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Mark runs through what the Government are offering to help employers, employees and the self-employed in this telephone interview by Paul Andrews, recorded for the Business Bunker Show on April 3rd 2020.

Listen to the recording at https://www.kentbusinessradio.co.uk/…/u…/2020/04/Xtra139.mp3 (start at the 15 minute mark) or read the transcript below.

Paul:

Welcome back to Business Bunker Show, Business Bunker Xtra Show, here on Channel Radio, Biz Radio, and Sound of Spitfire. Hopefully, on the line now, I’ve got Mark Telford. Mark, good morning.

Mark:

Hi, Paul.

Paul:

How are you, my friend?

Mark:

Very good, thank you. Very busy.

Paul:

I’m sure.

Mark:

I’m well, thank you.

Paul:

Good. Mark Telford of Telfords Accountants here. As he says, he has been very busy. He’s been absolutely fabulous, if I may say so. He’s formed a WhatsApp group of his clients. He’s been working at least 18 hours a day, by the looks of it, pumping out information and answering questions and checking stuff. Mark, tell us a little bit about you and your business first.

Mark:

Yeah. Okay. My business is a firm of accountants called Telford Accountants. We’re based in Sellindge, which is sort of halfway between Ashford and Folkestone. We’ve been going now for just over eight years, and we really support owner managed businesses throughout Kent and further afield, generally in the Southeast. No aspirations to go big. We’re a team of five. We all work remotely, and the onus is very much on becoming part of the business owners team.

Paul:

Yeah. One of the things that I really appreciate you, of the many things I appreciate you, you’re a very forward looking firm, and you’ve been very early adopters in technology and ways of doing things and automating that whole accounting and bookkeeping function.

Mark:

Very much. I think very much from the start, we’ve tried to work remotely. And now our team of five are as far afield as Scotland, and tech is an integral part of what we do, key to how we work and how, especially now, we’re being able to keep in contact with clients.

Paul:

Yeah. Absolutely. Funny enough, I’m good friends with a chap called Jonathan that runs a local law firm, and he’s got a legal partner, a lawyer, who’s worked for him for four years. They’ve never actually physically met, and she actually lives in the north of Norway in the middle of nowhere and works remotely. And they’ve never actually met in the four years that she’s worked for him, other than via VideoLink or whatever.

Interesting days. Let’s start to look at what’s actually going on at the moment. We’ve had loads of government announcements in terms of splashing the cash to try and stop a meltdown of business, and there’s been lots of different announcements and different things coming out. And of course, as each announcement comes out, hundreds if not thousands of people go, “Oh, it doesn’t suit me, and it doesn’t fit me.” And all of the rest of it.

I just want to make one comment, and you can comment on this if you’d like, or not, Mark, as the case may be. One of the things that’s astounding me reading WhatsApp groups and Facebook groups and LinkedIn groups and just generally on social media and people ringing me and asking me, is how few people seem to understand the basics of how their business is constructed.

And what I mean by that is in the early days, we got loads of people saying, “Oh, well, I’ve got a limited company, and I don’t get covered by self employment.” Well, that’s because you’re not self employed. Well, they don’t seem to understand how they’ve set up their own company.

And so many people as well are saying, “Well, I’m self employed, but I’ve never made a profit.” And they don’t seem to understand how their profits are put together. I don’t know if you’ve got any comment on that or whether you just want to ignore me.

Mark:

No. It’s very valid, and I think particularly when it was the announcement about the job retention scheme and its support for the self employed, and I think quite often individuals who may well start off as trading as a self employed individual, they then might be advised to convert to a limited company.

But they aren’t fully aware of all the implications of that, and they don’t really understand it, other than perhaps being told it’s more tax efficient. But obviously, it’s very relevant now, because I think in particular, directors of small owner managed businesses, they are potentially going to get no support at all from the government.

Paul:

Yeah. Absolutely. Even if they could furlough themselves, because so many of them get paid via dividends rather than PAYE, they’re going to get virtually nothing.

Mark:

Yeah. That’s very true. It’s always been the most tax efficient way for those people to be paid, but now, it’s sort of biting them in the backside.

Paul:

Absolutely. For me, another one of the outcomes of this is if you work in the insurance business, I think you’re going to be very busy for the next year or so going to see people and talking about income protection plans.

Mark:

Yes. And I think one good thing about this process is, and we touched on earlier. It’s going to make people look more into their business setup, and it’s what I like to call business resilience. They need to build more of it into their business.

