Suggestions For Companies during the Pandemic 

By John Waller Partner HBG Advisory Llp

The coronavirus COVID19 Pandemic continues to impact heavily throughout the world economically as well as health-wise. However, compared to previous financial disruptions, the Pandemic affects all business sectors in the UK. 

Homeowners also received confirmation that mortgage holidays have extended Application need to be made before March 31st, 2021 and maybe up to six months long.

The pending release of a coronavirus vaccine offers hope for businesses future survival in 2021. So then:

  • Ensure you remain aware of government support.

On October 31st,2020 the Chancellor announced the continuation of the Coronavirus Job Retention Scheme (CJRS) (furlough scheme) and that grants for businesses forced to close in England would receive up to £3,000 per month under the Local Restrictions Support Grant if eligible. The Self-Employed Income Support Scheme has doubled. It is in everyone’s interest to maintain a vigil on information released on the help and support available by reading Gov.UK website. The UK Government website offers a more significant overview of current pandemic support. 

  • Do not panic

An easy thing to say! We are ALL in it together, with the whole world that is. Our government has had to deal with an unprecedented situation. Not of its making, which has affected every aspect of society in the UK. So what are we do? Simple steps may, therefore, then take place to mitigate losses during the Pandemic. We list the most obvious, for we never actually consider the obvious solution because we perceive that as too easy.

Please read: Devising a business approach to survive and prosper.

  • Contact HMRC and arrange a Time To Pay for arrears.

Suppose If you’re still struggling to pay your business’s tax bills even with the payment deferrals offered in the government’s Covid support package, there is a potential solution available to you. HMRC’s existing Time to Pay scheme remains extended to ensure businesses have extra time to clear HMRC debt. 

  • So, suppose your business has cumulative arrears owing to :
    • Value Added Tax; 
    • Pay As You Earn;
    • National Insurance; 
    • Corporation tax;  
    • income tax liabilities.

Then making contact with HMRC is a priority. Subject to criteria a ‘Time To Pay’ Arrangement maybe then offered and agreed? 

  • Apply for a Government-backed Bounce Back Loan.

Qualification requires your business traded profitably and was viable before the commencement of the Pandemic. However, the length and introduction of a second lockdown have affected businesses far more significant than initially expected. Companies are now slipping and experiencing financial distress, If you have exhausted your Bounce Back Loan entitlement, the perhaps Insolvency looms for your business Read Liquidation and Bounce Back Loan Impact? for clarity on your position. 

If you though have not claimed assistance, carefully consider a Bounce Back Loan ensuring your company is solvent and was trading profitably before the Pandemic.

The Bounce Back Loans Scheme (BBLS) gives small UK businesses either 25% of their net turnover capping at £50,000 for the loan value claimed. In November 2020, the Chancellor extended the scheme to allow TOP UPS for those who did not fully claim. The banks generally process the loan expediently. The main features of the loans are:

  • They do not attract any interest charges in the first year.
  • After that, the interest rate remains fixed at an APR of 2.5%.
  • The loans remain 100% guaranteed by the UK government. 

Therefore, any defaults by companies will not require directors or owners of the business if a sole trader or partnership having to repay the loan remaining outstanding. 

Currently, (November 28th,2020) applications for the Bounce Back Loan Scheme remain open until January 31st 2021

For further help on Bounce Back Loans. please read “Bounce Back Loans and Liquidation“>

The term of the loan is six years, though you commence repayment earlier without paying any penalty. No repayments, however, are required during the first 12 months. The UK Government hopes that the support offered assists companies with adding to working capital while the business remains viable. 

  • Consider Restructuring your Business

The conditions during the Pandemic offer business owners an opportunity to review your businesses viability. Should you continue? If so, what changes are required to improve performance and profitability? If not, what is the best way to close? 

Considering Restructuring the business can involve:

  • Transforming the business arrangement;
  • ceasing services and products your business offers; 
  • refinancing the companies debt overall. 

Entailing the business with a restructure will then allow the business to:

  • Reduce operational costs;
  • and allow portability to return.  

Contemplate Debt Consolidation with a CVA

When faced with pressing creditors such as: 

  • HMRC
  • Suppliers, 
  • landlords.

Then consider debt consolidation using a Company Voluntary Arrangement (CVA).

A CVA is part of the insolvency rescue family. Once approved; It remains a legally binding agreement between your company and its creditors. The CVA requires 75% of the eligible voting company creditors to approve the scheme. Then upon approval, the CVA stops the companies creditors from commencing legal action and cancels any in progress. CVAs legally set out a way forward for the repayment of the companies debt either in part or full payment, depending on what was approved. Generally, 60 months is agreed to repay the creditors, Therefore allowing the company to remove the immediate burden of repaying the debts and improve cash flow to enable the company to continue trading.

Note, once the company completes its final payment, then it is debt-free.     

The latest news suggests that with the role out of vaccination, the Economy will be able to Recover.

For further information regarding ‘Suggestions For Struggling Companies during the Pandemic’., Please contact HBG Advisory or view www.hbgadvisory.co.uk.