As if battling coronavirus, dealing with Brexit and being in an uncertain lockdown position were not enough, some businesses are facing a perfect storm of challenges in dealing with tax and regulatory responses to the pandemic that seem uncoordinated at best.
Chancellor Rishi Sunak has so far offered 14 Covid-19 support packages since the pandemic started, including four ‘winter economy plans’ since 24 September alone.
While many of the measures have been broadly welcomed by businesses and employees, it is becoming clear that the constant tinkering with and readjustment to the support measures are not necessarily meshing with other non-Covid-19 government initiatives.
Even within those Covid-19 support packages, changes that many companies may have banked on, are now being deferred or phased out.
The Job Retention Bonus of £1,000 per employee, for those previously furloughed and still on the payroll at the end of January was announced fairly early on in the year.
Designed to encourage businesses to retain their workforce rather than lay them off at the end of the first furlough period, many companies had built this windfall bonus into their cashflow planning for the following year.
The amounts involved are not trivial. Companies that had furloughed 100 employees, stood to receive a cash amounts of £100,000 from the government.
These amounts have been important in cashflow planning and also in persuading auditors that the business had a future as a going concern.
In response to the lockdown in November the furlough scheme was extended to the end of March 2021, and this week has been further extended to the end of April.
As part of this, and presumably to help pay for the extension, it was announced that the Job Retention Bonus would no longer be paid in February and March. Its future remains uncertain.
This, combined with a third lockdown has thrown the plans for many businesses up in the air again: it has caused businesses and their auditors to scramble to understand the implications on cashflow and the viability of operations both now and in the coming year.
Many businesses will be particularly frustrated because it was one of the few direct grants to business made available during the crisis that put cash directly into their bank accounts.
Much of the support given to business has come by way of loans, tax deferrals or rates holidays – all welcome, but not an immediate source of cash that doesn’t need to be paid back.
The Job Retention Scheme payments went directly to employees, which while reducing the costs of continued employment, did not necessarily help support other business activities at a time when income has been significantly reduced.
Getting a clean audit is very important for relationships with lenders and other stakeholders.
Doubts over the ability to continue trading, can result in loan facilities being pulled and higher interest rates if borrowing remains. Moving the goalposts shortly before the payments are due is troubling.