Help for owner-managers of limited companies

VAT deferral – 1^st item for tomorrows “to do” list

If your business is VAT registered and have a VAT payment due between 20 March 2020 (Feb 2020 quarter end) and 30 June 2020 (April 2020 quarter end) you will have heard us advising on the option to defer the payment until a later date in order to help manage your cash flow. It has been confirmed that HMRC will not charge interest or penalties on any amount deferred. If you decide to defer your VAT payment, you must catch up your debt on or before 31 March 2021.

If you normally pay by direct debit you should contact your bank to cancel your direct debit as soon as possible or cancel this online if you are registered for online banking.

Please note you do not need to tell HMRC that you are deferring your VAT payment but if the DD is in place, they will collect it automatically.

You do still need to fill the VAT returns so don’t forget that bit.

Furloughing your small directors’ salary

Most directors take a tax-efficient salary of £715. If your company has no work for you to do other than basic statutory directors responsibilities, you can furlough yourself and the company can claim back 80% of this cost. If you have a partner or spouse on the payroll this will double your entitlement (you will receive 80% of each salary rebated).

It would be usual for this amount to increase in April 2020 but abuses of this are likely to be challenged. Those whose companies are still trading but are concerned about how long that will be need to consider very carefully their salary levels in April and beyond. Advice from your Principal Adviser is crucial in this situation.

Please see our guide to furloughing here.

Company dividends

If your management accounts show you as a solvent company with retained profits, you are still able to draw dividends even if you are making no profit now. This will of course deplete your cash and affect your credit rating. 

That doesn’t stop you re-introducing all or part of it to the business as a director loan owed to you at a later date.

If you need to do this please send us your management accounts for review and book a call your principal advisor or client manager for advice.

Personal mortgage holidays 

For the majority of people, your mortgage will be your biggest outgoing each month. 

You should contact your mortgage lender to arrange a payment holiday. Even if you are able to continue making mortgage payments, it is worth taking advantage of the mortgage holiday to be able to put some money aside as a safety net as we are unable to predict how long this will go on for and these holiday periods may get extended if this is to continue longer term. 

Buy to lets

If you are also a landlord with a buy to let mortgage, even if your tenant is still able to continue making rent payments you should request a payment holiday. This will allow you time to increase your personal income and build a savings pot in case you hit future financial difficulty. It also safeguards you in case tenants are late to advise you on if they can’t pay.

Directors expenses

Many directors are poor at keeping a record of their expenses and miss out on tax-free amounts. With time on your hands, ensure that you can claim for all your business expenses. This will then be money owed to you from the business tax free which will help maximise your personal income. 

Personal saving tips

To save as much money as possible during Covid-19 it is important to maximise income and minimise spending. For more information and tips please see our article: reducing your personal expenses.

Applying for universal credits

Universal credit is a monthly payment to help with your living costs if you’re on a low income or out of work. To check if you are eligible and to apply visit Gov.uk.

Please note there are queues within the application process, so the quicker you apply, the better!

Private school fees

Whilst not applicable to many, it is still unclear whether or not parents will get any money back with regards to private school fees. At the moment it seems that whether you do or not is completely up to the school itself, however it does seem highly unlikely as most schools are teaching pupils via online classes. To enquire, contact the school directly to discuss your options.

Business banking overdraft

One of the quickest ways to get your hands on some extra funds will be speaking to your business bank about increasing your overdraft limit. If you are registered for online banking most banks will allow you to apply for this online, otherwise simply give them a call to discuss your options and enquire about interest rates. 

The advice from the government on the business interruption loans and the banking sector aren’t currently completely aligned, and the lending process and information required is mammoth. We are confident this will resolve itself over the next few weeks and this gives businesses the time to put a full plan together and get accounts up to date which will be required.

If you have business premises

Please refer to our previous article: reduce the impact Coronavirus has on your business’ cashflow

As we are unsure just how long this pandemic will continue it is important to plan long term, therefore if this ends quicker than expected it will be a bonus!