Covid: Could you claim for business interruption?

4th July 2022

 

If your business was adversely impacted by the coronavirus pandemic, then you may wish to consider whether your insurance covered you for business interruption – as you could be due an insurance pay-out in relation to your loss of earnings.

When calculating your loss of earnings, there are a number of factors that you should consider, inclusive of the following:

  • Ensuring that you have strong management accounts for prior periods to demonstrate to the insurer what your expected earnings would have been, against what they were
  • You should also account for any savings that your business made as a result of the pandemic, which could include:
    • Furlough grants, plus the additional 20% of staff wages saving, if staff were furloughed at 80% of their usual wages
    • Any other grant support from local councils/government directly related to supporting the business

Note: insurers should not factor in grants such as the Leisure & Hospitality grant due to this support not being directly linked to businesses, but instead available at the same amount to all businesses within this industry

 

To ensure that your loss of earnings calculation is correct, you should also factor in the following points;

  • Did you have to refund any amounts to customers at a later date, that might not be factored in your original management accounts?
  • Did you incur additional costs throughout lockdown periods such as infection control measures for staff continuing to work?
  • Were any furlough overclaims subsequently repaid back to HMRC, as this would increase your loss of earnings?

 

Insurers will create their own workings to confirm what they expect your loss of earnings to be for these periods, and this calculation may differ to your original workings. To ensure that your claim is maximised, you should ensure that:

  • Average past performance is used where relevant – if your business is seasonal and therefore earns more in better weather, you may be able to demonstrate to insurers that your earnings would have been higher for the period April – June 2020 due to the weather
  • Insurers are using the same basis to calculate loss of earnings as you are – it might be the case that segments of your business were still able to operate and in this scenario you would have two options:
    • Calculate loss of earnings for elements of the business unable to trade
    • Calculate loss of earnings for the business as a whole – in this scenario you should make sure you compare your total expected income/expenditure with the total actual figures

 

You should also be aware that insurers will not consider reimbursements to customers where you were not contractually obliged to do so.

 

If you wish to discuss any of the points above further, or would like any assistance with your business interruption insurance claim, please do get in touch.

Other items in Blogs
Ellen Carter
11th August 2022 Revisit your remuneration?

For many SME owner-managed businesses, the tax optimum director remuneration structure for many years has been one of a low salary accompanied by high dividends. This allows Companies to take advantage of low dividend tax rates and, in many cases, no employers national insurance to be paid by the company (if paid at the Secondary…

Jaimie King
10th August 2022 Seeing Double: New Recovery Loan Scheme begins

While one government-backed Recovery Loan Scheme (RLS) ends, another opens.   The previous RLS closed on 30th June 2022, but to follow this the government have introduced a new RLS scheme to support businesses through the out-turn of the pandemic, expected to be accessible after 1st August 2022.   The New Recovery Loan Scheme Government…

Charlie Whittle
10th August 2022 Annual Allowance for NHS pensions

What is the annual allowance? The annual allowance for the 2022/23 tax year is £40,000 and each year this is compared with your pension input amounts. Your pension input is defined as the increase or growth in the capital value of your NHS pension benefits across all pension schemes. Any growth in excess of the…

Jake Day
8th August 2022 TRS Registrations: This deadline may apply to you

  1st September 2022 – This deadline may apply to you!   If you hold property or investments on behalf of another person, HMRC may consider this as a reportable trust arrangement. This may mean that you need to register on the Trust Registration Service (TRS) before 1st September 2022.   New legislation now in…

Megan Turner
4th August 2022 Charity Commission annual return: Planned Changes

The Charity Commission has launched a consultation regarding changes to the annual return.   There are a number of new questions, taking the total questions from 36 to 52, although only 32 will be compulsory. The aim of the new questions is to make the annual return more comprehensive, by gaining information around charity’s income…

Ben Beech
3rd August 2022 MP’s call for Government to Introduce Essential User Rebate

The All-Party Parliamentary Group for Road Freight and Logistics has today (27 July 2022) urged the Government to approve the introduction of an Essential User Rebate of no less than 15 pence per litre for operators within the logistics sector to combat the effects of soaring fuel prices and inflation.   The call has come…