The government believes it has done a good job supporting many businesses throughout the Covid-19 crisis, and for many this is indeed so, but we now need greater clarity to help SMEs survive the deluge of debt so many will face in early 2021.
One of the biggest issues facing SMEs in 2021 is the “wall of Debt” , that of how debt deferred in 2020 – such as VAT and income tax – is going to be treated by the government and their agencies
On top of this many SMEs have borrowed via bounce back loans and the Coronavirus Business Interruption Loan Scheme (CBILS), which have 12-month repayment holidays, and so payments will start in the Spring of 2021.
Without clarity many businesses will understandably be taking drastic action now in order to minimise the risk of being unable to pay the likes of deferred Income Tax, VAT and their Bounce-back loans at the time due. The most likely impact will be higher redundancies than might be necessary.
And this is why we are calling on the government to take action now to introduce measures to address this worry and to provide support that goes further.
Together with our colleagues at the UK200Group we have produced a paper (a copy is available below) which details recommendations on several financial problems affecting SMEs as a result of Covid-19.
This paper has been sent to, and is currently being considered by, the government.
Measures being recommended include:
- Consolidate certain debts into a single business support loan owed to HMRC.
- Establish a threshold for loans repayments based on a criterion such as: average profits of the last 3 years, size of business and size of loan.
We are encouraging SMEs to get behind our proposals by writing to their local MP to encourage them to support the introduction of the measures. We have produced a template letter that SMEs can use. This is available to download below.
Here to Help
In this year of uncertainty your business will be facing some unique challenges. With so many changes to taxation and grants and with other measures having been introduced, it can be confusing to keep on top of your entitlements and indeed, obligations.
Please do get in touch if you would like to receive some guidance or advice that is specific to your business and your circumstances.