Massive thanks to Bex Inglis from Princess P.A. who has yet again written a great article for you guys to read and take advice and guidance from. (Bex looks after lots for me in my own business, WB GAS LTD. We Install boilers across Luton, Dunstable, Milton Keynes & St Albans but, Bex from Princess P.A. works remotely for us, reach out to here if you need some help in your admin)
COVID-19 is having a significant impact on our way of life. With non-essential businesses closing their doors until this is over, now more than ever, we need to be looking at our finances and figuring out “how are we going to survive?”
Many of us have had a massive shock to the system with our businesses effectively stopping overnight. The government has rolled out schemes to help businesses throughout this period. This article will look at the critical points of some of those available.
Coronavirus Business Interruption Loan Scheme. (CIBLS)
This new scheme is now open to applications. It can provide funds of up to £5 million for companies experiencing lost or deferred revenues that lead to disruptions in their cashflow. The scheme covers loans, overdrafts and other business financial products.
The benefit to businesses is that the lender will pay the fee to access the scheme, with companies incurring no upfront costs and lower initial repayments.
This scheme is available to businesses that:
- are a UK-based, Small to Medium Enterprise (SME)
- have an annual turnover of no more than £45 million
- generate more than 50% of its turnover from trading activity
- wish to borrow up to £5 million
- have a borrowing proposal which the lender:
- Would consider viable, were it not for the COVID-19 pandemic.
- Believes will enable you to trade out of any short-term to medium-term difficulty
There are 40 accredited lenders across the U.K, and the full list can be found <here>https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/current-accredited-lenders-and-partners/
Businesses will need to approach lenders themselves, which can usually be done via the lender’s website.
Whether the finance is offered or not, will depend on the lender’s decision. Lenders will try to provide finance on standard commercial terms before using the scheme.
If a lender turns you down, you can approach other lenders within the scheme.
It’s important to remember that this will become a debt, and 100% of the liability will be with the borrower.
Coronavirus Self-employment Income Support Scheme
There is help available for those of us who are self-employed. The Self-employment Income Support Scheme will allow claimants to receive a taxable grant worth 80% of trading profits for the next three months.
Those eligible for the scheme will be contacted by HMRC to submit a claim online. HMRC will use data from the 2018/2019 tax returns that have already been submitted.
To apply, you must:
- Be self-employed
- Have submitted a 2018/2019 tax return and traded in the 2018/2019 tax period
- Be trading on application or would be if not for COVID-19
- Intend on continuing to trade in the 2020/2021 tax period
- Have trading profits of less than £50,000 a year
- Have lost trading/partnership trading profits due to COVID-19
If you have not yet submitted your 18/19 tax self-assessment tax return, you have up until 23rd April 2020 to do so.
Grants awarded under this scheme should start to be paid from the beginning of June 2020. Any monies received under this scheme will need to be declared on your next tax return.
Coronavirus Job Retention Scheme
This is a temporary scheme that’s looking to be live by the end of April 2020. The Coronavirus Job Retention scheme will provide a grant to companies to reimburse 80% of an employee’s monthly wage/salary (up to the value of £2500 per month) AND the associated employer’s National Insurance contribution. This grant will be taxable and subject to National Insurance in the usual way.
The scheme will be open for at least three months, starting from 1st March 2020, to all employers that started a PAYE scheme on or before 28th February 2020.
It will apply to all employers that currently have or intend to have employees on a leave of absence due to the Corona Virus (furloughed). Furlough has to be a minimum of 3 weeks to qualify.
Before you put an employee on furlough, you should speak with them beforehand as this will class as a change to their employment contract. Once furlough has been agreed, this will need to be put into writing to keep a record of the communication.
Once an employee is on furlough, they CANNOT undertake any work on behalf of your company.
Once the scheme is activated, a company will be able to make a claim once every three weeks and backdate it to 1st March if necessary.
- have been employed by your company on or before 28th February 2020
- currently be or will be furloughed
It is important to note that these schemes will be working beside each other. Due to the reduction in salary to 80%, an employee may then be able to claim Universal Credit to make up for a shortfall.
As a director, you should be able to claim this for yourself as long as you take a salary through a PAYE scheme before or on 28th February 2020.
Many people I have recently spoken to are not claiming Universal Credit, even if they are entitled to something because they “don’t see the point”. Realistically, Universal Credit will be there to supplement the loss of income that many individuals are experiencing due to the effects of COVID-19.
Make sure you have applied for Universal Credit. UC is worked out every month, using your income figures from the month before. This means that anyone with a fluctuation in income will see a change in the amount of UC that lands in their account. From 6th April 2020, the Minimum Income Floor will not be applied to Universal Credit during the Coronavirus Pandemic.
Note: You may already be claiming some benefits that would now fall under Universal Credit. Once you trigger a change in circumstances, you will be on Universal Credit for the future and will not go back to the older systems.
To see what you could be entitled to under Universal Credit, Turn2Us has a great benefits calculator which can be found <here> https://benefits-calculator.turn2us.org.uk/AboutYou?utm_source=BAdviser&utm_medium=referral&utm_campaign=GovUK>
What else can I do?
It’s worth bearing in mind that while options are limited, there does not appear to be a limit on what we can potentially claim.
As an example, you might not be eligible for the Self-Employment Scheme. However, you may still qualify for the Business Interruption Loan Scheme AND Universal Credit AND the Job Retention Scheme.
We also need to look at our business and personal finances with a fine-tooth comb. Many companies will still be sitting on unpaid invoices. These funds are vital to ensure your business’ survival, so get on and call them in. Bearing in mind that times will be hard for your customers, you can treat each invoice on a case by case basis, and have payment plans on hand to help those in need. For advice on a great credit control process, please see <here>: https://waynebettess.co.uk/2020/03/20/beat-the-corona-crash/>
Make a list of all the outgoings you have. Martin Lewis has a great budgeting tool that will help you figure out where you can afford to cut some costs which can be found <here>: https://www.moneysavingexpert.com/banking/Budget-planning/#bplanner
Talk to any companies that you have a direct debit with, such as Gas, Electric, Water, Council Tax, TV packages, Credit Cards, etc. You may be surprised at the available help.
History shows that businesses can and will be rebuilt. The plumbing and heating industry is, for the most part, indestructible. When this is over, you will be needed so, above all, remember to keep you and your family safe. Wash your hands, practice social distancing and remember, Health before Wealth.