CHW coronavirus client Q&A summary – 9 April

On the 9 April we held a Q&A session for clients through Zoom and were delighted to welcome over 30 attendees. Guests were able to hear from a panel of experts at CHW.

The team helped to demystify the current package of help from the Government and provided some valuable information and advice to assist business during this turbulent time. Our thanks also to Catherine Kerr from Primas Law who provided her insight from an employment law angle.

We have provided a summary of some of the key topics that were discussed. We will be holding future events for clients and contacts, do drop us a line if you would be interested in attending hello@chw-accounting.co.uk

Summary of the items discussed:

1.       Catherine Kerr, Partner and Head of Employment at Primas – Employment Law

Catherine discussed the Governments Coronavirus Job Retention Scheme and its potential impact for businesses as an alternative to redundancy.

Businesses will be able to furlough employees for a minimum amount of three weeks and the Government will pay the lower of 80% of their wage or £2500 pcm.  To read more about the scheme and how to apply please see our dedicated blog.

Some key points from the questions asked:

  • Employees are not to undertake any work whilst furloughed.  This includes, but is not limited to – replying to emails, taking calls or even promoting the business on social media.
  • Employees can however keep in contact with colleagues and partake in social activities i.e. zoom calls of a social nature.  They can also undertake training including internal training with colleagues and external training via other providers as well.
  • Employee can come in and out of furloughed as the business needs. However, furlough pay under the scheme isn’t triggered until they have been furloughed for 3 consecutive weeks so a rota shouldn’t be less than 3 weeks. When an employee returns to work, this will interrupt furlough and if they are furloughed again that will be a new furloughed period.
  • Contractors and those on the peripheral etc. need to be reviewed on a case by case basis. For those operating via an agency or umbrella company, the responsibility for applying for any money via the scheme will likely fall on the agency or umbrella company as the “employer” not the end client.
  • Currently a grey area over what work directors can undertake whilst being furloughed.  Directors have a personal responsibility to ensure the business is run correctly as well as their fiduciary duties to act in the best interests of the company, but if furloughed they are unable to do more than basic functions i.e. keeping in touch with staff, filing accounts etc. Technically, Directors can furlough themselves but in reality they can’t because it is almost impossible for them to not work on the business in the meantime to survive the crisis. There is hope the Gov will provide more clarity on this over the coming weeks.
  • HMRC have just issued clarification that employees can use their holiday allowance whilst furloughed, but the employer will have to pay them full pay and would be unlikely to be able to claim that day/period via the scheme. Although possibly they could claim 80% and top up the 20% to full pay. More guidance is needed. This suggests however it wouldn’t interrupt the overall furlough period. This also suggests there is nothing wrong with asking employees that are not furloughed to take holiday during the lockdown. You could honour pre-booked holiday or give notice of your intention for an employee to take holiday i.e. double the notice of the holiday required.
  • Furloughed employees will continue to accrue the statutory holiday allowance of up to 4 weeks, which the business can then spread over a two year period. It may be wise to amend your holiday policy to allow working employees to carry over holiday accrued during the lockdown to also use over a 2 year period to give the employer some flexibility so everyone isn’t trying to take holidays at the back end of the year.
  • Moving forward, HMRC probably don’t have the time or inclination to investigate every furlough application under the scheme. But they are likely to carry out random investigations over the coming years in a similar way I imagine to IR35 investigations. Please be careful.
  • Open communication with staff is key. It can help to make sure they understand the business reasons and what the company could look like if you don’t take measures such as furlough and what it could look like if you do. Furlough is about saving jobs which is positive so try not to be too downbeat when approaching staff. You’re not “disheartened” but rather positive about this short-term measure and the Govs support to get everyone through the crisis still being able to pay their bills with a job at the end (hopefully).

2.       Georges Daubney – Tax

All VAT payments due between 20 March 2020 until 30 June 2020 can be deferred. Therefore quarters ending 29 February, 31 March and 30 April 2020 can all be deferred. This is automatically available and there is no need to apply. HMRC will not charge any interest or penalties on this late payment. Any outstanding liabilities must be paid by 31 March 2021. You still need to submit your VAT return on time as late submission penalties will still apply. If you pay your VAT by direct debit you need to ensure the direct debit is cancelled if you would like to take advantage of this scheme.

Whilst it is difficult getting through to HMRC, we have seen more resources directed towards the helpline. Our advice is to persevere with the HMRC helpline as there are benefits to be had from doing so.

We are handling an increase in R&D claims for clients as they are useful tool for reducing tax liabilities.  We are also not seeing any delays to the usual 4 – 6 weeks it takes to process a claim. We would encourage all clients to explore this option.

All 2nd Payment on Accounts for 2019/20 which are due by 31 July can be deferred until 31 January 2021. This is automatically available and HMRC will not charge any interest on this late payment. If your dividend income for 2019/20 is going to be reduced then they may wish to claim to reduce their payments on account and reclaim the 1st payment on account made on 31 January 2020.

Coronavirus job retention scheme online portal for claims is expected to be open from 20th April 2020. Further details are available at https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

3.       Benjamin Day – Business Funding

The last couple of weeks has shown that the Business Interruption Loan Scheme is evolving.

We have seen the Government have put more pressure on banks to get funds out to companies quicker than they have been doing.

We have seen some exceptional cases being portrayed in the press. For more clarity on what is the best option for you, speak to your bank.

Since Friday, it has been announced that banks will no longer be taking any personal guarantees.

We are seeing that the application process is a lot quicker if you are applying for less than £250k and the business turns over less than £2m. Larger loan applications are still needing some level of underwriting.

Some banks have now have an automated application process online. Three questions are asked and there is a need to link your sage account to the application making it easier to review accounts.

All banks are different, for more advice we would recommend you contact your bank as the process isn’t a one size fits all.

What is clear is that you have to have the preparations done before applying for the Business Interruption Loan.

Cashflow forecasting model – you will receive better terms from the bank if you have a cashflow forecast.

A bank will want you to prove viability pre and post Coronavirus and the steps you’ve made in the interim.  Basic set of forecasts, the historical viability of the business to show how the businesses financial performance will track during Coronavirus, including the steps taken will be critical for the bank.

Relatively simple business plan will also need to be put together which we have a template for and are more than happy to sit down with you to discuss this.

4.       Nick Brierley – Business Recovery

Our Business Recovery division are also aware that Time to Pay Arrangements, which are granted by HMRC, are not currently being means tested and automatically granted when requested by companies.

In addition, there has been the announcement that there is a moratorium on wrongful trading claims made by Liquidators/Administrators against directors that will be applied retrospectively to 1st March 2020 and will be in force for three months. Wrongful Trading is an offence that occurs when a company is placed into a formal insolvency process (but not a Company Voluntary Arrangement) and the appointed practitioner considers that the director “knew or ought to have concluded” that the company was insolvent earlier than when the actual insolvency event occurred.  To find out more information on this please see our dedicated blog.

Nick reminded that in general, directors should still be mindful of their fiduciary duties and usual duties to stakeholders.

If you would like any more information on any of the above then please do not hesitate to contact any of the panel members on the details below;

Rob Lord – rob.Lord@cowgills.co.uk

Ian Orgill – catherine.kerr@primaslaw.co.uk

Benjamin Day – benjamin.day@cowgills.co.uk

Georges Daubney – georges.daubney@cowgills.co.uk

Nick Brierley – nick.brierley@cowgills.co.uk

Catherine Kerr – catherine.kerr@primaslaw.co.uk

 


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

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