Keep Calm and prepare (4)

25th March 2020

The Government update yesterday evening whilst declaring a national emergency and imposing a near full lock down, announced no further financial initiatives.  Whilst it is hoped that more will be forthcoming, it is worth summarising the package to date. We urge you to complete a business plan, utilising as many of the government schemes as possible, with the fundamental objective  of preserving cash for the difficult time ahead.

Do not underestimate the need to establish the viability of your business prior to the current world crisis.  Bring your accounts up to date, demonstrating that the business is fundamentally viable.  Then prepare profit and cashflow forecasts for at least the next 9 months, incorporating the government assistance that is available.

Coronavirus Job Retention Scheme
Designate affected employees as “furloughed workers” and notify your employees of the same.  HR legal advice is recommended.  If there are long term redundancies then consider utilising the Insolvency Service Financial Difficulty Scheme. This is less publicised  however on application The Insolvency  Service will make a soft loan for redundancies, if by doing so it preserves other employment

Deferring VAT and Income Tax Payments
No VAT is payable for the next 3 months (20 March 2020 until 30 June 2020), but this is repayable by 5 April 2021.

If you are self employed, Income Tax Payments due in July 2020 will be deferred until January 2021.

Time to Pay HMRC
 If you currently have VAT, PAYE/NIC or Corporation tax due, consider applying to HMRC for a time to pay agreement.  We would suggest an assumption of repayment over the period July 2020 to December 2020, although HMRC may give you longer.

If you have business interruption insurance seek advice from your solicitors as to whether you can claim now.  We understand that most policies exclude pandemics, but check it out.

Sick Pay to employees
This covers up to 2 weeks SSP per eligible employee who has been off work because of COVID-19.  The repayment mechanism is not yet in place but record the instances now.

Business Rates
A business rates holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year is being introduced. If you quality then do not pay 2020/21 business rates.

Cash Grants for retail, hospitality and leisure businesses.

The grants are up to £25,000 and your local authority will write to you if you are eligible.

Coronavirus Business Interruption Loan Scheme (“CBILS”)
If you had a viable business before COVID-19 and having taken advantage of the above measures, require a loan to get through the coming months, then make the application, preferably through your current lender.  We repeat, prepare a comprehensive business plan that demonstrates that but for COVID-19 there is a viable business, which will once again become viable, when the current crisis is over. Use your current advisers to ensure that your borrowing request is as robust as possible.

In addition to the above the government is said to be introducing a moratorium whereby business tenants can withhold rent for 3 months without risk of forfeiture of their lease.  The provisions simply delay the right of forfeiture and do not affect a landlords rights to claim forfeiture or recover rent at the end of the period.  Businesses should also consider seeking repayment holidays on finance loans/agreements in the short term to enable them to create the cashflow headroom to consider options going forward.

For larger businesses the Government has introduced the new COVID-19 Corporate Financing Facility whereby the Bank of England will buy short term debt from larger companies.  We would expect such companies to be already taking the appropriate professional advice.

Many of the above schemes commence this week and therefore we again urge management to prepare now as we are already aware that lenders are inundated with loan requests.  Make it easier for the lender to say yes.

If, having prepared your business plan, the future is still too uncertain, then consider formal restructuring routes such as a Company Voluntary Arrangement (“CVA”).  Whilst this is very much a “B” plan, if you need to understand how such a procedure could save your business, then please do not hesitate to contact one of us for a confidential and without charge discussion.

If you require any further information please don’t hesitate to call one of us on the numbers below;

Paul Ellison                          07967 471211 / [email protected]
Robert Keyes                       07500 933 022 / [email protected]
Gareth Roberts                    07979 706 392 / [email protected]
David Taylor                         07855 231 103 / [email protected]