UPDATE 30th MARCH 2020Please note all updates have been added to the original document, a summary of what has been added is below for quick reference.
The Corona Virus Business Interruption Loan Scheme (CBILs)
I am following this process with Natwest and HSBC at present. They require the following information so BE READY:● Up-to-date financial accounts (this includes your latest audited accounts)
● Any management information that would show your financial performance leading up to the current COVID 19 crisis.
● Cash flow information that shows how much funding you need and for how long.
This type of information should be at your fingertips. If it isn’t, get it and you’ll sleep easier at night for having it, I promise. Cash flow, forecasts, and business plans need careful consideration and tailoring to what you are applying for and why. Do not get me wrong here it’s not a case of manipulating the figures – it’s being clear on what the figures represent against what you are asking for. If you are applying for growth you need to ensure growth is shown in the figures and your plans.
BE CLEAR: You would (or maybe you wouldn’t) be surprised how many people ring these lines for lending/deferment of loans/business growth borrowing and when asking what they want the lending for they don’t have an answer. They just think it’s what everyone else is doing, it’s what they should do after being in business X number of years or because there is a current situational crisis, or it seems a cheap way to borrow so why not – this isn’t going to cut it . You need a reason to borrow and to know exactly where that money is going to go to and when. Lining your pockets is also not going to cut it.
Commercial Insurance● Firstly – find your policy and read it . Make a note of anything you feel would fall under this situation. This is likely to only fall under Business Interruption and maybe any sections you have on property or rent. Save it and keep it somewhere safe.
● Most commercial insurance policies are unlikely to cover pandemics or unspecified notifiable diseases, such as COVID-19.
● Notifiable diseases are certain infectious diseases that registered medical practitioners have a statutory duty to notify the ‘proper officer’ at their local council or local health protection team about when they come across a suspected case.
● The government keeps an updated list of notifiable diseases . On 5 March 2020, the government added COVID-19 to its list of notifiable diseases.
● Those businesses which have an insurance policy that covers government ordered closure and pandemics or government ordered closure and unspecified notifiable disease should be able to make a claim (subject to the terms and conditions of their policy).
● Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers.
● Many insurers use diseases on this list as triggers for the activation or exclusion of insurance cover. For example, insurers’ policies that cover notifiable diseases will
typically only cover a specific subset of notifiable diseases (such as Cholera or Anthrax) that the insurer will reference in the policy documentation. These policies will exclude any notifiable disease not on the insurers list, as well as future/unknown diseases (such as COVID-19). The price that the insurer charges for the policy is modelled against the risk posed by this set list of diseases.
WHAT WOULD AMY DO?● Don’t panic. There are lots of other interventions listed in this document. Some, maybe even all, may apply to you and your business. If you read your policy (and I hope you do have a policy to read!) and it looks like you’re covered for nothing don’t panic.
● However, don’t be complacent. Just because you don’t have to pay your VAT bill right now and you can cover your employees up to 80% doesn’t mean you shouldn’t explore (and possibly fight for) some sort of claim on your insurance.
● But… maybe not right now. It is important to read your policy and keep it safe but actually it is not worth putting a claim in right now. We are possibly at the very
beginning of this situation so we have no idea of the full claim required against something like Gross Profit for a Business Interruption claim.
● Check your dates, if is due for renewal any time soon (in the next 12 weeks) contact them and see where you stand for an extension (maybe another 12 weeks) at the
current terms/costs rather than a renewal.
Protection from Eviction● For Commercial tenants – check your policy is it you personally or the Company on the lease.
● Commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction.
● These measures will mean no business will automatically forfeit their lease and be forced out of their premises if they miss a payment up until 30 June .
● There is the option for the government to extend this period if needed.
● This is not a rental holiday. All commercial tenants will still be liable for the rent. Commercial tenants are protected from eviction if they are unable to pay rent.
● All commercial tenants in England, Wales and Northern Ireland are eligible.
● The change will come into force when the Corona Virus Bill receives Royal Assent. No action is required.
WHAT WOULD AMY DO?● Be ready for a touch conversion. If your landlord lives from their rental income from either just you or other rental properties that may also be defaulting it is not going to be
a nice chat (as much as you are entitled to have it) and you are going to want to bet they will want the whole lot you owe come 30th June . I am not sure of the mechanism
to help Landlords during this time – they can defer their mortgage payments but possibly only have £90+ a week to live on after that if they are self employed otherwise.
● Assess your cash flow and ensure that you can pay come the 30th June. It would be better to hold on to the cash in the bank just in case rather than pay it during these
times but be ready to pay it come the deadline.
