Monthly Archives: mars 2020

An overview of the COVID-19 crisis from a Corporate Finance spectrum

One of the measures outlined in the Government post budget Coronavirus briefings on 17 March 2020 was the Coronavirus Business Interruption Loan Scheme (“CBILS”).

Whilst the details will not be ready until Monday, as government interacts with the Lenders, this is in effect a rehashing of the Enterprise Finance Guarantee Scheme (“EFG”) launched after the 2008 banking crisis.  The main differences being an increase in guarantees from the government to the Lender from 70% to 80% and the increases in quantum from £1m to £5m.  The Lenders include all the high street banks plus a range of other ones, see attached link.

Unless the CBILS criteria are relaxed, compared to the EFG scheme, which we should know on Monday, the main question for the Lender would be whether the client is a “good business” that could service the loan repayments.  If it could but the Lender could not support due to lack of tangible security, then the government guarantee is there to support the Lender in order to de-risk that lack of security.

As was the case with the EFG scheme, it was initially launched in haste and the application of the scheme was left to the interpretation of the various Lenders meaning take-up was low. The lack of initial usage meant that the government expanded the lending panel so that now there are various challenger banks and asset-based lenders operating the scheme.

We suspect that the banks will focus on their existing clients and therefore they should be the first port of call, but it does mean that there are alternatives this time if the incumbent lender cannot help.

Coronavirus Business Interruption Loan Scheme (“CBILS”)

This is basically a rehash of the Enterprise Finance Guarantee loan scheme (“EFG”). The key differences are the government are guaranteeing the lender for 80% of the loan amount as opposed to 70%. Also, the maximum loan amount is £5m as opposed to £1m on the EFG scheme. No interest will be charged on these loans for the first 6 months, however capital repayments will have to be made. Applications must be made directly to a British Business Bank (“BBB”) accredited lender, many of which the Corporate Finance Team have strong existing relationships with and can assist with financial forecasts, process management etc.

The products included are:

• Term Loans.
• Overdrafts.
• Invoice Finance Facilities.
• Asset Based Lending Facilities.

Eligibility criteria:

• UK based, with turnover of no more than £41 million per annum.
• Operate within an eligible industrial sector. (a small number of industrial sectors are not eligible for support).
• Be able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years.
• Have a sound borrowing proposal, but insufficient security to meet the lender’s requirements.

Full eligibility criteria will be published shortly.

Sick Pay

The government has brought 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. The eligibility criteria for the scheme will be as follows:

• This refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19.
• Employers 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.
• The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible.

SSP is currently £94.25 per week. The refunds are likely to be a long process.

Businesses that pay business rates

• The government has introduced a business rates holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year.
• Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.
• Grants of £10,000 to £25,000 will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.
• Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority. Guidance for local authorities on the business rates holiday will be published by 20 March.

Calculating the Rateable Value – https://www.gov.uk/calculate-your-business-rates

Support for businesses that pay little or no business rates

• The government will provide additional funding for local authorities to support small businesses that already pay little or no business rates because of Small Business Rate Relief (SBRR). This will provide a one-off grant of £10,000 to businesses currently eligible for SBRR or rural rate relief, to help meet their ongoing business costs.
• If your business is eligible for SBRR or rural rate relief, you will be contacted by your local authority – you do not need to apply.
• Funding for the scheme will be provided to local authorities by government in early April. Guidance for local authorities on the scheme will be provided shortly.

You are eligible for SBRR if:

• your property’s rateable value is less than £15,000.
• your business only uses one property.

Calculating the Rateable Value – https://www.gov.uk/calculate-your-business-rates

HMRC Time to Pay tax

• All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time to Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
• If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.

Given the circumstances HMRC will likely be more lenient on Time to Pay. Interest and late payment penalties can also be waived.

Insurance The advice on this is to check your insurance policy to see if it includes cover for both pandemics and government-ordered closure. The government have confirmed that their advice to avoid pubs, theatres etc is sufficient to make a claim, should you be covered for the above

Coronavirus: UK interest rates slashed again in emergency move

The Bank of England has cut interest rates again in an emergency move as it tries to support the UK economy in the face of the coronavirus pandemic.

It is the second cut in interest rates in just over a week, bringing them down to 0.1% from 0.25%.

Interest rates are now at their lowest level in history.

