Essential planning for the future of your business

Businesses are gradually starting to understand how they might be affected by the financial impact of COVID-19.

As they start to transition from crisis management to securing the future resilience of their organisation, what are consequences of some of the Government backed initiatives that have been introduced recently and how might these might affect businesses over the next few months?

Coronavirus Job Retention Scheme (CJRS)

The Coronavirus Job Retention Scheme (CJRS) has allowed many businesses to receive grants from the Government to cover all or some of the costs of employees’ wages.  This Scheme is gradually changing and from 1 August employers will have to pay NIC and pension contributions on wages, rather than these being covered by the Scheme.  Subsequently, from 1 September, employers will have to contribute towards the wages of staff who are still furloughed.

This will mean additional costs for employers and so now is the time to think carefully about the approaches you take to managing cash in your business.  The increased financial implications may even mean that some employers will reluctantly have to let people go, with the resulting redundancy costs.

At this time, it is vital you have an accurate understanding of your current cash position and creating cashflow forecasts for next 3, 6 and 12 months will also help you to plan ahead for these various eventualities. Keeping your figures as up to date as possible and knowing how your financial position might change in the future will allow you, with the support of your accountant, to make informed strategic decisions about the future of your business going forward.

Income Tax and VAT Payment Deferrals

The Government have also allowed businesses to defer payments of Income Tax, due on 31 July, and VAT, due up to 30 June, until January 31 and March 31 respectively, and in addition have entered into Time to Pay arrangements with businesses for other taxes such as PAYE and Corporation Tax.

All these initiatives have been welcomed by businesses – but eventually, the tax will have to be paid. Businesses now need to plan ahead and ensure that these payments are included in their cash flow considerations over the next few months.

Coronavirus Business Interruption Loan Scheme (“CBILS”) or the Bounce Back Loan Scheme (“BBLS”)

If businesses are likely to be struggling to meet their future costs, it is still possible to apply for Government backed loans under the CBILS or the BBLS.

It was mentioned then that CBILS would initially run for six months and it is therefore possible that any business that has not already applied for such a loan will need to do so by the end of September.

The BBLS will run until 4 November 2020, with the Government retaining the right to extend this.

With regard to the BBLS, the terms of the loan are reasonably generous. The Government has set the interest rate for this loan at 2.5% per annum and the repayment term is fixed at six years. No repayments will be due during the first 12 months.

CBILS are available on repayment terms up to six years. The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees. The borrower will therefore benefit from no upfront costs and lower initial repayments.  Interest rates after 12 months vary between lenders and depend on the specific lending proposal.

However, it is important to be aware that businesses remain 100% liable to repay the full loan amount, both for the BBLS and the CBILS.

It is also important for businesses to realise that it takes time for these loans to be finalised (CBILS can take 4 to 6 weeks) when considering future cash flow requirements so action should be taken sooner than later to apply for such loans.

The UK Government is constantly updating and reviewing assistance available and so it is important to continue to review the current information on financial support schemes you may be eligible for.

Naylor Wintersgill Chartered Accountants

The Naylor Wintersgill team have been working hard to proactively support all of our clients during this difficult time and providing assistance such as applying for Government loans.

If you need support, please do not hesitate to get in touch with our team on 01274 733184 or email