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The coronavirus threat to business

The coronavirus disease (technically the Covid19 strain) officially spread to the United Kingdom on 31st January 2020 from China. Everyone should be concerned, but let’s get a little perspective here.

To many individuals, especially in the news media, we are facing an impending plague of seemingly biblical proportions. However, if you read a little more than just the headlines, you will discover that whilst the UK infection rate is rising. Currently, only one person per 50,000 head of population has Covid19.

I accept that things are deteriorating; however, the panic shown by some members of the public is ridiculous; loo roll hoarding being just one example.

Unfortunately, it does appear that the virus is here to stay, at least for the next few months. Its effects will undoubtedly create many problems for businesses, as well as everyone else in the population.

Covid-19 Background to business

To date, there seem to have been two extremes of reaction. Some people are carrying on, as usual, taking the view that coronavirus currently seems no more potent than the annual round of influenza.

However, in my profession I’m already seeing individuals cancelling meetings and appointments, wearing face masks, elbow nudging instead of shaking hands and, constantly applying hand sanitiser until their hands are so dried out to be almost raw.

But is this changed behaviour an extreme reaction based on the facts that we know, or just basic common-sense? Personally, while some individuals are going somewhat over the top, overall I lean toward the common-sense view.

Covid-19 Practical measures

While MJ&Co haven’t closed our office, we have brought in sensible precautions. So, from last week we have:

  •  Banned handshaking and other forms of physical contact
  • Asked everyone to wash their hands on arrival and
  • Have provided hand sanitisers (although apparently, these are less effective than the 20-second routine).

We have also suggested to clients that if they are about to or are currently self-isolating, that we set up Skype video conference meetings and other similar measures. Anecdotally I am aware that many of our small business clients have also started implementing this measure.

Additionally, when clients bring in physical records, we are guided by an NHS study out last week which found that the virus can survive on hard surfaces such as plastic and stainless steel for up to 72 hours and cardboard and paper, for up to 24 hours. Therefore records brought in are touched by a member of staff after a minimum of 96 hours, to be on the safe side!

Covid-19: Wages/benefits if you’re sick or self-isolating

Self-employed people who have symptoms or advised self-isolate may apply for one of two benefits, Universal Credit or Employment and Support Allowance (ESA).

With Universal Credit, there is a five-week delay before payment. However, you can get an advance to help you until you receive your disbursement. However, this will reduce future benefit payments.

For ESA claimants, this is now available from day one of “illness” rather than day eight. ESA paid to those who are too sick to work and is worth up to £73.10 a week if you’re under 25, or up to £111.65 a week. For the over 25s.

If you are on PAYE, UK employees will immediately start to get statutory sick pay (SSP) from the first day off work, rather than having to wait. SSP is paid by the employer, who is now able to claim back the first two weeks’ payments from HMRC.

Covid-19: Cashflow and tax payments

There is no doubt that the pressure on businesses is intensifying, especially with the latest advice to avoid travelling where possible and effectively stop going out, unless it is to the chemist or supermarket. This is starting to severely affect business cash flow and small businesses are disproportionately affected as most tend to live hand to mouth, with even a modest reduction in revenue having the potential to destroy the business if the situation continues beyond a few short weeks.

My advice is don’t wait until the roof caves in, contact suppliers and try to negotiate an extended line of credit. Consider laying off staff; I know it will be hard, but if you don’t, they may not have a job for much longer.

If you have premises, speak with your landlord and try to negotiate a reduction or a temporary suspension of rent. They are likely to listen because a short-term drop of income could ensure the survival of their tenant.

If you owe tax and cannot pay call the HMRC Coronavirus helpline (Tel: 0800 015 9559 Monday to Friday, 8am to 8pm Saturday, 8am to 4pm) or visit their website at https://www.gov.uk/difficulties-paying-hmrc. HMRC have considerable latitude to help all businesses, especially SME’s.

There has also been rumour of a temporary tax payment holiday, but as yet, no details have emerged.

Covid-19: Bank loans & mortgages

If you’re having financial problems, speak to your bank. The Bank of England has relaxed liquidity rules to enable banks to provide extended credit to their customers. Chancellor Rishi Sunak revealed on Tuesday a stimulus package for UK firms to battle the impact of coronavirus. The primary measure a whopping £330bn of business-loan guarantees.

Most of the high street banks and major mortgage lenders have announced help for customers affected by Covid19. The assistance includes the ability for you to delay your mortgage or loan payments. Payments will be decided on a case-by-case basis, a bit like the process of helping customers in financial difficulty.

The consensus is that you can delay payments for up to three months, just by asking. But it is essential to bear in mind that any delayed interest and capital repayments banks will add to the mortgage/loan balance. It is likely that the option of extending the term, rather than increasing future payments.

Covid-19: Other measures

Also, on Tuesday, chancellor Rishi Sunak revealed a £20bn stimulus package for UK firms to battle the impact of coronavirus, in particular, aid to cover a business rates holiday and grants for retailers, pubs and other unspecified small businesses.

As part of this announcement, the chancellor stated that grants of £25,000 would be made available to retail, hospitality and leisure businesses operating from smaller premises, and other small businesses.

Unfortunately, he was somewhat vague on which other ‘small businesses’ would be included in the grant scheme and how it would be administered. However, I understand that Local Councils will distribute the funds, similar to the recent flood repair grants.

Covid-19: Tax Accountant’s Summary

David Jones Shrewsbury Accountant and Founder of Morgan Jones

David Jones Tax Accountant

The problem with giving any advice is that events can overtake you; something that was brought home to me very recently when my booked holiday was cancelled when my airline pulled the flight with only 48 hours’ notice.

I am acutely aware of the problems facing many of my clients, especially one-person businesses; clients who do not have much in the way of financial reserves to fall back on. The financial support offered by the government will only cover the basics. It will not save a business if the day-to-day cashflow dries up for any length of time.

So if anyone reading this Blog needs some targeted advice or assistance in putting a letter together for their bank or possibly landlord.  Contact me I will do my best to help and rest assured, there will be no charge.

Also, I will be posting further blogs as and when more information is released by the government on exactly how the loan guarantee system will operate and exactly which businesses qualify for the grants and how to claim them.

If you would like more detailed information on some aspect of UK Tax, send me an e-mail and I’ll be pleased to advise further.