COVID 20 Page Action Plan Review

Yesterday Christopher Gibbons and Amy Beck went live on inqbates Facebook page, to discuss the implications that COVID 19 may have on businesses.

Together they went through the “COVID 19 – Action Plan” and PDF created by Amy (What would Amy do?), which details what they have been doing, the government support that is currently available and how we are applying this, along with new ways of working given the current climate within our businesses.

There is no doubt that there will be a whole host of hurdles to over come with the current economic climate changing so quickly. There will be updates regarding what they are doing to over come these and how they, and their businesses are reacting to COVID 19 and preparing for the aftermath.

See links below for the COVID 10 – What Would Amy Do help and advice.

COVID Actions to take now!

  • Take a deep breath.
  • Do not pay HMRC anything they are due at the moment. This includes anything you may owe for:
    • Corporation Tax 
    • VAT
    • Self-Assessment Tax 
    • PAYE/NI – they have agreed a postponement for payment of the 3 above but not for PAYE/NI/Student Loans at present but the deadlines for payment but I suspect they will agree this soon. Note your deadline for payment and check here before that time. This is usually 22nd after the previous months payroll should you pay monthly. 
  • Maintain all of your normal returns – Do not stop submitting VAT returns, statutory accounts, self assessments etc. You must maintain all statutory deadlines. These returns will create liabilities you will need to pay eventually but it’s the payments themselves that can be negotiated and delayed NOT the returns. Do not give HMRC or any other public  body any reason to chase you.
  • Sign up to your local council Facebook page – I do not know a council without one. Check it regularly. Most local authorities also have their own business pages and groups. Find out what they are and check them daily. 
  • If you see something do it – Your software company for something or another is offering a discount/free month, Facebook is offering credits, your association for your sector is offering support. Do not hesitate and do not put it off. The smaller the company, the smaller and more focused is the cash pot. Once you have a good set of forecasts, a grip on your cash flow and a sturdy business plan for these tough times applying for any pot becomes clicks not hours. 
  • Do NOT assume anything – Assumption is the mother of all *mess* ups. Do not assume that you can sit there and the help will come to you or because someone else has qualified for something that you will too. Most of the below will need at least a phone call, others will need a full application process. I will note if they do not. We also cannot assume that the help is infinite, it may be first come first serve, so acting appropriately and actively is key. 
  • Plan, plan and plan again. Review your forecasts and budgets, build best case and worst case scenarios. Identify the important costs and not so important. Focus on the next 3 months and be prepared to take some of the actions, listed out below, should they apply for you and your business.
  • Be organised. This is just a general life lesson. Thank you for listening.
  • Assess your options. Read all of the links below

What to do next…

Your Business

When talking about Businesses I am speaking with regards to Limited Companies. For those that are self employed see the Yourself section. 

The Coronavirus Business Interruption Loan Scheme (CBILs)

  • The Government intends to guarantee 80% on loans made by banks to small and medium sized businesses. In theory, this should give banks the confidence to lend with lower interest rates, less red tape, and without Personal Guarantees
  • If the banks do still want a personal Guarantee (this is not yet confirmed) then please consider carefully whether you should take it out – see What would Amy do.
  • Up to £5m and with 12 months interest free
  • Also focussing on overdraft facilities (maybe more expensive but more flexible).
  • Should be starting from Monday 23rd.
  • You are eligible for the scheme your business is UK based, with turnover of no more than £45 million per year and your business meets the other British Business Bank eligibility criteria
  • The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank websiteAll the major banks will offer the Scheme once it has launched. There are 40 accredited providers in all.
  • You should talk to your bank or finance provider (not the British Business Bank) as soon as possible (after the scheme is released) and discuss your business plan with them. This will help your finance provider to act quickly once the Scheme has launched.
  •  If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow.

WHAT WOULD AMY DO?

This is a multiple offering so the situation is different for each category. I will discuss in turn. Firstly however, what they will want and what you need (for your own sanity if nothing else) is a cash flow forecast for the next 6 months, a tailored business plan for this current situation and an honest appraisal of what you actually NEED. Do not go rushing out to get all of this because its available, it all comes with a cost, bit do get applying (and THIS WEEK) if you do need it AND/OR its of another benefit like replacing more expensive lending. If after you’ve assessed your cash flow and you will have a gap to get you through the next 6 months then see below:

