When COVID directly impacted upon the UK in Spring 2020, the Government introduced a range of measures specifically targeted to help SME businesses survive the expected period of financial strain. Such businesses should now be planning ahead for when this support is gradually withdrawn:
- Deadline for arranging with HMRC when to repay COVID related (ie between 20-Mar-20 and 30-Jun-20) deferred VAT.
- End of period of statutory relief from wrongful (ie insolvent) trading claims possibly being made against a director personally.
- 100% business rates relief for retail, hospitality and leisure businesses reduces to 67% relief.
- Government furlough wages subsidy reducing from 80% to 70%.
- End of moratorium for creditors being able to file:
- Statutory demands.
- Winding up petitions.
- End of furlough wage subsidies scheme.
- Temporarily 5% reduced VAT rate for hospitality and tourism to increase to 12.5%.
- Deadline for claiming the 5th, and final, SEISS support grant for the self-employed (covering the period May-21 to Sep-21).
- End of Coronavirus SSP rebate scheme.
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- Government backed Recovery Loan Scheme ends.
- End of moratorium on landlords evicting commercial tenants.
- 67% business rates relief for retail, hospitality and leisure businesses ends.
- Removal of £10,000 temporary debt threshold required for a winding up petition.
- Ending of debtor business giving creditors 21 days for a response before they can proceed with winding up action.
- End of business loss tax relief 3 year carry back rule (reverts back to 1 year).
- Temporarily 12.5% reduced VAT rate for hospitality and tourism to end.
Also during this time, businesses that applied for COVID related bank loans (CBILS & BBLS) are going to have to start making repayments once the initial repayment holiday period ends.
Even after Government support, COVID has been a mixed bag for businesses. Most have struggled on, with suppressed results, and often with more (cheap) debt. But we have also seen:
- More owner exits, through voluntary liquidation or an early retirement related trade sale (particularly to take advantage of the generous ER rate of CGT which many think might be short-lived and the ability to take advantage of the currently vibrant private equity market),
- Businesses going bust,
- Some taking advantage of new market opportunities and thriving,
- Some individuals who were laid off now taking the leap of faith to start their own business.
As always with running a business, the best entrepreneurs will now once again be planning for how to navigate the challenges ahead and preserve their cashflow, as the remaining support measures end.
Blog entry by: Ian Piper