Interest will still be charged on the late payment of CGT if it is not paid within the 30 day deadline though!


IMPORTANT : CJRS Claims, portal live on Monday 20 April

The latest guidance from HMRC was finally out last night & their portal opens 8am Monday. There are still some unanswered questions for HMRC, which the accountancy & tax professions are pushing for answers on, but the standard information is clearer now.

There are some fiddly bits, but most of the ‘we don’t know yets’ probably won’t affect most payrolls – but let us know if you have any employees on payroll with no NI number (eg from overseas or under 16yo), or any of zero hours contracts, or any new starters in late Feb/March, these are all trickier.

If we are preparing your claim, for example because we already operate your payroll, we will already have been in touch with you.

These are notes for those employers who are preparing their own grant claims. 

The process:

You will login through your employer’s Govt Gateway but you’ll need to also be registered for PAYE online and have an ePAYE number. Do this here: https://www.gov.uk/paye-online/enrol

It may be a struggle to get the claim uploaded, paid and into your account by 25th April, if you’re a ‘last Friday’ payday, but hopefully by 30th April, but this all depends on whether the portal is stable to cope with the millions of users!

If you don’t have funds to make the April payrolls, you should put a contingency plan in place.  Speak to us if you need further help with this.

You’ll make your first grant claim for March and April together, then one per pay period after that.  You can upload your grant claim from 14 days before the payday.

Get all your information ready for the claim – suggest you’ll need a spreadsheet! You’ll have to enter all furloughed employees individually if you have less than 100, you can bulk upload an excel spreadsheet if you have more than 100 employees to claim for.

There is no ‘save and return’ option and you’ll be kicked off after 30 mins of inactivity – so keep doing keystrokes to keep yourself on there, whilst you check information.  Try and be as prepared as you can be before you logon.  There will be a calculator on the portal if you are stuck but try and work it out yourself on spreadsheet first, as that will be quicker.

Common situations:

  1. Holiday Pay – you can allow holidays & it doesn’t break furlough (which otherwise needs to be a min of 3 weeks each time); but you have to claim just 80% for the grant amount & then top up to 100% for your payroll; same for bank holidays, if they’re normally taken as leave. Or you can just assume it’s a working-furlough-day, claim the furlough amount & add their extra holiday days onto entitlement for ‘post lockdown’.  Your decision probably depends on how much all these accrued holidays are going to cause you a problem later in the year. You need to remember that the holiday top up element is not just basic pay that you might have used to calculate the furlough grant element but should include commission, bonuses etc.
  2. If you normally claim £4k NI employment allowance (based on your business’ last year’s Class 1 Employers NIC being less than £100k) then you still have to take that in April, and until it’s used up. You will probably need to do some working out of this on a spreadsheet, as the Employers NIC element of your grant must be the lower amount.
  3. The worked examples on the HMRC handout show how to calculate pro-rata pay and NIC for furlough/non-furlough days –you include all dates in the month, 7 days a week.  If you are using average pay because they had uneven pay amounts, check what you can and cannot include (list on handout) and note that you need to average it for the tax year 2019/20 up to the date each employee was furloughed – using number of days from 6th April 2019 until the date they were furloughed (if before 6/4/20).  The worked examples in the handout are useful. HMRC HANDOUT

Suggestions:

  1. prepare a reconciliation sheet of your grant claim & eventual payrolls – there may be some adjustments to make such as topping up apprentices to App Min Wage, topping up holiday pay, or pension contributions, for example;
  2. if there is anything you’re not sure about, make a judgement and note why you considered that to be the correct treatment. Then you can check in the coming days/weeks when things are clearer & adjust either grant claims and/or payrolls next time.
  3. Make sure you write down the submission number or take a screen shot as HMRC are advising an email confirmation will not be sent!

Capital Expenditure Deferral

In a time of uncertainty any capital expenditure needs to be assessed to determine if it is either essential for the continued running of the business or will generate significant new cash inflows.

It isn’t advisable for a business to use available cash or overdraft to fund capital expenditure as this will deplete the working capital and potentially make it less resilient.

There are many sources of finance for capital expenditure such as hire purchase and leasing which can match the expenditure more in line with the useful life of the particular asset, resulting in less pressure on cashflow and working capital.

Capital expenditure relating to your computer system is potentially one area where expenditure cannot easily be deferred, if for example staff are now working from home the robustness of your system could be even more critical. Replacing in-house servers with a cloud-based subscription alternative might now be a more cost-effective alternative to consider. Another way of deferring expenditure in replacing computer servers at the end of their lives is to explore whether extended warranties can be purchased, and servers instead replaced on a one by one basis.