17/02/2021 Holderness Gazette Article
Where do the weeks go? I can’t believe it is only 2 weeks ago since my last article, it only seems like yesterday. Yet it is important to remember that during these difficult times, there are some people for whom the last 2 weeks may seem like an eternity. Alone, isolated and scared to go out, the 4 walls may be crushing them. If you know someone who may be feeling like this, maybe a neighbour who is alone, then why not just check they are OK. All it needs is a quick phone call, a knock on the door or maybe just a smile and wave is all they need to brighten their day.
We will be hearing next week what the Government has planned for the roadmap out of the current lockdown. To be honest, I don’t envy their position. How do they protect our health and wellbeing, restart the full economy, and still protect us from the Covid pandemic? I’m not even going to speculate what will happen or how long it will take. We just need to be patient.
I heard last week that a very good friend of mine, going back to my Withernsea High School days, is stepping down as the Managing Director of KCOM after 32 years with the company. He has seen the company through many milestones during these years. It is quite ironic that the Ex Withernsea High School student should step down at a point KCOM are rolling out “fibre to the premise’s” broadband in Withernsea. Well done Sean. Wishing you all the best for the future.
Bounce Bank Loans
The Government recently announced that Bounce Back Loan borrowers will now have the option to tailor payments according to their individual circumstances with the option to delay all repayments for a further six months.
Pay as You Grow will be available to over 1.4 million businesses and provide repayment flexibilities to enable borrowers to tailor their repayment schedule, with the option to extend the length of their loans from six to 10 years (reducing monthly repayments by almost half), make interest-only payments for six months or pause repayments for up to six months. This will mean that businesses can choose to make no payments on their loans until 18 months after they originally took them out.
Businesses first began to receive the loans in May 2020 and the first repayments will become due from May 2021 onwards.
Pay as You Grow’s additional support will give borrowers the option to tailor repayments to their individual circumstances which will provide more time and greater flexibility to repay the loans.
Chancellor Rishi Sunak said: ‘Businesses are continuing to feel the impact of extended disruption from Covid-19, and we’re determined to give them the backing and confidence they need to get through the pandemic.
‘That’s why we’re giving Bounce Back Loan borrowers breathing space to get back on their feet, through greater flexibility and time to repay their loans on their terms.’
The Pay as You Grow scheme will provide businesses with the following options:
- Extend the length of the loan from six years to 10 at the same fixed interest rate of 2.5%.
- Make interest-only payments for six months, with the option to use this up to three times throughout the loan; and
- Pause repayments entirely for up to six months. This option is available once during the term of the Bounce Back Loan.
Business secretary, Kwasi Kwarteng, added: ‘These flexible repayment options will give businesses the time they need to recover from the pandemic before paying back loans, giving them the breathing space and confidence to build back better.’
Under the Bounce Back Loan Scheme, no repayments or interest are due from the borrower during the first 12 months of the loan term.
Bounce back loans (BBL) – can a director be held personally liable? – Directors beware!!
The Bounce Back Loan Scheme (BBLS) has been a useful tool for some businesses to carry on trading through the pandemic. The loan was designed to help businesses carry on by covering any other overheads. However, they have also been open to abuse and some directors have taken the opportunity to use these loans for personal purposes, with some withdrawing the funds and liquidating the company.
If a company enters an insolvency process, the BBL will become an unsecured debt in the insolvency, banks will have to claim the money back from the Government who guaranteed the loan. Personal guarantees were not required by the banks to provide the funding.
However, an appointed liquidator, as part of his duties, will investigate the conduct of the directors of a company. If he finds that the BBL has been misused by the directors, such as paying off personal loans etc., then the veil of incorporation will be lifted, and the director will be personally liable for the misused funds.
Salary vs Dividends – beware the pitfalls if affected by Covid?
Dividends are a more tax efficient method of securing remuneration and many owner managed business owners will take a low basic salary and use monthly dividend payments to top up their remuneration.
It is imperative that when the dividends are declared there are sufficient accumulated profits available. When the dividends are declared, reference should made to the last annual accounts (if recent) or some up to date management accounts.
If dividends are declared or money is taken by directors / shareholders and there are insufficient reserves, it places the directors / shareholders at serious risk of personal liability if their business fails. If your company has been affected by Covid and have suffered a downturn which has reduced their distributable reserves, then care should be taken as to how you remunerate yourselves to avoid any potential personal liability if the company subsequently fails.
Deferred VAT
If you deferred VAT payments due between 20 March and 30 June 2020 and still have payments to make, you can:
- pay the deferred VAT in full, on or before 31 March 2021.
- join the VAT deferral new payment scheme – the online service is open between 23 February and 21 June 2021, or
- contact HMRC on Telephone: 0800 024 1222 by 30 June if you need extra help to pay.
You may be charged interest or a penalty if you do not pay the deferred VAT in full by 31 March 2021, opt into the new payment scheme by 21 June 2021 or agree extra help to pay with HMRC by 30 June 2021
If you want to join the new scheme
The VAT deferral new payment scheme will be open from 23 February up to and including 21 June 2021.
If you’re on the VAT Annual Accounting Scheme or the VAT Payment on Account Scheme, you’ll be invited to join the new payment scheme later in March 2021.
The new scheme lets you:
- pay your deferred VAT in equal instalments, interest free.
- choose the number of instalments, from 2 to 11 (depending on when you join)
To use the online service, you must join the scheme yourself. We cannot do this for you.
Instalment options available to you
The month you decide to join the scheme will determine the maximum number of instalments that are available to you. If you join the scheme in March, you’ll be able to pay your deferred VAT in 11 instalments or fewer.
The table below sets out the monthly joining deadlines (to allow for Direct Debit processing) and the corresponding number of maximum instalments (including the first payment):
| If you join by: | Number of instalments available to you: |
| 19 March 2021 | 11 |
| 21 April 2021 | 10 |
| 19 May 2021 | 9 |
| 21 June 2021 | 8 |
If you want to join the new payment scheme, you can do so through your Government Gateway account. If you cannot use the online service, contact the COVID-19 helpline when the scheme opens on Telephone: 0800 024 1222. An adviser will help you join.
Stay safe and look after each other. It feels like we could be almost through this!