COMMENT No matter how big or small, I am seeing hoteliers across the nation feel the impact of the coronavirus crisis. Given the lingering uncertainty on the duration and extent of the outbreak, this uncertainty is likely to continue. With the country in lockdown, independents and chains are ensuring that they have the smoothest business journey possible – from urgently reviewing their contingency plans, through to how best to deal with suppliers and other creditors.
Relief is now available for businesses within the industry, and hotel owners need to consider obtaining the relief in order to navigate through this uncertain period.
The government is providing grants to cover 80% of the salary of PAYE employees who have been laid off as a result of the crisis. It is backdated to 1 March and is expected to be up and running later this month, and anticipated to last for three months.
To qualify, you need to identify employees affected and advise them of a change of status to “furloughed workers”. Once the information has been submitted to HM Revenue & Customs, it will reimburse 80% of that employee’s wage up to a cap of £2,500 per month.
While this innovative scheme aims to support businesses and the broader economy by not making people redundant, it does assume that the business has enough cash in the bank to continue to pay the remaining 20% of salaries to those furloughed employees.
It is my belief that many in the sector will do what they can to retain skilled employees on the payroll for when the current circumstances change, and the market takes off again.
Hotel owners should also take advantage of the recent expansion of HMRC’s Time To Pay scheme, which offers 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.
Business Payments Support Service
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. A Coronavirus Business Payments Support Service has also been launched 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. Additionally, a dedicated helpline has been set up to support businesses that are concerned about not being able to pay their tax due to the financial impacts of Covid-19.
All VAT liabilities due from 20 March to 30 June 2020 will also be postponed, with VAT refunds and reclaims paid by HMRC as normal. Taxpayers will have until the end of the 2020/21 tax year to pay any liabilities accumulated during the deferral period.
For finance directors, support through the taxation system, grants and financial mechanisms will become crucial tools if organisations or clients are struggling to generate enough cash to meet operational costs. A well organised and structured TTP arrangement, alongside the VAT support provided, can build the key components of a successful turnaround plan that ensures cash flow and safeguards jobs now.
A further option that should be considered is communicating with the banks and taking advantage of the numerous packages they are putting together to support businesses, particularly for small and medium-sized enterprises and mid-market firms.
The government’s Coronavirus Business Interruption Loan Scheme, which has replaced the existing Enterprise Finance Guarantee loan scheme, can also support long-term viable businesses who need additional finance for cash flow issues.
And retail, hospitality and leisure firms with a rateable value of less than £51,000 will not be paying business rates this year. An additional cash grant of up to £25,000 per business is available.
The hotel sector is set to face a very challenging few months, with income and revenue severely hit by the widespread travel restrictions in place, both across the UK and worldwide.
The challenge now for government is the speed at which many of these schemes are implemented and rolled out, and how they reach UK businesses facing imminent cash flow difficulties. Failure to do so may mean companies may have to look at more formal insolvency options.
Paul Smith is managing director, restructuring advisory, at Duff & Phelps
