As announcements about financial help and support in the current crisis have been released gradually over the last week or so, now seems a good time for a round-up of the help available to limited company owners. While there is no single measure aimed specifically at director/shareholders (unlike employees, sole traders and partners in partnerships), there is still help available.
VAT and Tax deferrals
The vast majority of our limited company clients are great at saving for corporation tax, VAT and personal tax as they go, and the tax payment deferral measures should mean that you can safely dip into your tax savings for a while if you need to.
- VAT payments for the quarters ending in February, March or April can be delayed until early 2021 (though if you’ve a direct debit in place with HMRC for your VAT it’s important that you cancel it – they’ll take the VAT on time otherwise).
- It’s now been confirmed that all self-assessment taxpayers (not just sole traders and partners) can delay their July 2020 personal tax payment until January 2021.
- For companies with a March year-end, you should hopefully have a year’s worth of corporation tax in the bank, which isn’t due to be paid until the end of this year.
This should mean that must companies will have a cash reserve available to draw on. And if you don’t have sufficient profits to pay dividends, then borrowing money from your company is an option.
Deferring other taxes
The VAT and self-assessment deferments above are automatic and you don’t have to apply for them. There aren’t any formal general agreements that other tax payments can be delayed. But HMRC have set up a special helpline for businesses that need to discuss deferring other payments.
It might take a long time to get through, although a client called them one day last week at 8.15am and she was through within five minutes, so aiming for the start or end of the day is probably sensible. It sounds as if generally HMRC are very open to agreeing more generous payment terms.
Grants
- Rates-related grants - If you formally rent premises subject to Business Rates, you should be eligible for a grant if either (a) you currently benefit from Small Business Rate Relief (remembering that you will qualify even if SBRR means you pay no business rates all), or (b) you’re in the retail, hospitality, nursery or leisure sectors.
- Job Retention Scheme - If you employ staff but don’t currently have work for them, you can use the JRS to claim a grant to cover 80% of their wages. This scheme is not intended to cover directors, but it's looking quite likely that HMRC may end up being sympathetic to eventual claims from companies against part of a director's small salary where the company's work has totally dried up. But nobody knows that yet, the claims process won't exist for at least a month, and there's no action you can take now that will make a difference. So you'll just have to be patient on that one.
- Statutory Sick Pay – some years ago HMRC stopped reimbursing employers for SSP they paid to staff – but they will now reimburse it if it’s coronavirus-related. Not right away, though, there’s no mechanism for doing so right now, so you’ll need to fund the (modest) cashflow to begin with.
Director’s Loan Account and profit reserves
- It may well be that your company owes you some money on your Director’s Loan Account, which can be paid out to you tax-free while you’re not earning. Do check with us if you’re unsure.
- Don’t forget that if you have profits built up from previous years, you can use those to keep paying yourself dividends, even if you’re not currently working. The beauty of a limited company is that you have the ability to smooth out dividends, even when profits are volatile. For those of you who have been in the habit of drawing less than the company has made in profits in the past, now is the time to make use of those extra profits!
Other things to consider
- Check your business insurance policy, in case you have Business Interruption cover.
- Speak to your landlord (for both your home if you rent, and your business premises) to see if you can delay payments, get a discount, or a rent-free period. Some landlords are open to this.
- Consider talking to your lender to arrange a mortgage payment holiday.
- Talk to your bank to see if you can arrange a business or personal overdraft facility.
- If a loan would be more appropriate, consider asking your bank about the government-backed Business Interruption Loan Scheme
- If you want to take another job during this period, that’s absolutely fine – there’s nothing to stop you from having a job alongside your own limited company.
- Universal Credit may be available to you – you’ll need to check online to see whether you meet the criteria, but it’s potentially worth a look.
- Some clients are finding opportunities to use their skills to provide different services, or to deliver their services in new ways, or to find new customers to target. It could be worth asking yourself whether you can adapt your business model to find opportunities in the current circumstances – we’re seeing a number of clients doing this successfully.
- Remember also that it’s fine to dip into your savings. While it’s natural to want to preserve them, one of the great benefits of having savings is to help you survive an unexpected loss of income. With interest rates on cash savings being low, it’s unlikely to cost much in terms of lost interest, and you can look to rebuild savings once things return to normal. You’ll need to check the rules for withdrawals from your particular account, but even some ISAs now allow you to withdraw cash and replace it later in the same tax year.
Hopefully there are some helpful pointers here, and we’ll of course let you know as and when any new measures are announced.
Good article; limited support for limited companies, but good to know whats out there
Posted by: David Crowe | April 01, 2020 at 11:55 AM