Published on March 24th, 2020 | by The GC Team0
Coronavirus: 10 steps SMEs can take to still be in be in business this time next year
On Day 1 of the temporary closure of non-essential retail businesses, following Prime Minister Boris Johnson’s statement last night (23rd March 2020) on the necessary measures which need to be taken to control the spread of COVID-19, David Jinks, Head of Consumer Research at ParcelHero, which bills itself as “the small business champion”, says the majority of the UKs 5.9 million SME businesses and retailers will survive the coronavirus outbreak if they get to grips with the latest Government coronavirus SME assistance packages quickly.
Here is his a ten-step guide to making full use of the aid schemes:
Retain Key workers, even if they are not essential right now
The Coronavirus Job Retention Scheme (CJRS) enables employers to access grants, by the end of April at the latest, from the UK’s tax authority to allow them to keep paying staff. The government says 80% of gross wages in the private sector, up to £2,500 a month, for those not working and who would otherwise have been laid off, will be covered by these grants from HM Revenue and Customs.
SMEs will need to designate affected employees as ‘furloughed workers,’ and notify their employees of this change.
Don’t exploit the system
The latest guidance says that employers can choose to top-up CJRS pay, either for the unfunded 20% of pay or the amount above £2,500 for higher earners, but this will not be a formal requirement to obtain access to the scheme. Our advice is that those companies who do top-up pay will be more likely to retain key workers post-crises. We also advise companies not to try and manipulate the scheme. Where a business can carry on without those physical interactions, for instance by working remotely, it should be business as usual. The scheme isn’t designed as a wage subsidy for SME employers.
Reclaim sick pay coverage for current workers
A new scheme will shortly be available to allow SMEs to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to Covid-19. This refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of the virus. Employers should maintain records of staff absences and payments of SSP, but employees don’t need to provide a GP fit note. The Government says it will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible.
Investigate potential CBILS Government backed loans
The newly founded British Business Bank’s Coronavirus Business Interruption Loan Scheme (CBILS) facilitates business loans to smaller businesses that are viable but unable to obtain finance due to having insufficient security to meet the lender’s normal requirements because of the Covid-19 crises. In this situation, CBILS provides the lender with a government-backed 80% guarantee against the outstanding facility balance.
The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
Be cautious of CBILS risks
CBILS comes with strings, however. The borrower always remains 100% liable for the debt. Any loan of over £250k will need to be secured by company assets. SMEs should ask themselves; do you really need to borrow against a secured loan now?
Read the small print of CBILS’ terms
CBILS is for borrowing proposals which, were it not for the current COVID-19 pandemic, would be considered viable by the lender. Research how much more generous the CBILS’ terms really are than the suspended Enterprise Funding Grant (EFG) scheme SMEs may have applied for previously. ParcelHero believes it is vital the Financial Conduct Authorities’ CBILS guidance is taken into account by lenders, that they must take on board the spirit of the new loan scheme and not stick to former ‘peacetime’ criteria. Otherwise the nation just undertook to back 80 % of loans banks would make anyway.
Defer VAT and Income Tax payments
An automatic VAT deferral will apply from 20 March 2020 until 30 June 2020. No applications are required for the deferral and businesses will not need to make a VAT payment during this period. And, for the self-employed, Income Tax Self-Assessment payments due on the 31 July 2020 will be deferred until the 31 January 2021.
12-month business rates ‘holiday’
The Government has announced it will introduce a business rates holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year. SMEs don’t need to take any action to qualify for this. It will apply to their next council tax bill in April 2020. However, local authorities may have to reissue companies’ bills automatically to exclude the business rate charge; they will do this as soon as possible.
Grant funding of up to £25,000
Retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000 will qualify for the Retail and Hospitality Grant Scheme. This provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.
For businesses in these sectors with a rateable value of under £15,000, they will receive a grant of £10,000. For businesses in these sectors with a rateable value of between £15,000 and £51,000, they will receive a grant of £25,000. The local authority will write to all SMEs eligible for this grant shortly.
The HMRC Time To Pay Scheme
One final useful Government measure is the announcement that 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 will be agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. If an SME has missed a tax payment or might miss its next payment due to COVID-19, it can call HMRC’s dedicated helpline: 0800 0159 559.
Jinks concludes: “Those SME companies that make full use of the help on offer from Government, but don’t commit to schemes that might become a significant burden in the future, will be in a significantly healthier position than looked likely just a few days ago, even following the new Government lock down.”