There have been a number of measures announced by the Government to support businesses across the country ...
Many of these owners have complicated tax statuses and different measures will have different impacts. Some are individuals, some are companies. Whatever position you find yourself in, you will need to decide on which scheme is best for you.
The key support measures are as follows:
tax payment deferral
- the Coronavirus Business Interruption Loan Scheme (CBILS)
- the Coronavirus Job Retention Scheme (CJRS)
- business rates holiday
- grant support connected to business rates status
- the Self-Employed Income Support Scheme (SEISS)
There is detailed information on these schemes and links on the government own website.
So I've put together my own thoughts on support available for owners of FHLs and other serviced accommodation and outlined each of the main schemes below.
Tax Payment Deferrals are all about cashflow for you and your business. The entire tourism industry is going to take a hit this year and many, if not most, will make losses. For VAT registered businesses, you can automatically defer VAT payments for the period 20th March to 30th June until the end of the 2020/21 tax year. This won't have a great deal of impact if you have no bookings, but even if you do defer, then you must still file your returns and repayments will be made by HMRC where required.
When it comes to Income Tax, the second payment on account date is moved from 31st July to 31st January next year. That is considerably more help for individuals, but do consider the appropriateness of your first payment on account from January this year. Should it be reduced to achieve a tax refund? When it comes to PAYE and Corporation Tax liabilities, you can apply to HMRC for more time to pay so you can improve your cashflow.
You have to remember that a debt is a debt and you will need to pay it back. The Government is providing up to an 80% guarantee to the bank to encourage them to offer support. However, they are still skittish in case you go bust so having an up-to-date business plan when you make your approach to your bank is always a good idea.
I personally feel that cutting costs is far better than debt-financing. And unless you bank with one of the main UK banks then access to CBILS may be difficult to achieve.
If you have done a cost-cutting exercise, then you'll discover that wages are probably one of your biggest liabilities. The CJRS is designed to help you with that. You can furlough your employees (assuming you have them) which means they go home, stay there and are not allowed to work. The Government will give you a grant of 80% of their wages up to a cap of £2,500 with you deciding if you want to top them up to 100% or not, which depends on your own cashflow.
Ensure your employees' contracts are up to date and that the employee understands what furloughing means. I can recommend a number of good Human Resources experts from my own network if you need help with that, though do remember that right now, they are likely to be very busy!
One point to note for directors of limited companies. If you draw a small PAYE salary each month and top up with dividends then accessing CJRS is likely to be quite difficult. You can't work when furloughed (although you can do admin and planning your business; just not create any income) so remember that 80% of a small number, is an even smaller number. As an alternative, you may need to consider a Universal Credit application to tide you over.
If your business pays rates then you will receive a 12-month business rates holiday for 2020/21 if you are a retail, hospitality or leisure business in England. Most businesses would be covered by Small Business Rates Relief or Rural Rates Relief.
However, if you're simply paying Council Tax on your FHL or serviced accommodation then there is no scheme and the liability still applies. Different rules apply in Wales, Scotland and Northern Ireland so again, I can refer you if needs be.
If you do pay rates and your stable value is between £15,000 and £51,000 then you are eligible for a grant of £25,000. If the rateable value is below £15,000 then you are eligible for £10,000. Both grants are most welcome, but as with all Government schemes, you'll have to wait for the money to come through and there are possible restrictions on personal use.
And the final scheme I want to mention today is the Self-Employed Income Support Scheme (SEIS) available to those individuals who are self-employed or are a partner in a trading partnership. Your profits must be below £50,000 and more than half of your taxable income.
The SEIS scheme mimics the CJRS, but if you are an FHL or serviced accommodation owner then you may not be covered by this scheme because HMRC is looking at the trading pages of the self-assessment tax returns and not the FHL boxes on the property pages.
If your bookings don't recover quickly, and the current crisis continues into next year, your FHL may not reach the 210 days availability in the tax year so you may have to rely upon the period of grace election. Remember, that FHL Loss Relief is very restricted right now which could be a big problem for you.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.