Accura Accountants – Obtaining Bank loans, VAT deferral and furloughed staff
I set out an extract from the HMRC website in connection with the comments from our Chancellor that the Government would assist companies obtaining loans from banks.
“Support for businesses through the Coronavirus Business Interruption Loan Scheme
The temporary Coronavirus Business Interruption Loan Scheme supports SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years.
The government will also 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.
The government will provide lenders with a guarantee of 80% on each loan (subject to pa re-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The scheme will be delivered through commercial lenders, backed by the government-owned British Business Bank.
There are 40 accredited lenders able to offer the scheme, including all the major banks.
Eligibility
You are eligible for the scheme if:
- your business is UK based, with turnover of no more than £45 million per year
- your business meets the other British Business Bank eligibility criteria
How to access the scheme
The scheme is now open for applications. All major banks are offering this scheme.
To apply, you should talk to your bank or one of the 40 accredited finance providers (not the British Business Bank) as soon as possible, to discuss your business plan. You can find out the latest on the best ways to contact them via their websites.
Please note that branches may currently be shut down to enable social distancing.
The full rules of the scheme and the list of accredited lenders are available on the British Business Bank website.
If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow.”
I have discussed this scheme with a director of one of our high street banks. Banks are under considerable pressure themselves with both illnesses & government instructions for social distancing to be maintained, leading to many businesses advising their staff to work from home.
I did discuss requirements for these loans and wish to share the contents of my discussions to ensure that any client wishing to approach their banks for assistance, ensure that the following information is to hand:
Background Information Required
1. A written update on the performance of your business, prior to the onset of coronavirus.
2. A written update explaining the impact that coronavirus has had on your business.
3. A written update explaining the impact you anticipate that coronavirus will have on your business in the future.
4. Written detail of any key assumptions made / risk factors considered within your forecasted financial information (related to point 2 below under the ‘Supporting Documents’ heading).
5. The amount of borrowing you are seeking to apply for (in £’s) and how this correlates with the ‘estimated total cash requirement’ that your business has over the next 12 months (as forecasted in point 2 below under the ‘Supporting Documents’ heading).
6. A written update of the extent to which you’ve explored other areas of funding or Government support.
7. Your written thoughts to the following: The bank will base your business performance in 2021 and 2022 on your performance prior to the onset of coronavirus. Please outline any longer-term impacts of coronavirus which may mean this is not appropriate.
Supporting Documents / Financial Information Required
1. Any internal information showing the 12 months performance of your business prior to the impact of coronavirus (e.g. management accounts or audited accounts for 2019).
2. The set of forecasted financial accounts you will use to estimate your total cash requirement over the next 12 months (profit and loss & cash flow forecast).
3. A schedule of any current Hire Purchase or third-party finance commitments in place, including the following for each individual finance agreement held:
- What specific asset has been funded.
- What level borrowing remains outstanding currently (in £’s).
- What the current monthly repayment is (in £’s).
- What the remaining term is (in months).
- The name of the lender that provides this finance.
- If this specific finance agreement is a Hire Purchase or Leasing finance product.
I fully appreciate that the above information will take time and be somewhat costly to produce. We at Accura Accountants are here to assist any client in both accounting terms and to prepare in written format, information to comply with banks requirements.
VAT Deferral
I would like to clarify the position as far as VAT payments due/payable are concerned between 20th March 2020 and 30th June 2020.
Firstly, clients if you would like assistance from HMRC to defer your company VAT until 31st March 2021 you must stop your DD (Direct Debit).
Nothing else needs to be done and no communication with HMRC is necessary.
The VAT returns MUST be submitted on time as if the payment was going to be paid.
In my opinion, to not submit VAT returns could enable HMRC to revoke their offer of assistance (although I have not seen any referral to this point, I am just being pragmatic).
The VAT liability should be noted on all financial accounts and clients should ensure that the liability is within their cash flow projections for 31st March 2021.
VAT due for prior periods pre-20th March
If VAT was due but was not discharged as a result of Covid 19 (or possibly due to other factors) and you were not able to pay your VAT by the due dates pre 20th March 2020 it is essential to apply for a TTP (Time To Pay) facility from HMRC. As discussed, the possibility to contact HMRC currently maybe a little difficult to say the least.
I suggest that any client that wishes to offer HMRC repayments over an extended period, or requests deferral for say 3 months and thereafter pays monthly (say over the following 6 months) I suggest that you write to HMRC and make this request. It is essential to explain your circumstances, such as the damage to one’s cash flow as a direct result of Covid19 and the lockdown ordered by the Government.
In all probability, you will not receive a reply in the near future but it is essential that taxpayers make the request and evidence of the request is held on record. Do not just ignore the problem.
We at Accura Accountants will assist where required in drafting and providing addresses etc
Do not forget to quote your VAT number and if any client has had contact with their local office, do not forget to retain copy. If the letter can be sent by “next day delivery” with a postage receipt, please submit by this method.
Furloughed staff
Whilst writing, the HMRC website has been updated and I copy an extract a in connection with furloughed staff.
“Employers need to make a claim for wage costs through this scheme. You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.”
Again, I request that if any client has Furloughed staff and require Accura Accountants assistance in submitting claims, please provide us with full details of staff Furloughed together with their full details, such as staff name and salaries. The portal will in all probability not be operating until late April.
The employer has to discharge employee’s wages, even if Furloughed and the recovery of the grant will no doubt be paid (if accepted) mid-May onwards.
Another area of misunderstanding is the reference to potential claims from 1st March 2020, and a claim under Furloughed staff. I questioned one client who asked us to submit this claim from 1st March for staff he had furloughed.
I could understand that staff had been “laid off” and a claim lodged with an expected HMRC deliberation as to whether the claim is acceptable, but to make this claim using formalities noted and addressed initially by the Chancellor is somewhat forward looking. At 1st March the word “Furloughed” was not used in day to day language. I am sure all clients reading this can see the little issue as being somewhat contrived, yet a claim based on a need to lay off staff would no doubt be acceptable.