  • If you have a current loan
    • All high street banks will let you defer payments for your loan. Your repayments after the period of deferment will either be recalculated to repay the loan in the same term time frame (and therefore be greater than before) or will be added onto the end of your loan (you will have incurred the interest during the deferment period) 
    • This is not a free option, I would suggest that money from not paying during the AGREED time is put aside and only used if absolutely necessary.
    • If your loan is expensive and the rates for the CBIL loans show that they are much more competitive then look to replace your current loan or lending facility (overdrafts etc). This will need careful planning and positioning as the banks are not looking to lend to replace facilities – this is not their purpose. Check your early repayment fees and ensure you can maintain any new repayments. Adjust or add into your cash flow.
  • If you have a current overdraft
    • Firstly, the loans are interest free for 12 months – even a small one is likely to be cheaper than an overdraft.
    • Overdrafts are flexible but usually expensive and in comparison with these loans very expensive. If you find after your cash flow assessment you either require a small overdraft and want the flexibility to use it or not then now is the time to apply for one or have the current one extended. 
    • Rules/eligibility for overdrafts are usually more lax (hence more expensive). You may not require as much administration as you would for a loan, it could just be a phone call.
    • Overdrafts usually charge an admin fee to set up it is unsure if this fee is being waived at this time. 
  • If you have no lending currently and need some
    • Again, if after an assessment you require a loan then this is going to be some of the cheapest around. 

Overall this is LENDING, money you have to pay back with interest. I find it very unlikely that there isn’t a small amount of personal liability amongst all the Government backing so should not be entered into likely. If you need it and can come out of the other side of it (after your assessment of business plans, cash flows and forecasts) then this is likely to be some of the cheapest lending ever offered – but LENDING nonetheless. They should not be used to maintain business AS NORMAL, they are required to get you through, not let you maintain costs as if nothing was happening, you should still take this time to assess all costs across the business and make tough decisions. Other interventions for maintaining staff and grants for those with high fixed overheads are also available and should be assessed as an overall intervention. 

It’s important in applying that you are clear and consistent in your need for the loan and its use. I have secured loans, overdrafts and temporary facilities in the last 12 months that have required much more than a “can I have some money please?”. Be ready and confident.

The £10k Grant

  • One off payment rumoured to be made early April – it will not need to be repaid.
  • You do not need to apply, the local authority will be contacting those eligible. That said if you do not hear from your local authority by the 27th March contact them.
  • You will be eligible if your business is eligible for Small Business Rates Relief or Rural Rate Relief. If you are unsure then please check your Rates bill. 
  • If you do not pay rates then because of the nature of your premises then this either needs to be queried (why aren’t you?) or hold tight, further Government support must be coming for those small businesses that are missing out.

WHAT WOULD AMY DO?

  • If I qualified I would ENSURE I got this.
  • If you do not hear from your local authority by the 27th March and think this grant applies to you contact them. We need to give local authorities time BUT do not leave it solely to them, they will be overrun and you could be missed in its administration. 
    The £25k Grant
  • One off payment rumoured to be made early April – it will not need to be repaid.
  • You do not need to apply, the local authority will be contacting those eligible.
  • You will be eligible if you operate a retail, hospitality or leisure business operating from smaller premises with a rate-able value of between £15,000 and £51,000.

WHAT WOULD AMY DO?

  • If I qualified I would ENSURE I got this.
  • Obviously this includes some grey areas re the type of business you are so I suggest you please contact your local authority to try and gain clarity, and argue with them if they disagree with you. 
  • At the moment the Government is focused on any business where social interaction is encouraged – they will be compensating these businesses first and by the most money. You may need to argue that your business is covered in this category if you feel that it is. 
    The Business Rates Holiday
  • Applicable to the 2020-21 tax year – if you have already received your bill but are eligible this will be corrected.
  • You will be eligible if you are based in England and are in the retail, hospitality or leisure sector.
  • This should be issued or corrected automatically by your local authority
  • Again, grey areas will apply so please contact them directly if necessary.

WHAT WOULD AMY DO?

  • Obviously this includes some grey areas re the type of business you are so I suggest you please contact your local authority to try and gain clarity, and argue with them if they disagree with you. 
    VAT
  • For VAT, the deferral will apply from 20 March 2020 until 30 June 2020.
  • All UK businesses are eligible
  • This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.

WHAT WOULD AMY DO?

  • Ensure all submissions and deadlines for VAT returns are met. The extension is to pay not to submit. Check online via your HMRC account or see your VAT certificate for your deadline dates. 
  • Make a note of your liability and put that money aside. The likelihood is that you should have that cash already put aside for the next return due because it has been accumulated from sales that have occurred before this whole thing hit. Do not spend that cash – it is not a bonus. It will be required to be repaid and those dates for repayment will soon come around. 
  • If the cash is needed to maintain business then only once all other grants have been exhausted and appropriate cuts have been made should you use it. Do not use it to maintain business as usual – you will still need to make cuts and maintaining all business expenses as if you were running at full sales will only get you in the sticky come new repayment dates. IT IS NOT FREE CASH.
  • If your VAT return comes out that HMRC owes you cash, get it in and keep the pressure on to get that cash back.
    All other tax liabilities
  • This includes Corporation Tax and any other tax liabilities
  • It is unclear if this includes PAYE/NI/Student Loan deductions but I suspect not. 
  • HMRC have called this the “Time to Pay” Service. 
  • All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs.
  • These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
  • You are eligible if your business pays tax to the UK government and has outstanding tax liabilities
  • If you have missed a tax payment or you might miss your next payment due to COVID-19, please call HMRC’s dedicated helpline: 0800 0159 559. Before calling make sure you have all your reference numbers to hand. 

