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Tag: government assistance

government assistance

  • Coronavirus Grants 2.0 – Finding Your Exit – Small Businesses

    Apart from using the same £2,500 monthly maximum, the two schemes are very different with the self employed now compensated for a maximum of 6 months and employees a maximum of 8 months. This perhaps reflects the fact that the self employed can work as much as possible, but employees cannot work at all or, more likely, the government would prefer employers to take more time to make decisions about redundancies.

    What do I need to know?

    Self Employed (SEISS)

    The current version SEISS 1.0 closes on 13 July 2020 with the new version SEISS 2.0 opening in August 2020.

    The maximum drops from £2,500 per month to £2,187.50 per month, rounded up to a 3 month lump sum of £6,570 being 70% of £3,125 or your average profits, as currently calculated, if lower.

    You can claim both grants or only one: SEISS 2.0 is NOT dependent on claiming SEISS 1.0.

    Presumably if you were adversely affected early on, say in April, where your profits dropped in April, but they have since picked up, you can’t claim SEISS 2.0, but this isn’t yet clear.

    Coronavirus Job Retention Scheme (CJRS)

    June – carries on as now, except any employee who needs to be in a claim from July, must be in a claim in June. With the 3 week minimum, this is an effective last date for newly furloughed employees of 10 June. All claims for June (and presumably earlier) must be made by 31 July.

    July – carries on as now, except employers can choose not to claim for any hours/days employees work paying them their full pay as before the crisis.  

    This could be beneficial for shareholder-directors who may be able to generate good profit for their limited companies in a couple of days but pay themselves only their usual small salary.

    August – as July, except employers must pay any employer’s national insurance (NI) and pension contributions on furloughed pay.

    September – as August, except the government grant to the employer is 70% of pay up to a maximum of 70% of £3,125 = £2,187.50 adjusted for any hours/days worked.

    October – as September, except 70% is now 60%, being a maximum 60% of £3,125 = £1,875 adjusted for any hours/days worked.

    What are the figures for shareholder-directors who can’t work?

    Taking the typical reference salary of £719, the £575.20 current furlough claim will change as follows:

    • June £575.20
    • July £575.20
    • August £575.20 (no NI or pension)
    • September £503.30
    • October £431.40

    Unfortunately, a dividend replacement scheme for shareholder-directors wasn’t announced, with the Chancellor reminding us to use other measures such as business bounceback loans, VAT deferral and income tax deferral. HMRC is also being helpful where companies ask to defer corporation tax under general time to pay provisions.

    Further details on both schemes will be available on 12 June. In the meantime, businesses are still working their way through this, looking for their way out.

    Please ask your usual On The Spot contact for further assistance.

  • Small Businesses – May The 4th Be With You!

    How small businesses can strike back and win the Coronavirus war…

    Today is the day the most useful loan initiative for SMEs goes live, the Bounce Back Loan Scheme (BBLS). Coincidence? Parallel universe? It probably feels like it!

    Why are they so good?

    From today, to enable the smallest of businesses to easily access cash, after answering only 7 questions, loans will be available for between £2k to £50k capped to 25% of your turnover, 100% government guarantee and interest and fee free for a year, after which the interest rate is only 2.5%. Therefore, next year the annual interest will be only £25 for each £1,000 borrowed. Loans to sole trader and partners between £2k and £25k may be the easiest to access. 

    These Bounce Back Loans are clearly earmarked to help the smallest of sole traders, partners and limited companies survive the coronavirus disruption.

    But why would I take on any debt at such a difficult time?

    Understandably you may not want to take on debt. Consider what will happen if you don’t?

    It’s right to be cautious, but this may be the occasion where to survive you need to Strike Back!

    If your business was doing well and profitable and only the coronavirus has affected its recent results, it’s likely to maintain its underlying viability in the long run, admittedly with some adjustments.

    Yes, you will have a debt to pay back and probably less cash than before, but your business will have survived. Think of it is a medium term investment.

    What should I do with this cash?

    You may need it to pay suppliers whose services/products you can’t do without, such as rent, utilities, phones, IT, repairs, insurance, non-furloughed staff.

    Record your income and outgoings in detail, day to day, for say the next 3 months to ensure you ask for what you need to see you through, allowing for any further grants you’re expecting from the government. Beyond that in less detail.