The Bank said it would also increase its holdings of UK government and corporate bonds by £200bn effectively pumping more money into the economy.

UK200Group Member Responses to COVID-19

This morning we bring updated insight from fellow UK200Group Members with regards the Government’s support packages for SMEs with regards to the current crisis.

UK Financial Support for SMEs from Tax Panel

The evening of Tuesday 17^th March, Chancellor of the Exchequer, Rishi Sunak, announced that he will be almost tripling the UK coronavirus rescue package for the UK economy and new measures have been put in place to support businesses. We reached out to the UK200Group Tax Panel for their expert views on this subject matter. Please see the responses below: 

Paul Brown, Whittingham Riddell

‘The grants for smaller businesses (up to £10k for businesses qualifying for small business rates relief and up to £25k for retail, leisure and hospitality businesses with properties with a rateable value between £15k and £51k) are obviously very welcome as a short term cash injection and should go some way to easing immediate cash flow issues.  Similarly the business rates holiday for all retail, leisure and hospitality businesses can only be a good thing as well.  Allowing restaurants and pubs to operate a takeaway service might make some small difference as well – I for one am prepared to make the sacrifice and eat more takeaway if it is in the national  interest!

The government backed loan scheme is also going to help mitigate the short term impact, especially if the first six months are interest free.  However the reality is that this is just a loan (and one guaranteed by the government rather than provided by it).  It will therefore have to be paid back at some point.  Businesses will need to be realistic in terms of how much they borrow and how they can repay it once the situation returns to normal, otherwise they might just be “kicking the can down the road.”  The cynic in me thinks that it is slightly disingenuous of the government to be trumpeting £330 billion in support when in reality it is the lenders who will be putting the cash on the table and the government will (aside from covering the first six months of interest) only bear a cost if the guarantee is ultimately called upon.  That is not to say the support is not valuable – it clearly is – but I do wonder whether more emphasis on grants and the like might have been more valuable in securing the longer term future of business.’

Francis Whitbread, Edmund Carr

‘Whilst the financial support package is very welcome, my view is that  a considerable amount of clarification is needed on how it will be applied. I would have thought a self-employed individual was a business and so was in need of support, but there is an implication this is not the case. The only reference to self-employed persons is under the section “Support for businesses paying tax”, which talks about “All businesses and self-employed people in financial distress”. Elsewhere the term used is “business”, so does this mean the only support envisaged for other self-employed persons is a longer period to pay tax? Given the large number of individuals who are self-employed, proper support is also needed for them.

Other Comments…

Equally we have comments from another UK200Group member – the Succession Forum Chair, Richard McNeilly of member firm Dains.Please see below:

Filing deadlines

On a daily basis, we are being asked to postpone fieldwork with clients (mainly audit) this will impact the client at ourselves. Firms don’t run with loads of capacity so if we miss the ‘window’ with clients to complete their work, it is possible that we will not be able to fit it in later (depending on how long the issues persist). The ICAEW aren’t going to drop their standards (quite rightly) but it may help to improve flexibility in filing deadlines for statutory accounts and corporation tax in due course.

HMRC – time to pay and other queries

Whilst recognising that HMRC are likely to be inundated with TTP requests, it would be helpful if government can ensure that there really is some ‘joined up thinking’ between policy makers and HMRC, implementing TTP. On too many occasions in the past HMRC have been unwilling to accept the narrative accompanying a request from business owners, many of whom have played by the rules and paid their taxes. Rather than HMRC intervene on every occasion, surely HMRC/government can simply apply a set of rules to TTP, which accountants could secure through provision of information in a standard format – simple form, simple process – no need to intervene and waste time arguing! If this applies for initial requests only, this would hugely reduce the workload of HMRC.

New HMRC helpline launched to help businesses concerned about paying their tax due to COVID-19

The helpline allows any business or self-employed individual who is concerned about paying their tax due to coronavirus to get practical help and advice. Up to 2,000 experienced call handlers are available to support businesses and individuals when needed.

If you run a business or are self-employed and are concerned about paying your tax due to coronavirus, you can call HMRC’s helpline for help and advice: 0800 0159 559.

For those who are unable to pay due to coronavirus, HMRC will discuss your specific circumstances to explore:

• agreeing an instalment arrangement
• suspending debt collection proceedings
• cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately

The helpline number is 0800 0159 559 – and is an addition to other HMRC phone contact numbers. Opening hours are Monday to Friday 8am to 8pm, and Saturday 8am to 4pm. The helpline will not be available on Bank Holidays.

