Corona Virus and the Small Business: Frequently Asked Questions
Updated 26/03/2020 19:00
We are helping clients navigate these strange times and in many cases the same questions are arising. If you have a question that is not featured, please get in touch and we can add it. The chances are, if you are thinking it, many others will be too.
As the situation is constantly changing, we are updating this frequently.
NEWS IN ON 26/03/2020 Support for sole traders and partnerships
The Chancellor has unveiled plans to support sole traders and partnerships with profits of less than £50,000 in the 18/19 tax year or an average of the last three years earnings. This scheme does not apply to new businesses that have started in this tax year and does not apply to business owners operating through a limited company.
Support for a three month period will be payable in cash to business, up to £2500 per month or 80% of average monthly profits, whichever is the lowest. Business owners need do nothing. HMRC will be in contact with those who are eligible. The cash will be paid in June to a nominated bank account. If you are concerned that June is too long for you to wait, please contact us and we will work with you to bridge the gap.
FAQ: I operate through a limited company and take a mix of salary and dividends. Will this support for small business owners announced apply to me?
No. The scheme is not available to limited company owners. It is the governments view that this is support by the coronavirus job retention scheme. Our concern is that if company owners are taking a mixture of dividend and a small salary through PAYE, it will only be the salary element of the remuneration that will be covered by the scheme and even then, only 80% of it. In addition, because this is a “furlough scheme”, no work must be undertaken and therefore there is no opportunity for the business owner to keep his or her business going or the qualification to the scheme will be forfeited. Speak to us and we will advise you on what measures you can take to ensure that you steer your business through the next few months.
FAQ: I have only set my business up in the last 12 months. Will this support for small business owners announced apply to me?
No. The scheme is only available to individuals and partnerships who have submitted a tax return. Your first tax return is going to be 19/20. We often find that people in their first year of business receive a tax refund, especially if they were previously employed. If this is the case for you, you could be entitled to a tax refund from 6th April 2020. Get in touch and we will see how we can help you.
FAQ: I need financial support to see my business through
There are several options available, dependant one your circumstances which include, but are not limited to whether you are an employer, whether you have a tax liability and if you pay business rates or are exempt through the small business scheme.
Coronavirus Business Interruption Loan Scheme
This is available to all businesses. Approved lenders can loan between £1000 and £1.2 million and the loan is government backed.
The business loan scheme will now be interest free for 12 months.
The qualifying lenders of the loan scheme have now been announced. See link below. Not all lenders can offer all products. We can help you decide which product is right for you, help you to consider how much you require and assist in the application. Deborah, Martyn, Amy, Jenny and Naomi are resident experts on this.
long term loans
invoice discounting ( loan can be secured against outstanding invoices owed to you)
Contact us and we can discuss what you need to do to prepare the required information to apply for finance.
FAQ My business has been forced to close. I am concerned about paying my team whilst there is no work to do.
Coronavirus job retention scheme
The furloughing scheme is available where the government will support you if you temporarily furlough workers instead of permanently laying them off / making them redundant, because there is no work for them to do and economic conditions make it difficult for the employer to maintain their wages. It is expected that the individuals will return to work when conditions improve.
Businesses can apply for a grant of up to £2,500 a month to cover 80% of salary for those retained but not working.
There are HR responsibilities to fulfil (ACAS 0300 123 1100) & we can help you through the administration of this via our usual payroll service.
The scheme will take effect from a backdated 1 March and is expected to last at least 3 months.
Please read below and / or get in touch . Sophie, Matt and James are our resident experts on this.
As a director can I be “furloughed” and therefore have my pay supported?
Furlough implies that an individual is on leave because there is no work to do for a impermanent amount of time. If you are still running your business you can not be furloughed.
FAQ: How do I apply statutory sick pay to my employees?
Employees are entitled to SSP from day one rather than four if they are off as a result of the virus or having to self-isolate.
Employers are asked to use their discretion about what evidence is required. If you decide employees need to supply evidence they will be able to get if from the NHS 111 online instead of having to get a fit note from their doctor.
The government will meet the cost of coronavirus statutory sick pay (SSP) for small businesses with up to 250 employees for 14 days, providing over £2 billion for up to two million businesses.
We are trying to find out how this will be reimbursed but anticipate it to be offset against existing PAYE liabilities. When we know more we will let you know.
