Beyond the balance sheet

UK Coronavirus (COVID-19): Advice and guidance for SME businesses

Christina Nawrocki 24/6/2020 22 minute read

Christina Nawrocki FCCA, details ideas and support for SME businesses experiencing cash flow issues as a result of the COVID-19 outbreak.

Healthcare chiefs have projected that potentially 80% of people could become infected with UK coronavirus in the next 12 months!

The health, financial, and business implications of this are likely to be enormous! Many economies are in some form of lockdown with people purchasing the basic, essential items in the main while many people are unable to attend workplaces.

The result is a significant demand and supply shock to the global economy with severe consequences potentially for SME businesses. The virus is likely to see a prolonged suppression in footfall and spending on products and services. The question is how can business owners plan and enterprises endure with sales in a slump, less cash coming and liabilities that still need to be fulfilled?

Read on for details of government support, plus ideas and strategies to consider. Remember to revisit this page often as we update it in line with government guidelines and financial support offered to the private sector.

Concerned about cash flow issues from COVID-19? Get in touch for advice >

Other areas of essential financial planning

If you're a client of Wellers, be sure to get in touch at any time. Our partners and team are on hand to support you throughout this period of disruption and angst. We can brainstorm practical solutions around the spread of coronavirus in the UK economy. Planning remains key, so be sure to review the following:

17. Cash flow management and credit control

18. Employee planning

19. Suppliers and stock

20. Landlords

Coming out of lockdown

21. How exiting the coronavirus lockdown will hurt profitability

22. HMRC to penalise businesses that made fraudulent COVID-19 claims

1. Coronavirus Business Interruption Loan Scheme

The government has unveiled a package of £330bn in state loan guarantees to help the private sector. The British Business Bank is co-ordinating the "Coronavirus Business Interruption Loan Scheme" (CBILS) which applies to firms with a turnover of less than £41m.

The funding was made available through commercial banks from Monday 23 March 2020. It works whereby the banksreceive a guarantee on 80% of the value of the loans that are issued. This should mean they're more willing to lend by reducing their exposure to the risks of potential defaults.

The government will also cover the initial 12 months of interest payments on these loans.

To qualify for CBILS the criteria is as follows:

  • Applicant businesses must be UK based
  • Turnover must be less than £500m
  • You must have a sensible borrowing proposal, and sufficient security to meet the lender’s requirements
Overdraft facilities are also under review and it's possible these could be extended to then be paid back with the above financing. For details of what you will need to present to access the loans be sure to check our guest post, courtesy of Capitalise, on CBILS here.

For details of the banks offering this scheme be sure to check the British Business Bank accredited lenders and partners page.

We recommend you get in touch with your business bank manager as soon as possible to discuss the options available on a ‘bridging’ overdraft to assist with immediate cashflow issues.

2. Bounce Back Loans

Bounce Back Loans will enable sole traders, micro, and small business entities to borrow 25% of turnover up to £50,000 with a 100% government guarantee. This will include a 12 month interest free period and a quick decision making facility.

The government will cover all fees and interest on the loan during year one. This deems the loan to carry a 0% interest rate for the first 12 months and there will be no repayments due on the loan during this timeframe, thus aiding cashflow.

3. The Future Fund and R&D rescue package

The Chancellor has created a £1.25bn rescue package aimed at start-ups and scale-ups. A total of £500bn of the package has been allocated to the Future Fund. This is a co-investment in fast growth businesses that are backed by third party investors. Unsecured loans of £125,000 - £5m will be made by the government through the British Business Bank, and must be matched by the private sector.  

The government are also providing £750m of funds which will be distributed in the form of grants and loans to smaller businesses with a Research & Development (R&D) focus. This will be implemented through Innovate UK.

4. The Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme will be available until the end of October 2020 to all UK employers. It works as a grant from the government to help employers pay part of your employees salaries by keeping them on the payroll, instead of making them redundant during the crisis. 

On 29th May, the Chancellor announced that the CJRS would begin tapering off in preparation for its inevitable end after eight months of supporting businesses across the UK.

