Introduction

(Updated 19 March 2020)

With the situation surrounding COVID-19 constantly changing, we are aware that you will have concerns about how it may impact on your businesses and employees. There is lots of misinformation being reported so we have sought to pull together a reference guide for clients to quickly identify support and assistance that has been made available by the government, together with details of how to apply for support where appropriate.

We will be updating this guide in the coming days, weeks and possibly months in line with further announcements of government measures. However, given how fast moving the situation is, we would strongly advise you to keep up-to-date daily and follow the advice from the government and other organisations we have listed below.

Chancellor’s Announcement on 17 March 2020

On Tuesday 17 March 2020, the chancellor, Rishi Sunak, announced a further suite of support measures to prop up the UK economy as the COVID-19 pandemic tightens its hold on the UK.

In addition to the £30bn of support announced at last Wednesday’s Budget, the Chancellor vowed to do whatever it takes to protect households and businesses to pull through, and ensure that the punishing financial effects of the pandemic are not permanent. 

The three immediate steps that the chancellor announced include:

Business Support Loans

£330bn of government backed and guaranteed loans to support businesses, equivalent to 50% of GDP, to support any business requiring access to cash to pay rent, salaries or supplies. Such loans will be available on attractive terms. If demand outweighs £330 billion then further funds will be provided. For larger businesses such funds will be available via banks. 

For SMEs, the chancellor has extended the newly announced Business Interruption Loan Scheme from £1.2m to £5m, with no interest due on repayments for the first 6 months of the loan.

Both of these schemes will be available from w/c 23 March 2020. 

The chancellor made specific reference to the aviation sector, with plans in the coming days, together with the secretary of state for transport to agree specific support package for airlines and airports, as well as other sectors hardest hit by the pandemic.

Cashflow/support for hospitality, retail and leisure sectors

The chancellor acknowledged the concerns of the sector as regards cashflow and fixed costs for businesses, including pubs, clubs, theatres, and hospitality and leisure venues.  Please see our ‘Insurance’ and ‘Cash Flow’ sections later in this guide.

Help for individuals

For those who find themselves in financial difficulties due to COVID-19, mortgage lenders are to offer a 3-month mortgage holiday.

An outline of the package of measures

The package of measures to support businesses announced so far includes:

  • a statutory sick pay relief package for SMEs
  • a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
  • small business grant funding of £10,000 for all business in receipt of Small Business Rates Relief (SBRR) and Rural Rate Relief
  • grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
  • the Coronavirus Business Interruption Loan Scheme to support long-term viable businesses who may need to respond to cash-flow pressures by seeking additional finance
  • the HMRC Time To Pay Scheme.

Support for businesses who are paying sick pay to employees

For workers who are self-isolating owing to COVID-19, Statutory Sick Pay (SSP) is payable from day one.
For all other workers, SSP is payable from the fourth full day on sickness in the normal way.

Average pay has to be £118 per week to be entitled to SSP based on their pay over the previous 8 weeks.
If an employee has worked less than eight weeks, their average pay is based on what has been paid to date.
SSP is payable at a rate of £94.25 a week.

Will my business be able to recover SSP paid to staff?

  • Small and medium-sized employers will be able to reclaim SSP for sickness absence due to COVID-19
  • This refund will cover up to two weeks’ SSP per eligible employee who has been off because of COVID-19
  • Only employers with fewer than 250 employees (as at 28 February 2020) will be eligible
  • Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
  • Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note
  • For clarity, employers cannot reclaim for those employees who were paid SSP for reasons other than COVID-19

When and how will this be available?

  • There is no system in place at present
  • The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible.

We suggest you ensure you can evidence if asked those who have been paid SSP as a consequence of COVID-19.

Support for businesses who pay business rates

The Government will introduce a business rates retail holiday for all retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year.

Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.

A £25,000 grant will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.

When and how will this be available?

Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority. Guidance for local authorities on the business rates holiday will be published by 20 March.

