Government measures – Jobs Plan

The Chancellor presented his “Plan for Jobs” this week, providing a number of financially supportive measures, designed to kick-start the economy.  We have published a separate blog on this point on our website here.

Job retention bonus

There will be a new one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed until at least 31 January 2021. Employees must earn above £520 per month on average between 1 November 2020 and 31 January 2021. Payments will be made from February 2021 and further details about the bonus will be announced by the end of July 2020.

New apprenticeships

From 1 August 2020 to 31 January 2021, employers in England will receive a payment of £2,000 for each new apprentice they hire aged under 25, and £1,500 for each new apprentice they hire aged 25 and over. These payments will be in addition to the existing £1,000 payment that the government already provides for new 16-18-year-old apprentices.


Guidance on hospitality and tourism VAT published

HM Revenue & Customs (HMRC) has published guidance on temporary cuts to the rate of VAT from 20 per cent to five per cent from Wednesday 15 July 2020 to 12 January 2021 for certain goods and services in the hospitality and tourism sectors.

The reduced rate was announced by the Chancellor at the Summer Economic Update on 8 July 2020 and applies to:

  • food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs
  • hot takeaway food and hot takeaway non-alcoholic beverages
  • sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities

The reduction also applies to admission to the following attractions, where they do not qualify for the cultural VAT exemption:

  • theatres
  • circuses
  • fairs
  • amusement parks
  • concerts
  • museums
  • zoos
  • cinemas
  • exhibitions
  • similar cultural events and facilities.

The dedicated guidance documents that set out the VAT treatment of catering and takeaway food and hotels and holiday accommodation have also been updated to reflect the temporary change.

The guidance informs small businesses that use the Flat Rate Scheme that certain percentages have been reduced in line with the new temporary five per cent rate of VAT.

Further guidelines also set out the arrangements that apply where supplies straddle the temporary reduced rate.

VAT is a complex tax and therefore if you would like support with any of this detail please don’t hesitate to contact us on 01522 81 5100.


Details of the “Eat Out to Help Out” scheme confirmed

The Government has now confirmed details of the ‘Eat Out to Help Out’ scheme, announced by the Chancellor at his Summer Economic Update on Wednesday 8 July.

The scheme covers the cost to restaurants, cafes and pubs that sell food of providing a 50 per cent discount, capped at £10 per head, on food and non-alcoholic drinks purchased for consumption on the premises from Mondays to Wednesdays in August.

The scheme is open to businesses that were registered with their local authority as food businesses on or before 7 July 2020, provides or shares a dining area for eat-in meals and sells food for consumption on the premises.

HM Revenue & Customs says this could include:

  • restaurants
  • cafés
  • public houses that serve food
  • hotel restaurants
  • restaurants and cafes within tourist attractions, holiday sites and leisure facilities
  • dining rooms within members’ clubs
  • workplace and school canteens

Participating businesses are expected to provide the offer throughout their opening hours on the days that the scheme is in operation, Monday, Tuesday and Wednesday throughout August.

The scheme applies to food or non-alcoholic drinks, meaning that a coffee purchased without food to drink in a café’s seating area would be eligible for the discount.

The guidance also gives details of how businesses should apply the discount to customers’ orders. Service charges are not covered, while the £10 a head cap is based on the number of people at the table, including children. This means that the discount available to a table of six would be capped at £60, even if the discount for one or more individuals exceeds the £10 cap, assuming the table is covered by a single bill.

The scheme does not apply to takeaway food and drink, or catering services for private functions. It also does not apply to mobile vans or takeaways that provide tables and chairs on the pavement.

However, the guidance does confirm that the scheme can still be used where a customer orders food for dining in but then takes away the remainder of their meal.

The scheme also cannot be put towards:

  • alcoholic drinks
  • tobacco products
  • food or drink that is to be consumed off-premises
  • food or drink that is sold as part of a private party, event or function taking place within an eligible establishment.
  • food and drink combined with another service, like B&B.

Eligible businesses can register to take part in the scheme using an online portal, which is set to go live from 13 July 2020 here.

The discount can be provided alongside existing offers and comes in addition to a cut in VAT from 20 to five per cent for food and non-alcoholic drinks, as well as for accommodation and admission to attractions, which will apply from Wednesday 15 July until 12 January 2021.

HMRC guidance is also available. This has some handy worked examples of how the scheme will interact with other items you might find on bills like alcoholic drinks and service charges.

