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Financial Support for SMEs

What’s available to businesses right now, and is it worth claiming?

Over the past few weeks, the Government has been making announcement after announcement around financial support packages for SMEs. Understandably, this has raised a lot more questions than answers.

Andy Eaton, Managing Director, Mount Business Services, has analysed and broken down what’s on offer for us. Here he puts it into an easy to understand, plain English guide.

What’s the score?

The Government are releasing support packages on an almost daily basis and the good news is that this is likely to continue.  There is something for most of us and we need to be flexible and ensure we are aware of the aid and whether it’s worth securing.

The cost, £350bn, is enormous and will need to be paid back one day. However, right now, it’s your turn to take control and look into the help being offered

First things first, look at your personal finances

As a business owner, the first and best place to start is by looking at your own expenditure and asking yourself; “Do I need it?” and if you do, “Do I need it now?” From this point, create and keep a simple 13 week cash flow forecast for your household and business.

Then examine other ways you can start making differences:

  1. Mortgage deferment:

This is available for up to three months to anyone not in arrears.  Apply to your mortgage provider online.

  1. Delaying IR35 in the private sector:

A massive bonus for single operator limited company contractors. This subject will return, but for now you have a year’s grace. Approach your client and insist on remaining independent for another year, the cash impact is every month for the next year.

  1. VAT deferment:

VAT registered businesses with a quarterly balance due between 20th March and 30th June, can defer until 31 March 2021.  This is a 12 month interest free loan from HMRC.  If you pay VAT by Direct Debit, you MUST cancel it before payment is due to take advantage of the scheme

  1. Income Tax instalments 31 July 2020:

If you pay by instalments, HMRC has offered to waive the second instalment due 31 July 2020 to 31 January 2021

  1. Corporation Tax deferment:

You can defer corporation tax due for up to three months or spread payments.  Call HMRC on 0800 0159 559 and follow the instructions.  Only you can do this, so make sure you have your Unique Tax Reference and company data ready for security checks

Note: You do need a clear reason to delay payment e.g. the impact COVID-19 and lockdown has had on cash collections, payroll payments to staff, paying key suppliers.  Anecdotally, HMRC prefer you to call when the balance is due, usually nine months after your year-end; for example, 1st April for a 30th June year-end.

  1. Staff Furlough:

Employees you can’t afford to pay due to Covid-19 can be “furloughed”, a major plank in the government’s strategy to keep people employed during lockdown and ensure we return to work in numbers to accelerate economic recovery.

HMRC will provide 80% of employee gross salary up to £2,500 for three months, commencing 1st March 2020.  To be eligible your employee must be on leave of absence and retain all contractual employee rights during the furlough period.  They can’t be employed elsewhere, unless part time worker for you or work on your business for free.

To deliver this, HMRC is currently developing an online solution. Be warned, HMRC has payroll data for all employees and less than honest claims will fall foul.

HMRC estimates the portal will be available from 20th April.  It’s worth speaking to your payroll provider for further advice.

  1. Business Grants:

This is ONLY available to Retail, Hospitality, or Leisure businesses using a property for business, e.g. shops, gyms or pubs registered as rateable by the local authority. Rateable values of £15,000 to £50,999 could receive a grant up to £25,000; less than £15,000 up to £10,000.  There’s no application and your Local Authority will be in contact if eligible.

  1. Business Rates Relief:

Again, this is ONLY available to Retail, Hospitality, Leisure, or Nursery businesses. You will not have to pay rates until 1 April 2021.  There’s no application and your Local Authority will be in contact if eligible.

  1. Government guaranteed loan scheme:

From 23rd March, SME loans of up to £5m will be 80% guaranteed by the Government with a 12 month interest  and possibly capital repayment free period. The loans will be provided through regular high street banks.

However, not all banks are offering the scheme, rates of interest after 12 months are variable and you may have to give personal guarantees.  The order of guarantee call-off, should you default, is: 1st personal guarantee; 2nd government; 3rd bank.  This loan may not be the best choice if you have other sources of finance.

To obtain finance you will need a valid reason, plan and cash flow, profitable prior year accounts, 3 months bank statements and 4 quarters of VAT returns if VAT registered.

  1. Loan capital repayment holiday:

Where you, or your business, already have fixed term debt it may be possible to arrange a repayment holiday. Halifax and Santander are two examples of banks offering this scheme.

As you can see, there is a lot available to businesses, but all come with their own pros and cons. We are living in extraordinary times, but we all have to do what we can to get through and come out the other end focused and raring to go.

Mount Business Services are financial experts who support owner-managed businesses that do not have the time or resources for a “fully staffed back office”, as well as growing businesses that do not want the overheads and distractions of a normal administration function. For more information contact Andy at andy.eaton@mountbusinessservices.co.uk.