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Accounting for COVID-19: the fightback continues

As further details emerge of government support for businesses hit by the pandemic, Business Control’s Richard Starkey offers an accountant’s view of the help on offer.

 

Job Retention Scheme

 

The Treasury is clearly trying to help businesses as much as it can and the biggest piece of news in the past few days has to be the £1,000 bonus for retaining furloughed staff. The existing furlough scheme will be replaced with this one-off reward for each worker retained for three months until the end of January 2021, and the employee must earn above £520 per month on average over that period. Payments will be made from February 2021.

 

Clearly, this is positive news for businesses that will have bills stacking up. Is it enough to entice a company to keep a previously at-risk member of staff on? Do they want to start paying a proportion of employee wage costs next month, then more in September, rising to over 20% in October and then three months of full wages just to qualify for a £1,000 bonus? I’m not sure. 

 

What will happen remains to be seen, but the cash will nevertheless be a welcome boost for when the current furlough scheme comes to an end. Certainly, it has been a masterstroke that has kept over 9m people in work and this latest grant is another way of easing the financial pressure on companies. It will probably suit the larger businesses more – if you’ve got over 100 people on your payroll, a £100,000+ cash boost in February will have a considerable impact on your finances.

 

Interestingly, Primark, which would be in-line for £30m from the scheme, has already said it will not apply for the handout. It’ll be interesting to see how many national companies follow-suit. 

 

Market update 

 

In my corner of the business world, many Business Control customers are starting to see the green shoots of recovery. We’re by no means out of the woods, but there are sparks of life, no question about it. People are coming into the market for new business and companies are refocusing their output. Some are even hiring and I’m glad to say that many of our clients have had a reasonable few months and are feeling cautiously optimistic. 

 

Meanwhile, there’s been some good news for the hospitality sector in the form of a VAT reduction (on food) to 5%. Will the 15% reduction be passed on to the customer in its entirety? I doubt it. And I don’t blame the businesses at all if not. They’ve taken the hardest hit of any of us over the past few months and they should be able to recoup some of their losses. My only reservation is the amount of administration that this reduction will generate. It would have been much easier to drop it to 0% across the board.

 

At the same time, there is a meal voucher that effectively everyone in the country is entitled to and this should generate some welcome custom in restaurants and pubs on Mondays, Tuesdays and Wednesdays in August. Again – and without wishing to sound too negative – it’s worth pointing out that this scheme will generate an  administrative burden for these businesses, and that’s something that’s easy to overlook.

 

Looking ahead

 

As I mentioned in one of my previous blogs, the telling time for the wider economy will be October, when the furlough scheme ends. I have a feeling that it won’t be as bad as some are predicting and that there is a genuine desire to get back ‘out there’, to do well and even to grow. And if we all maintain that optimistic outlook as we head into the autumn, then most businesses should live to fight another day.   

 

Don’t forget to check out the rest of our Accounting for COVID-19 blogs here, and please check back periodically to get the very latest insight and information from the Business Control team.

Better still, you can access a whole host of resources for business owners including blogs, smart guides and infographics for free. Simply opt in here

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