Chris Goads BSc FCA, partner at Stephenson Smart’s Wisbech, March and Downham Market offices, assesses the impact that Bounce Back Loan repayments might have on businesses and what options there might be to help with making the repayments.

What is a Bounce Back Loan?

The Bounce Back Loan was one of the financial support schemes put in place by the government to support businesses, at the start of the coronavirus pandemic.

Many businesses are now starting to receive the payment schedules for Bounce Back Loans taken out, with their first repayments being due.

Although Covid restrictions are starting to be lifted, we are still seeing different sectors and businesses recovering at different rates. Some businesses are still not functioning at the same level they were before the pandemic hit, and therefore seeing a reduction in income.

Some of our clients are started to be contacted by the bank they took their Bounce Back Loan through with repayment schedules for those loans, often with a high monthly payment. For example, if a business took out a Bounce Back Loan of £50,000, they will be looking at a repayment rate of around £887 per month, to start imminently.

What if I can’t start to repay my Bounce Back Loan?

Our advice is that if your business is facing a repayment figure that is unattainable you may be able to look at a Pay As You Grow option. This allows firms to extend their loan terms, reduce repayments or take a repayment holiday.

The bank you borrowed your Bounce Back Loan from should have been in touch to highlight this option.  It is important to contact them as soon as possible, and ideally about a month before your first payment is due, to ask to defer or flexibly manage your repayments.

As Chartered Accountants and Business Advisors, Stephenson Smart are qualified and experienced in helping businesses manage their cashflow and plan financially, even in difficult times.  We are keen to support our clients, local businesses and our communities during this recovery period.

If we can support you or your business with this or any other financial help, please get in touch.

Profile: Chris Goad BSc FCA

Related Pages: Covid-19 Business Interruption Guidance

One positive thing to come out of the Covid pandemic is the amount of new business start ups in the UK. 2020 saw an extra 84,758 businesses setting up, compared with 2019. This is equivalent to a 12.3 per cent increase year on year, which is the highest percentage growth since 2011 and the highest actual growth on record.

Starting up a new business is both an exciting and a challenging task, which carries with it an element of risk. Key decisions need to be made, and there are many factors to consider.

Business plan for new business start up

A business plan is an essential document that will guide you in establishing and growing your new venture; helping you focus your thoughts, providing you with targets and goals as well as giving you an indication of your cash requirements.

Finance for new business start up

Business financing can take two forms: debt or equity. Debt means borrowing money. Loans may come from family, friends, banks, other financial institutions, or professional investors. Equity relates to selling an ownership interest in your business. Such a sale can take many forms, such as the admitting of a partner or, if you are in a company, issuing of additional shares to investors.

Getting a grant is also an option. There are many different small business and start-up grants available depending on where your business is based, how large it is and what you do.

What type of company is right for a new business start up

Options are: Sole Trader, Limited Company, Company Limited by Guarantee and Limited Liability Partnership (LLP). The type of company you choose will be dependent on the nature of the business you intend to carry out.

Taxes, legalities, and insurance for a new business start up

A significant task for a new business owner is ensuring that the business complies with the extensive tax, legislation and insurance requirements that are imposed by various authorities. To avoid problems, penalties and – in some cases – legal action, it is important to understand your obligations.

Stephenson Smart are Chartered Accountants and Business Advisors in Norfolk and Cambridgeshire. We can guide you through these important decision-making processes. As specialist business start up advisors, we can help you make the appropriate registrations, assist with cash flow forecasts and offer regular updates to enable you to monitor the performance of your business.

Related Services: Business Start Up Advice

Is your business ready for the new rules after Brexit?

If you trade with countries in the EU, then you need to be prepared for the end of the Brexit transition period on 31 December 2020. After this date, there will be changes to customs procedures and VAT reporting.

Customs Procedures

A new customs border will be created between the UK and the EU – regardless of whether a Free Trade Agreement is reached or not. This means that full customs procedures will be required for goods crossing the UK/EU border and customs declarations for imports or exports will have to be submitted to HMRC. If your business does not have the expertise to manage this new paperwork, you can employ an agent to assist you. This will come at a cost to your business, but if goods turn up at the border without the right paperwork, they will be stuck in the port.

There is some initial support from HMRC when the EU transition period ends. The customs grant scheme has been changed to allow more businesses access to the funding. Traders who are new to customs can apply for up to £1,000 to support with the initial costs of basic customs training. Authorised Economic Operators who have had a base in the UK for less than 12 months can also apply.

The co-funded training project grant allows customs intermediaries, as well as traders who complete their own declarations, to receive up to €2 million.

Grants will be issued on a first come, first served basis, with the closing deadline being 30 June 2021. This may well be earlier if all available funding has been allocated before this date.

VAT reporting

Implications in respect of VAT need to be considered too. How will VAT be charged on trade with the remaining 27 member states?

In theory, UK VAT could be removed altogether. In reality, this is very unlikely to be the case.

The reporting requirements will change as a result of the UK becoming a ‘third country’ in the eyes of its relationship with the EU though.

Currently, zero-rating is likely to be applicable when goods are exported from the UK to the EU (so long as a valid VAT number is held for the EU customer and shown on the sales invoice, along with proof of export etc.) due to the trade agreement. Reporting requirements currently consisting of an EC Sales list and Intrastat, where thresholds are exceeded.

From 1 January 2021, assuming no special relationship is in place, UK VAT would not need to be charged, meaning zero-rating would still be applicable (proof of export would be required as is currently the case).

However, an import declaration will be required with import VAT and customs duties likely to be payable on importation.