9/7/2020


Summer “mini-budget” introduces further support measures for business

(Updated 8 July 2020)

On Wednesday (7.7.2020), Chancellor Rishi Sunak made a speech entitled “Summer Economic Update” where he unveiled further Government supports and he unveiled the Government’s plan for jobs which he described as the “Second phase in in the Government’s economic response to the crisis.”

As with announcements in the past few months the detail will follow and as we know the devil is certainly in the detail. There were some interesting points raised and we wanted to let you know the highlights . We will update you on the details in the next few days as the Government publishes the specifics of the support.

Coronavirus Job Retention Scheme (CJRS) and NEW Job retention bonus 

The CJRS ends in October and the Chancellor looked to cushion expected redundancies with the announcement of a Job Retention Bonus (JRB). The new scheme will give employers £1,000 for each previously furloughed employee they retain and keep in employment until January 2021, as long as they are paid at least £520 a month. Further details of the scheme are expected later in July.

NEW Kickstart scheme and measures to help people find work 

In order to support people finding jobs, the Chancellor announced the Kickstart Scheme, which will provide £2 billion to support the creation of “high quality” six-month work placements for 16 to 24-year-olds on Universal Credit and at risk of long-term unemployment.

The Government will provide employers that offer the placements funding equivalent to 100 per cent of the relevant level of the National Minimum Wage (NMW) for 25 hours a week. It will also cover the associated Employer NICs and minimum automatic enrolment pension contributions.

Rishi Sunak also outlined additional measures, including funding for traineeships and employers that hire new apprentices, as well as funding for several careers and job-finding programmes.

The apprenticeships funding will provide £2,000 to employers in England for every apprentice hired under the age of 25 and £1,500 for each newly hired apprentice aged 25 or older. This funding is in addition to schemes already in place to support employers in taking on apprentices.

VAT reduced for hospitality and tourism sectors 

The Chancellor outlined a VAT rate cut for the Hospitality and Tourism sectors from 20 per cent to five per cent. The measures relate specifically to food and non-alcoholic drinks and to accommodation and admission to attractions, with further details expected to be published later.

The VAT rate change comes into effect on Wednesday 15 July 2020 and will be in place temporarily until 12 January 2021.

Read our blog post on the temporary VAT changes (last updated 10.7.20)

Eat Out to Help Out

The “Eat Out to Help Out” scheme will provide a discount of 50 per cent of up to £10 a person on eat-in meals, including non-alcoholic drinks, at participating establishments on Mondays, Tuesdays and Wednesdays for the month of August.

Restaurants, cafes and pubs can sign-up for the scheme on a new website on Monday 13 July 2020.

Read our blog post on the details of this scheme. (last updated 10.7.20)

Stamp Duty Land Tax holiday

There is a temporary cut in Stamp Duty Land Tax (SDLT) from 8 July by raising the nil-rate band from £125,000 to £500,000 until 31 March 2021. The Treasury estimates that, as a consequence, around nine in 10 people buying a main residence will pay no SDLT.

If you purchase a residential property between 8 July 2020 to 31 March 2021, you only start to pay SDLT on the amount that you pay for the property above £500,000. These rates apply whether you are buying your first home or have owned property before.

As outlined above we will keep you up to date with these and other measures as the Government releases further details. Please talk to us if you need any help during this time by contacting us on 01522 81 5100. 


Cash is king, we know that but more so now. Five tips for proactive cash management

Over the last two months monitoring cash flow has been a top priority for most businesses. For most, this has been activity thrust upon them by the current situation. Even though the shock of lockdown is becoming a distant memory monitoring cash is still a vital activity and one that should be led by senior leaders/ owner-managers.

For many SME owner-managers, proactive and systematic cash management is not something done routinely. We know from the results of research that cash flow hiccups are often identified at the eleventh hour giving little time to identify and arrange a suitable funding solution.

“Instead of looking through the telescope the wrong way round business owners should be looking through it normally to spot cash challenges in the distance and give time to deal with them.”

Without cash a business is doomed and therefore its management should be the number one priority of every senior team or owner-manager.

Outlined below are five tips to help your business become more proactive around cash management.

Make cash management everybody’s priority

Communication is important. Inform senior managers why cash management is important. Let them see the plan, the challenges, risks of not being proactive and the numbers involved. Focusing the minds of leaders, senior managers and budget holders and asking them to communicate to their teams makes cash management an important task for everybody, part of every employees role. Communicating, top-down ensures there is no misinformation within the team and everybody knows how important a task it is.

Manage cash inflows

For most businesses that need to consider managing incoming cash, managing Aged Receivables is where the focus should be. Consider automating the routine day to day debt collection with an app like Chaser leaving your teams time free to focus on that stubborn debt.