FAQ: I’m worried I can’t pay my tax bill
The help available depends on which type of tax you need help to pay.
VAT payments for all businesses is being deferred until the end of June.
What it means: e.g. If your quarter end is March, you do not need to make the payment due by 10th May. The next payment you will need to make currently is 10th August.
You should still calculate and submit your VAT return as normal.
I am going to struggle paying other tax including PAYE / Corporation Tax / payments on account for Self-Assessment
HMRC is operating a time to pay arrangement. The line is likely to be very busy. You may consider cancelling direct debits to HMRC, but be aware that there is a risk until HMRC have agreed the payment arrangement. We are experiencing them to be very sympathetic at this current time. Call 0800 159 559
FAQ: Am I eligible for the grants?
At present, £25,000 grants will be available for anyone in the retail, hospitality and leisure industry who qualify for small business rate relief. £10,000 grants will be available for other industries qualifying for small business rate relief. We understand that these are being administrated by the council and you do not need to do anything and the council will be contact.
Our enquiries to the council lead us to believe that rates invoices will be reissued in April 2020.
FAQ: I’m self employed and working from home. The help available doesn’t seem to apply to me.
Many people feel this way. There is a small amount of help if you are sick of £95.85 but it is not sufficient to cover usual level of earnings. Pressure groups are appealing to the government to do more to support self employed “sole” traders and we believe that a bill may have been passed in parliament yesterday (23/3) but hasn’t been announced.
Self-employed will get full Universal Credit at a rate equivalent to statutory sick pay, and support to cover up to 30% of house rental costs. The universal credit allowance has increased by £1,000 a year.
Also, have a look at Crowdfunder’s Pay It Forward initiative where many small businesses are securing debt free finance.
FAQ: Will I be covered by my business insurance?
It depends on the policy. Call your insurance provider and ask them about business interruption. Early indications are that business interruption is not covered by pandemics, but it’s always worth asking.
FAQ: I feel really anxious. I just don’t know how my business will survive.
In short, keep a calm head and plan! Plan your cash flow, for both business and personal.
If you calculate your personal finances first, this will give you an idea of what you need your business to pay you.
Ask your mortgage company for the three month payment break. Speak to your landlord if you rent. If you have any credit cards, you may choose to reduce your payments to the minimum amount.
Cancel any unnecessary subscriptions or other costs, however be mindful of cutting too far! That sky subscription may be a godsend whilst the children are home and you shouldn’t cut access to helplines and support that you might need. Also be mindful that this will pass and you don’t want to “kick the can” into the future either. Loans and deferrals will need to be paid back eventually, so strike the right balance.
Call in any outstanding payments that are out to you. Be understanding that these are difficult times for everyone, but be assertive in claiming back funds owed to you and signpost others to the help above if they aren’t aware of they aren’t aware what’s available to them.
A very brief explanation of how to do a very simple cash flow forecast:
Ideally, use excel, a sheet of paper or at worst, back of the proverbial cigarette packet. We want to plan the next three months cash in, cash out and see the impact that it has on the cash available.
First of all, find out todays bank balance as a starting point.
Then add up all income expected in each month and add this to bank balance. Be conservative about the likelihood of these coming in. Are any at risk? Err on the side of caution if you are uncertain.
Next, add up all of your expenses and deduct this from the above. Allow for sundries and unexpected items. This will be your forecast balance at the end of the month.
Review the cash positions. If you are going to be short, you will know how much you need to find to make ends meet and take necessary action.
FAQ: What else can I do?
Whilst the future might seem pretty bleak, this is also an opportunity to reinvent our businesses into much better, more efficient models. For example, if you are stuck operating within a fixed cost base, you might consider ways to be more flexible which has become easier in recent years with the “pop up” culture and flexible working arrangements and gig economy that we have found ourselves. This allows your business to grow again, with matched expenses.
It’s also a time to be creative and think differently. We are hearing great stories of restaurants setting up a delivery service and yoga instructors launching live feed classes with more attendees than was possible in a physical space, so get thinking! How can you be better and more efficient and find the silver lining that’s hidden inside your business!
Be positive and keep yourself and your family well, because really, good health is what matters most to us all and our family. We know that stress caused by financial worry is also not good for our health, so keep yourself informed, have a plan and let us know if we can help.
Everyone at Harlands