CORPORATE INSOLVENCY AND GOVERNANCE ACT CHANGES EXTENDED
Changes to the Corporate Insolvency and Governance Act were due to expire on 30 September 2020. These measures from the Corporate Insolvency and Governance Act have been extended to relieve pressure on businesses dealing with coronavirus. These are summarised below;
CHANCELLOR ANNOUNCES SUPPORT TO PROTECT JOBS AND HELP BUSINESSES WITH CASH FLOW
Today the Chancellor announces further support for businesses and individuals as the government looks to manage the virus whilst protecting jobs.
We are in a very different position to back in March, when there were many uncertainties and the measure implemented were for immediate support and thought temporary. We now know that further restrictions are likely for the next 6 months, and the hence the support announced today.
The primary goal of the next stage is to protect jobs, yet the current Job Retention Scheme, more commonly known as "furlough" will finish at the end of October 2020. The new scheme is aimed at protecting genuine jobs, and not to support those that can only survive through the furlough scheme.
Lucinda Matkin of LM Insolvency welcomed the new scheme stating "it offered continued support in unprecedented times, but also acknowledged that support must be focused viable businesses" she went on to say" It is clear that not all jobs will be saved. nor all companies, but this is not possible for any government. The rate of insolvencies have been significantly lower than the previous year, with company insolvencies for the month of August 2020 being 43% lower than the same time last year. Likewise bankruptcies were also down 43% on the same month last year. These statistics illustrate the need to support what the chancellor termed viable jobs and not just those that can survive through the furlough scheme, as many businesses that would originally have been insolvent have in effect been given a lifeline, or the inevitable has been delayed"
So what is the continued support?
There are two elements;
Job protect comes in the way of a New Job Support Scheme with three objectives;
The scheme will run for 6 months from 1 November 2020 (follow on from the furlough scheme which will end). Its aimed at viable jobs, so is support for those working.
It is support for those working at least one third of their normal hours, which a company/employer will pay for as normal.
For the remainder which they do not work, the employee will be supported further by the government and the employer, with each contributing one third of the pay for normal hours not worked.
All small and medium sized businesses will be eligible to claim for the scheme, but large business will need to prove they have been affected with a fall in turnover. The scheme will also be open to those that did not utilise the furlough scheme.
The Job Retention Bonus and Kick Start Schemes remain in place and are unaffected by the new scheme.
CASH FLOW SUPPORT
The second part of the support announced today by the chancellor is aimed at support the cash flow of businesses, whilst they protect jobs.
There are no new loan schemes or grants announced rather an extension of existing schemes.
Bounce Back Loans
Bounce Back Loans gave a £38 billion boost to businesses, and originally were interest free for year and then repaid over 6 years. The "Pay as You Grow" announced today means these loans can now be paid back over a period up to 10 years, almost halving the monthly payments, companies also have options to make interest only payments for a period of time and take 6 months repayment holiday if really struggling. Further more these measure would not impact the credit score of a business using them.
Lucinda Matkin of LM Insolvency said "this will help businesses as they look to recover, but I hear of many businesses that took a minimal loan amount, thinking the impact would only be temporary, and under current terms are unable to top up that loan. Now that it is clear we face longer term restrictions, an option for those that had not utilised the support fully would have been extremely beneficial to those businesses that miscalculated the impact of the outbreak or the longevity of it"
Business Interruption Loans (CBILS)
The government backed guarantee has also been extended to 10 years for these loans, and the deadline for applying has been extended.
Over £30 billion of vAT was deferred to March 2021. To help cash flow rather than the a lump sum becoming due, companies will be able to spread the cost over 11 months interest free.
In addition the reduced VAT rate of 5% for the hospitality industry will remain at 5% until the 31 March 2021.
Self Assessment Tax
Deferred Self Assessment payments due January 2021, can also be spread over 12 months from next January, rather than a lump sum becoming due.
If you are still going to find managing cash difficult, having utilised cash reserves and are juggling reduced income with your outgoings, please do not hesitate to contact us at LM Insolvency, you have more options the soon you act.
Likewise if you have decided that you no longer wish to continue, we can talk you through the options available, whether insolvent (unable to pay all your debts including redundancies) or solvent (and looking to save tax on exiting your business). Email email@example.com or call 07972928153
A NEW GOVERNMENT BACKED BOUNCE BACK LOAN SCHEME FOR SMALL BUSINESSES UP TO £50,000
On 27 April 2020 the Chancellor announced a new Bounce Back loan scheme for small businesses hit by the impact on the pandemic, allowing businesses to apply for loans up to £50,000, with government guaranteeing 100% of the advance.
Despite the announcement by the Chancellor he is ‘unconvinced’ by universal government guarantee.
Rishi Sunak reiterated that he “remained unconvinced” of the case for rolling out a 100% government guarantee across all the state’s coronavirus loan schemes.
