Limited Government assistance for hard-hit companies

The Chancellor of the Exchequer, Rishi Sunak, has set out a package of temporary measures to support public services, people and businesses through this period of disruption caused by COVID-19. This includes a package of measures to support businesses including:

A Coronavirus Job Retention Scheme; deferring VAT and Income Tax payments; a Self-employment Income Support Scheme; a Statutory Sick Pay relief package for small and medium sized businesses (SMEs); a 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England; a small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief; grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000.

HMG will pay the self-employed a taxable grant worth 80% of their average monthly profits over the last three years up to £2500 per month, which will be available for three months and is to be extended if necessary. People can claim these grants and continue to do business. The scheme is open to anyone of trading profits of up to £50,000 and is available to people who make the majority of their income being self-employed and Have a self-employed tax return for 2019.

HMRC will contact those eligible directly with a form to fill out, then HMRC will pay the grant directly to bank accounts. The aim is to pay at the beginning of June (3 months backdated) and anyone who missed the Jan filing deadline has been given an extra 4 weeks to submit their tax return.

The Coronavirus Business Interruption Loan Scheme is offering loans of up to £5 million for SMEs through the British Business Bank and a new lending facility from the Bank of England has been set up to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans.

The British Independent Retailers Association (Bira) has welcomed the rescue plan for the self-employed but raised concerns that many of its members still won’t benefit.

The package will see self-employed workers paid up 80% of lost wages by the Government on earnings capped at £50,000. However, as Bira’s CEO Andrew Goodacre explains, some members will still be left to struggle because of certain exemptions to the package.

“I welcome the fact that the Chancellor is committed to providing direct financial support to self-employed retailers,” he said. “However, many of our members are not sole traders and so a grant based on profit may not work for them as our members might pay themselves a dividend, which is excluded. We need to understand the detail on this one – as with all the other announcements.”

Hardware/DIY stores and health food stores have been identified and included in the list of essential services alongside food shops, supermarkets and pharmacies and are therefore allowed to continue trade during UK lock-down. Other shops around the country have been forced to close for at least three weeks.

Brian Palmer, a tax policy expert at the Association of Accounting Technicians, said that the self-employed operating through small limited companies were stuck in the middle of the two bailout schemes. “Many of this group draw a low salary and top up their income with dividends.” he told The Guardian. “They will not qualify as self-employed, or for a significant payment from the coronavirus job retention scheme. Instead, they risk dropping through the cracks.”

Heather Self, a partner at the accounting and business advisory services Blick Rothenberg, agreed. “The government and HMRC have worked incredibly hard to get something out which will help the majority, but there are some losers.’,” she said. “A family with one earner on £51,000 will get nothing, whereas another with two people earning £49,000 each will get two lots of support. Someone with a mix of self-employed and earned income also may not qualify.”

Many LLC Directors reacted with fury and despair at being left out in the cold, with business owners who channel profits back into their companies and people who’ve been self-employed for less than a year amongst those missing out. Those whose company earnings are just above the £50,000 threshold are also feeling forgotten. Since the announcement, some analysts have said the number of people who fall through the gaps of the scheme could be as high as two million of the 5.75million people registered as self-employed, according to The Times.

Bira has also launched a new coronavirus hub, accessible through its website, to help members and the wider independent retail community through the crisis. Information on the hub includes:
• The list of businesses still allowed to trade, and those being asked to close
• How and where to access emergency Government support, including the Coronavirus Business Interruption Loans
• Details of local authority support
• Employee/Employer guidance including details on sick pay allowance
• The latest legislation with regards to ‘relaxed’ trading

There are also guides to wellbeing, as well as stories of what people are doing to adapt to the current situation.

“I know these are unforeseen, uncertain and troubling times for small independent retailers. We are taking our responsibilities to respond to coronavirus – Covid 19 – very seriously. First and foremost, let me promise you that looking after you, the rest of our members and the team here at Bira is our top priority,” said Mr Goodacre.

“Having successfully campaigned to have rates relief extended to all retailers, we are now pushing government to make the cash grants and business interruption loans available quickly and with easy access.”
The Bira hub also includes information on financial support from devolved governments and recommends businesses consult with HMRC, their banks and insurance providers sooner rather than later to see what support is or is not available. Hardship funds are also available through local authorities, alongside rates relief.