There is no doubt that we are in the midst of an economic crisis that will affect all our businesses. Below are some financial tips and information to help your business at this difficult time, provided by our expert accountancy partners Whitemoor Davis and Butterworth Barlow.
The government have acted clearly and decisively to mitigate the impact on most businesses and individuals. This package of measures, announced by chancellor Rishi Sunak include:
- A Coronavirus Job Retention Scheme – this will cover 80% of wages costs for laid off workers. It will continue for at least three months and be accessed via an online HMRC portal. We await further details of how to access this.
- Deferring VAT payments – businesses are not required to pay any VAT before 30 June and will then have until 31 March next year to settle the deferred liability. No application is necessary, this relief will be provided automatically.
- Deferring Income Tax payments for the self-employed – payments due on 31 July will now be deferred until 31 January 2021 with no interest or late payment charges. This is a good short-term measure but potentially leaves taxpayers with significant tax bills six months later.
- A Statutory Sick Pay relief package for SMEs – up to £188.50 can be reclaimed for each employee who has had to self-isolate during the crisis (subject to meeting the minimum income requirements). As of yet, there is no mechanism in place for recovering this. We expect further details soon.
- Universal Credit for the self-employed - payable at a rate equivalent to SSP - £94.25 per week. We await further details.
- A 12-month business rates holiday for all retail, hospitality and leisure businesses in England. Cash grants of up to £25,000 per property will also be available. Local Authorities will administer this relief automatically without the need for a claim to be made.
- Small business grant funding of £10,000 for all businesses in receipt of small business rate relief or rural rate relief. Again, there is no need to claim this although the immense pressure on Local Authorities may mean that payments are delayed.
- The Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank – this should be available this week. A facility of up to £5m can be provided with no interest payable for the first 12 months.
- A new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans.
- The HMRC Time To Pay Scheme – this can give firms and individuals in temporary financial distress some breathing space in respect of outstanding tax liabilities. There is a dedicated HMRC helpline to call on 0800 0159 559.
- Mortgage holidays – borrowers can apply for a three-month payment holiday from their lender and this applies to both residential and buy-to-let mortgages and will not affect the borrower’s credit rating. Interest will still be charged and future payments are likely to increase as a result of the break.
- Rent holidays – tenants can apply for a three-month payment holiday from their landlord. The rent owed must be repaid later but may be hugely helpful to tenants in the short-term. The impact on landlords may be severe, particularly those with multiple properties.
Tips to help your cashflow:
- We suggest you do not pay the Crown (VAT or PAYE) if this is going to create a severe cash flow problem. The government have promised the financial support mentioned above. How this will work in practice is still unclear so hold off making payments until we have more information.
- Rent quarter day is at the end of the month. If you lease your premises, discuss with your landlord a postponement if payment of the rent will put your practice under financial pressure. Most Landlords would rather seek a temporary solution than lose their tenant all together.
- Contact your bank manager now to discuss and arrange a loan under the government disruption scheme to get you through the next six months. All the indications are that there may be a short peak but there is going to be a long financial tail. Under the scheme, the government is underwriting 80% of the loan so the risk profile for the bank is low.
- Regarding staffing levels, be flexible if you can agree reduced working hours in exchange for reduced pay in the short term. The cost of recruiting staff is not cheap, and it may be more cost effective, as well as better for morale, to keep current staff rather than downsize and then have problems upsizing or retraining new staff later. It may be worth asking or requiring (if employment contracts permit) staff to take annual holidays over the next four weeks, thus minimising overall disruption once normal working resumes.
- Make sure you talk to staff working from home on a regular basis and monitor their output - stay focused and part of the team.
- We would urge you do not take on any unnecessary financial commitments at this time.
Finally, having said all the above, if you have small suppliers who have provided goods or services to you, please pay them if you can. If we keep the money flowing, we can all try to operate as normally as possible for the benefit of everyone.
We understand this is going to be a tough time for many businesses across the UK, not just the construction industry. We also know how tight profit margins already are for Architectural Practices. We hope that many can continue to work on projects from home and keep some business areas functioning with some income being generated. This may be difficult, and you will not be alone. The RIBA and its partners aim to provide as much advice and guidance as possible to assist both individual Members and Practices at this time.
If you need advice, find the relevant contact information on the Accounts and Payroll for architects and practices page.