Emergency financial help for business
This is the second in our series of bulletins through which we aim to help all our clients by sharing up-to-date official Guidance and practical tips to combat the financial impacts caused by the Cornonavirus (Covid-19).
There are five emergency financial aids that I want to highlight today.
CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME
From today, the Coronavirus Business Interruption Loan Scheme (CBILS) is open for applications.
If trading within your business has been hit by coronavirus, you can apply for additional finance via any one of 40 banks and accredited lenders.
To support your application you will probably need up-to-date accounts and financial projections. Naturally, ad+ can prepare any accounting or cash-flow information required by the bank.
If your business needs to borrow, this is an attractive arrangement.
- UK Government will provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims). That makes it much more likely that banks will lend.
- No charge to businesses or banks from the UK Government. This reduces the upfront costs normally associated with a business loan.
- Supports loans of up to £5 million. This ceiling should be more than adequate for most local businesses.
- Interest free for the first 12 months – interest payments are covered by the UK Government. This a big help and significantly reduces the repayment cost of the loan.
- Your business must be UK based with turnover of no more than £45 million per year. That covers every one of our clients.
- Your business will need to meet the other British Business Bank eligibility criteria: “Have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty”. That means your business must be viable. You have to demonstrate that the business was successful before the impact of coronavirus, and that with this financial package the business will probably remain successful after coronavirus.
CORONAVIRUS JOB RETENTION SCHEME: FURLOUGHED WORKERS
Announced on Friday, The Chancellor’s latest announcement looks as though it could be the lifeline that many businesses need. HMRC will reimburse 80% of “furloughed workers” wage costs, up to a cap of £2,500 per month.
However HMRC is NOT ready to receive claims nor to pay refunds. HMRC is working to introduce the necessary software as a matter of urgency.
To qualify, your business will need to:
· designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
· submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal when it becomes available.
As soon as the software system is operational, ad+ can help you by submitting the required information to HMRC.
- Your business does have to apply for this aid via the new HMRC portal (still to be launched).
- Once the HMRC portal is operational, your business will be required to submit information about the employees that have been furloughed and their earnings.
- HMRC will provide a grant for 80% of affected wages: your business is not required to pay the 20%.
- There has not been any announcement about National Insurance Contributions nor Auto-Enrolment pension contributions.
- The Government announcement makes it clear that this aid is designed to preserve the jobs of employees that would otherwise have been laid off during this crisis. It is reasonable to expect HMRC to ask for some evidence showing how your business has been adversely affected by the coronavirus.
- This is not a “blank cheque” from HMRC.
Although you can delay payment of VAT you must continue to complete and submit your VAT Return on time.
It is important to note that VAT can be DELAYED but not avoided. If you delay you must still pay whatever VAT is due at a later date. Make sure you set that money aside and don’t touch it, otherwise you will just delay a VAT headache.
Provided you give us the records when requested, we can complete and submit your VAT Return on time.
- This is an automatic offer with no applications required.
- Businesses will not need to make a VAT payment during this period.
- Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period.
- VAT refunds and reclaims will be paid by the government as normal.
SELF-EMPLOYED TAX ON PROFITS
On Friday, the Chancellor announced that the next Self-Assessment payments due on profits from a self-employed business will be deferred until January 2021. This should not be confused with Directors who are employed by their company.
Once again, please note that the tax payment is not cancelled, it has just been delayed.
- Applies to self-employed.
- This is an automatic offer with no applications required.
- No penalties or interest for late payment will be charged in the deferral period.
HMRC TIME TO PAY Time
Last week, I mentioned the Time to Pay arrangements for HMRC debts. This facility is available in conjunction with the new aid arrangements described above.
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.
These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
- You are eligible if your business: pays tax to the UK government, and has outstanding tax liabilities.
- Phone HMRC’s dedicated helpline (0800 0159 559) to discuss your specific circumstances.
- Right now, HMRC is being very understanding and have already agreed a number of “time to pay” deals which have really helped the businesses involved.
NORMAL BOOKKEEPING, ACCOUNTS, TAX, and COMPANIES HOUSE
Don’t forget to send us your accounts and tax return information as soon as possible after your company year-end (or 5th April, for personal tax). This will enable us to advise you as early as possible of your tax liability, in order that you can effectively provide for that liability or get a Time To Pay arrangement in place, if necessary.