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Hoteliers across the country are feeling the impact of the coronavirus (COVID-19) crisis. Independents and chains are scrambling to ensure the smoothest business journey possible, while stricter social-distancing policies are implemented.
From how best to deal with suppliers and creditors to evaluating their contingency plans related to human resources (HR), HM Revenue & Customs (HMRC), tax liabilities, funding and cashflow.
Away from the uncertainty, there is some relief at hand for smaller businesses within the industry which all hotel owners and operators need to take advantage of.
Coronavirus Job Retention Scheme
The most dramatic intervention was announced on Friday 20 March, under which government grants will cover 80% of the salary of PAYE employees who would have been laid off as a result of the crisis. It is backdated to 1 March and is expected to be up and running in April. It is anticipated to last for three months.
To qualify, employers need to identify those employees affected and advise them of a change of status to ‘furloughed workers.’ Once the information has been submitted to HMRC, it will reimburse 80% of that employee’s wage up to a cap of £2,500 per month.
Changes in HMRC “Time To Pay” arrangements
Businesses also need to take advantage of the recent expansion of HMRC’s Time To Pay (TTP) scheme. A TTP arrangement with HMRC is a structured payment plan for any outstanding tax obligations, allowing businesses and the self-employed to defer tax payments over an agreed period of time.
The changes outlined in the Budget offer businesses more generous payment terms, with firms now having more time to pay VAT, payroll taxes and Corporation Tax. The government has also launched a Coronavirus Business Payments Support Service to help businesses in arrears with existing tax liabilities up to circa £100,000. Larger liabilities are expected to be dealt with on a case-by-case basis.
All VAT liabilities due from 20 March to 30 June 2020 will be postponed. VAT refunds and reclaims will be paid by HMRC as normal. Taxpayers will be given to the end of the 2020/21 tax year to pay any liabilities accumulated during the deferral period.
Coronavirus Business Interruption Loan Scheme
The government has also launched the Coronavirus Business Interruption Loan Scheme (CBILS) which has replaced the existing Enterprise Finance Guarantee (EFG) loan scheme, to support long-term viable businesses who need additional finance for cash flow issues.
Business Rates and Grants
In the Budget it was announced that retail, hospitality and leisure firms with a rateable value of less than £51,000 will not be paying business rates this year.
The Chancellor has now gone one step further by providing an additional cash grant of up to £25,000 per business.
Duff & Phelps can help businesses establish best practices across the entire value chain, including assistance with a range of transformational HR initiatives, accessing emergency funding, maximising cashflow management, Time To Pay arrangements and proactively ensuring all suppliers and creditors are properly managed.
By Paul Smith, managing director, restructuring advisory at Duff & Phelps
