YOUR DAILY BUSINESS GUIDE FOR A FAST-MOVING LANDSCAPE
If you have questions, please get in touch with our COVID-19 Task Force here
Unprecedented. Extraordinary. Uncertain. Our vocabulary for these times reflects how we feel. About our businesses. Our family and friends. Ourselves.
At Cooper Parry, we want to give you all the help we possibly can. Now, more than ever. And with government communications flying around like never before, we think it’s easier to share the latest news as a series of themes. These will obviously keep changing and refreshing over the coming days, weeks and months.
So you know, that if you want to catch up on any updates, you can do so at: covid19@cooperparry.com
More than that, you can always get in touch with our team of specialists with your specific questions. Stay safe and stay positive everyone.
23RD MARCH
Retain Your Most Valuable Asset. Your People.
Read about the Coronavirus Job Retention Scheme. We’ve never come across the government giving such support to help businesses and their employees.
We were wow’d by the Chancellor’s announcement on Friday 20th March when he committed to pay most of the wages of people that would otherwise have been laid off due to coronavirus. He called it “unprecedented measures for unprecedented times” and we certainly can’t remember any bigger pledge than this ever being provided by this government or previous ones.
The Coronavirus Job Retention Scheme will be available to all UK employers, large or small. The scheme will cover 80% of monthly wages, up to £2,500 per employee. As the payment is by way of grant this means that employers do not need to pay HMRC back.
Employers will need to think about funding the 20% not covered by the grant and the position of higher paid employees earning over this amount. Also, the definition of a monthly wage is not yet known; for example, does the £2,500 grant include employers’ NIC ?
It’s clear that if you decide to pay your employees more than the 80% monthly wage covered by the scheme then any extra will not be covered. However, what’s not clear is whether the rules would permit the use of unpaid holiday or leave for the 20% balance whilst still giving employers access to the scheme.
Despite some unknowns, we consider the scheme will go a long way in providing financial security for your employees. It means your business can focus on keeping going during these difficult times and hitting the ground running when things pick up again.
The scheme will be open before the end of April and can be backdated to start from 1 March 2020. The timing of receiving the grant may therefore not align to the payroll cost so it is worth thinking about the cashflow impact. The scheme is initially available for three months, but the message was that this could be extended if necessary. The government promised there is no limit to how much this might cost.
You will need to decide quickly whether you need access to this scheme, and which of your employees will be affected. If you have made redundancies since the outbreak it is not very clear whether you can bring these people back on the payroll and include them, although we would hope this would be the case in these circumstances. You will need to notify any employees if you are including them in the scheme.
To benefit from the scheme employees need to be ‘furloughed’ and at present it’s unclear what happens to employees off sick, self isolating or on holiday. The finer details of the ‘furloughed’ concept are yet to be published but we expect this to be employees that will be retained, kept on the payroll but not working.
HMRC are setting up an online portal where employers will be able to enter details about the employees they need to claim for. We will let you know when this is available. Before then, we recommend planning for at least the next three months and thinking about which of your people you will need to continue to run your business in the short term and those which can be ‘furloughed’ to secure their jobs and the future of your business.
If you need help with this, then get in touch with Mark Baxter. You are also likely to need legal input to consider the employment law aspects of the proposals.
In relation to tax liabilities due don’t forget commitments have already been made by HMRC on the Time to Pay and Statutory Sick Pay (see below).
Automatic VAT payment holiday
Read about the VAT payment holiday. Never in history have the government said pay us later for your VAT.
Chancellor Rishi Sunak announced that VAT payments owing during the period from the 20th March 2020 to the 30th June 2020 will be deferred. Businesses will have until the end of the 2020-21 tax year to repay what they owe. HMRC have confirmed that VAT payments due between March 20th and 30 June (including payments on account) fall within the deferral but they must be paid by 31 March 2021. Direct Debits should be cancelled to take advantage of the deferral, which will need to be set up again after the event.
What’s also great is that this is an automatic offer and will alleviate the burden of immediate cash flow concerns without having to go through any red tape or helpline to get it. It is said to be the equivalent of injecting another £30bn into the economy.
