Practical Coronavirus (COVID-19) Advice

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Managing Your Financial Commitments

Three month rent holiday for commercial tenants

Commercial tenants who miss rent payments because of Coronavirus in the period until 30 June 2020 will be protected from eviction. These measures, were included in the latest draft of the emergency Coronavirus Bill currently going through Parliament and so would take effect from the date the bill receives Royal Assent.

As commercial tenants will still be liable for the rent after this period, the Government has said it will continue to speak to commercial landlords and review the impact that the measures are having on their cash flow.

As tenants may be required to settle any arrears on expiry of this period, they should consider the impact that this will have on their cash flow, and if necessary, open discussions with their landlord as soon as possible. If you require advice regarding your cash flow management, please contact your Menzies representative who will be happy to help.

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VAT Updates

Deferring VAT payments for 3 months.

  • All UK VAT registered business are eligible – no applications necessary
  • Businesses do not need to make a VAT payment during this period
  • VAT refunds and reclaims will be paid by the government as normal
  • Don’t need to pay any accumulated liabilities until 31st March 2021
  • No interest or penalties on the amounts deferred.

It is currently anticipated that liabilities due for payment after 30th June will need to be paid on time.

“This will be a major cash flow boost for our business which is estimated to be over £2.5 million as an interest free loan until end of Q1 2021 without having to jump through hoops to get it!”

A Menzies Client on the value of the VAT deferral

IMPORTANT INFORMATION FOR THOSE THAT PAY BY DIRECT DEBIT

Customers who normally pay by direct debit should cancel their direct debit with their bank. Please do so in sufficient time so that HMRC do not attempt to automatically collect on receipt of your VAT return.

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Income Tax & the Self-Employed

Deferring the second self-assessment payment on account due on 31 July 2020 until January 2021

  • All UK taxpayers are eligible – you do not need to be self-employed to be eligible for the deferral
  • Applies automatically – no applications necessary
  • No penalties or interest for late payment will be charged in the deferral period.

Self-Employment Income Support Scheme

Following increasing pressure, the Chancellor of the Exchequer has issued a further financial package targeted at those who derive the majority of their income from self-employment who are facing hardship due to the Covid 19 pandemic.  The self-employed includes partners in a partnership.

The amount of grant available could be worth up to £2,500 per month for 3 months, and the expectation is for this to be rolled out by June 2020.  The scheme will be reviewed and may well be extended.

There is not much detail available as yet, and the Chancellor appears to have delayed roll out for a few days to try and prevent any illegitimate claims.  To qualify, the individual must have been self employed for the 2018/19 tax year, still trading in the current tax year, and anticipate trading in the 2020/21 tax year.  If you were not self-employed in 2018/19, you will not qualify under the rules as they stand and as announced.

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Business interruption loan scheme

In the first instance we strongly recommend all SME business owners speak to their banks to understand all options available to them, as the loan guarantees are not available to large corporates with turnover above £45m. The new Coronavirus Large Business Interruption Loan Scheme is being launched to help businesses £45m – £500m turnover during April 2020.

Up to £5m emergency funding from the banks with the Government providing an 80% guarantee to the bank. Personal Guarantees for 20% of the loan will be required for loans above £250,000. The process is being simplified businesses should approach their relationship banker with their, most up to date P&L and Balance Sheets and updated forecasts in the first instance along with details of other measure and Government support taken.

Key details at glance

  • Businesses with less than £45m turnover
  • All businesses affected by Covid-19
  • Sector eligibility only a few exceptions; banks, insurance and public sector businesses
  • A sound borrowing proposal is required
  • Amount – £1,000 to £5,000,000
  • Term – Up to 6 years
  • Interest – Interest free for the first 12 months followed by sensible low rates
  • Capital repayment holiday (at lenders discretion 12 months on offer from several)
  • Fees – No arrangement fees are being levied
  • Available through 40 lenders including the high street banks
  • Administered by the British Business Bank.

A package of information may be required as part of the application which should include the latest annual accounts, current management accounts and forecasts  along with details of other measures implemented.

These are being made available from 23 March 2020 initially for six months.

