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As the dust settles and the detail emerges from the March 2020 Budget, we wanted to share the key takeaways for Small and Medium-sized Enterprises (SMEs). There have also been some additional updates since this, which are captured here.
A more complete summary of the Budget can be found here. Please be mindful however that some of this has been superseded by the £330bn+ stimulus package announced by the Government on 17th March 2020. These additional policies, as much as is currently known, are captured below.
Whilst it is good to see some movement in the right direction here, and potentially more to follow, there is still a need for more support of the self-employed and workers alike.
Rates Relief
Small businesses can claim £10,000 (previously £3,000 cash grant in the budget), with further announcements on rates expected later this year. It is not clear on the mechanism for doing this however and we recommend you speak to your local rates office to find out more, although it should become clear in the next two to four weeks. One such office said that this should be an automatic process, which wouldn’t require an application, but we await confirmation if this is indeed the case.
There is more specific relief in the retail, leisure and hospitality sectors here and more to come.
Business Interruption Loan
There will be a special loan available for Small companies who are hit by the Coronavirus, as a temporary Business Interruption Loan.
The British Business Bank will deliver the loan scheme, which “will be in place in a matter of weeks” to support SMEs to access bank lending and overdrafts. Interest rates will be similar to current bank lending as the Government will forgo their 2% premium which they charge on the similar Enterprise Finance Guarantee scheme (‘EFG’).
Essentially the Government will provide the lenders with an 80% guarantee of the loan, with the lending provided by a pool of lenders, supporting loans of up to £1.2m per small business (with anticipated total lending here to hit £1.2bn). We believe this is going to be extended as part of the £330bn package, but details have not been released yet. There also might be specific help available here for the aviation industry.
However, ultimately this is a loan and it will still need to be repaid, it’s not the simplest and it’s not been launched yet so it is unclear how helpful this might be.
Tax helpline
HMRC have set up a specialised helpline and employed 2,000 specialised staff to help support businesses and the self-employed concerned they will not be able to pay their tax on time, specifically due to the coronavirus. In additional to practical help and support, if you are unable to pay your tax as it falls due, they can explore:
- agreeing an instalment arrangements;
- suspending debt collection proceedings; and/or
- cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately.
Their scope is therefore above and beyond what can be provided as part of a time to pay agreement, so if you need to, we suggest you get in touch with them as soon as possible.
Their opening hours are Monday to Friday 8am to 8pm, and Saturday 8am to 4pm, and they are often less busy first thing and last thing.
IR35
Effective from 6th April 2020, contractors working through Personal Service Companies for Medium and Large end clients’ were to have their IR35 status established by their end clients’, in line with the previous changes to the Public Sector. Small end clients’ remain outside the scope of these changes.
Sensationally last night it was announced that the reforms to IR35 will be delayed by 12 months, due to pressure from the House of Lords and coronavirus.
If this had been changed six or nine months ago, this would be the headline winner. However, to put it simply this is too little to late for many contractors who have already lost their roles, been forced into PAYE positions and often been hounded by HMRC.
It is also a deferral and the government remain committed to its reform, at least at this stage. This group in particular are likely to be the first to lose their roles as businesses make tough decisions.
Research & Development
Whilst there is limited good news for smaller businesses here, SMEs who claim some of their relief under the large company scheme (for example for work undertaken for large companies) will see the RDEC increase from 12% to 13%. We would have liked to have seen improvements to the SME rates, but we can’t have everything.
However, if you have a limited company, I would think long and hard if have any genuine advancements in science or technology as part of your business, which incur costs. The relief remains very generous, for HMRC the claims are processed quickly, and it could wipe out your corporation tax / general a loss / refund position.
Consider leveraging the generous R&D tax credits, especially if you’re a limited company engaged in genuine advancements in science or technology.
Entrepreneurs Relief
One of the surprises of the day that for those potentially looking to sell their business in the foreseeable future, the good news was that Entrepreneurs Relief will be retained. Although the lifetime allowance will be reduced from £10m to £1m.
Here the owners of businesses can pay tax at just 10%, on the sale of qualifying assets, subject to certain conditions.
The Chancellor believes this should not materially reduce the incentive to start and build businesses, with 80% of businesses unaffected. The relief is that it is still available. It won’t help you day-to-day, but at least you will still get the benefit from all your hard work.
Other tips
At this difficult time we all need to come together to support and help one another. Other than the above schemes, there are also a few things you might be able to do to help your business, above and beyond the government schemes mentioned above. These can include:
- Act now, plan, prepare and be ready, whatever the scenario;
- Prepare cashflow models for your business, to understand how your position is looking and when your issues will arise under different scenarios;
- Go through your profit and loss account; are there any costs you can strip out? Today, next week, next month? Do you need to set the ball-rolling now, especially as some services require a notice period?;
- If you have a landlord (for business or personal) talk to them and see if there is any flexibility in your current arrangement. They are potentially getting relief, maybe they can pass this along to you to keep you as a tenant?;
- Manage your debtors and creditors. Don’t pay anyone before you need to and get money in from your customers as quickly as you can. Maybe look to see if you can extend credit terms, payment days or put things on direct debit to spread payments and ultimately improve your working capital;
- If you have any lenders, keep communicating. If you are going to have any issues with payment, the earlier you communicate the better. However, you never know, they may be able to accept delay payments, payment holidays or potentially even extend your current facility to you. Again they might be getting some help here, so maybe they can pass this over to you.
Contact Black and White Accounting
These are unprecedented times. If you want someone to talk through your position with, you need help with modelling your scenario and what could happen, or need clarity on any of the above, please get in touch with us today.
Even if it is not our direct help, but some one of our Strategic Partners, do get in touch and we can see who is best placed to help you. At this time especially, they could include a Business Recovery Specialist, Debt Advisor, Debt Collector or HR Consultant, to name but a few.
Email us, complete the ‘Got a Question’ form on the right-hand side, or call us today on 0800 140 4644. We look forward to talking further with you.
