Help you need to carry on
Don’t miss out. Financial support measures for private practices hit by the pandemic are still available. Ian Tongue gives a recap of the main ones to be aware of.
Covid-19’s impact has been with us for over a year now and the majority of private practices have experienced a significant reduction in income.
The Government has brought in several measures of financial support since the pandemic that have evolved and therefore it is worth recapping on the current situation.
Coronavirus Job Retention Scheme (CJRS)
This is by far the most publicised and widely used financial measure and is often referred to as the ‘furlough scheme’.
It has been a lifeline for a huge number of businesses and is an incentive to retain your employees during a period of downturn or inactivity. This scheme in particular has evolved several times during the period it has been in place.
Initially, the scheme prevented the employee working in pretty much any capacity for the business with the exception of directors carrying out statutory responsibilities.
It also added the complication of only being available to those on the payroll at the end of February 2020 and largely based on that month’s pay for the calculations.
From 1 July 2020, a more flexible arrangement was put in place whereby you can claim financial support for the hours that an employee does not work and pay them for the hours they do work.
At the same time, the Government announced a reduction to the level of financial support in an attempt to wean businesses off the scheme.
Due to the upsurge in the virus, the scheme has been extended several times but has seen little further changes aside from the level of support and eligibility to claim. It has, however, introduced strict time-scales to make a claim for the support, which may see employers miss out if they are not organised.
At the time of writing, the scheme is set to end on 30 September 2021 and can be summarised as follows:
For periods up to 30 April 2021
Employees must have been employed as at 30 October 2020;
Those employees must have been reported under a PAYE scheme at any time between 20 March 2020 and 30 October 2020;
The lower of 80% of the monthly salary or £2,500 can be claimed each month;
Employers’ National Insurance and pension contributions cannot be claimed.
For the period from 1 May to 30 June 2021
Employees must have been employed as at 2 March 2021;
Those employees must have been reported under a PAYE scheme at any time between 20 March 2020 and 2 March 2021;
The lower of 80% of the monthly salary or £2,500 can be claimed each month;
Employers’ National Insurance and pension contributions cannot be claimed.
From 1 July 2021
At the time of writing, it appears that the same eligibility criteria will apply as with the period 1 May-30 June 2021.
However, the level of support will reduce as follows:
- Claim for July 2021: lower of 70% of salary or £2,187.50.
- Claim for August 2021 and September 2021: lower of 60% of monthly salary or £1,875 per month.
It is important to note that the deadline to claim support under the scheme is largely 14 days after the month end.
Therefore, the claim for April 2021 has to be submitted to HM Revenue and Customs by 14 May 2021 and so on until the proposed final claim for September which is due by 14 October 2021.
If you are in any doubt regarding the eligibility of the scheme to your circumstances, speak with your accountant.
Loan support
At the outset of the pandemic, the Government unveiled support in the form of a loan that had Government backing, known as a Coronavirus Business Interruption Loan (CBIL).
These loans had 80% Government security and therefore the lenders still required full applications to approve the loans, which made access to this funding difficult, as the banks felt the 20% exposure to bad loans could harm their operations.
The Government then introduced the bounce-back loan, which was capped at the lower of 25% of income or £50,000, but had 100% security from the Government.
This led to a streamlined process of loan applications, with the money often paid over within a few days following a simplified application process. The CBIL loans were generally for larger businesses and the bounce-back scheme for smaller operations.
Favourable repayment periods
The benefit of both loans are favourable repayment periods, low interest rates and deferred payment start dates.
The bounce-bank loan has been a welcome lifeline for many consultants who have not been able to work privately or had their income substantially reduced since the pandemic started.
The CBIL and bounce-back loans were available until 31 March 2021, after which time new or extended applications will not be available.
From 6 April 2021, a new loan support scheme is available to ensure that businesses still have access to financial support from banks and other financial institutions. This new arrangement is referred to as the recovery loan scheme.
The new arrangement operates in a similar way to the CBIL scheme whereby the Government will provide 80% security on the loan. Applications can be made from 6 April and close on 31 December 2021.
The new scheme offers loans and overdrafts from £25,001-£10m and also other types of invoice or asset finance from £1,000 to £10m.
For loans and asset finance, the repayment term is up to six years and for overdrafts and invoice facilities, this is three years. No personal guarantees will be taken on facilities up to £250,000 and the borrower’s main home will not be taken as security.
As with the original CBIL scheme, a full loan application will be required by the bank to ensure the viability of the business to repay the debt in the future.
Self-employed
Despite many consultants being self-employed, few will have been eligible to claim under this scheme due to having salaried or other sources of income.
It may, however, have been applicable to a spouse or family member if they are self-employed.
Unlike the CJRS, which is claimed monthly, the self-employed income support scheme is claimed in quarters, with the maximum amount available being £7,500 per quarter.
In last month’s Budget, the Chancellor announced an extension to this scheme to allow a fourth claim to be made on the same terms as previous, but a fifth claim will be subject to a review of how the business has fared over the pandemic period.
If you or a family member are eligible for this scheme, it is important they speak to their accountant to understand their position.
VAT
The majority of consultants will not be VAT-registered, as the medical services that they provide are exempt from VAT. For those that are VAT-registered, they had an option to defer the VAT relating to payments due between 20 March 2020 and 30 June 2020.
For those that did defer the payment of VAT, if you have not paid the deferred amount by 31 March 2021 and want to pay by instalments, you will need to apply for this by 31 June 2021 and can take up to 11 months depending on when the application is made.
However, as the scheme has been open since 23 February, each month that goes by reduces the number of months that you can repay the amount over. If you are in this position, contact your accountant to ensure that this has been dealt with.
Ian Tongue (right) is a partner with Sandison Easson and Co, specialist medical accountants