● Make some big decisions. Is the site right for you anyway? Do you need a bigger space? Have you been wanting to move/scale/shift the business for a while now? Are
you going to use this time to make decisions based on your potential to grow, if it was on the cards before maybe now is the time. What I mean by this is once you’ve taken
some time out to decide on your new strategy, and growth has been in your grasp but limited by a physical site, maybe now is the time to utilise borrowing such as the CBILs
to take that, carefully considered, step.
Corona Virus Job Retention Scheme – for DIRECTORS● You can claim for Owners/Directors via the scheme but ONLY WHAT IS GOING THROUGH the PAYROLL – PAYE. If you do not run a payroll at all you will not qualify.
● You are (as it stands) not allowed to work. You obviously have obligations as a Director you need to fulfil such as returns and other high level administrative responsibilities and
it is unlikely you will be penalised for doing this during the time you have furloughed yourself.
● Same amounts apply BUT ONLY WHAT IS GOING THROUGH THE PAYROLL – 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?● The chances are, if you are running a payroll at all, as a small business your directors amounts are likely to be for the minimums – at its highest the tax threshold at around
● Lobby the bleep out of this. My Colleagues and I in the finance world for small businesses are fighting for some clarity. I very much suspect that only PAYE element at
80% will NOT change. But – one thing I do think is VITAL for small business is that they are allowed to continue to work (maybe defined up to a certain amount of employees
10-25 and if you are deemed a micro entity up to £632k turnover). We should be able to continue to conduct marketing, maintain our social media, still make the sales/bookings
we can make. The self-employed are allowed to continue to work. In the instance of small businesses, employees may need to be cut for hours/responsibilities but the
chances are they are all vital in some capacity to keep the cogs whirring. Following the current guidelines for not being able to work at all will kill so many small businesses.
The ICAEW had some nice examples I liked, link here .
The Self-Employed Income Support Scheme (SEISS)● NOT Limited Companies (therefore not Directors or dividends) only Partnerships, Sole traders, the stand alone self employed and part (over 50%) other self employed.
● This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if
needed. ● You will be contacted and then can apply if you’re a self-employed individual or a member of a partnership and you:
○ have submitted your Income Tax Self Assessment tax return for the tax year
○ traded in the tax year 2019-20
○ are trading when you apply, or would be except for COVID-19
○ intend to continue to trade in the tax year 2020-21
○ have lost trading/partnership trading profits due to COVID-19 ● Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the
following conditions being true:
○ having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
○ having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period ● If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.
● If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020.
● HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before the 23 April 2020 deadline in the usual way.
● You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable): 2016 to 2017, 2017 to 2018 and 2018 to 2019.
● To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable/available) then divide by 3 (where applicable/available), and use
this to calculate a monthly amount.
● It will be up to a maximum of £2,500 per month for 3 months paid directly into your bank account, in one instalment.
● You cannot apply for this scheme yet. HMRC will contact you if you are eligible for the scheme and invite you to apply online. Individuals do not need to contact HMRC now and doing so will only delay the urgent work being undertaken to introduce the scheme.
● You will access this scheme only through GOV.UK . If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam.
● Once HMRC has received your claim and you are eligible for the grant, we will contact you to tell you how much you will get and the payment details.
● If you claim tax credits you’ll need to include the grant in your claim as income.
WHAT WOULD AMY DO?● Few notes first.
○ This is a grant. You do not need to pay it back, if you fall under the criteria then apply once they have identified you.
○ Get your self assessment in for 1819 – this was due at the end of January 2020 you naughty people! Not only the submission but the payment was due then too. TUT TUT. Shame on you. However – when you do submit you will NEED TO PAY the tax due for 1819. The deferment at the moment is for the July payment for 1920 not 1819. If you can’t afford it – contact them – there is not an automatic grace period for 1819 for you not to pay immediately.
○ Get out the calculator – see how much this could mean for you and get it in the cash flow. It won’t be paid out for a good few months so don’t bank on this cash any time soon but it may help you make other decisions on the gap until then.
○ You are allowed to continue to work.
● Make sure you have access to your GOV.UK account. Log in to be able to see your previous returns. If you have forgotten your password sometimes this needs posting – there will be a backlog in the near future so do this today.
● For our businesses/partners many are Directors of Limited Companies and this does not apply to them. We, myself included, are deemed self employed for all other lending/relief. Mortgage applications, overdrafts, pretty much any credit, anything with a pound sign we are self employed, but not for this. I am also sad to say that we are also likely to be the ones paying for it in the future. It has been implied that for the self employed to benefit in the same way as the employed with this scheme that the tax benefits of being self employed will lessen and become more evenly matched with the employed to recover this cost.