“We shouldn't ask taxpayers to bear all the risk of lending almost unlimited sums to businesses who may have very little prospect of paying those loans back – and not necessarily because of coronavirus, said the Chancellor. “Instead, the new Bounce Back Loans carefully target the extraordinary level of state support at those who need it most.”
So what is the New Loan Scheme?
Note: the guarantee is to the lender and not the business, the business will still be responsible for repaying the loan, and debt will still not be suitable for some smaller businesses
The loans will be easy to apply for through a short, standardised online application (just a two page form with no forward-looking business viability tests or eligibility criteria), making this a Fast Track process. The loan should reach businesses within days- providing immediate support to those that need it as easily as possible.
NEW MEASURES TO PROTECT UK HIGH STREET FROM AGGRESSIVE RENT COLLECTION AND CLOSURE
On the 23 April the Business Secretary announced high street shops and other companies under strain will be protected from aggressive rent collection and asked to pay what they can during the coronavirus pandemic.
The majority of landlords and tenants are working well together to reach agreements on debt obligations, but some landlords have been putting tenants under undue pressure by using aggressive debt recovery tactics. I personally have also heard of cases of companies struggling with potential rent increases despite the current outbreak.
This new legislation will be in force until 30 June, and can be extended in line with the moratorium on commercial lease forfeiture.
These measures come on top of a substantial package of business support measures, including a moratorium on evictions for commercial tenants for at least a 3-month period, which includes a suspension of forfeiture rights,which prevents all commercial tenants from being removed from their properties until 30 June.
Should you need assistance with negotiations or help and support considering the longer term options please do not hesitate to contact our Licensed Insolvency Practitioner for a FREE consultation on Tel: 07972928153 and email: firstname.lastname@example.org
INTERNATIONAL WOMEN'S DAY, WOMAN OF THE YEAR FINALIST...HERE'S TO ALL THE WOMEN IN BUSINESS!
International Women's Day is a global day celebrating the social, economic, cultural and political achievements of women. The day also marks a call to action for accelerating gender parity.
International Women's Day (IWD) has occurred for well over a century, with the first IWD gathering in 1911 supported by over a million people in Austria, Denmark, Germany and Switzerland. Prior to this the Socialist Party of America, United Kingdom's Suffragists and Suffragettes, and further groups campaigned for women's equality.
Today, IWD belongs to all groups collectively everywhere.
IWD is not country, group or organization specific.
On this day, 8 March 2019, IWD, I am proud to sit here today to be recognized as a finalist in the Woman of the Year category at the Women in Credit Awards 2019, being a founder and director of a successful boutique Insolvency firm, alongside the other remarkable female finalists that include doctors and professors, as well as other professionals. It's not just the celebrities, politicians and activists that impact on the world for future generations, but those that successfully go about their day to day lives. Here's to all the women in business today!
...CONFIDENTIAL BUSINESS SUPPORT AND ADVICE TOO
With this post we wanted to highlight some of the other important services we offer, when directors and partners of companies need financial and business support.
CASE STUDY - HOSPITALITY CLIENT & BANK LENDING
The client will remain anonymous, as the services provided were business support and advice and not a formal insolvency. This particular client was within the hospitality sector, although these services can apply to any.
In November, a restaurant/hotel had breached its overdraft limit, and was struggling to manage cash-flow with the limits of the agreed overdraft, as a result the owners of the business had been requested by the bank to undergo a independent business review in order for the bank to assess whether the business was insolvent or whether they would be prepared to continue supporting the business, and if so on what terms.
The key issues were;
As such the owners felt an overdraft of £50,000 was required short term to see them through over the Christmas period and low season, compared with an agreed overdraft facility of £20,000.
LM Insolvency & Advisory Limited carried out a review of the business and possible improvements, cost savings and management of the cash flow. The outcome was to reduce the lending requirement to a peak of £40,000, in addition the review was able to provide the bank with comfort of the business's ability to repay the overdraft during the forthcoming peak season.
Alternative options including other lending and formal insolvencies were discussed with the owners and considered so that an informed decision on the way forward could be made.
The final outcome was an agreed temporary overdraft with the business's current lenders for the £40k to April 2019, providing the owners with certainty of trade over the Christmas period and the comfort in the medium term of the support whilst they seek to trade through the cash flow difficulties, and implement changes that would bring about higher efficiencies and cost savings.
Whilst we unable to provide the full details of this case, due to confidentiality of the client, we hope this highlights some of the other services we offer, including, but not limited to, independent business reviews, cash flow, management and forecasting, stakeholder management in particular creditors. Should you relate to any of the above issues, or are interested in our business support services please do not hesitate to contact Lucinda at email@example.com or call 07972928153 for a coffee and chat to discuss further.