Think too about how to make it easy for your customers to pay you. Adding payment links to digital invoices and collecting retainers by Direct Debit may speed up payment times too. Check out Xero support for how to do this to invoices in Xero.

Finally consider undertaking credit checks on all new major customers. This will help you evaluate the risk of non payment before you start to raise sales invoices but may also enable you to negotiate different payment terms.

Have you taken advantage of all government schemes?

There have been almost weekly announcements of support for businesses and you would have been forgiven for missing one of the non mainstream support packages.

Review the .gov website for details and follow them up.

Talk through cash flow shortfalls early

We all have people that support us when we need it. Whether that is an employee or your external accountant, talk to them about cash worries and challenges. Identify the challenge and find a solution to deal with it. For help and assistance with managing cash and finding a solution talk to either Richard Hallsworth, Stephanie Smith or Steve Robinson, our funding specialists.

Revisit your cash flows regularly

This is a vital activity. Amend cash flow models and forecasts as things become more certain. If you are establishing plans to bring income forward or steepen the cash coming in curve on the way out of lockdown make amendments showing the impact of each measure.

Add in changes to government backed support schemes as they are secured and update predicted cash coming into the business when you speak to debtors.

Technology

There are lots of examples of apps that pull data from your accounting software but as yet I am to be convinced on how accurate a picture they present. For now in our business we still use a spreadsheet to forecast cash over the current month and then the next 90 days. This is a daily summary and reconciled each day to the bank.

Final thoughts 

The management of cash flow has never been so important as it is now. Understanding where any gaps might be, how deep they may become and the impact on the position of the business is vital if long term health is to be preserved.

Leading from the front with a clear and proactive message on the importance of good cash management should be a top priority in any sMe whilst owner managers in Smes should focus on cash and ensure they understand the position themselves.


Moving your exit “V” curve, let’s revisit our exit strategies

The impact on the economy of lock down has been significant, possibly the most significant since the 1700’s. We’re told that the economy will bounce back and that the shape of the curve will be a “V” shape. 

Whilst the inward shape of the curve in terms of the gradient is now known the exit curve is not. Clearly the bounce back is not going to be as steep and probably different for each industry (and business within) as restrictions are relaxed. 

In order to understand your cash requirements until restrictions are relaxed and through the initial opening you should be putting a cash flow forecast together and updating it on a weekly basis. 

But that’s operational and I want to talk about strategy. 

Let’s say that based on government advice and modelling you have forecast your outward “V” curve, your anticipated cash inflow from sales. On the graph below this is the red curve. It’s your base income forecast. 

My challenge to clients is to now identify ways you can steepen the gradient (i.e. increase the pace of recovery – green line) or move it forward (i.e. create income ahead of your base forecast – blue line). 

One step to the left!

I’ve talked to dozens of small business owners who are currently closed but are finding legal ways to create income streams, such as cafe’s selling take out pizza or meals etc. They are moving their “V” curve, creating income ahead of where they might expect to and getting ahead of their base forecast.

The blue curve is the effect of this. There will be new ways of generating income by either delivering new products and services or delivering existing products and services in new ways whilst restrictions are in place.

Keep running up that hill

I’ve talked to other business owners who are thinking of ways to reopen with a bang, ensuring that when they do open income is maximised in whatever way they can. One of my clients, a small hairdressing business, is actively starting to fill a virtual appointment book ensuring that their clients have a place booked for when they reopen and guaranteeing their income. They are not waiting for customers to come to them!

The green curve is the effect of this. There will be ways of selling more to existing customers or attracting new customers.

A word of caution 

The one vital boundary to bare in mind when starting to identify ideas is trust. Being responsible, in terms of applying government guidance will be a vital part of long term sustainability. Businesses that flout rules and guidance, in their “customers minds”, may be dealt a significant blow when those customers come to make their next purchasing decision and vote with their feet.

So in summary, strategic thinking around your exit “V” curve could be a way of finding your way through and out of restrictions maximising revenue and cash at this important time but also identifying new ways to generate sustainability.

If you’d like to talk this through please contact me (Richard Hallsworth) on 01522 81 5100 who would be happy to have a virtual coffee with you.


COVID-19 Our advice for recovering & rebuilding

Over the last few weeks we’ve been working hard to help clients secure their businesses and ensure they have sufficient cash flow to survive to the end of June. Whilst some of this work will continue with some clients in acute financial distress we are now starting to think about how we help clients recover and rebuild.

These pages are designed to provide some advice in this respect so please read our thoughts… coming soon.