Devonshires’ Debt Management – Advice for Businesses
Cash is King and every business needs a detailed monthly cash flow. To assist businesses the Government have initiated the following schemes:
VAT deferral for April/June 2020. This is automatic. There is no application. Businesses submit VAT returns in the usual way but do not pay the VAT. The VAT is to be paid by 1 April 2021.
PAYE deferral can be applied for HMRC can agree to defer payment of PAYE as part of a Time to Pay (TTP) arrangement. TTP arrangements must be agreed with HMRC on an individual basis. HMRC will agree a payment plan based on weekly or monthly payments over a period that is normally less than 12 months but can be as long as 30 months. File PAYE returns as normal. If you wish to delay payment contact the dedicated HMRC Time to Pay helpline on 0800 0159 559 to discuss repayment terms. Small Business Grant Scheme up to £10,000;
Cash Grants for Retail and Hospitality and Leisure Businesses up to £25,000 per property;
Business rates are suspended for retail, hospitality and leisure businesses for 12 months.
The self-employed and partnerships can claim grants of up to £2,500pcm
Covid-19 business interruption scheme loans up to £5 million. Scheme run by major clearing banks. Contact your bank and make an application. Fees are suspended for year one. Repayment over six years.
In addition, businesses can seek to increase overdraft facilities.
Employee subsidy scheme. In return for not making employees redundant, the Government will pay 80% of their wages up to a ceiling of £2,500 per calendar month. This scheme is in its formative stages and it is anticipated that payment will be made in June. The objective is that businesses can use the VAT deferral cash flow in order to pay these employees.
Tax deferral. The income tax payment due in July 2020 is deferred to January 2021. This should only be deferred where necessary as it will have to be paid in January 2021 together with the January 2021 payment.
Administration: where a business enters into Administration which is a formal process, then it is protected from its Unsecured Creditors during the period of the Administration. This is normally for a year, but can be extended. Note:
Many Administrations involve what is termed a “pre-pack” meaning that the business goes into Administration and its business and assets are bought out the same day or shortly thereafter at market value leaving the debts behind in the limited company in Administration. Alternatively, where the Administrator feels that the best way to maximize the value of the business is to do so, he or she may decide to trade the business for a while whilst a buyer is found, thus seeking to ensure that where possible the employees’ jobs continue.
Administration initially runs for a year, but this can be extended.
Company Voluntary Arrangements where a company enters into a debt repayment agreement with its creditors, paying back debt normally at a significant discount and continues to trade.
The advantage for creditors of such a scheme is that they get some money repaid and that will be more than they can expect to be repaid if the company goes into liquidation, where unsecured creditors normally receive little or no repayment.