Further to recent developments, we have written to our clients stipulating the action plan they should have in place.
As a business, your lack of response will reduce your likelihood of survival. We share our thoughts on how to survive in these uncertain times, and how to BUY TIME.
At this present moment, the key importance surrounding many small businesses is survival. This is predominantly dictated by the link between time and cash. The idea being that we need to preserve cash for as long as possible, to ensure we buy the time to maintain the business in the long term.
Your response is key. The quicker you make these decisions, and action the elements below, the more time you buy your business.
We have been working with one of our clients, who is an ex-military strategist, combining his strategic perspective and our financial perspective to produce the below for our clients.
Expenses-Action Plan
With limited cashflow coming into the business during the upcoming months, in any normal situation where we witness a decline in income and cashflow, we would be determining which costs move from being ‘All costs’ (such a staff entertaining, directors optional pension contributions) to what we consider to be ‘Non-discretionary costs’ (the basics of what you need to operate your business- such as relevant computer software, phone costs).
However, these are unprecedented times and therefore there is now a third group of costs we need to move to – ‘Survival Mode costs’. Items that we would previously consider as ‘Non-Discretionary costs’ that the business would have to pay no matter what, such as computer software and phones, heat/light if applicable, are now costs which can be negotiated. Telephoning your computer/industry software suppliers, contacting your mobile phone company, contacting your utilities companies and asking for 3 months relief (not to be repaid, but simply so that they have the best chance of keeping you as a client for the long term). You need to start making these phone calls and stressing the importance of your business. Ask for 3 months free, ask for 50% discount for these three months- anything you can attain relief on). This will buy you time, which is what your business will need to get through this difficult time. If you have not done this already, this should be your plan this week. Look through your bookkeeping / your bank statements for the regular amounts that leave your account. Telephone those suppliers. Delay the cash payments / attain relief for 3 months.
We have produced a graph below which illustrates the importance of this, of TIME.
In some cases, revenue will have completely stopped, therefore the blue cashflow line is subject to differ dependent on the business and industry, but the general theory is relevant.
VAT Payments- Action Plan
VAT payments that fall due for the period 20 March to 30 June 2020 (thus this will include businesses with a 31 March QE, 29 Feb QE and 30 April QE), can delay the payment of their VAT until the end of the tax year 2020/21. Currently this is only for these returns at present. The payment still has to be made but no interest is applicable. Our advice is to take advantage of this and there is no application necessary. This buys your business TIME. If you are on a direct debit you need to cancel the DD if you wish to take advantage of this.
Note only: The returns still have to be filed, so please ensure you still file these.
PAYE Payments- Action Plan
PAYE payments remain subject to approval for delay. The COVID-19 helpline contact number for HMRC is on our website and on our Instagram and Facebook. You need approval if you wish to delay these. I advise doing this. Buy the business TIME. They are likely to give you up to the end of June in the short term.
Self-Assessment Payments- Action Plan
Many directors fall within self assessment due to their dividends. If we prepare your personal return we will have notified you if you have to make a payment on account by 31.7.2020 in your personal tax letters for 2018/19. Only self employed individuals have the automatic deferral of the second payment on account to January 2021. As a director, you are an employee with investment income- You are NOT self employed. Therefore if you wish to defer this payment you need to contact the helpline. This is not due until 31July 2020, so you can do this at a later stage in May/June.
Corporation Tax Payments- Action Plan
If you have corporation tax payments falling due within the next 3/4 months (companies with a June year end, July year end, August year end, September year end), you can request to delay your corporation tax payment. Again, you need to speak to the helpline.
Assistance with Wages- The Coronavirus Job Retention Scheme
We published an article which was sent to all clients on 24.3.2020, and has been published on our website regarding this scheme. There is not yet a date for this to be opened, and the grants are likely to be sent to businesses at the end of April 2020. Currently it is still not clear as to whether directors apply, however we are currently working with the assumption that they are if they have been furloughed, but this is subject to change as and when we receive more clarity. When we run the payroll for directors at the end of April, when more information has hopefully been released, we will be in touch regarding whether or not you have been furloughed. We are looking to claim this for our relevant clients when the portal is open if we run the payroll on your behalf. For clients we do not run the payroll for- it is your responsibility to claim this. We will publish more information on this when it is available. For details on how much can be reclaimed and procedures, see our article: https://www.hatherleigh.co.uk/news/employers-directors-formalities-financials-and-operations-the-coronavirus-job-retention-scheme
If you rent a premises/office
Grants are available for businesses who qualify for small business rates relief or rural business rates relief, up to £10k. Local authorities will write to businesses directly. No application is necessary. This is likely to be first week of April, so look for your letter in the post and if you have not received anything we advise contacting your local authority by the end of the second week of April 2020.
There will be a business rates holiday for the 2020/21 tax year for all businesses in leisure, hospitality and retail.
The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property. Businesses in these sectors with a property that has a rateable value of £15,000 and under will receive a grant of £10,000. Businesses in these sectors with a property that has a rateable value of between £15,000 and £51,000 will receive a grant of £25,000.
Check with your landlord or the local council if your premises is applicable.
For now, the above should reflect your action plan to ensure longevity. TIME IS KEY. This is reflected by cashflow. To give your business the best chance of survival, the above is important, as we are uncertain how long this will last, therefore action the above in order to maintain reserves in the event that this situation surpasses June 2020.
As soon as we have updates regarding directors pay, and the portal being open, we will be writing to our clients. We are currently checking this daily and we have updates from the ICAEW and HMRC as agents.
We wish you all the best for now, and stay safe.