There’s no doubt that this provides businesses with much-needed cash. However, businesses would be wise to think ahead and place themselves in the best position once the deferral period has come to a close. See further VAT tips on how to maximise your VAT position links to here
It is important to recognise that, as things stand, businesses will be expected to continue submitting VAT returns during this period as usual. We anticipate that the deferred amount will be the VAT liability (i.e. VAT on sales net of any deductible input tax on expenditure) due in the designated period. One further point to note is that HMRC have confirmed that VAT reclaims and refunds will be paid as normal. Therefore, businesses which find themselves in a regular repayment position should not be affected by this announcement.
HMRC may consider on a case by case basis other measures to support your business, for example a temporary suspension of the monthly payment on account regime or seasonal adjustment of VAT return stagger periods. Get in touch if you would like to talk this through with Damian Shirley. If you have had discussions with HMRC we would love to hear your feedback covid19@cooperparry.com
Small and particularly vulnerable businesses
Although every businesses will be impacted by COVID – 19, read about the Extra help available for small and particularly vulnerable businesses.
There are other ways the government is helping out businesses with financial support that they won’t need to repay.
Those of you based in England and operating in the retail, hospitality and leisure industries won’t pay business rates for 2020/21. This will broadly apply to properties in England that are occupied:
- As shops, restaurants, cares, drinking establishments, cinemas and live music venues
- For assembly and leisure
- As hotels, guest & boarding premises and self-catering accommodation
There’s nothing for you to do to get this relief – your local authority will deal with it for you.
Some of you will qualify for cash grants, too. For businesses in the same industries mentioned above, grants will be available as follows:
- £25,000 per property with a rateable value between £15,001 and £51,000
- £10,000 per property with a rateable value of under £15,000
In addition, businesses in any industry that pay little or no business rates will also be given a grant of £10,000. This applies to businesses already claiming small business rate relief, rural rate relief or tapered relief.
Your local authority will write to you if you are eligible for these grants. They are being provided with guidance on this soon from the government. There’s nothing you need to do.
What if I run a children’s nursery?
Properties that are occupied by providers of Ofsted’s Early Years Registration or are wholly or mainly used for the provision of the Early Years Foundation Stage which get a business rates holiday for the 2020/21 tax year. Again, if you qualify this will be applied automatically by your local authority so there is nothing you need to do to get this help.
And don’t forget….
The above measures are in addition to those that have already been announced, which includes:
- Coronavirus Job retention scheme (see above)
- VAT payment holiday (see above)
- Financial measures backed by the Banks
- Statutory Sick Pay
- Time to Pay arrangements (see below)
If you would like to chat about any of the above please get in touch with Mark Baxter
The role of HMRC
The amount of tax you pay is always important but what’s crucial to cashflow right now is the timing. Read about time to pay.
Right now, cash is king. How you manage your revenue, costs and tax position can often help to improve cash flow. A few straightforward tweaks to revenue and costs may help in the immediate term. For example, you can bill earlier, speed up payments through deposits or prompt payment discounts, and agree to pay suppliers later.
When it comes to tax, HMRC will offer ‘Time to Pay’ arrangements to support cashflow when required – but what exactly is on offer?
Here’s what we know so far:
- 2,000 experienced call handlers are available on 0800 0159 559 to talk to businesses and self-employed people who are concerned about struggling to paying their tax due to coronavirus
- The time to pay provisions can apply to any tax (PAYE, Corporation Tax etc) which a business owes HMRC.
- The handlers will discuss paying your tax by instalments, suspending debt collection proceedings, and cancelling penalties or interest where these have arisen due to administrative difficulties with contacting or paying HMRC
- HMRC asked those who have already missed/will miss their next payment to call the helpline, but asked those worried about a future payment to call nearer the time.
‘Time to Pay’ is not a new concept and we hope HMRC will be more lenient in their approach given the circumstances. Right now, HMRC are saying requests will be reviewed on a case-by-case basis, so it’s hard to be specific. Early indications are that requests are being dealt with sympathetically although it is taking some time to get through.