I think we’re now at the stage where we’ve got over the initial shock of COVID-19 and the lockdown, and it’s now a case of particularly what we’re trying to do with clients now, is we’re trying to get them to put action plans in place and continuity plans so that they can start to say, look at their position and think, “Well, okay. This is where we are now. I now need to do something to improve my situation.”

Paul:

Yeah. Absolutely. I think anything like this will throw up opportunities going forward. It will throw up glaring holes, as we’ve kind of been discussing, in how we’ve been operating prior to this. But I think there will be a lot of people looking at this, and obviously, quite rightly, because they need to.

But there will also be opportunities, and there will be radical change. I was just [inaudible] before I got you on the phone, Mark, in the recruitment industry, for years they’ve tried to introduce video interviewing, and it’s never really taken off. And then all of a sudden in the last three weeks, everything’s done by Zoom and Skype and BlueJeans and  VideoLink. I think it’s going to become a cultural thing from now on in that we do do a lot more video meetings and video interviews and stuff like that.

But one of the other things, looking, and just hearing some of the heartrending stories from your WhatsApp group of your client base, outside of wages, the second biggest overhead for most small businesses is their premises cost.

Mark:

That’s absolutely right. Rent and rates is a huge cost. It’s a fixed cost. It’s nothing they can do about. And unfortunately, there are some businesses that aren’t getting any support.

Paul:

Absolutely. I could tell you some stories. I’ve got three offices in three different council locations, and I can tell you different stories from each of the, and different reactions from landlords. Some landlords have been very supportive and offered us a rent holiday. Some have absolutely refused point blank. And one just sold the building that we were in. There’s all kinds of things going on.

But again, I think from my point of view as the owner of Fruitworks, which is not doing too well at the moment, obviously, because of the lockdown, but I think in the future places like community work spaces will take off even more than they were before because of the easy turns and the lack of commitment that’s needed to go forward. You’re not going to be locked into a long lease.

Mark, do you want to just run over with us what the government offerings are and what the various criteria is as you understand it?

Mark:

Yeah. Of course. What I’ll do is I’ll start off with the ones that really affect individuals directly the most, and that’s in terms of how their pay or their income, how they’re going to be supported in that respect.

The situation we have, if we start with the self employed people, because that’s probably the easiest one to start with, they are going to receive a grant which is equivalent to 80% of their average monthly earnings or 2,500 pounds, whichever is the lowest, provided they’ve had a trading profit of less than 50,000 pounds in the tax year that ended in April 2019 or the average of the three years from 2017 through to 2019.

That’s the self employed people who work on their own. They could also be a partner in a partnership, but critically, they’re not a director of a limited company.

Paul:

Okay. Can we just clear something up? Because I saw lots of self employed people getting very confused over this term, and it’s the term that’s bandied around by lots of people for lots of political reasons as well. And that’s made a profit of 50,000 or less. And a lot of people say, “I don’t make a profit.” But I think that’s because they don’t understand what’s classified as a profit as far as a self employed sole trader is concerned.

Mark:

Yeah. In very simple terms, that’s your income or your sales, less all of your expenses.

And it’s the net figure which is your profit.

Paul:

It’s what you put on your self return and are paying your income tax against as your earnings for the year.

Mark:

It is absolutely that, and that’s how the revenue will be working out who’s entitled to what. They will be basing it on the information that they already hold. Now, those first payments aren’t due to come out until June. And at the moment, it’s going to run for three months. What’s also important there is that if those self employed people are still able to work, they can still work.

Paul:

There’s no restrictions on them doing what they can.

Mark:

No. No. That’s true. And that’s quite different to the position with limited companies, where people may have heard this term, furloughed which was a new term for me before I heard it, and that was by the chancellor.

This is really to be used as the alternative for business owners where their only other option would have been to have made people redundant. Rather than make that person redundant, they are able to claim back 80% of that individual’s wages, subject to a capital gain of 2,500 pounds.

Now, and again, there’s more confusion about this, of how it works. I’ve had business owners say to me, “Well, do I still need to pay my staff? How do I get the money back from the government?”

And in very simple terms, yes, you need to pay your staff. You will claim that money back from the government. HMRC are busy working on a new portal for claims to be submitted from which payments will be generated. That’s not live at the moment.

And this is important, because it’s really going to affect small businesses’ cash flow. It’s unlikely that you will get any money back from the government until the end of April at the very earliest. At that point, you will have probably perhaps paid out your March wages to your team and also April. And only at that point you’ll be getting the money.