Support for businesses who pay little or no business rates

The government will provide additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR). This will provide a one-off grant of £10,000 to businesses currently eligible for SBRR or rural rate relief, to help meet their ongoing business costs.

When and how will this be available?

If your business is eligible for SBRR or rural rate relief, you will be contacted by your local authority – you do not need to apply.

Funding for the scheme will be provided to local authorities by government in early April. Guidance for local authorities on the scheme will be provided shortly.

Support for businesses through the Coronavirus Business Interruption Loan Scheme

A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch next week to support businesses to access bank lending and overdrafts. The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value. Businesses can access the first 6 months of that finance interest free, as government will cover the first 6 months of interest payments.

When and how will this be available?

The scheme, delivered by the British Business Bank, will launch w/c 23 March. Details are still being finalised, but you can find more information here

Guidance as to when and how this will be available (updated 19 March 2020):

The British Business Bank have provided more details on the qualifying criteria for the loan scheme. In order to meet eligibility for CBILS the business must:

  • Be UK based, with turnover of no more than £41 million per annum
  • Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support – see below)
  • Be able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years
  • Have a sound borrowing proposal, but insufficient security to meet the lender’s requirements

There are certain companies that are not eligible to make the claim (https://www.british-business-bank.co.uk/wp-content/uploads/2020/03/Ineligible-and-Restricted-Eligibility-Sector-2017.pdf)

More eligibility criteria will be published in the coming days.

To apply for the funding, a business will need to approach one of the 40+ accredited lenders (https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/) directly rather than through the British Business Bank.

As we understand it to date, the scheme will be available to apply for from early next week (w/c 23 March).

Support for businesses paying tax (HMRC Time to Pay Scheme)

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.
Time To Pay gives businesses a time-limited deferral period on HMRC liabilities owed and a pre-agreed time period to pay these back.

HMRC will discuss your specific circumstances to explore:

  • agreeing an instalment arrangement
  • suspending debt collection proceedings
  • cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately

When and how will this be available?

If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.

Business Insurance

Irrespective of the chancellor’s comments on 17 March, many businesses are unlikely to be covered as most business interruption insurance policies are dependent on damage to property, which will exclude pandemics.

Where a business interruption section of insurance is in operation, it may include cover for denial of access including infectious diseases. However, cover under these extensions will nearly always be based on a specified list of diseases and has been since the SARS outbreak in 2003. These policies exclude business interruption due to new and emerging diseases, like COVID-19. The current COVID-19 outbreak is therefore not covered under a significant majority of business interruption policies. 

Many businesses will be wondering if they are covered for financial losses should they have to self-isolate, if health authorities order the closure of their business because of COVID-19, or if they are entitled to compensation for reduced customer activity.

It is important to check the business interruption wording on your policy and if you think you have a valid claim, this should be lodged with your insurance company’s claims team.

Most property damage sections insure business contents including computers at the business premises only. We would recommend you check your policy to ensure items are covered away from the office if you are planning to work from home.

You can read the Government’s guidance on business insurance after the chancellor’s comments here.

People who need to make a new claim for financial support

The government understands people who are required to stay at home or are infected by COVID-19 may need financial support, and quickly.

It has announced that:

  • those affected by COVID-19 will be able to apply for Universal Credit and can receive up to a month’s advance up front without physically attending a jobcentre
  • the 7 waiting days for Employment and Support Allowance (ESA) for new claimants will not apply if they are suffering from coronavirus or are required to stay at home – so it will be payable from day one.

When and how will this be available?

Further information on how to apply can be found here.

Statutory sick pay and universal credit

To make sure people in work can take the necessary time off to stay at home if they are suffering from COVID-19 or to prevent its spread, changes have been made to Statutory Sick Pay and how Universal Credit supports self-employed claimants.