WHAT WOULD AMY DO?

  • So Corporation Tax is usually due well after the year end so I would suspect for most that tax liabilities would be paid up for previous returns. I know all of my companies and those I look after are all up to date with previous liabilities. 
  • For the next liability due I would assess where we are and make a judgement, again just like for VAT this money should have been put aside as it has produced profits from the previous period not during this crisis time. In saying that I would not look to jump and pay it – having the cash in the bank that may be used if absolutely necessary is more accessible than any other option. HMRC is not looking to charge interest on deferring payment so this is one of the cheapest forms of cash to keep and use if absolutely necessary.
  • If you owe from a previous return (then shame on you) or if you haven’t even submitted that return (further shame on you) then now is the time to call that number. Make a note of what you owe and factor it into your cash flow so you are ready to pay when the time is up. 

As I have mentioned previously, I fully expect there to be more measures announced in due course. I am hoping that they include support for businesses outside the rates scheme (i.e working from home, etc), reduction of the VAT rate, and a break in PAYE payments .

YOUR EMPLOYEES

Support for businesses who are paying sick pay to employees

  • HMRC will bring forward legislation to allow small-and medium-sized businesses and employers 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 COVID-19 (from Day 1)
  • Employers (all in the UK) with fewer than 250 employees will be eligible – the size of an employer will be determined by the number of people they employed as of 28 February 2020
  • Employers will be able to reclaim expenditure for any employee who has claimed SSP(according to the new eligibility criteria) as a result of COVID-19
  • Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of corona virus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website.
  • No current method of claiming this yet. A rebate scheme is being developed. Further details will be provided in due course once the legislation has passed. I suspect w/c 30th March.

WHAT WOULD AMY DO?

  • Keep good records of those that are off sick and when, follow the guidelines and be sure to collect the correct information and online sick notes.
  • Check all your employee contracts and ensure you adhere to your contracted obligations for sick pay. You may also need to check any employee handbooks (great time to assess and update these in the coming weeks). 
  • Communicate with your staff regularly as to what is expected of them and what they can expect from you. 
  • Wait and see – hopefully a mechanism for compensating the employer will be up and running soon.

Support for businesses through the Corona-virus Job Retention Scheme

  • Under the Corona virus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
  • All UK businesses are eligible.
  • You will need to:
    • designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
    • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)
  • HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

WHAT WOULD AMY DO?

  • Be clear – the situation is this: there is no work for your employee to do now that this crisis has hit and/or you have been forced to close entirely and/or you can no longer afford to keep that employee on but are maintaining the business with other staff/resources AND you expect that employee to return after this period/you wish to retain the employee. You cannot claim if that employee is still working in any capacity. The principle is YOU WOULD HAVE LET THEM GO. 
  • Make the assessment – check your forecasts, make a true and accurate assessment of what you business needs and take those decisions. 
  • Keep good records – be ready to defend those decisions. Communicate to your employees (correctly and appropriately) as to what this means to them and how you will maintain frequent communication. Keep all records safe – HMRC may ask for them in the future. I have a feeling that this is going to be regularly assessed for fraud and incorrectly claiming could result in severe consequences. 
  • This will be for employees paid via the payroll (yet to be confirmed if it includes Directors) – any contractors, subcontractors, consultants or anyone paid via invoice will not be eligible. And it will only be for the amounts running through that payroll – I suspect an average over the previous 12 weeks (HMRC use this method for other benefits). So if Directors do qualify and you take part dividends or other benefits and part payroll it will only be the payroll element you will be compensated for if you close.

Please direct your employees to this link should they have further questions.

YOURSELF

Income Tax Self-Assessment

  • Payments due on the 31 July 2020 will be deferred until the 31 January 2021.
  • If you are self-employed you are eligible.
  • This is an automatic offer with no applications required.
  • No penalties or interest for late payment will be charged in the deferral period.

WHAT WOULD AMY DO?