Initially the Treasury covered 80% of the salaries of employees kept on by their employers for up to £2,500 per month. This was available from 20 April 2020 but claims could be back dated to 1 March 2020. From August, alterations will be phased in asking employers to cover an increasing portion of their employees costs until the scheme ends in October.

To access it you will need to:

  • Identify the impacted employees as 'furloughed workers'.
  • Notify these employees of this change
  • Submit information about furloughed employees to HMRC along with their earnings through their new HMRC online portal
  • Add new empolyees before the 10 June 2020 cut off

5. Statutory Sick Pay

With regards to Statutory Sick Pay (SSP), the government have reduced waiting days for employees meaning it kicks in immediately. This is for an initial period of 8 months. Employees who self isolate will be entitled to SSP from day 1.

Your business can reclaim the first 14 days of SSP from the government if you employ less than 250 staff. Exactly how this will work has yet to be announced but employers will not need GP notes to make the claims. 

6. Support package for the self employed

The Chancellor has announced a £6.5bn bailout through the Self-employment Income Support Scheme. The self employed are said to be most likely to work in sectors that are hit by a large drop in demand. The package initially worked whereby grants of 80% of historical income up to £2,500 a month were issued to those in the self assessment system with an income below £50,000.

At the end of May, Rishi Sunak announced that the SEISS would receive a final grant to see the UK's self employed through the final few months in line with the CJRS. The application will be open in August and the grant will cover 70% of the individual's average monthly earnings.

Over 50% of your income has to be from self employment. Those with earnings above £50,000 are deemed to have generated sufficient income to be able to cope without support during the outbreak. The calculation for the grant is based on the average of your income declared in your last 3 tax returns.



If you haven't filed 3 years worth of tax returns then it will be based on whatever you have submitted in that timeframe. If you're newly self employed then if you can't provide a tax return with income on it, you won't be paid. It won't depend on you proving your business has been adversely impacted by coronavirus. This means you can claim the grant even if you continue to work.

Of note, the grant is based on income, not turnover, meaning if you have significant expenses then you may struggle to cover them and have any income left over. 

7. The trade credit insurance guarantee

Trade credit insurance provides protection to businesses in instances where their customers either don't pay (often in instances of bankruptcy), or fail to pay on time. The likely recession caused by the COVID-19 lockdown means credit insurance companies are now likely to face significant claims as businesses struggle to pay their bills.

This could make such insurance very expensive or possibly result in such policies being taken off the market potentially at a risk to many organisations doing business. To prevent this, the government are setting up a reinsurance arrangement with key UK insurers. They will guarantee trade credit insurance policies, further details of which will be publicised at the end of May 2020. 

8. Support for the charity sector

The Chancellor has put together a £750 million coronavirus support package for charities that support the vulnerable and provide key services during the lockdown. In total £360m of funding to be directly allocated to charities providing these front line services.

A further £370 million has been allocated for small and medium-sized charities working at the heart of local communities. This is for those making a big difference during the outbreak, including:

  • Delivering food
  • Delivering essential medicines
  • Providing financial advice
In England, this funding will be provided through organisations such as the National Lottery Community Fund. A grant application scheme will be opened and distributed in the form of direct cash grants.

9. Deferral of VAT payments

Support is set to be made available to businesses by deferring VAT payments for 3 months. This will apply from 20 March to 30 June 2020 and applies to all VAT registered traders.

There is no need to apply for this scheme, it will happen automatically. Businesses won't need to make a VAT payment for the specified period. Instead you'll have to the end of the 2020/21 tax year to fulfil your liabilities for the deferral period.

Of note, HMRC will not suspend collection of direct debits for payment of VAT. If you have a direct debit mandate in place for this then you will need to contact your bank to cancel it before payment is due to be collected.

After that you will need to remember to then set it up again at the appropriate time. You will need to pay the accumulated VAT by the end of the 2020/21 tax year. So be sure to continue to file your returns by the due date.

Any VAT refunds or reclaims to you will be settled by the government in the usual fashion.

