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COVID-19 small business update

This COVID-19 small business update applies to all small businesses but, if you work in the retail, hospitality and leisure sectors the section on the grant does not apply and a separate scheme is described in the last paragraphs.

The Chancellor announced recently further help for small businesses and provided more detail on how to apply for these initiatives.
Our accountants Brookes and Partners use helpful email newsletters to update their clients and we’ve used one as the basis of this update.

This guidance also provides details of support available to businesses including:

  • small business grant funding;
  • statutory sick pay relief package for SMEs;
  • the Coronavirus Business Interruption Loan Scheme to respond to cash-flow pressures;
  • the HMRC Time To Pay Scheme to help with tax;
  • a 12-month business rates holiday for all retail, hospitality and leisure businesses in England;
  • grant funding of £25,000 for retail, hospitality and leisure businesses with property.

As a small business you can apply for the following:

Small Business Grant

If you have a premises for which you pay business rates (not including rates for a home used as a base for working) and you are in receipt of small business rate relief or rural rate relief you will be eligible for a grant.

This grant is for £10,000 and you should not need to apply for it as local authorities are tasked with contacting every business to which it applies.

Grants are not usually repayable and hopefully this will be confirmed when the official paperwork is issued. If you haven’t heard anything by the end of April from your local authority, then contact your local authority.

Coronavirus Business Interruption Loan Scheme

The COVID-19 business interruption loan scheme will be delivered by the British banking system and the process is being finalised – it is still fluid at present. The Bank of England interest rate has been cut again to 0.1% but this may not be passed on in full to business customers.

What does it mean?

The government have agreed to underwrite (cover losses) to the banks for lending to companies and whilst banks are being told to be more lenient with their lending rules, there remains a credit process to qualify.

As with a loan application under normal circumstances, the underlying strength of your business will drive a positive lending decision. Therefore, some preparation is critical before you approach your bank for a loan under the new scheme.

There are 4 key elements to consider:

  1. You need to have a plan / strategy in place for your business during this period. Consider….
    • What business leads can be developed, even if this doesn’t result in immediate work, to indicate future earnings and a sustainable business after you come out of this period. In essence, the means to repay the loan;
    • If you are paying staff, what can they be doing now or redeployed to do and that will generate income now or in the future. Self-isolation is not a holiday and you should consider the work they can do to contribute to current and future earnings by creating future opportunities and generating income for the remainder of the year;
    • Create a basic cash flow for the next six months factoring in delays in payment and work. It’s more than likely that this will show a cash requirement in the short term (the need for the loan) but longer term, it will need to show a return to ‘normal’ over later months and show what your turnover might be;
    • The bank will want to know that you are proactively managing the situation as best you can so as much detail you can provide about how you can manage the workflow and cash expenditure the better. This should include the use of ‘funds’ from the loan – see below.
  2. By working through your cash flow and plan as describe above, you should be able to decide how much funding you require to overcome this unprecedented period. The bank will want to know how much you need, how you have calculated this (based on the cash flow not a random number) and how you intend to pay the loan back (your forecast will indicate your capacity to repay).
  3. You will most likely need your last 2 sets of accounts but confirm this with your bank first.
  4. Once you have all of this in place, call your bank to arrange for a funding facility to be set in place.

The banks are working hard to implement this scheme and they are bound by government to help provide support and cash if your business plan is solid for post COVID-19 trading.

Statutory Sick Pay relief package for SMEs

Those who follow advice to stay at home and who cannot work as a result will be eligible for statutory sick pay (SSP), even if they are not themselves sick. Anyone not eligible to receive sick pay, including those earning less than an average of £118 per week, some of those working in the gig economy, or self-employed people, is able to claim Universal Credit and or contributory Employment and Support Allowance.

You should use discretion and respect the medical need to self-isolate in making decisions about sick pay. You will be able to claim statutory sick pay for any employee off work for COVID-19. Payroll systems are working with the government to put in place a method for how to claim this. Details are emerging but, any employee who is off work due to COVID-19 will need to get an online sick note. Guidance for employees can be found on the gov website. A new online sick note will be made available soon.

Paying taxes – HMRC Time To Pay Scheme

Again, cash flow planning should be done first to identify the impact of any tax payments during the period. Where delaying payment will make a difference to your business continuity there will be support from HMRC.

Once you have identified if delaying tax payments will help, call the HMRC helpline on 0800 0159 559

HMRC Officers will then walk through the options and agree a plan.

Business rates holiday for all retail, hospitality and leisure businesses in England

If you have premises, you pay business rates (again not including companies that operate from a home base) and you operate in the retail, hospitality and leisure sectors you are eligible for additional COVID-19 relief.

All businesses that were billed for business rates in the 2019-20 year and were operating in this sector will have a full year free from rates in 2020-21.

You do not need to apply for this as the local authority will action automatically. If you are eligible, consider removing any direct debits for rates as it is very possible that the April payment might get taken automatically before the adjustments are made.

Grant funding of £25,000 for retail, hospitality and leisure businesses

If your rateable value is between £15,000 and £51,000 then you will be eligible for a £25,000 grant from your local authority to help smooth the cash implications.
It is unclear at this time how or if this is to be repaid, but you should assume that it will need repaying at some point, but it will be offered on a long payment period with favourable interest rates. Keep an eye out for the application you need for your local authority.

Use this time to look at what drives your profit and formulate your future business plan to do more of that when ‘normal’ business returns.

Above all, remember that your, and your families and staff, health and wellbeing come first – in our previous blog we covered how to stay safe at work.

Our thanks go to Brookes and Partners who look after about 400 small firms in the Stamford area for tips in this COVID-19 small business update.

Read more on the government website which is constantly updated!

Download a copy of the Governments excellent COVID-19 Guidance for Employers & Businesses Infographic!

Author – Mike Jenkins