  • This is usually half your previous years tax liability – HMRC make an approximation based on this for the following year and want you to pay it half way through the year so that you don’t have a full years worth of tax to pay in January. They will have written to you – find that letter, make a note of the amount.
  • Make a note of the date: 31st January 2021.
  • This will mean you will have a FULL YEARS worth to pay in January. If you are not already, start putting money aside for your tax liability monthly. You will have access to this as cash if you need it but keep it aside until you do. You will still need this money in January, do not spend it. 
    Mortgages – General
  • Mortgages are getting cheaper
  • Exactly what happens as a result of the base rate cut depends on what type of mortgage you have: 
    • Tracker mortgages: Here you’ll get the full 0.65 percentage-point base-rate cut (from the two cuts combined), worth roughly £40/month per £100,000 of mortgage outstanding.
    • Variable-rate mortgages: Here you should definitely see a cut, usually by the full 0.65 percentage points. 
    • Fixed-rate mortgages: If you’re on a fix, as the name suggests, your rate won’t change during the fixed period.
  • Rates for new mortgages, including fixes, are likely to drop over the next week, so check to see if you can get a cheaper deal on your existing mortgage. 

WHAT WOULD AMY DO?

  • If your mortgage is up for renewal or you are soon to come off a fixed rate then now (give it two weeks) is the time to shop around. If you prefer a fixed rate to know your exact repayments then interest rates can go no lower so you should start to see some competitive rates. If you are on a variable or tracker then you are ‘quids-in’ already. 
  • If you need to know your exact new repayments use this calculator. Update your cash flow accordingly. 
    Mortgages – Payment Holidays
  • Three-month mortgage payment holidays are available for those who are struggling.
  • This is not automatic or free – see below.
  • It is not compulsory for the banks to give you this – it is voluntary.
  • An example:  Let’s imagine you have 19 years and three months left on your mortgage. For the next three months you wouldn’t pay anything. Then when your mortgage repayments resume, the total you owe would be spread over the following 19 years – so you would see a very small uplift in future payments. If you have less time on your mortgage the more the payments would increase when it restarts. 
  • You will still be charged interest – THIS IS NOT A FREE OPTION – but it’s added to the total cost and you get short-term respite. It’s worth noting that if you take a mortgage holiday you WILL still be charged interest for the time you’re not making payments. But you won’t have to pay it back immediately – it’ll be added on to the total cost of your mortgage and factored into repayments when you start making them again.

WHAT WOULD AMY DO?

  • If I wasn’t keeping up with my bills and food on the table became a challenge I would speak to my bank. This is not a free option and your repayments will be more when you restart. 
  • I want it noted that banks have ALWAYS offered this to those in financial distress and given personal circumstances either agreed or denied it. The only difference here is that the Government is more actively supporting it so banks are being less fussy and the process to qualify is easier. 
  • If you take it now then PUT AS MUCH OF THAT MONEY ASIDE so you have it for the following 3 months. You will need the following 3 months after this next period to recover from the previous 3 months.
  • You may only need a one month break, if things improve get back on the phone and restart payments. 
  • My experience of the process is that you may be on hold with your bank for a long time but the process once you get through is a 5 minute one. 
  • Taking a payment break always used to affect your credit score. I cannot find complete confirmation that taking this as an option won’t. 
    0% Credit

WHAT WOULD AMY DO?

Basically If you need some personal credit, you are good at managing your money and can ensure you maintain repayments – 0% credit cards for spending can be your best bet. Again not free money, it will all have to be paid back and you are wholly liable for the balance but 0% is exactly that. If you NEED it it can be the cheapest form of borrowing personally. I have a feeling these types of offers are going to be withdrawn and quickly. See here for the latest deals. I am not one for encouraging any personal debt and would only suggest this if absolutely necessary.

THE FUTURE

Once you’ve had the meltdown, allow yourself to mentally rebuild and refocus . Take the interventions required and keep a close eye on your reporting. After that please consider that it isn’t all doom and gloom and where there are challenges there is opportunity, but we need to get through the next 3 months first. Businesses that keep moving forward will be the ones to make it out the other side in a better position, rather than standing still and waiting.

Now is the time to bring your team together. Share your concerns, your plans, your hopes, etc with your team and get their support. For most employees it is a scary time right now wondering if they will remain employed. You may have to make decisions that will cost people their jobs, but those you keep will be because they are an important part of your future business so treat them as such.

All those things you keep putting off because you’re too busy, this could be the perfect opportunity. Systematise your business, address your workflows, software choices, check you’re getting the best deals on your overheads, review your HR, etc etc – there’s always things we’re putting off and now could be the time to sort it. In truth this is my favourite bit! I graduated in 2006 in Economics and started in finance shortly after – then came the 2008 crash. Troubleshooting and true assessment of costs and systematisation for efficiency is vital all year every year as far as I’m concerned but now more than ever it’s time to make true assessments and actions to survive. 

Once your foundation is bolstered, you can look forward to when things do return to a relative normality. Review your marketing, innovate your offerings to clients, look into opportunities you may have previously overlooked.