10. Deferral of Income Tax

All taxpayers with a second self-assessment payment on account due on 31 July 2020 can defer Income Tax payment until 31 January 2021. For this scheme there is no need to apply, it will occur automatically. It is not necessary to be self-employed to be eligible for the deferral.

It is yet to be confirmed by HMRC, but the current understanding is the deferral applies to taxpayers registered in the 2018/19 tax year on which the payment on account is based. If you qualify for the deferral and you have set up a direct debit mandate to make payment on account for 31 July 2020, then you should consider cancelling it.

The deferral period means there will be no interest charges or penalties for late payment. There is further good news for all businesses and individuals in financial distress as a result of the COVID-19 outbreak as HMRC have increased their Time to Pay offer (see section 11 in this post). 

11. Business rates holiday

A business rates holiday has been announced for organisations in the retail, leisure, and hospitality sector with a rateable value of less than £51,000. This is for the next 12 months, to help those particularly struggling with the fallout from coronavirus.

It includes art galleries, B&Bs, caravan parks, club houses, guest houses, gyms, museums, night clubs, and sports club. Pubs will receive an increased discount on their rates from £1,000 to £5,000 where their rateable value is less than £100,000 in England.

12. The Small Business Grant Fund for businesses that pay little or no rates

The government is providing a Small Business Grant Fund consisting of funding to local authorities. This is so they can support small businesses that pay little or no business rates as a result of small business rate relief (SBBR), rural rate relief (RRR), and tapered relief.

It is a one-off grant of £10,000 to help such firms in meeting their on-going financial commitments. To qualify your business must:

  • Be based in England
  • Be a small business and be in receipt of SBBR and/or RRR
  • Occupy a property

Be sure to get in touch with your local authority to apply for this funding.

13. Grants

Many businesses have been identified as not having sufficient insurance provisions to cover the impact of the crisis. For this reason cash grants of up to £25,000 in the retail, leisure, and hospitality sector will be made available with a rateable value between £15,000 and £51,000.

14. IR35 delay

The introduction of IR35 off-payroll working rules in the private sector will be delayed by a year to 2021. They were to be introduced in April 2020 and this was set to have a significant impact on many businesses that make use of contractors and freelancers.

15. Universal credit, working tax credits, and housing benefit

A £7bn welfare support package means government measures aren't just aimed at businesses but also workers.

From 6 April 2020, the Universal Credit ‘standard allowance’ of £323.22 a month for single people, and £507.37 a month for couples, increased by £1,000 for the next 12 months. Working tax credits also increased by the same amount. Housing benefit is set at 30% of market rent.

As housing benefit will be paid via universal credit you can use this link to check your overall eligibility.

16. HMRC payment plans and helpline

HMRC have set up a helpline to support business and the self employed affected by COVID-19.

If you think you're going to struggle to pay HMRC then contact them immediately. Explain your situation to them clearly and in normal circumstances they might then set up a payment plan. They offer this extra time to pay in situations where someone can't settle the tax liability now but will be able to do so at a future date. 

You can then make payments in instalments on specific dates they will agree with you.

17. Cash flow management and credit control

Many businesses have experienced severe and sudden drops in demand and sales. The implications are severe and significant for many organisation's cash positions with withdrawals likely to be greater than cash injections.

Whist understandably very worrying with things like employees wages to fulfil, remember many businesses experience some form of these challenges in the business life cycle, regardless of coronavirus. The good news is there are some credit control tips that can potentially help:

  • Review your sales ledger as to who still owes you money and how much
  • Send any invoices out promptly
  • Check for invoices that have already been sent out and now need paying, plus any overdue ones
  • Start, or continue, chasing those that owe you money
  • Offer discounts potentially for early payment
  • Where customers are struggling to pay what's owed, consider offering them a payment plan so at least some money is coming in
  • Consider factoring that allows you to collect a cash advance, from an organisation that purchases your invoices or debt, as a percentage of the value of your outstanding invoices
  • Look at invoice discounting, whereby you draw money in the form of a loan against your sales invoices before your customers have actually paid you
  • Review your profit extraction strategy in line with the above
  • The British Bank are coordinating the additional financial support for UK businesses as outlined in the Budget but at present this is a work in progress, watch this space as we will keep you updated

18. Employee planning

As cash coming in dries up your ability to pay for things may be limited. Naturally you will therefore look to cut costs and make savings. The likelihood is one of your biggest outgoings every month will be your payroll.

