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How to facilitate strong cash flow through government incentives

Across the country, companies of all sizes face a new reality as they try to operate under the new conditions imposed by Covid-19. For small organisations in particular, many of the fundamental operations of running a business, whilst more difficult, have become even more important. 

Cash flow is without doubt the primary concern for many businesses during this period. As companies repurpose to support the fight against the virus, furlough staff, reduce service or move their operations online, normal models of practice are being thrown out of the window. 

For those who are not classed as key workers, the only way to keep running is for work to take place from home – an impossible task in many industries. However, even beyond this, the crisis is having a major impact on day-to-day processes and core business models. 

According to banking platform Tide, the revenues of SMEs are set to decline by nearly 60% in April and the impact is projected to be particularly damaging for those in the hospitality and leisure sector.

As businesses face tough choices over how to keep staff employed and keep the business afloat at all, cash flow becomes a real challenge. Supply chains are broken and demand for services or products is reduced or non-existent. Paying staff and suppliers on time and receiving payment may be difficult for some even at the best of times but in this environment, it’s proving to be a sink or swim situation. 

However, it is not all doom and gloom. 

There are several ways in which companies can weather this storm. The Government has created support packages and initiatives which are incomparable to anything this generation has seen before. SMEs should seize what they can and need. Similarly, many advisors are providing free or reduced cost services to help SMEs access the information they need to survive the storm, particularly if they are repurposing their operations to support the fight against COVID-19. 

The current schemes include: 

Coronavirus Business Interruption Loan Scheme (CIBLS) – this scheme has been set up to support businesses which are seeing cashflow disrupted or losing revenue due to COVID-19. Through approved lenders, businesses can borrow up to £5 million. Whilst the borrower is responsible for the debt, the Government will guarantee the first 12 months of interest and any lender-levied charges. 

Small Business Grant Fund - The Small Business Grant Fund applies to all businesses who receive either Small Business Rates Relief (SBRR) or Rural Rates Relief (RRR). This means that they will be eligible for a one-off grant payment of £10,000 to help with business costs.

Coronavirus Job Retention Scheme – This scheme enables employers whose businesses are severely impacted by COVID-19 to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

Deferral of VAT payments - All VAT payments are postponed for the next three months until the end of June 2020 during the coronavirus pandemic. This will benefit around 2 million VAT payers and delay £30 billion in taxes, since it includes pre-crisis trading. The VAT is then due at the end of the 2020/21 financial year. VAT refunds and reclaims will still be made by HMRC as normal. 

An existing incentive which can enormously help SMEs which are repurposing their business, to adapting their operating model or supply chain to face the new reality, is the R&D tax relief scheme. Many companies are unconsciously innovating to survive and thrive and as a consequence, they should seek the relief which the Government provides on R&D. Additionally, for companies that are repurposing their operations to fight COVID-19, Leyton is providing our R&D tax service for free projects related to COVID-19. We hope this offer will aid the facilitation of strong cash flow and recovery of costs where applicable to reinvest into these repurposing businesses. 

The Government and businesses across the country are working relentlessly to support communities, our health service and individuals through this pandemic. As SMEs look to support their business and people through this time, they MUST take advantage of the full range of the schemes and incentives that are available to them.

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