31 March 2020 – Grants, calculating the 80% for furloughed workers, and other updates
It feels like ages since I last sent out an update, but I realised it was actually only 4 days ago. We are still dealing with a rapidly changing situation often with only brief official guidance issued by the government.
There are a few key updates I wanted to send to you today.
We should now be getting closer to the point where businesses with premises who meet the criteria for a small business grant are actually able to access some cash. We had heard that this should be an automatic process whereby you would be contacted by the local council if you were eligible for a grant, however it appears that this has now been changed and you will need to apply for the grant.
You will need to look on your local council’s website, or check with your local council on how to apply. We’ve checked the situation for two nearby local councils:
- The Royal Borough of Windsor and Maidenhead will automatically identify all ratepayers who may qualify and will email an application form to them in the next few days. They have more detailed information available on their website.
- Wokingham Borough Council have now got a form on their website.
How to calculate the 80% grant for furloughed employees
- The minimum furlough period is 3 weeks
- You need to work out an appropriate date for each impacted employee – you can’t simply backdate to the start of March. This early date is only appropriate where employees were already out of work
- The maximum amount you can claim from the government is £2,500 per month per employee
- If an employee is salaried then the amount you can claim is calculated based on 80% their salary excluding bonus, commission, etc.
- If an employee is on variable pay then the amount you can claim is the higher of 80% of their pay in the same month last year, or 80% of their average salary over the 2019-20 tax year (again subject to the £2,500 cap, and looking at their basic pay)
We can help you to work out the amount that can be claimed, an appropriate start date for when the employee is to be furloughed, and we can provide you with a letter to give to your employees to ensure everything is agreed and evidenced. Once we know what the HMRC portal is going to look like we also expect that we will be able to assist with making the claim. We don’t yet have a good feel for the amount of time all of this will take and some of this support will be chargeable. Depending on your existing arrangement with us where possible we will offset this against reduced support in other areas.
I have deliberately not gone into the position around furloughing a sole director as we still don’t have sufficient clarity from HMRC around what level of activity can be performed by the director while furloughed – the basic rule is that a furloughed employee should do no work for the business. While confirmation has been provided that a director can still perform their statutory responsibilities our current understanding is that this does not include managing administrative work, and certainly does not include anything that could generate revenue. As and when we have more detail I will send out a further update.
Check your sources
Inevitably at the moment there are a lot of experts online who are trying to provide helpful information, without always having that clearly supported by actual government guidance. We are being very careful to fact check the information that we are sharing. If we don’t know, then we will say we don’t know. If you have heard something online then always try to trace it back to gov.uk, otherwise it could just be somebody’s best guess rather than something you can rely on. Please be patient, we are doing our very best to give you the right advice at the right time. This is a rapidly changing situation and we expect further clarifications from the government and from HMRC – and quite likely additional measures will be announced.
As always we send you all our very best wishes to keep well.
27 March 2020 – Quick update on the self employed announcement
The Chancellor has just announced the help available for the self employed, and I wanted to get an update out to you as soon as possible. The main highlights are:
- Help is available for the self employed and for self employed partnerships
- This does not apply to limited company directors
- The amount will be calculated by looking at the average taxable profits for the 2016-17, 2017-18 and 2018-19 tax years
- 80% of the resulting monthly amount will be paid out, up to a maximum of £2,500 per month
- Your taxable profits have to be under £50,000 to qualify
- The majority of your income has to come from self employment, so if you are self employed and also an employee you may not qualify
- This will take the form of a taxable grant – so will be taxed as additional income in the 2020-21 tax year
- The expectation is that this will be paid as a lump sum in June, covering March, April and May
- You are able to continue working and still receive the grant
- HMRC will contact you if they think you are eligible, and you will be asked to complete a form with the relevant financial information as well as asking certain questions to ensure that you qualify (so for example are you still self employed)
- If you became self employed in the 2019-20 tax year then you will not qualify.
As and when more information is released we will let you know.
25 March 2020 – Cashflow forecast template
Like you, as small business owners Emma and I are finding the current situation increasingly challenging. We know that we need to take control where we can in order to get through to the other side in as good a shape as possible. Managing our cashflow is key. Knowing what our likely incomings and outgoings are is helping us to map out our plans for the team, and potentially our need to access additional funding.
We are also having conversations with many of you that have highlighted that this is a critical area across the board. Creating a cashflow forecast is one of the best things you can do.