Making employees redundant could be an eventual option but that carries potential operational, customer service, and emotional consequences. You may have some loyal staff who have helped you build the business into what it is today. You may be very reliant on their attitude, knowledge, and skills meaning redundancy is an absolute last option after all others have been exhausted. 

Instead consider the example of how the manufacturing business, Barry-Wehmiller, avoided mass layoffs during the great recession. When in 2009 40% of their product orders dried up, CEO Bob Chapman found another way instead of redundancies.

His solution required all employees, at all levels, to take unpaid leave of up to 4 weeks. That meant the financial pain wasn't taken out on any one group and everyone felt they were pitching in to help each other. It's a great example of a people first approach and meant Barry-Wehmiller was in a very strong position for the economic recovery.

19. Suppliers and stock

If you owe money to suppliers and you're struggling to make payment then the key is to communicate with them as early as possible. Explaining your cash flow difficulties may help you to negotiate either:

  • An extension of credit or;
  • A potential payment plan with them whereby what's owed is spread out in payments over a set number of months

Another issue you may be experiencing is sitting on stock you can't sell. This is likely to be the case for many retailers, restaurants, bars, and pubs. As an idea you may be able to adjust by following the demand. If people are eating out less for example, might you be able to switch operationally to online orders, deliveries and takeaways instead?

20. Landlords

WHN solicitors suggests you check your lease carefully for a 'force majeure' clause. The question becomes would coronavirus classify as such an event. It might do should there be a mandatory quarantine as a result of the virus. In such an event you, the tenant, might be able to suspend rental payments.

Force majeure clauses do however, tend to be rare. Apparently many of today's leases include a rent suspension provision if a business is impacted by an uninsured risk. Other attempts to independently close for example, would likely see you struggle to withhold rent under the terms of the lease.

Again, communicate with your landlord as early as possible, you may be able to negotiate a rent holiday, also known as a rent free period. To do so and to leverage your negotiating position consider:

  • Any disrepair in the property that you've had to carry out work on at your own expense
  • Work to bring the property in line with planning, fire, and other regulations
  • Any fit out work you had to conduct to establish your business in the property, plus how this has enhanced the value of the landlord's building
  • The total period of loss of trading as a result of any of the disruption from the above forms of work
  • Your past good record of paying rent on time if applicable, these are difficult times and some leeway may be given to good tenants

21. How exiting the coronavirus lockdown will hurt profitability

We may be gradually exiting the coronavirus lockdown, but it's unlikely to be a case of returning to business as usual. The only current certainty is that the virus remains a threat. For as long as that is the case and there is no vaccine, businesses will have to introduce, implement, and police a range of measures to keep employees and customers safe.

This will increase the cost of doing business which in turn will squeeze profit margins. Consequently for most SMEs the challenge won't be so much restarting their trade, but finding a way to do so profitably.

22. HMRC to penalise businesses that made fraudulent COVID-19 claims

Government support measures such as CJRS and SEISS are said to have cost the taxpayer £27bn so far. HMRC are now looking at clawing money back in instances where individuals and businesses didn't qualify for these schemes.

Where the SEISS grant is deemed to not have been due, it will be recovered through a 100% tax charge. There have also been reports of businesses furloughing employees only to then get them to continue working. Legislation will now provide businesses with a 30 day window to declare non-compliance.

Investigations by HMRC will place the emphasis on individuals and business owners to prove their eligibility. Keeping good, accurate records will be essential while purchasing tax investigation services could help to keep the cost of a HMRC enquiry down.

Cash flow issues Covid-19 Get in touch with Wellers

The content of this post was created on 17/03/2020 and updated on 24/06/2020.

Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.


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