Off payroll (IR35) rules deferred

The Government has announced that the Off-Payroll rules, due to come into force on 6 April 2020, have been delayed for 12 months.  This is in response to the challenges caused by Covid-19. 

This is a welcome announcement.  Our observations over the last few weeks have been that engagers of freelancers and contractors have been taking the view that the majority of freelancers were employees for tax purposes.  This approach by engagers has more often than not been fuelled by a fear of wrongly implementing their new responsibilities under the proposals, which were onerous.  Had the rules proceeded as planned on 6 April 2020, many individuals would be taxed as employees without the security and many of the employment rights enjoyed by permanently employed members of staff.  Indeed, many have already transitioned to being taxed as employees and for those, the deferral has come too late.

Whilst this is only a deferral, it does represent an opportunity to continue lobby Government on the significant issues caused by these changes before they implemented.  UK200Group Freelancers and Contractors and Tax Panel will continue to make representations to Government over the coming months on behalf of our clients.

Latest advice for businesses during the current COVID-19 outbreak

The Budget included a number of measures intended to help cushion the financial impact of Covid-19 on businesses.  As with many Budget announcements, the practical detail is a little light.

I’m talking to the Treasury and HMRC about how we can work with them to get detailed guidance out to our clients, and will be reporting back on that as it comes along.

If anyone comes across anything useful do send an email over – I’m more than happy to collate that sort of thing and share it around people.

In the meantime, the main lines of support that can be accessed are:

Time to Pay

HMRC are apparently going to be a lot friendlier with Time to Pay applications, and will even waive interest and penalties on late payments.  

They’ve found 2,000 experienced call handlers to do it, although where they found them and what experience they have isn’t mentioned.  Are they re-purposed airline sales staff, perhaps?

The helpline number for this is 0800 0159 559, rather than the usual Time to Pay lines.  The staff are supposed to be able to help with other bits of tax-related help and advice, although it’s not clear what those might be at this stage (other than arranging for the collectors not to pay you a visit just yet).

Statutory Sick Pay

It’s now easier for this to be claimed: it can be paid from the first day of absence due to Covid-19, or to self-isolation because it’s suspected.  This is mostly an issue for internal HR systems, really; which should make sure they have a reasonable way to check and document absences, especially as they are being told not to require a sick note from a GP.

Employers with fewer than 250 employees are going to be able to claim back the first two weeks’ worth of SSP per employee.  There isn’t a mechanism for this yet: the announcements just say that it will be set up ‘as soon as possible’, ‘over the coming months’.  I am not holding my breath on that one, but I am ready to be pleasantly surprised.

All the SSP changes are supposed to come into effect from the day the Statutory Sick Pay (General) (Coronavirus Amendment) Regulations 2020 came into force, which was Friday 13 March.  Those two days after Budget Day may be important, depending on how strict HMRC get on enforcement.

They also have a sunset clause, expiring after eight months (13 November).  So that tells us something about how long HMRC expect things to go on for.

For employers, the speed with which the repayment mechanism can be set up is going to be key.

Non-SSP

The self-employed will have to go through the benefits system, but can claim from the first day of illness or isolation instead of waiting for seven days.  They can be classed as having limited capability for work, too.

Apparently those who are self-isolating will not be required to go to a jobcentre to prove it, and the whole claim procedure is supposed to be ‘quicker and easier’ than it currently is.  Which is nice.

Business rates

Various discounts have been announced, but I’ve not seen anything about how they’re to be implemented.  It therefore looks as though they’ll just feed through the normal system, which presumably means that rates bills which have already been issued will need to be recalculated.

For those with full rates relief anyway, funds are available to the local authorities to provide grants which are meant to be £3,000 per business.  There are no details of how to claim – the process will presumably vary by authority.

Business loans

The British Business Bank is to support up to £1bn of lending by guaranteeing up to 80% of loans up to £1.2m.  This isn’t additional funding, it’s just supporting loans made by banks in the usual way. 

Anecdotal evidence suggests that banks are getting a lot of enquiries from businesses looking for cashflow loans, so one wonders whether one billion will be enough.

Congratulations!

Congratulations to our Daniel White for passing his Level 2 AAT Elements of Costing exam!