I’ve therefore created a cashflow forecast template which you can download for free – you are welcome to share this with other businesses if you would like. This is just a simple excel spreadsheet where you can enter your bank balance and the money you are expecting to get in and pay out.
The spreadsheet will then automatically calculate your expected closing bank balance each month, so you can see if the business is at risk of going overdrawn, or exceeding your overdraft limit. This then helps you to identify if you need to change the timing of supplier payments, or if you need to arrange a loan under the Coronavirus Business Interruption Loan Scheme.
If I have set it up correctly then you should be able to access the cashflow forecast template here (you will need to download it and save a copy) – if you aren’t able to then please email us and we will send it to you via email instead.
I know it isn’t always great to just have a template on its own. We can therefore offer a couple of bits of extra chargeable support if needed. I have discounted our fee by roughly 50% to try to keep this affordable given the circumstances, but we will have to do these on a first come first served basis if the demand is too high.
- One hour call with Emma or I to review your completed cashflow forecast template – £100 + VAT
- Three hour workshop with Emma or I to create the cashflow forecast with you – £300 + VAT
Please let me know if there are any problems with the template, this is a cut down version of what we would normally use internally so could have some teething issues!
21 March 2020 – Latest announcements on help for businesses
There are such significant changes on almost a daily basis now – I didn’t want to leave this update until after the weekend. If needed we will send a follow up on Monday as I know the government is under pressure to do more to help the self employed.
Coronavirus Job Retention Scheme
This really feels like a game changer. All UK business with employees who designate people as “furloughed workers” will be able to get 80% of their salaries (up to a maximum of £2,500 per employee per month) reimbursed by HMRC. The employer can choose to top this up, but does not have to.
Information will have to be submitted to HMRC via a new online portal. We will of course keep a close eye on this to see how to access the portal, and what information will have to be provided. Funds won’t be paid out until late April which may cause you issues with cashflow in the meantime – however there are other measures such as the loan scheme that could help.
My understanding is that employees had to be on the payroll at the end of February for this to be available, and for employees on zero hour contracts amounts will be calculated with reference to normal levels of salary. We do not yet know all of the ins and outs, but will send further clarification as it becomes available.
Deferring VAT and Income Tax Payments
VAT payments that would have had to be made between 20 March and 30 June 2020 will not have to be made until the end of the tax year. There is no need to apply or to call HMRC to ask for time to pay, this is available automatically. VAT refunds and reclaims will be paid by the government as usual. We would recommend for any of you where cashflow is a concern to take advantage of this. I assume where you have a direct debit in place to collect the VAT that you will need to cancel the direct debit with your bank – again if we get more information we will share it with you.
For Income Tax Self-Assessment, payments on account which should be falling due on 31 July 2020 will be deferred until 31 January 2021. If you are self-employed you are eligible. This is also an automatic offer, there is no need to apply, and there will be no penalties or interest charged. We don’t yet know if limited company directors are also able to defer their July tax payments.
Coronavirus Business Interruption Loan Scheme
This should be available from Monday. The government will provide lenders with an 80% guarantee on loans made under the scheme. The loans will be interest free for the first 12 months. If you already have business loans that can be repaid without penalty then it may be worth investigating this scheme to enable you to have one loan payment instead of multiple payments, and to ensure that any repayments you make reduce the amount outstanding instead of just servicing the interest.
Please bear with us over the next few days as we are spending almost all of our working hours talking with clients who have been directly impacted. There could therefore be delays in sending out accounts etc. (where we don’t risk missing filing deadlines), or in responding to less urgent emails. In addition we are all now working from home, most of us with children of various ages who also need our attention.
Please continue to reach out where you need support. And as always we send you all our very best wishes to keep well.
19 March 2020 – Keeping in touch
Given the circumstances and the speed at which everything is changing we will be trying extra hard to stay in touch with you all and to send updates as needed around what the government is doing to help small businesses.
Impact on our own team
So much for planning a test day working from home on Tuesday. That became the first official day working from home, and the office is now alas empty! Schools are shutting on Friday (if they haven’t already) so the majority of us will be attempting to work from home while managing children of varying ages. Please be patient with us if we have unexpected interruptions on calls! I’m also now officially isolated with my family for the duration as one of my children is on immunosuppressant medication. We will do our best not to let the disruption change our response times…
How can we help
At least we have got a business where we can pretty much just shift our working model – I know we are among the lucky ones. We are looking at how we can best help those of you who are going through much more significant challenges.
