When businesses face change or uncertainty, they inevitably look in the direction of their accountants for help. Now they need help in the middle of a global health crisis.
After Making Tax Digital, IR35 and Brexit, COVID-19 coronavirus is the latest issue confronting businesses. In a remarkable Budget, the Government announced a raft of measures designed to ease the pain of small companies and help them survive the pandemic.
The overriding aims were to keep businesses and individuals solvent and to make it possible to cope with a wave of sickness absence.
“Small businesses are undoubtedly at the sharp end of the shock to the UK economy. We welcome this very pro small business budget and the use of fiscal and monetary policy to support them,” commented Sonali Parekh, Director of Policy at the Federation of Small Business.
She added that accountants would be pivotal in helping business access benefits and support.
“As more support becomes available over time accountants will become an important conduit of advice to small businesses.”
Here are the main Government initiatives designed to support businesses during the coronavirus pandemic.
Support through statutory sick pay
Where workers are not able to work because of the virus, the Government will refund the cost of statutory sick pay for up to 14 days. This applies to firms with fewer than 250 employees. It will also apply from day one rather than the usual day four of illness — even if individuals have no symptoms.
At a cost of £2bn, this step isn’t cheap but is seen as important removing some of the financial burden of the workers having to self-isolate.
Question: how will payments be made? The Government must find a quick mechanism to deliver rebates, or cash flow will suffer.
Help for the self-employed
The picture for the nation’s 4.8 million self-employed and ‘gig economy’ workers is less rosy. The Chancellor made it easier to claim Universal Credit by removing the minimum income floor for those affected by coronavirus. This will help those with fluctuating incomes. Claims can also be made from day one instead of day eight. For those who fall through the safety net, there will be a £500 million hardship fund.
Question: could more direct help be given to the self-employed workers? An online petition asking for them to be included in the statutory sick page scheme during coronavirus has quickly gathered 200,000 signatures – enough to force a Parliamentary debate.
Business rate relief for key sectors
Businesses in the retail, leisure and hospitality industries are most likely to suffer as people avoid public gatherings. To support them, the Chancellor announced a one-year business rate holiday on premises with a rateable value of up to £51,000.
The idea was based on the retail discount scheme, which provided limited relief from business rates. It will be a welcome help and provide an even bigger shot in the arm for hard-pressed high streets and town centres.
Question: how will businesses gain this relief? Under the retail discount scheme some local authorities gave automatic relief. Others made businesses apply.
Measures to ease cashflow
HMRC’s Time To Pay arrangements will be scaled up to support firms struggling with cashflow issues. HMRC will make decisions on a case by case basis and is employing an extra 2,000 staff to run a dedicated COVID-19 helpline.
Question: if decisions are on a case by case basis, what are the ground rules?
Banking support for small businesses
A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch in a matter of weeks to support businesses to access bank lending and overdrafts. The aim is to make sure banks continue to support SMEs if times get tough. The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders confidence in continuing to provide finance.
Is Government doing enough?
The Budget has been well received for the scale of its investment in areas like infrastructure and the health service.
But the immediate concern is how businesses and individuals can be safeguarded given the prospect of a shutdown of parts of the economy.
“This is a really positive first step but we need to see how coronavirus plays out and whether these measures are sufficient, or if additional support is needed,” says the FSB’s Parekh.
“We do think the Government needs to monitor the situation to make sure that they support smaller business in managing their cash flow at this most challenging time.”
Given the scale of support for business, some were surprised that fine print of the Budget confirmed that IR35 would still be introduced in April.
- Government guidance on coronavirus for employers, employees and businesses
- Coronavirus help and information
- Who wins and who loses in the Self-Employed Income Support Scheme?
David Nunn is Content Manager at AAT.