This includes:

  • people who cannot work due to COVID-19 and are eligible for Statutory Sick Pay will get it from day one, rather than from the fourth day of their illness – the government intends to legislate so this measure applies retrospectively from 13 March 2020
  • Statutory Sick Pay will be payable to people who are staying at home on government advice, not just those who are infected, from 13 March 2020 after regulations were laid on 12 March 2020 – employers are urged to use their discretion about what evidence, if any, they ask for
  • if employees need to provide evidence to their employer that they need to stay at home due to coronavirus, they will be able to get it from the NHS 111 Online instead of having to get a fit note from their doctor – this is currently under development and will be made available soon
  • self-employed claimants on Universal Credit who are required to stay at home or are ill as a result of coronavirus will not have a Minimum Income Floor (an assumed level of income) applied for a period of time while affected.

IR35 tax reforms suspended for one year

It was announced in the Commons yesterday by Steve Barclay, chief secretary to the Treasury, that the Off Payroll Working Rules (IR35) which were to be implemented in the private sector from 6 April 2020 will be delayed 12 months in response to the impact COVID-19 is having on the economy.

It is important to stress that this is a delay in the implementation rather than a cancellation and Steve Barclay confirmed in the Commons that the government remains committed to implementing these rules from 6 April 2021.

Contractors who have been advised that they will be caught by these rules by their engagers should liaise with their engagers to determine their next steps.

VAT considerations and cashflow planning for COVID-19

Businesses in many sectors are feeling the pressure of COVID-19 and the reduction of customers as a result of social distancing and isolation. We have seen some innovative responses from businesses which we have outlined below and the VAT considerations. We have also detailed some cashflow options available to businesses and what to do if you unable to make your VAT payments.

Gift vouchers

We have seen business offering discounted vouchers for purchase now that can be used at a later date to help businesses get much needed income at this difficult time. From a VAT perspective, there are two types of gift vouchers – single-purpose and multi-purpose. A single-purpose voucher is a voucher where the VAT rate of the product to be purchased is known at the time of issue (for example, a beauty salon where all services are standard rated). This type of voucher is subject to VAT when issued. A multi-purpose voucher is where the VAT rate is not known at the time of issue (for example, a shop that sells adult and children’s clothing). This type of voucher is subject to VAT when redeemed. It is important to note that if the vouchers are sold at a discount, VAT is only due on the payment received, not on the face value of the voucher. Please get in touch if you need any guidance in this area.

Take-away services

With people being advised to avoid restaurants, some establishments are considering offering their food for take-away. The supply of hot take-away food is still subject to VAT at the standard rate as is considered catering. However, if businesses are providing any cold food (e.g. salads, bread, cakes) or food to be heated at home, these will likely qualify for the zero-rate of VAT. HMRC state that cold food to take away is not catering if the customer must prepare it themselves before it can be consumed (regardless of whether delivered or collected). Cooking, reheating or arranging food on serving plates is considered preparation. Not all cold food will be zero-rated and drinks are typically always standard-rated so please contact us if you need guidance on the different VAT rates.

General cash management options

  • VAT grouping

    o    If you have large intra-group charges, a VAT group will remove the associated VAT charge which could help with cashflow if businesses find that they are paying VAT to HMRC before the receiving entity is able to claim it. There are specific forms that need to be completed to apply for a VAT group and we can provide these if required.
  • VAT return staggers

    o    It may be beneficial to review the VAT periods you are currently using to see if there is one that would better suit your trading pattern. Additionally, if you are in a repayment position (because your purchases are higher than your sales), it may be beneficial to move to monthly VAT returns. If you would like any assistance with modelling this, please get in touch.
  • Cash accounting

    o    If your estimated taxable turnover is less than £1.35 million in the next 12 months, you can apply for cash accounting which means your will only have to pay HMRC when you receive payments from your customers rather than when you issue an invoice.  This provides you with automatic bad debt relief.
  • VAT reclaims

