What COVID-19 support schemes are available for company directors?

Chartered accountant Oliver Lumb looks at the ways in which sole directors and family businesses can seek help during the coronavirus emergency.

It is a decision that many entrepreneurs have had to make: whether to operate as a sole trader, or to incorporate and operate as a limited company. Today, in the light of the COVID-19 crisis, a sole trader, who has found themselves unable to trade, can see their earnings subsidised by 80% of the average up to a maximum of £2,500 per month. Unfortunately, the same support is not directly available for directors of small limited companies. This was initially identified as a gap in government coronavirus support. In more recent weeks, as the situation has developed, there are now significant relief schemes available for small companies. Navigating the mass of information available can be a struggle though, especially given the added stress that everyone is under. Outlined below are five key schemes which a sole director or a family-owned company could take advantage of.

Coronavirus Job Retention Scheme

It is common for a sole director to have a small salary which is then topped up by dividends. HMRC have provided clarification that a Director can be furloughed, and the company could claim 80% of the director's usual payroll earnings. As with other employees who are furloughed, when a Director is furloughed, they should not carry out any of their normal work for the purposes of generating revenue, but they can still fulfil their statutory duties. Statutory accounts must still be prepared, confirmation statements must still be filed at companies house and VAT returns must still be submitted to HMRC by the normal deadlines.

If your situation is that there are two business partners who are both directors, such as a husband and wife, it may be easier to justify one partner being furloughed while the other deals with the shared statutory requirements.

If a sole director has decided to furlough themselves, it would be good practice to notify stakeholders such as customers and suppliers and other business contacts, notifying them again when you resume trading.

Deferment of VAT liability payments

If you are having cashflow issues and you are VAT registered, HMRC has offered an automatic deferral of VAT liability payments due between 20 March and 30 June 2020, to be paid by 31 March 2021, giving you an additional 9-12 months to pay. During this time, you will be required to submit your returns as normal, however HMRC will not charge any interest or penalties. If you pay by direct debit, you will need to cancel the arrangement before the normal due date, in order to prevent HMRC taking the payment automatically. If you are in a VAT refund position, you can continue to claim your VAT refund as normal.

Deferment of July 2020 Self-Assessment payment on account

Similarly to the VAT deferment, if you are due to make a payment on account for your personal income tax in July 2020, you are able to defer this payment to January 2021, in order to give you an additional six months to save the money, during a period when your income may be lower than normal. The July payment on account is calculated as being 50% of the expected tax liability based on your income for the 2018/19 tax year. If you expect your income for the 2019/20 tax year to be less than the previous year, then you should contact your accountant, who could help you apply to have your payments on account reduced to the correct amount.

Business Support Grant Funds

Companies registered in England may be eligible for this scheme if they are the ratepayer of property and are in receipt of either Small Business Rate Relief or Rural Rates Relief. A company can apply to their local authority for a cash grant of £10,000 for each property. Your local authority should have contacted you if they believe you are eligible for the grant scheme.

Business Interruption Loan Scheme

This scheme gives businesses with a turnover of less than £45 million per year access to loans, overdrafts and other financing of up to £5 million for up to six years. To be eligible, the business must have a proposal which a lender would consider viable, if it weren't for the coronavirus pandemic. The government support comes in the form of a payment to cover the first 12 months of interest and any initial set-up cost incurred, ensuring your cash flow is maintained. Additionally, the government will provide a guarantee of 80% of the loan.

More information about the existing support measures is becoming available rapidly and additional support is being announced on a regular basis as the lockdown is extended and the economic impacts reach further.

To find out more about how Page Kirk could help assess your eligibility and support your application for any of the support schemes mentioned above, then give us a call on 0115 955 5500 or email us at enquiries@pagekirk.co.uk.