From past experiences, you can expect them to ask you:
- The amount of tax you need more time to pay and the reasons why
- What you’ve done to try and pay the tax so far
- Details about your income and expenditure, including projections and forecasts
- Whether you’ve approached your debtors to try and get more cash in
- How much you can pay right now and how long you want to pay the rest over
- Your bank account details (for setting up direct debits)
- Confirmation that the personal calling has the authority to say the directors will ensure that the instalment payments will be made
- Also, make sure you have your reference numbers to hand before you call (for example your UTR for corporation tax).
If you’d like any assistance to help prepare for your conversation with talking to HMRC regarding ‘Time to Pay’ arrangements or have got any feedback that we can share on your experience of the helpline (on a no names basis of course) please get in touch with Mark Baxter
The VAT Holiday is going to be automatic which will be a relief to businesses and these announcements together are going to be crucial to the cashflow of many businesses.
A lot of businesses are also reliant on R&D tax credits being refunded from HMRC so making sure you know where you are with your claims and of course claiming the full amount you are entitled to can all help with cashflow. To date there have not been any announcements made on speeding up R&D but we are lobbying hard for some help and we hear an announcement from HMRC is expected, click here to hear the latest from Chris Knott
What about my self-assessment position?
Income tax self-assessment payments due on 31 July 2020 will be deferred until 31 January 2021 for the self-employed. This is an automatic offer with no applications required. There will also be no penalties or interest charged in the deferral period.
Our personal tax and wealth specialists have pulled together some key insights to help guide you through these extraordinary times. The first of their regular bulletins can be read here:-
Technology and remote working
We hosted our first Digital Culture Webinar where there was lots of discussion around remote working and the tools and tech required to keep your workforce engaged and connected. Click here to view it.
Financial reporting during this chaos
Are you struggling to file your accounts on time? See here for latest information from Companies House
Companies House have announced that businesses affected by the COVID-19 pandemic can now apply for an extension to file their accounts and confirmation statements.
Where the impact of Coronavirus means you cannot file on time, Companies House are automatically granting a 2 month extension and will consider a further one month extension on a case by case basis.
You need to apply and can do so online here
Please get in touch with Alison Fovargue if you want to chat this through
Financial support backed by the banks
There’s been a lot of noise around the government’s Coronavirus Business Interruption Loan Scheme (“CBILS”) announced on Tuesday. The £330bn headline number is clearly eye catching; but is it enough and how do you access the funding?
So there has undoubtedly been enormous amounts of stimulus funding announced by government and the Bank of England the last week. From our conversations with businesses and lenders, two themes are very current;
- CBILS is broadly for SMEs with less than £45m turnover. There are some industries that are not eligible – see full eligibility here
- CBILS is a guarantee scheme designed to support loans or overdrafts of up to £5m and up to six years that don’t meet “normal” bank lending criteria. The business will remain liable for the borrowing in the first instance, but the government covers 80% of the liability if it isn’t repaid in due course. As a result, the business and shareholders will be taking on additional debt which will need to be repaid.
- The government will pay to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will not face any upfront costs and will benefit from lower initial repayments.
- The funding will be provided by banks and other lending institutions.
- The CBILS framework says that businesses must have “a sound borrowing proposal”, but insufficient security to meet the lender’s normal requirements.
- CBILS is supposed to be operational from today – however at present banks and businesses have had little clarity on how the scheme will work and, more importantly, how quickly it will really be available. The clear message from those needing funding is that time is of the essence.
What about larger businesses?
The Bank of England (BoE) is also offering support to much larger firms that are investment grade rated (under the “COVID-19 Corporate Financing Facility”)
This still leaves an enormous gap where, currently, there is no support for mid-market firms between SMEs and investment grade companies (those with turnover greater than £45m but that do not qualify as investment grade). On 20 March 2020 the Chancellor promised this gap would be addressed and we expect more announcements.
The BoE will have a wider role to support Banks themselves to accommodate the enormous rise in lending. We are hearing stories of banks being proactively supportive in their own right (without the government backing so far), with repayment holidays, covenant postponements and increased liquidity being made available.
It goes without saying that liquidity and cash is key – we suggest that you make the most of your Overdrafts and Revolving Credit facilities to ensure you have a cash buffer on balance sheet.
If you are looking for help with funding, we have a number of specialists in the team who worked through the 2008-10 crisis. Please get in touch with Paul Ambrose
The CP policy
CP have been considering our own COVID – 19 policy, to read it click here