Large Business’ CBILS

Although currently not available, here is a summary of key criteria and amounts (as currently understood):

  • Businesses with turnover £45m – £500m
  • Loans up to £25m 
  • Available if the business is unable to source regular finance
  • The Government will provide the lender with an 80% Guarantee

Further details on this scheme have been promised by the Government – these are to made available later in April 2020.

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Bank of England Lending Facility

Large businesses impacted by the Coronavirus outbreak will be able to access a new lending facility, which will be run and funded by the Bank of England.

The Covid Corporate Financing Facility will provide short term bridging finance to businesses by purchasing a type of debt called commercial paper. The BoE has stated that the aim is to support liquidity and ensure businesses can pay rent, staff, suppliers and purchase stock, however we are awaiting details of eligibility criteria The scheme is expected to be running by the start of next week.

Key details at glance

  • Open to non-financial firms that make a material contribution to UK economy
  • Investment grade credit rating or similar (i.e. similar financial health, even if they haven’t got a credit rating) before the crisis
  • Amount: Uncertain
  • Term: Up to 12 months

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Time to Pay Arrangements

Businesses owners or individuals in financial distress, and with outstanding tax liabilities, may be able to agree a Time To Pay arrangement with HMRC. These are agreed on a case-by-case basis, subject to taxpayers’ individual circumstances and ability to pay, and would allow business to defer HMRC liabilities for a limited period.

In expectation of increased demand, HMRC has set up a dedicated COVID-19 helpline, will also waive late payment penalties and interest where a business has problems meeting its filing obligations or paying its taxes due to COVID-19.

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Business Rates Reliefs

It was announced last week that the discount will be increased to 100% for one year and extended to all retail, hospitality and leisure businesses in England, including any property used wholly or mainly as a:

  1. shops, restaurants, cafes, drinking establishments, cinemas and live music venues,
  2. for assembly and leisure; or
  3. as hotels, guest & boarding premises and self-catering accommodation.

In addition, a further business rates relief has been created for Nursery Businesses, which will operate on the same basis.

As this is a measure for 2020/21 only, the Government is not changing the law relating to business rates reliefs. Instead it will be for individual local authorities to adopt a local scheme and determine in each individual case when to grant relief under their discretionary relief powers. To help them with this, the Government has provided detailed eligibility criteria.

Key details at glance

  • Businesses that received the retail discount in the 2019/20 tax year will be rebilled by their local authority as soon as possible.
  • Some local authorities will apply the discount automatically to all eligible businesses, others may requires businesses to apply to receive the discount.

Your local authority should be able to help with any questions on eligibility.

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Grant funding

For small businesses and the retail and hospitality sector

Additional funding will be made available via local authorities in England to support small businesses that already pay little or no Business Rates because of Small Business Rate Relief (SBBR) or Rural Rate Relief.

The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property, depending on the rateable value of their property.

Once up and running, no application will be necessary as councils will contact businesses (based on their business rates records), however no funds will be available until early April.

Key details at glance

  • One-off grant of £10,000 to businesses currently eligible for SBRR or Rural Rate Relief, to help meet their ongoing business costs.
  • Retail, hospitality or leisure businesses with a ratable value under £15,000 will receive a grant of £10,000
  • Larger grants of £25,000 for retail, hospitality or leisure businesses operating from premises with a rateable value over £15,000 but below £51,000.
  • Your local authority should be able to help with any questions on eligibility (although firm hoping to claim the Retail and Hospitality grant may have to await further Government guidance which has been promised shortly)

Check if you qualify for a self-employed grant.

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Statutory Sick Pay

Small and medium-sized businesses are able to claim support with the extra costs of paying Statutory Sick Pay (SSP) for sickness absence due to COVID-19. Legislation will be brought forward to allow businesses to reclaim eligible SSP costs, probably in the Covid-19 Emergency bill, however this is not yet clear. Existing systems are not designed to facilitate such employer refunds for SSP, however the government will work with employers over the coming months to set up a repayment mechanism for employers as soon as possible.

