[UPDATED 3 MAY 2020]
The coronavirus or COVID-19 crisis spiraled in the month of March, leading to a UK wide lockdown, affecting businesses of all kinds across the country. What does this mean for your business in the retail, hospitality and leisure sector?
Alongside the travel industry, the retail, hospitality and leisure sectors have all been hit hard by the coronavirus crisis. People slowly started to avoid going out shopping, to restaurants and to gyms. Eventually, as the crisis got worse, the government took further steps and initiated a lockdown, forcing many businesses in these sectors to close their doors.
This will probably mean there’s little to no income for your business.
However, the Government have now offered financial support for you and your business. So, what is available to you?
Watch our video to find out more, or read about it below.
Please note that the video was recorded on 27 March 2020 and amendments have been made since. The text is being updated for these amendments.
Business Rates Relief and Grant
There will be a 100% discount on business rates from April if your business is in retail, leisure and hospitality.
There will also be a £10,000 grant for retail, hospitality and leisure businesses operating from premises with a rateable value of less than £15,000. This will rise to a £25,000 grant if you are operating from premises with a rateable value between £15,000 and £51,000.
These grants are per premises, ie you can have more than one grant.
These reliefs will be administered by your Local Authority, so any queries should be directed to them. Most Local Authorities published an online claim form at the end of March, so please check the local website.
This grant will surely bring some very useful income into the business, including personal living costs during the months you will be closed.
Just remember to check that it is you who pays the rates. In the past few days, we have had some clients enquire but get told they are ineligible, as their landlord is down as the rate payer – meaning that the landlord will be eligible, and you are not.
There was Top-Up scheme announced on 2 May for small businesses who missed out on the original grant. This is aimed at businesses who pay for premises but are not the rates payer.
Job Retention Scheme
The first amount of direct cash that is available comes from the Job Retention Scheme.
Here, the employees of the company will not have to be made redundant or laid off. Instead, they can be “furloughed”. This means that the government will pay 80% of an employee’s gross pay for up to four months, up to a maximum funding of £2,500 per month.
This will be particularly useful for those businesses that have had to close completely during the lockdown, or if other closures have caused income to fall or stop entirely – meaning that the business will be unable to pay staff from its own resources. The idea is that businesses can retain their employees until the lockdown ends, and they can then resume employment.
As the employer, you can also decide to cover more of the employee’s wages, but this is not legally required.
To make sure that you are furloughing correctly, seek HR advice. There is a legal process to go through to make sure that everything is done properly.
Who is covered?
You can only furlough employees who were on your payroll prior to 19 March 2020 and included in an RTI submission to HMRC by that date.
If you had already laid somebody off prior to the scheme being announced, then you can also bring them back onto payroll using this scheme as it can be backdated to 1 March 2020.
How much is covered?
The amount covered by the Government will be based on the amount paid in the February payroll. If someone joined mid-month, it will be pro-rated.
If an employee is on variable pay, you can pay (and claim) based on:
- Their pay in the corresponding month one year earlier; or
- Average pay from 1 April 2019 to 31 March 2020 (or the months that they worked if they after 1 April 2019)
The scheme is not intended to cover discretionary bonuses, commission or tips.
You can claim for payments you are obliged to make and also include overtime worked in the corresponding month or average pay.
The maximum claim to cover gross wages is £2,500 per month.
Employer’s National Insurance and any Employer pension contributions will also be covered on top of this.
How do I claim?
There is an online portal.
When does the scheme end?
The Government recently extended the scheme until 30 June 2020.
What work can my employees do when they are furloughed?
There has been some confusion over this, and the advice given is that the employee can not do any work at all. They can’t do anything that generates revenue or provides a service to the business but they can do training.
You can’t part-furlough someone – it’s all or nothing.
The minimum length of furlough is 3 weeks.
Statutory Sick Pay
Usually with Statutory Sick Pay (SSP), an employee must wait until their fourth day of sickness before they can claim sick pay. However, if anyone working for your company has coronavirus, they can claim SSP from day one.
The Government will now pay for the first two weeks of SSP for employees impacted by coronavirus. Normally, the business would have to pay this, and under normal circumstances it cannot be claimed back.
