How UK SMEs can stay afloat amidst COVID-19 lockdown

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“The government lockdown doesn’t have to spell the end for SME businesses,” says ParcelHero. The worldwide delivery company has laid out steps for SMEs to take to still be in business next year.

Retain key workers, even if they are not essential right now. The Coronavirus Job Retention Scheme (CJRS) enables employers to access grants, by the end of April at the latest. The government says 80% of gross wages in the private sector, up to £2,500 a month, for those not working and who would otherwise have been laid off, will be covered by these grants from HM Revenue and Customs.

Don’t exploit the system. The latest guidance says that employers can choose to top-up CJRS pay, either for the unfunded 20% of pay or the amount above £2,500 for higher earners, but this will not be a formal requirement to obtain access to the scheme. Our advice is that those companies who do top-up pay will be more likely to retain key workers post-crises. We also advise companies not to try and manipulate the scheme. Where a business can carry on without those physical interactions, for instance by working remotely, it should be business as usual. The scheme isn’t designed as a wage subsidy for SME employers.

Reclaim sick pay coverage for current workers. A new scheme will shortly be available to allow SMEs to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to Covid-19. This refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of the virus. Employers should maintain records of staff absences and payments of SSP, but employees don’t need to provide a GP fit note. The Government says it will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible. Investigate potential CBILS Government backed loans. The newly founded British Business Bank’s Coronavirus Business Interruption Loan Scheme (CBILS) facilitates business loans to smaller businesses that are viable but unable to obtain finance due to having insufficient security to meet the lender’s normal requirements because of the Covid-19 crises. In this situation, CBILS provides the lender with a government-backed 80% guarantee against the outstanding facility balance.

The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.

Be cautious of CBILS risks. CBILS does come with strings. The borrower always remains 100% liable for the debt. Any loan of over £250k will need to be secured by company assets. SMEs should ask themselves; do you really need to borrow against a secured loan now?

Read the small print of CBILS’ terms. CBILS is for borrowing proposals, which if it were not for the current Covid-19 pandemic, would be considered viable by the lender. Research how much more generous the CBILS’ terms really are than the suspended Enterprise Funding Grant (EFG) scheme SMEs may have applied for previously. ParcelHero believes it is vital the Financial Conduct Authorities’ CBILS guidance is taken into account by lenders that they must take on board the spirit of the new loan scheme and not stick to former ‘peacetime’ criteria. Otherwise the nation just undertook to back 80 % of loans banks would make anyway.

Defer VAT and Income Tax payments. An automatic VAT deferral will apply from 20 March 2020 until 30 June 2020. No applications are required for the deferral and businesses will not need to make a VAT payment during this period. And, for the self-employed, Income Tax Self-Assessment payments due on the 31 July 2020 will be deferred until the 31 January 2021.

Use the HMRC Time To Pay Scheme. One final useful Government measure is the announcement that all businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements will be agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. If an SME has missed a tax payment or might miss its next payment due to COVID-19, it can call HMRC’s dedicated helpline: 0800 0159 559.

“Hard though it is to believe right now, as the full impact of the virus only begins to take hold, but there will be a time when this is over,” says David Jinks, ParcelHero’s Head of Consumer Research.