1. Cash flow forecasting
If you are struggling to figure out at what point you might need to stop paying VAT / PAYE / tax bills, or when you will have to consider taking advantage of the Coronavirus Business Interruption Loan Scheme, then please get in touch. We normally charge £600 + VAT for a full cash flow forecast but can look at what we can do to either offset that against other services that you may not be utilising fully with a drop in activity, or we could do a higher level version for half the cost.
2. Providing updates on government assistance
We are obsessing over the daily coronavirus press conferences and making sure we access the detailed government guidance when it is released. Hopefully sending rather more regular newsletter style updates will be a useful way of sharing that information with you. Currently the area we are getting the most questions on is on the grants that have been announced – check further down this email for the detailed guidance.
Having worked with so many small business owners over the years we are used to chatting through business ideas, and are already having conversations with some of our most impacted clients to try to come up with different ways of generating some income to keep their businesses alive. We are more than happy to have these calls free of charge. If you haven’t heard from us and want to have a chat then please get in touch and we will arrange a good time.
4. Other experts
We are planning to arrange a webinar in the next few days with an HR expert who will be able to run through some of the impacts on your employees, and answer your questions. If there are other areas you can think of where a similar set up would be helpful then let us know.
Currently these are only going to help a limited number of businesses, but the help will be very welcome.
- If your business has premises and currently is eligible for small business rates relief then there will be a cash a grant of £10,000. This will be delivered by local authorities. If this applies to you then you will be contacted by your local authority – there is no need to apply. Funding will be provided to local authorities in early April.
- If your business is in the retail, hospitality and leisure sectors and you don’t qualify for small business rates relief then you may be able get a larger cash grant of £25,000. Again you need to have premises, and will be eligible for the grant if the rateable value of your premises is between £15,000 and £51,000. Not sure what the rateable value is? You can check online at https://www.gov.uk/correct-your-business-rates
The government doesn’t want any of our businesses to fail over the next few months, and we are determined to help you through these difficult times as much as we can. Please reach out where you need support – or even if you just want a sympathetic voice at the end of the phone. And we send you all our very best wishes to keep well.
13 March 2020 – Coronavirus and remote working
I know we were all bored of Brexit but I wish we were back to the news being full of Brexit stories – like many people we as a team are getting increasingly concerned about the impact of Coronavirus.
What are we doing as a firm?
We are currently exploring what our options are if a) one or more of the team is ill, b) schools are closed, and c) what if several of us are very unwell at around the same time. From our perspective certain services need to be provided, most notably payroll, whether or not we are able to come into the office as normal.
Firstly thanks to our efforts to move fully onto the cloud we are all able to work remotely. We will be having a test day in the next week where we all work from home to determine if there are any issues that arise as a result. Please be patient if you call the office as the call may be answered by our call answering service instead of one of the team. Your message will be forwarded on.
Secondly we will be encouraging the team to work from home 1-2 days a week and to utilise our second office more so we are less likely to spread the virus between ourselves.
Thirdly the team are all taking their laptops home each day, so if a school is closed at short notice then we will be ready and able to work from home.
Fourthly we are starting to cross train the team to ensure that we have more cover for the most urgent work should multiple people be ill at the same time.
Lastly we are reluctantly taking the decision to move all meetings online to video conferencing software for the time being. A number of us have immediate family with underlying health issues and we need to ensure that we are doing what we can to reduce the risk.
Thoughts on how to minimise the impact
We are of course also very aware of the impact that is already being felt by a number of clients who are in the hospitality or travel industries, and the knock on impact that we are starting to see in other areas. For some industries there is very little that can be done. It may be a case of batten down the hatches and preparing to weather the storm.
The government has however announced a package of measures to provide support for businesses. If you haven’t already done so make sure you read the information provided to see what the options are. You may be able to take advantage of the Coronavirus Business Interruption Loan Scheme, or if you have employees off sick we can assist with getting the government to refund 14 days of statutory sick pay. We are also looking into the £3,000 cash grant available for businesses who qualify for small business rate relief.
For other industries it may just mean exploring different ways of working, and taking advantage of remote working practices. If you can save on travel and meeting costs but continue to have key interactions with your customers then that may help to mitigate the lasting impact on your business.
Please get in touch if you have areas where you need our support. And we send you all our very best wishes to keep well.