On Friday 2oth March, the British Government responded decisively with unprecedented measures around how they plan to support British businesses and individuals during the Coronavirus pandemic.
The closure of pubs, restaurants and the leisure sector, in general, represents the most significant enforced peacetime societal interruption to the nations pastimes and leisure activities. In a quite frankly, staggering series of measures announced by the Chancellor of the Exchequer on Friday evening, limitless funds were pledged to assist businesses and their employees to manage their finances during the looming uncertainties.
The existential threat of mass insolvencies, particularly in the leisure sector which the measures seek to avoid and at least the prospect of the industry falling off a cliff edge will have been a significant factor in the government thinking.
Support for Business Rate Payers
The Government has put in business protection measures with the announcement a rates holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year.
Occupied properties qualifying for this relief will be wholly or mainly being used:
· as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
· for assembly and leisure
· as hotels, guest & boarding premises and self-catering accommodation
A £25,000 grant will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.
To support smaller businesses and their business owners, the Government will also provide funding by way of a one-off lump sum grant of £10,000 to businesses currently eligible for small business rate relief (SBRR) or rural rate relief, to help meet their ongoing business costs.
The headline has to be the job retention scheme, known as Furloughed Workers, which will help employers and businesses retain their PAYE staff which would ordinarily be laid off or even made redundant during the crisis. Grants, funded by HMRC will allow furloughed staff to be paid 80% of their wages up to £2500. This is a truly historic moment as it is the first time a British Government has ‘paid wages’ in the private sector.
While this will be a real cost to the treasury, in the event of mass insolvencies, the treasury would be liable to meet redundancy costs of amounts owed to employees, so this scheme heads this off to some extent. Without knowing the devil in the detail, presumably, the ‘retained’ staff will stay on employers PAYE schemes. Therefore the exchequer will recover an element in this way.
Deferral of Tax Responsibilities
With the Business Interruption Loan Scheme announced just days earlier in the Budget and initially scheduled for six months, the announcement on Friday 21st March extends this to 12 months. Loans of up to £5m in value across a period of 6 years can be accessed, with the Government covering the first 12 months of interest payments and any lender-levied fees. A visible indicator of the fast-moving nature of the situation.
The Government also announced the deferral of VAT liabilities for the next quarter providing a significant boost to business cashflow. Businesses need to be aware that there is a deadline for repayment of March 2021. This is not a giveaway; it is a deferral and cashflow will need to be carefully managed to ensure that the extended deadline can be met.
While many are calling for more support for the self-employed (which we expect to see in the coming days or weeks), several fundamental changes have been put in place to support almost 5 million people impacted by a loss of earnings.
Following the support measures announced for businesses, the self-employed will no doubt feel short-changed with the steps afforded to them at present. For those who have COVID-19 or have been advised to isolate will be able to access Universal Credit payments in full at a rate of SSP available to employees which equates to £94.25 per week. The primary benefit afforded the self-employed at this stage is the deferral of Self Assessment payments due in July to January 2021.
Changes to Universal Credit and Working Tax Credits will help up to 4 million vulnerable households to the tune of an estimated £6 billion as will the relevant housing benefit uplift to cover at least 30% of market rents.
The treasury has clearly timed these announcements at the very point where it is predicted that the effect of the virus is set to grow exponentially. These are fluid measures and under constant review. There will no doubt be consideration around terms of eligibility and possibly existing track records of individual businesses. Nevertheless, they are bold measures, and the Government have taken the correct blunderbuss approach when faced with such an unknown enemy.
Long term considerations
Businesses and individuals need to keep in mind that not all these coronavirus business support measures are a blank cheque and will need to be repaid in the short to medium term.
At Poppleton & Appleby Northern, the partners and vastly experienced staff are available to discuss any issues with accountants or businesses directly. We also have a network of funders who have promised to look at situations positively, including panel members of the Coronavirus Business Interruption Loan scheme, which is backed by the British Business Bank.
To discuss your current position and if the measures will see you through the long term, please do not hesitate to contact us to see how we might be able to support you.
Poppleton and Appleby have also been invited by Skipton Business Finance to be one of their valued partners in relation to introducing businesses who may be eligible for the Coronavirus Business Interruption Loan Scheme.