One thing I’d say to business owners, it’s really critical that they do a very short term cash flow forecast. It doesn’t have to be complicated. It could be on a spreadsheet. It could be on a notepad. It’s whatever makes sense to them.

Paul:

And just one point there, because some people have asked me this as well, the government are paying 80% up to a limit of, was it £2,500 a month?

Mark:

That’s right. Yeah.

Paul:

If you’ve got employees that earn more than that, you can pay them the difference if you so choose.

Mark:

Absolutely. You can. It’s just the government support is capped.

Paul:

Yeah. You could run your normal payroll and pay your staff normally as you do, and then in a month, two months, or three months, however long it takes, get 80% of it back. That’s basically the way to look at it, I guess.

Mark:

Yeah. They’re subject to that cap at £2,500.

Paul:

Absolutely. Okay. And the difference between that and the self-employed one is that they can’t work whilst it’s being claimed.

Mark:

That’s right. Furloughed workers have to be doing no work. They can’t undertake trading. That could be relevant if you’ve got individuals who perhaps, they want to look at picking up new skills, they can undertake that. But they can’t actually do any work which would be deemed contributing to that business’s core activity, whether that’s sales, marketing, production. Any of those aspects which they would ordinarily do, they can’t be seen to be doing that to qualify for the furlough scheme.

Paul:

Absolutely. And as a director of a limited company, if you’re on PAYE, you can furlough yourself, I understand, and you are allowed to do the statutory work but no business work. Is that correct?

Mark:

That’s right. There was an awful lot of confusion about this until there was a webinar by the CBI last Friday where they covered this particular point. This is very relevant for those small limited companies where the director is the only person, let’s call it, employed by the business, only person on the payroll.

They can furlough themselves and only undertake what’s called statutory duties, which would be things such as paying the bills, doing the bookkeeping, submitting the VAT return. Those would be statutory duties. They are not part of that company’s core business.

Paul:

Right. Okay. As you said, though, Mark, quite rightly, there’s going to be a time lag between paying out your running costs to a business, whether you’re self employed or a limited company, and claiming things back from the government’s various schemes. That’s understandable, isn’t it? This has all been rushed into place, and some of us are starting to feel sorry for H… No, we’re not. Not really. HMRC are trying to react to this quickly.

There are a couple of other things that I think we ought to touch on that could potentially help people a little bit in the interim with their cash flow. But again, you’ve got to be careful, and that’s the fact that they’ve said we can suspend VAT payments.

I think I’m right here, and I’m going to ask you after I’ve said it to put me right. And I also believe that if you were due to pay income taxes, self employed person, that’s also been furloughed, sort of to use the idiom of the day. That’s also been put back. Is that correct?

Mark:

Yes. There’s been support in both of those areas. If we look at VAT first, if a [inaudible] business, if their next VAT payment is due between the 20th of March and the 30th of June, that is deferred or postponed until April 2021.

Paul:

Right.

Mark:

Now, the current thinking is that that will be the only VAT payment that gets deferred. Once we’re after that period, things will then go back to normal. That VAT still needs to be paid. A very important point, you still need to submit your VAT return.

Paul:

Right. Okay. That is important. You have to put a VAT return in, but for this particular payment period, you can furlough it, for want of a better term.

Mark:

Yeah. You just delay the payment. And really important, another point, if a business has a direct debit in place to pay their VAT, make sure they cancel it.

Because there’s no guarantee that the HMRC will not take the money.

Paul:

Absolutely. And just on that, the point about raising that for companies that are VAT because not having to make that payment will help in the short term with your cash flow a little bit, possibly.

Mark:

Yeah. Absolutely. And it’s a cost that people are probably looking at and thinking, “Oh, I need to figure out.” I think what’s particularly important and why it’s relevant we talk about all of these points is because I’m always hearing, which is quite worrying where business owners haven’t had any contact from their accountant.

It’s just the accountant relaying the information to the business owner to give them a degree of comfort and an element of peace of mind that they know what they’re entitled to, and they can see some benefit.

On the second point that you mentioned there, Paul, about the self assessment tax, this is for any self employed people or perhaps people who run their own businesses and receive some untaxed income. We talk about dividends there.

If they are making what’s called payment on accounts, that’s obviously income tax payments. The next one was due for July of this year. That has been postponed until January 2021. Again, there’s a six month benefit there, but it still needs to be paid.

Paul:

Yeah. Does that also count for PAYE directors that also often get charged on account in advance?

Mark:

That’s right.