With the coronavirus situation in mind, the government will pay £94 a week for two weeks.
For cash flow aid, much of the help provided seems to be in the form of payment deferral.
Income Tax payment deferral
There will be a six-month deferral on your personal tax Payment on Account due on 31 July. The payment date will now be 31 January 2021.
This will still have to be paid but, for now, it should help you with some cash that can be used elsewhere.
If you are VAT registered, you won’t have to pay any VAT in this quarter. Payments due between 20 March 2020 and 30 June 2020 do not need to be paid until 31 March 2021.
However, if you’re on a Direct Debit, you do need to cancel it so they don’t automatically take the cash.
Like the income tax Payments on Account, the VAT will still have to be paid but, for now, it should help you with some cash that can be used elsewhere.
Delays to paying your taxes
HMRC has a dedicated coronavirus helpline on 0800 024 1222 if you’re struggling to pay a tax bill due to coronavirus / COVID-19. You should be able to get a Time To Pay agreement to delay or stagger any tax payments.
Coronavirus Business Interruption Loan Scheme
The brand-new Coronavirus Business Interruption Loan Scheme has been introduced by the Government and is a package worth around £330 billion. This is not free money; it’s guaranteeing the loans to make it easier for you to get the credit you urgently need.
The idea of this is for the government will guarantee 80% of loans between £50,001 and £5 million, but it’s ultimately a case of going to the lender, and this scheme might help you get that loan you need.
You need to have a business bank account and the details are as follows:
- The Government will cover 12 months’ worth of interest payments
- The Government will back the loan – meaning it will be easier to get credit
- The Government are not guaranteeing they will pay it off if you can’t (speak to the lender about this).
- The lenders will not need a personal guarantee for loans up to £250,000 but will do so for amounts larger than that.
If you do want the loan, the first port of call would be your bank.
The good thing with this scheme is that the government have committed to paying the interest on these loans for the first 12 months, as well as arrangement fees! So, if you can afford to pay back the loan within 12 months, you’d have to pay no interest, making this a very affordable cash injection.
Bounce Back Loan scheme
A “mini” version of the scheme above, this is for loans between £2,000 and £50,000.
This loan is 100% backed by the Government, will have an interest rate of 2.5% per annum, and no capital or interest repayments in the first 12 months.
- Borrowing from £2,000 to £50,000
- Amount capped at 25% of turnover
- No interest or capital repaid in first 12 months
- Loan lengths up to 6 years
To be eligible, you need to tick three boxes:
- You’re based in the UK
- You’ve been negatively affected by Coronavirus
- You weren’t an undertaking in difficulty on 31 December 2019
What about me, the Director of a limited company?
As the Director of the company, there’s not a lot directly available to you. However, you could furlough yourself to become eligible for the Job Retention Scheme and have 80% of your salary covered.
Like a regular employee of the business, you cannot be involved in providing services or generating revenue for the business. This is inherently tricky when you are the Director, because even if you are just paying some suppliers or submitting a tax return, that is classed as providing a service to the company. So, if you’re a one Director firm, it’s tricky to be furloughed and apply for the coronavirus Job Retention Scheme.
As previously mentioned, you could also defer income tax payments on 31 July 2020.
The Government have asked mortgage lenders to give three months holiday on these repayments. It’s just a deferral once again, and it will be repayable on the interest paid on the mortgage holiday. But this will at least free up some cash for the next three months for other uses.
This is only available on residential and Buy-to-Let mortgages.
Not every application will be approved as your lender will look at whether it would actually be helpful. The banks have confirmed it will not affect your credit rating.
HOW CAN WE HELP?
At this time, it’s vital to understand your cashflow and access to finance. You also need to know which costs you can cut, or where you can increase sales.
We can help in all of these areas and would be happy to do so. If you need more information or guidance, then we would be happy to arrange a phone call/video call with you so that you know what you need to do.
If you’d like to (virtually) meet, please ring us on 0151 380 8080 or email your favourite Liverpool accountants at email@example.com . We look forward to hearing from you.