Key information for business owners

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Every single business owner across the country has been impacted in some way by Covid-19; here at Vibrant we’re trying to provide as much information as possible to help you make decisions, access funding, look at your planning, sort your tax and cash flow analysis out and more. Here’s our round up of what business owners could be doing or looking at during lockdown.

Get cash back into your business

Our Bev highlighted the chancellor’s recent updates on the Coronavirus Business Interruption Loan Scheme (CBILS). Here’s the key points:

  • Applications will not be limited to businesses that have been refused a loan on commercial terms.
  • The Treasury has not capped the interest rates banks can charge
  • Banks will be banned from asking company owners to guarantee loans with their own savings or property when borrowing up to £250,000
  • Larger firms (with a turnover of up to £500m) will also be eligible for more help with state-backed loans of up to £25m available to firms with revenues of between £45m-500m.

Time to Pay is tailored to your individual circumstances however the main things to consider are:

  • All businesses in financial distress, and with outstanding tax liabilities, may be able to seek a Time To Pay arrangement. Does this fit your current business situation?
  • Take advantage of automatic deferral of VAT for the period 20 March 2020 to 30 June 2020.
  • It’s critical that you Cancel your DD on your VAT Payment if you wanted to take the opportunity to delay

Get talking

Deferral of PAYE and Corporation tax is easy to obtain BUT you must talk to HMRC (unlike the VAT deferral). HMRC’s new dedicated helpline is 0300 200 335

It’s important that you talk to your landlord about your commercial tenancy agreement, the law protects you being evicted if you can’t pay. So make a voluntary arrangement that works for you both. Don’t forget there’s mortgage breaks of offer too.

Look at tax

Review whether there may be any opportunities you’ve missed, or known opportunities that can be accessed now such as:

  • If you’ve been completing some interesting new product development or research and development (R&D) over the past few years get your claim in
  • Is there an opportunity to claim any capital allowances?
  • Any losses now could enable you to get tax back from previous years.

Err on the side of caution

When you are making decisions err on the side of caution and ensure you document everything with regards to your employees was the key piece of advice from Amanda Bayliss of Hello People Solutions.

We’re all familiar with the word Furlough but what does it mean in practise?

  • Employees HAVE to be on FPS as of 19th March for you to furlough them. You can re-employ someone and furlough if that works for you both.
  • Your people CAN NOT do any work whatsoever; they can train providing it does not result in revenue making.
  • They can seek employment elsewhere (unless you have a solid clause in their existing contract) if you furlough them
  • If they work for you and another business you can furlough them whilst they keep working in their other job

The best advice Amanda can give is to ensure you have a written record on file of the furlough letter, you need to keep it for at least 5 years in case HMRC audit you. If you want more information drop us an email on as we a detailed email on all things furlough we can send you.

80% or 100% pay?

Another consideration is what to pay, you can pay them the additional 20% if possible. The government will pay cover 80% of gross before tax. If your employees monthly salaries vary then you can use the last month’s payment (February 2020) or take an average of the 12 months or use February 2019’s pay. Choose the higher amount, include overtime and commission but remember bonuses can’t be included in furlough pay.

The claims portal is being developed with phase 1 already being tested, they have built it expecting mass claims. Make sure you registered for PAYE online and you run your payroll first before popping your information into the portal once it is live. Your claim starts from the date that your employee stopped working.

What about holidays? There’s only currently ACAS information available (access that here

  • You could use holiday allowances now instead of furloughing but you need agreement from your employees
  • Bank holidays / statutory holiday accrued during furlough can be carried over for 2 years as the Government has relaxed working time regulations. Bank holidays can be taken at a later date when you have been furloughed.
  • It’s important you agree in writing what holiday arrangements are just in case your employee leaves during those 2 years (it will result in payment of days if you don’t have an agreement set)
  • You need to give extra notice to staff (say 2 weeks) if you as the business owner want staff to take holiday instead of furloughing them.

CATCH UP on the latest Furlough information on Bev’s latest video here

Don’t forget your director duties

Whilst Insolvency laws and directives are changing, as we follow Germany and Australia’s lead, Lucinda Matkin of LM Insolvency was keen to remind business owners of their legal obligations with regards to their duties.

There’s more protection for companies right not to prevent them simply being wound up and the scheme proposes business owners are give time to restructure thereby keeping their employees in work.

s123 IA86 states that a business is insolvent when it is unable to repay its liabilities as and when they fall due. Lucinda highlighted that the early signs you should look for are:

  • If you are maxing out your borrowing, your overdraft is fully used
  • If you are struggling to keep up with late payments
  • Your creditors aging is getting bigger and bigger
  • Cheques are bouncing
  • Directors pay is frozen or simply not being paid
  • Profit in total decline

Firstly, get in touch with an insolvency practitioner if you are seeing anything in the list above. Also be careful who you pay; don’t fall into a preferences situation where you put someone close to you in a better position than other creditors; this includes your bank. It will be claimed back if you enter into insolvency. Plus, it’s your duty as a director to treat all creditors fairly.

Don’t claim Directors loan payments or dividends if you can’t pay your creditors unless there’s available profit in your company. If there is then keep dividend payments reasonable and be careful on overdrawn directors’ loans because you will have to pay them back.

Remember that transactions that are undervalued, perhaps assets given as gifts or sold under the market value can be reviewed up to 2 years later. An insolvency practitioner could come back to restore or get payment back for that asset.

Finally, you might have heard that wrongful trading has been relaxed this does not mean it’s a free for all as a director. Document your decisions if you are struggling or can’t pay creditors showing your genuine reasons. It’s no defence to say you didn’t know you’d run out of money, it’s your duty as a director to do your cash flows.

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