Businesses aren’t out of the woods yet, even if coronavirus restrictions were done away with on 19 July 2021.
Some businesses will especially struggle with certain Government COVID-19 support schemes coming to an end, most notably the furlough scheme.
Fortunately, there are still some Government-backed business support schemes for businesses to take advantage of as well as options with HMRC and creditors to rearrange your debts.
Here are some strategies you can use to help your business’s finances.
Recovery loan scheme
The recovery loan scheme stands as the main loan support scheme open to businesses, replacing the ones we saw launched last year, such as the bounce back loan scheme.
Open to businesses that have been adversely impacted by the pandemic until 31 December 2021, the reovery loan scheme (RLS) offers eligible businesses loans worth between £25,001 and £10 million.
The Government has capped interest rates at 14.99% on recovery loans, but you can expect some lenders to offer packages with even lower rates.
Businesses should find applying for the loans relatively hassle free, given that the Government promises pay lenders 80% of the original loan if a claimant defaults on the payment.
Creditors are therefore incentivised more than usual to hand out loans, while they can be more lenient in their review of business’s finances and compensate for the pandemic, promising to give as many businesses as possible a chance for support.
Businesses that took part in previous coronavirus loan schemes, such as the bounce back loan scheme, can still apply for the RLS, although the amount they receive may be lower.
HMRC payment plans
Businesses can also breathe easier when they know that HMRC tends to be very receptive to repayment plans for businesses that have difficulties meeting their tax obligations.
Sole traders especially stand to benefit from arrangements with HMRC given the extra risk associated with being personally liable for their business’s finances.
You can set up a payment plan online to spread the cost of your latest self assessment income tax bill if you meet certain criteria:
- you owe no more than £30,000
- you do not have any other payment plans or debts with HMRC
- your tax returns are up to date
- your latest self assessment is less than 60 days after the payment deadline.
It’s easy to arrange too – you don’t even need to contact HMRC directly to set it up. All you need to do is log into your Government Gateway account and go from there.
Remember, if you’re self-employed, you also have the added option of applying for the fifth round of the self-employed income support scheme. The deadline for that is 30 September 2021.
For other tax bills, including corporation tax, you must get into contact with HMRC directly to discuss your options and make a time to pay arrangement, allowing you to spread the cost of the tax bill by paying in instalments.
HMRC also recommends that taxpayers who can’t pay because of the COVID-19 pandemic contact their coronavirus helpline to get onto its time-to-pay service.
Another strategy that can help businesses is entering into an agreement with creditors called corporate restructuring, or turnaround.
This involves the reorganisation of the company’s debts and sometimes the selling of certain non-essential assets to keep the company afloat.
Agreements can also stipulate how the company and its business will be operated, and when and how much the creditors can be expected to be repaid.
They can be informal contracts, or use formal procedures such as administrations or a company voluntary arrangement.
Entering negotiations can be daunting, especially if you’re not sure of what your strategy will be when dealing with creditors, so seeking advice from an accountant is recommended before going down this path.
Reach out to us to talk about other ways to support your business.