The latest information on the support available to businesses and employees from the UK Government is explained on our website here.
In such a rapidly changing and demanding economic situation, many businesses are asking themselves what their immediate next steps should be. Based on our experience and the guidance issued by the UK Government, here are our key recommendations.
Ensure you have a cashflow forecast. While uncertainty of income makes this more challenging, it is important to assess the potential damage to your business. Our expertise in advising businesses at all stages of their lifecycles means we can offer guidance on cashflow forecasting and management: please reply to this email if you would like assistance.
Consider employee costs. Coronavirus has forced unprecedented economic conditions upon most businesses, putting many in the unwelcome position of having to rationalise costs – and employees are usually the biggest cost for businesses. You should explore all available options, including:
- Redundancy: if you have employees who you wouldn’t re-employ, consider making them redundant at this time.
- Coronavirus Job Retention Scheme: government grants for up to 80% of salary of employees who would otherwise be laid off and are furloughed up to £2,500 per employee, backdated to 1 March. Being furloughed means that employees would be kept on the employer’s payroll rather than being laid off, but with no work to do. The scheme is due to be launched before the end of April; initial details are available from the government here.
- Temporarily reducing your company’s operational hours and your people’s working hours, with commensurate reduction in salary– if you don’t have lay-off clauses or a short-time working contractual right in your contracts, consultation is required.
- Directors might consider living off capital if possible, borrowing money from the company instead of on payroll; and if taking dividends, consider leaving until after 5 April 2020 to defer personal tax.
We have more information about redundancy considerations, including possible alternatives, in this article on our website.
Defer taxes.
- For VAT, the next quarterly payment due between 20 March 2020 and 30 June 2020 will be deferred until the end of the 2020/21 tax year.
- For personal tax, the payment due on 31 July 2020 by the self-employed will automatically be deferred until 31 January 2021.
- Under Time To Pay, HMRC will discuss deferment of other taxes (corporation tax, PAYE etc) on a case-by-case basis for businesses and self-employed people in financial distress, and with outstanding tax liabilities, who are unable to pay due to coronavirus. More details are available on the government page If you cannot pay your tax bill on time.
Review all other costs, such as:
- Rent: negotiate with your landlord for a deferment at worse, a payment holiday at best.
- Rates: do any of the government schemes (listed here on our website) help? If not, it’s worth talking to your local authority.
- Expenses: stop all that are unnecessary.
- Suppliers: make pay arrangements.
- Personal costs: look into deferring payments, especially for mortgages (mortgage borrowers can apply to their lender for a three-month payment holiday), and council tax (by speaking to your council)
Above all, we should all continue to act responsibly. The unprecedentedly far-reaching impact of this crisis means that every business, and every person, has a duty to be considerate and supportive. It’s never been truer that we’re all in this together.
As new measures are announced by the UK Government, we are continually updating our website’s dedicated coronavirus section with a range of guidance and insights on responding to the current situation.
We wish you, your families and your colleagues the best of health.