    o    If a business has underclaimed VAT on purchases (for example, the most common is employee expenses), it can go back 4 years to correct the position and inject some much needed cash into the business. In some situations, it is possible to utilise alternative evidence if a VAT receipt is not held.  We are happy to assist or advise what can be reclaimed.
  • Accruals

    o    Although many invoices are issued electronically now and are received quite quickly after issuing, if businesses are finding that invoices are being posted after the period has ended (and been closed) they should consider running a quick report just before submission to pick up any invoices that have been posted late but still relate to the VAT period.
  • Tax Points

    o    The tax point is when the VAT is due. There is a basic tax point (when goods are provided/service is performed) but this is overridden if payment is received or invoice issued prior to the basic tax point or an invoice is issued within 14 days of the basic tax point. Whilst businesses will be keen to raise their invoices to get payment, it could be possible to consider whether a payment request could be issued first, with the VAT invoice following.  This could delay when VAT is actually due. 

Time To Pay (VAT)

If businesses do find themselves in the position that they cannot pay their VAT bill, there is a dedicated COVID-19 helpline for businesses struggling to pay their tax liabilities. “Time To Pay” arrangements are on offer for businesses and individuals with a VAT liability. Additionally, arrangements can be obtained in relation to PAYE, Corporation Tax and Income tax liabilities. These arrangements are bespoke and consider your financial situation to allow you to spread the cost of your tax liabilities over a period of time.  These can be negotiated by an agent and Mitchell Charlesworth is able to help if needed.

VAT support

If you find yourself unable to prepare your VAT return or have any questions with the above initiatives or any other you are introducing to get your business through this unprecedented situation, please contact our VAT Partner, Alison Birch, (Alison.birch@mitchellcharlesworth.co.uk or 0161 817 6100) who will be able to help.

R & D Tax Relief

As well as the new measures announced by the chancellor at the Budget and in his press conference on 17 March, there are existing tax reliefs available that can assist a company’s cashflow position during these challenging times. In particular, companies should be considering if they have undertaken activities that would be eligible for R&D Tax Relief. This could be worth up to 24.7p in additional tax relief for every £1 that is identified as R&D cost and can result in a tax refund being received from HMRC, especially where no R&D claim has been made previously by the company. Our experts in this field would be more than happy to assist in determining if you qualify for this tax relief.  Please contact Phil Hartley for further information (phil.hartley@mitchellcharlesworth.co.uk / 0161 817 6100)

Where a business incurs a trading loss as a result of the COVID-19 uncertainty, it is possible for the business to carry this loss back against the previous year’s profits. This provides a tax refund to the business which assists with the business’s cash flow needs. To be able to make this claim, the year-end accounts will need to be prepared and be ready for submission and, therefore, it is important that the records are provided to the accounts team as soon as possible post year-end so the claim can be submitted.

Cash flow planning using cloud accounting

The COVID-19 outbreak is already having a significant financial impact on a number of sectors such as hospitality and leisure and this is set to expand further into other businesses, both in terms of supply chains and consumer demand.

Cash flow planning is therefore critical, and we recommend that all businesses consider the potential financial impact COVID-19 may have on their business and assess the resources they need to weather the storm

For those of our clients who currently use Xero or Quickbooks Online we recommend that you consider the use of a cash flow forecasting add-on to start to assess “what-if” scenarios such as:

  • What if my supply chain is disrupted and I’m unable to supply some goods or services?
  • What if I experience a reduction in sales due to less demand arising from COVID-19?
  • What if my business is forced to temporarily close through government policy but I need to keep paying staff and other overheads?

It is best to have a worst case “what if” scenario in mind so that you can plan appropriately, looking at where the key pain points will be and what financial support can be put into place to try to reduce your risk. This may include contacting your bank, utilities providers and HMRC to request payments are deferred or seeking additional finance. 