Paul:

Yeah. Okay. There’s that element, too. There are a few things that you can kind of hang onto your money a bit longer, but I would emphasise, I’m sure you would too, Mark, this has got to be paid at some stage.

Mark:

That’s right. The things that don’t need to be paid back, support, which is essentially a grant, the furlough scheme money, which is reimbursed. That doesn’t need to be repaid.

The business rates grant fund, which is being made available. Again, that doesn’t need to be repaid. Whenever we’re talking about postponing or deferring the payment of the tax, that does still need to be paid.

Paul:

Yeah. Absolutely. Let’s just touch on those last two things as well, Mark, the grants and loans and types of things that are available. The government have said that certain industries in leisure retail up to a certain size can claim a rebate or to be let off or deferred business rates.

Mark:

Yes. If you’ve got a business in the retail, hospitality, or leisure sectors, two levels. If you have a rateable value of the premises you occupy, which is less than £50,000, that’s the rateable value, not the rates you pay, the value of the premises, you could get a grant of £10,000.

Paul:

Right.

Mark:

If the rateable value is between £15,000 and £51,000, you can get a grant of up to £25,000.

Paul:

Right.

Mark:

Now, if you operate a business which benefits from the small business rates relief or the rural business rates relief, you could be entitled to a one off grant of up to £10,000.

Paul:

Right. Okay.

Mark:

Added onto that, we’ve also got the situation where there is going to be a business rates holiday in the current year. It’s the year, sorry, the year that starts on Sunday, sorry, Monday the 6th of April, business rates holiday there for the whole of that year for, again, the retail, hospitality, and leisure businesses.

Paul:

Okay. It’s interesting. I understand why the government picked those industries, because they were the hardest hit upfront. But of course, the economy is an integrated economy, and the whole thing’s gone down like a pack of dominoes. Those businesses going offline forced other businesses going offline. I’m just making a comment. I know that there’s not much to be said. They’ve done what they’ve done, and that’s where we are.

The final point that I want to raise is the British business bank loans, and there’s been some controversy over that and the initial offerings. And I believe the government have actually come out officially this morning and put a stop to it. And that was loans to business of up to five million pounds and derived through the High Street banks. And it turned out that some of the banks were demanding personal guarantees for the loans.

Mark:

Yeah. Personal guarantees, and then wanting to put a debenture on a business, a debenture that, again, is in the form of a guarantee. Yeah. And that proved very difficult to come by. I communicate with hundreds of accountants through various groups around the country, and there’s a very small minority who have actually successfully managed to get a loan for a client.

Paul:

Yeah. Yeah.

Mark:

My message there to small business owners is don’t just rely on one of these coronavirus business interruption loans. Look at all the other options that you have to try and get some additional cash into your business.

Paul:

Yeah. Absolutely. I don’t know if you saw, Mark, the government actually came out this morning and said, “No. We’re not having this. Loans up to £250,000 are guaranteed by the government, and you must not give a personal guarantee or a debenture. They are not normal loans.” And they made that quite clear. But actually getting money out of a bank is not quite the same, is it?

Mark:

No. No. No. It’s not. And it’s interesting now, because we’re at that point where we now need to start doing things, and I think it’s really important that the business owners, firstly, they’re provided with all the information that they have and a lot of the points we just discussed here. But then they also need to look to plan not just how they get through this lockdown period but how they can hit the ground running and their business can get back up to speed as quickly as possible when things do start to open up.

Paul:

Yeah. No. Absolutely. Look, Mark. Thank you so much for taking some time out of your very busy day, and I know just how busy and how hard you’ve worked on this. And I have to say, we really do appreciate what you’ve done personally and coming on the show and giving us an overview of what’s going on. Thank you so much for that.

Mark:

Thank you, Paul.

Paul:

If people want to find out about Telfords Accounting, what’s your website? Where do they find you?

Mark:

The website address is www.telfordsaccountants.com. If they want to email us directly, the email address is office@telfordsaccountants.com. We’re also on social media, Facebook, we’re very active on there. Just search for Telfords Accountants. Or you can contact me directly on LinkedIn and just search for Mark Telford.

Paul:

Fantastic. Mark, thank you so much for that. It’s been a pleasure to talk to you. Going anywhere nice for the weekend?

Mark:

I might get out into the garden.

Paul:

Yeah. I might go to the kitchen. I haven’t planned it yet. Mark, thank you so much. It’s a pleasure to talk to you, as always. Stay safe, my friend, and we’ll see you soon.

Mark:

Yeah. Thanks, Paul.

Paul:

Cheers, now. Bye-bye.