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Meston Reid & Co: what are the options for business?

 

 

Aberdeen , Scotland, Monday, 19 November 2018
Meston Reid & Co
12 Carden Pl, Aberdeen AB10 1UR
Picture by Abermedia / Michal Wachucik

By Mark Brown, audit, accounts and business assurance partner at Meston Reid & Co

We know things can change quickly in the world of business, but this is altogether new territory for companies across the north-east of Scotland.

Not only do they have to respond to the severe – and continuing – consequences of COVID-19, but there’s also the major impact of the low oil price to contend with.

These unprecedented challenges are prompting many businesses to ask themselves what their immediate next steps should be. Many are, inevitably, in the unwelcome position of having to rationalise costs – and employees are usually the biggest cost for any business.

Based on our experience and the guidance issued by the UK Government, here are some key points of fact – and some options – to consider:

Cashflow: Ensure you have a cashflow forecast. While uncertainty of income makes this more challenging, it is important to assess the potential damage to your business. It’s vital to have this financial management and forecasting to hand in a fluid situation.

Directors: Staff will be looking for leaders to lead by example. Directors and senior managers taking reduced salaries or delaying other payments, such as dividends, are options to consider.

Redundancy: If putting staff on furlough – the government job retention scheme – is not an option, then redundancies to protect the future of the business is a consideration. There is, however, a need to act responsibly in these unprecedented times.

Coronavirus Job Retention Scheme: Government grants for up to 80% of salary of employees who would otherwise be laid off and are furloughed up to £2,500 per employee, backdated to March 1. Being furloughed means that employees would be kept on the employer’s payroll rather than being laid off, but with no work to do. The scheme is expected to be in place up to May 31.

Working hours: Temporarily reducing your company’s operational hours and your people’s working hours, with commensurate reduction in salary, is an option to consider. If you don’t have lay-off clauses or a short-time working contractual right in your contracts, then proper employment law consultation is required.

Deferral of taxes: For VAT, the next quarterly payment due between March 20, 2020 and June 30, 2020 will be deferred until the end of the 2020/21 tax year. For personal tax, the payment due on July 31, 2020 by the self-employed will automatically be deferred until January 31, 2021. Under Time To Pay, HMRC will discuss deferment of other taxes (corporation tax, PAYE etc) on a case-by-case basis for businesses and self-employed people in financial distress, and with outstanding tax liabilities, who are unable to pay due to the impact of coronavirus.

Rent: Negotiate with your landlord for a deferment at worst; a payment holiday at best.

Rates: Do any of the government schemes help? If not, it’s worth talking directly to your local authority.

Expenses: Postpone all that are unnecessary.

Suppliers: Negotiate time to pay arrangements now.

Insolvency: The temporary suspension of wrongful trading rules for company directors has removed the threat of personal liability during the pandemic. This will apply retrospectively from March 1, however, there remains a duty of care to be exercised by a responsible director. Act and think pragmatically and record the reason for all key decisions. If business survival is simply impossible for whatever good reason, our in-house licensed insolvency practitioner and his team are here to help. The new rules will allow companies undergoing restructuring to continue to get access to supplies and raw materials They can’t be put into administration by creditors.
Personal costs: Look into deferring payments, especially for mortgages (mortgage borrowers can apply to their lender for a three-month payment holiday), and for council tax by speaking to your council.

This unprecedented far-reaching crisis means that every business, and every person, has a duty to be considerate and supportive. The only way to get through this is by helping each other as much as we can. Our website www.mestonreid.com is constantly updated with the latest advice,

Mark Brown is audit, accounts and business assurance partner at Meston Reid & Co, an Aberdeen-based chartered accountancy practice that has a broad range of clients, from personal service companies (PSCs) to large businesses in the energy sector. The vast majority of its clients are based in the north-east of Scotland.

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