Key details at glance

  • Employers with fewer than 250 employees (as of 28 February 2020)
  • Reclaim up to 2 weeks SSP for any employee who has claimed SSP (according to the new eligibility rules) as a result of COVID-19
  • Employers should record staff absences, but GP fit notes not required
  • The scheme will commence from the 13th March 2020.

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Three month extension period to file company accounts

Businesses can now apply for a 3 month extension for filing their accounts. Companies will still have to apply for this extension, but those citing issues around COVID-19 will be automatically and immediately granted an extension. The applications can be made through a fast-tracked online system which will take just 15 minutes to complete.

While this will ease the burden on those businesses that are struggling as a result of COVID-19, where possible companies should still be aiming to file their accounts on time.  In these challenging times having current financial information will be crucial.

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Supporting your people

For employees who are not paid – or have pay reduced – for a period of time, they may be entitled to state benefits such as Universal Credit, Job Seekers Allowance or Employment and Support Allowance.  They should start an application on-line for Universal Credit. 

Staff who are mortgage holders may also be able to agree a payment holiday with their lenders.

Staff who become affected by the virus or who are required to self-isolate will be entitled to statutory sick pay, and the government have waived the normal three day waiting period to allow employees to receive payment from day one (or isolation).   Whereas SSP is normally paid at the employer’s cost, the government has announced that it will meet the cost of providing statutory sick pay for up to 14 days for workers in companies with up to 250 employees.

Annual Leave Entitlement

The government have announced changes to employee annual leave entitlement following on from the Covid-19 pandemic we’re currently facing. The update means that employees who have not been able to take all their statutory leave due to Covid-19 will be able to roll these holidays over the next two leave years.

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Mortgage lenders

Borrowers that are experiencing issues with their finances as a result of Covid-19 should speak to their lender as soon as possible, with details of your current financial position. Lenders have agreed that they will support customers, including through payment holidays, or reduced payments, of up to 3 months. 

This option should be considered carefully, particularly if your circumstances are unlikely to change, as the interest that you would have paid during this period will be rolled up and added to the balance due. Nor is it clear whether the term of the mortgage would be extended, which could result in borrowers having to make higher repayments over the remaining term of the mortgage.

Other options may be to see if you could transfer to a better mortgage deal for you.

Insurance

Businesses should check with their insurance provider if they are covered. The Insurance industry has confirmed that the Government advice to avoid pubs, clubs and theatres etc. is sufficient for businesses to claim on their insurance where they have appropriate business interruption cover for pandemics in place. However, many businesses are unlikely to be covered as most business interruption insurance policies are dependent on damage to property, which will exclude pandemics. 

Policies should be checked carefully as some businesses may have purchased a specific add-on relating to notifiable diseases (which includes Covid-19), but some of these will still specify damage to the building. Other businesses may have purchased supply chain or denial of access cover which may meet their needs in this case.

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How is Menzies responding to Coronavirus (COVID-19)?

The spread of the Coronavirus (COVID-19) continues to dominate the news, with major implications for public health and the NHS. It is also causing economic disruption and we want to reassure you we have put in place sensible measures to ensure that Menzies is well prepared and well positioned to continue to support you and handle your work. 

We are focused on two key aspects: the health and welfare of both our clients and staff and our ability to continue to support clients. In light of this we’ve pulled together a range of Brighter Thinking resources that may help you manage the uncertainty within your business.

We would encourage all business owners to be actively reviewing their short, medium and long-term cashflow forecasts and seek early advice and support to proactively manage your business risk.

As the situation evolves all businesses will need to adapt. We can support you to manage many of the impacts of Coronavirus on your business.

Need specialist advice and support for your business sector?

Simon Underwood - Menzies Accountant

SIMON UNDERWOOD
BUSINESS RECOVERY SPECIALIST

Ed Hussey - Menzies Accountant

ED HUSSEY
PEOPLE SOLUTIONS AND HR SPECIALIST

Sadie Channing - Menzies Accountancy Firm

SADIE CHANNING
BUSINESS FORECASTING SPECIALIST

Mark Perrin - Menzies Accountant

MARK PERRIN
BUSINESS STRATEGY SPECIALIST

John Foundling - Menzies Accountant

JOHN FOUNDLING
CORPORATE FINANCE SPECIALIST

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