Two of the best cloud-based products which can assist with cash flow forecasting are Float and Fluidly. Both of these products link directly to Xero and Quickbooks Online to provide real-time data to enable accurate forecasting. Float is widely considered the best app to forecast cash flow levels day by day, although it is also able to provide a cash flow forecast on a monthly basis covering a longer period. Fluidly uses advanced Artificial Intelligence to predict future cash flow based on actual historic payment days for customers and suppliers to provide a starting point for a monthly forecast which can then be amended for different scenarios. For more information, please click on the links below:

https://fluidly.com/

For those of our clients who don’t use Xero or Quickbooks Online as their main accounting software, please contact your local office if you require assistance with cash flow forecasting or additional finance to sustain your business through the downturn. Our team of advisors is here to support your business through this period of uncertainty.

How the UK Banks are responding to COVID-19

Banks have also announced ways in which they will support businesses or individuals affected by the coronavirus outbreak.

Natwest

Natwest has outlined the initial support it will provide to SMEs across the UK, including committing £5bn to support small businesses with working capital finance. There will also be loan repayment holidays for small business borrowers and the provision of temporary emergency loans with no fees.

RBS

RBS, which owns NatWest, said borrowers would be able to defer mortgage and loan repayments by up to three months if they are in financial difficulty as a result of COVID-19. They could also apply for an increased temporary credit card limit and may be able to request an increased debit card cash withdrawal. The bank also said it would waive early closure charges on fixed savings accounts and offer refunds on credit card cash advance fees. These measures will be assessed on a case-by-case basis.

Lloyds Banking Group

Lloyds Banking Group is providing £2bn of arrangement fee free finance to support small businesses up to £25m turnover in size. The finance is available to support ongoing cashflow needs, caused by interruptions to supply chains or due to high staff absences.

Barclays

Barclays stated that it is working with smaller business customers seen as being at-risk, with 12-month capital repayment holidays offered for SMEs with existing loans over £25,000.

HSBC

HSBC has allocated £5 billion to help businesses in need of support and is proactively contacting its customers to see what help their businesses need. They have also announced a package of support measures for borrowers in financial difficulty as a result of COVID-19, including reduced or deferred mortgage repayments, a temporary increase in credit card and overdraft limits and early access to fixed-rate savings accounts without closure charges.

Santander

Santander said it would look at each customer’s situation and explore ways to support them depending on their specific circumstances. The bank’s support for customers includes the option to potentially defer or reduce repayments that are due.

The Co-Operative Bank

The Co-operative Bank is providing lending products such as overdrafts, loans or charge cards. It can look at temporary increases or requests to pause or reduce current payment obligations, and will take a flexible approach, based on individual circumstances. There are also offering no arrangement fees for overdraft or loan facilities provided as a result of COVID-19.

Yorkshire Bank

Yorkshire Bank is urging its business customers to speak with their relationship manager, share the impacts of COVID-19 and discuss how they can help. The bank will continue to view funding requests favourably provided the underlying business remains sound, and can consider a range of options to help its business customers.

Trade body UK Finance said banks and other finance providers understand that some customers may be worried about the effect that contracting the coronavirus could have on their finances and asking for help early is key.

The Bank of England has also announced a range of measures designed to support banks and businesses. Measures include a drop in the interest base rate and a funding scheme to assist banks and building societies with their ability to make lending available to customers at an affordable level.

Other support resources

UK government: guidance for employers, employees and businesses about COVID-19

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/guidance-for-employers-and-businesses-on-covid-19

UK government: number of COVID-19 cases and risk in the UK

https://www.gov.uk/guidance/coronavirus-covid-19-information-for-the-public

CBI: support for businesses impacted by COVID-19

https://www.cbi.org.uk/articles/supporting-businesses-impacted-by-the-coronavirus/

FSB: advice to small businesses and FSB members about COVID-19

https://www.fsb.org.uk/campaign/covid19.html

ACAS: Covid-19 advice for employers and employees

https://www.acas.org.uk/coronavirus

CIPD: How employers should respond to the COVID-19 threat

https://www.cipd.co.uk/knowledge/fundamentals/emp-law/health-safety/coronavirus-factsheet