    Make prudent assumptions about when your sales will pick up and therefore when you expect to repay the loan, likely a small manageable amount each month spread over a few years.

    The affordable low interest rate gives you time and space to update your business model to thrive in the new adjusted world.

    How do I update my business model?

    Think about what you’d have done if you’d planned a 3 month lifelong dream trip exploring space on a Star Destroyer which needed to be paid for somehow. What would you have thought about in advance?

    Perhaps it would be a list like this:

    • Establish the availability of different and new communications operable from ‘space’.
    • How to carry on looking after existing clients in a different way.
    • How you can continue to make new connections and build up new leads.
    • How to sell product or services remotely eg sub-contract deliveries, try online services.
    • How to deal with a missed meaningful marketing date eg father’s day if you sell gifts.
    • Offer a different product or service as a one-off eg sell personalised father’s day online videos.
    • How to still send relevant marketing messages.
    • How to use the change of venue to your advantage.
    • Do you need some new focussed advice that will pay for itself?
    • How and when to pay your bills with reduced income? Can some be delayed?
    • What cash is needed on each of the days that you’re away?
    • How will you make sure you have enough cash every day?
    • Are you eligible for grants or loans? You are exploring space after all!

    What should I expect the future to look like?

    It will be different and probably, initially, harder work than before you went into space. On the other hand, you may find permanent, new markets and customers expanding your business even further. You can make decisions and change direction quickly and have the satisfaction that the success was yours. Anyway, you didn’t set up your own business, which you can run exactly as you see fit, for an easy life. Did you?

    At the risk of upsetting Star Wars fans: Live long and prosper 😊.

  • Coronavirus – Loans, Grants & Tax – Small Businesses

    Here’s a quick summary of the sort of practical help notified this afternoon by the Chancellor. Together with a reminder of some useful tax rules which may also help with your cashflow.

    Business Rates:

    • No rates payable for 12 months for any business in the retail, hospitality or leisure sectors.
    • In those sectors, if your rateable value is less than £51k, you’ll also receive a cash grant of up to £25,000.
    • Any business which gets small business rates relief, will receive a cash grant of £10,000 (increased from £3,000 announced in the Budget).

    Government Backed Loans:

    • These should be available from your bank early next week starting 23 March and further details will be issued shortly. 
    • The government guarantee is for 80% of the loan, so your bank is likely to need some security for the other 20%.
    • No interest will be charged for the first 6 months.
    • The interest rate will be favourable and the term from 3 months to 10 years.
    • If you expect your business to recover from the disruption because you have a sound business, you may wish to take a loan out.

    Mortgage Holiday:

    • At least a 3 month mortgage holiday for those in difficulty, from your lender.

    Insurance Claims:

    • Insurers will pay out against policies that cover pandemics.

    Universal Credit:

    • If your income has dropped you may wish to access the benefit system.
    • This was made easier as announced in the Budget.

    Statutory Sick Pay (SSP):

    • If you’re a director of your limited company, you can pay 2 weeks if you need to self isolate.
    • The government will refund this £94 per week, maximum £188, to your company.
    • It will also refund SSP for your staff for up to 2 weeks to your business or your company.

    Using Existing Income Tax and Corporation Tax Rules:

    • As we’re near the end of the tax year, get your income tax return in as soon as possible from 6 April 2020, for a possible refund of some of your January 2020 tax payment. And know the exact amount due in July.
    • If you make a sole trader or partnership tax loss to 5 April 2020, generate a tax refund by carrying the loss back to 2019.
    • If you’re a start up sole trader or partnership, this loss can be carried back 3 years to generate a tax refund from your previous PAYE job or even from rental income.
    • If you’re a limited company and make a loss in your current year end, carry it back by a year to generate a tax refund.
    • If you’re working from home more than usual, claim more costs against your taxable income for your home office.
    • The sooner you get tax returns sent in, the sooner you can benefit from the above.
    • Getting your return in early, doesn’t bring forward any tax payment dates, but it does bring forward tax refunds.
    • A return of Time To Pay help from HMRC, where you phone HMRC to agree a delay in paying your tax. Have a realistic proposal ready that you expect to adhere to.

    Off-Payroll Working (IR35) Delay:

    • Freelancers and consultants worried about getting taxed as an employee from 6 April 2020, have a year’s reprieve until 6 April 2021.

    Thank you and stay well.