Current pandemic has forced the entire country to stand still. Along with registered businesses, Sole traders and partnerships have suffered an equal hardship to generate revenues to survive. The UK Government has established a way to support self-employed individuals and is in the process of designing an application method.
The scheme will allow individuals to claim a taxable grant worth 80% of the trading profits for the period of three months till June 2020. However, the claim amount is restricted to £2,500 a month. HMRC has set the process in a way that they will contact individuals by mid-May 2020 if they are eligible for the scheme and will invite them to apply online. Once your application is successful, HMRC will evaluate the eligible amount and confirm that with you.
Considering the above, it will be really a tough time for the Self-employed, and survival will become a major issue. We at Affinity Associates has worked out possible steps an individual should take in order to overcome this.
Firstly, a claim for Universal Credit can be made while you wait for the grant, but any grant received will be treated as part of your self-employment income and may affect the amount of Universal Credit you get.
Secondly, we can follow three step process as below:
Below 3 step process will help in taking the right decision –
- Evaluating the loss of turnover during and after the closed down period. This can be achieved by estimating the loss in turnover per day (otherwise earned) by comparing it to historical data. A forecast need to be prepared keeping in mind that future revenues, once the lockdown is over, will also be minimal.
- Identification to be made between fixed costs and variable costs that can be avoided or curtailed. This step will help you to calculate the liquidity required for the business to survive. i.e. you will know your breakeven point.
- Once both above ‘projections and liquidity requirement are calculated, next step will be taking advantage of government funding and support. There are various schemes and grants offered by the UK Government which are as below –
Coronavirus Job Retention Scheme – This scheme will help you to cover major fixed cost (Salaries) that any business will have. If your business is registered for PAYE scheme, then you will be eligible to claim this benefit. 80% of the wages (up to £2,500) along with 80% of Employer’s NI and pension costs will be reimbursed by HMRC for March, April and May 2020. Employers will need to pay salaries for all three months and then by end of April 2020 HMRC will update on the process to obtain this relief.
VAT payments (if registered) due between April 2020 and June 2020 are now deferred until March 2021. Thus, liability can be settled anytime up to the end of March 2021 and there will be no interest payable on due amounts.
Interim payment for tax year 05/04/2021 can differ. Further, if there are any liabilities pending to pay, we can request HMRC to defer those payments too.
Business rates relief – Your local council will forgo the rates for financial year 20/21. No application to be made.
an application can be made for Coronavirus Business Interruption Loan Scheme. This scheme helps small and medium-sized businesses affected by a coronavirus (COVID-19) to access finance of up to £5 million. The government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees. This means smaller businesses will benefit from no upfront costs and lower initial repayments. To check your eligibility and apply for a loan please click here
Small Business Grants Fund (SBGF) and Retail, Hospitality and Leisure Grant Fund (RHLGF) – The government has further announced that Local authorities will provide grants to businesses based on their rateable value. Under the Small Business Grant Fund (SBGF) all eligible businesses in England in receipt of either Small Business Rates Relief (SBRR) or Rural Rates Relief (RRR) in the business rates system will be eligible for a payment of £10,000. Further details can be found here.
Affinity Associates Limited is committed to providing advice and support that is required in sustaining your business. We provide impeccable service in evaluating businesses and also preparation of management information (including projections). Call now for a consultation on 02089032077 or submit your request to contact us.