UK businesses (as well as EC businesses trading in the UK) will need to consider how it will clear and pay import VAT and duty on goods both entering the UK and going from the UK to the EC.

A UK seller may well have to register for VAT in the EU country of where the goods are exported should the buyer not act as the importer. It should be noted that VAT rates and thresholds vary from country to country.

Some good news for those not fond of forms at least – no EC Sales list or Intrastat sales reports will be required in the UK, as things stand.

This has been an incredibly challenging year for businesses, who have already seen a huge amount of interruption to their day-to-day management. Having to deal with the changes that come with Brexit have, understandably, been pushed to the side. However, if your business has any interaction with countries in the EU it is very important to take some time now to understand the changes that will need to be made to ensure that your business can continue to operate.

Article updated 27 January 2022

In March 2021, the VAT Reverse Charge for construction services regulations came into effect for those working in the construction industry. The legislation applies to those businesses who are both VAT registered and undertaking Construction Industry Scheme (CIS) works.

Essentially, it means that the customer is now liable to account for the VAT on goods purchased and services received, rather than the supplier.

The change has been introduced in an effort to combat missing trader fraud. Missing trader fraud occurs when individuals set up construction companies, operate as normal, but siphon off VAT as it moves up the supply chain by not declaring their output VAT.

What is the VAT reverse charge?

The VAT Reverse Charge is a scheme where by the customer accounts for both the input and output VAT on a transaction, and no VAT is paid between the two parties.

Rather than the supplier charging and accounting for the output VAT and the customer reclaiming the input VAT, it is now the customer who accounts for both the input and output VAT on their VAT return, leaving a £Nil VAT position. The customer does not pay over any VAT to the supplier.

It is vital that all invoices issued within the scope of the VAT Reverse Charge have a clear statement declaring that the VAT is subject to the ‘reverse charge’.

Does the VAT reverse charge affect my business?

The charge affects VAT-registered businesses where payments are required to be reported through the Construction Industry Scheme (CIS). Reverse charge will apply along the supply chain, until the recipient is an end user. An end user is a consumer or final customer that does not make an onward supply of the building or construction works supplied to them.

The reverse charge applies only to supplies which would otherwise be subject to VAT at the standard (20%) or reduced rate (5%). It does not, for example, apply to zero-rated supplies or supplies made by someone who is neither registered nor required to be registered for VAT.

Where there is an ‘end user’, they will be expected to provide notification of end user status to its supplier. This signals that its supplier should charge VAT in the usual way.

What do I need to do to comply with the VAT reverse charge?

• If you are doing work for a private customer or non-VAT registered business (an ‘end user’), nothing will change, and you will continue using the existing VAT rules.

• If you are a VAT registered subcontractor working for a contactor you no longer need to account for VAT on that service, but on your invoice, it must be made clear that the domestic reverse charge applies, and that the customer is required to account for the VAT. For example, the invoice must state as follows: ‘Reverse charge: Customer to pay the VAT to HMRC’.

It must also be clearly stated how much VAT is due under the reverse charge scheme, but that VAT amount should not be included in the amount charged to the customer. These sales are effectively now ‘zero rated’ and should be shown in box 6 with no corresponding VAT liability in box 1.

• If you are the contractor receiving reverse charge supplies your supplier will no longer charge you VAT. Instead, you will account for the VAT and recover it simultaneously on the same VAT Return, subject to the normal rules of input tax deduction. You will account for both the ‘sale’ with entries in Box 1 and Box 6, and the purchase with entries in Box 4 and Box 7.

Other considerations for the VAT reverse charge

If the building service that you are providing is under a single payment contract, the tax point is the date that the service is performed or completed. However, if you issue a VAT invoice or receive payment before the service is performed or completed, VAT is due on the date of the invoice or receipt of payment – whichever is earlier.

It is worth bearing in mind the implications the reverse charge may have on business cash flow, as VAT will no longer be paid and received between businesses.

Further guidance on the reverse charge is available on the HMRC website

This is a big change to the way VAT is handled in the building and construction industry. If your business is affected and you would like more guidance on this scheme, please get in touch.

Richard Crossley set up Crossnet Creative, specialising in web development and graphic design, just over a year ago. With companies diversifying to keep afloat during the coronavrius pandemic, Richard has found himself inundated with rebranding and signage requests to allow firms to continue trading in line with social distancing guidelines.

Amongst his clients are JayCraft Food Machinery in Fincham, near Downham Market, and restaurant Liquor and Loaded in King’s Lynn.

Richard said: “Many companies have been forced to make significant changes. I have supported JayCraft in rebranding the website as they have adapted production lines, while Liquor and Loaded has developed a delivery service, so I have updated the website and designed some new branding for a new curb side pick-up initiative.

“I’ve been asked to do logos, letterheads and signs – all to help companies move forward. Graphics obviously become essential in that process.

“As businesses we have all really had to pull together and help each other out and thankfully I have found myself really busy.”

Gary Kerr, owner of Liquor and Loaded said it was helpful to have a trusted company to turn to.

“We have been very fortunate in being able to remain open and we are thankfully busy, but it did also mean an investment in new information and branding. It’s important to keep ourselves visible with the right message and Richard has got that spot on.”

Richard, who has an office in March, and previously worked for a local company as a graphic designer, said he had been ably supported by accountancy firm Stephenson Smart in setting up on a self-employed basis.

“I am just at the end of year one, so I’m about to submit my first set of accounts. Stephenson Smart were recommended to me and have been very encouraging and supportive.”

Paul Wood, manager at Stephenson Smart in March, said it was imperative that new businesses were backed in the current climate.

“It’s fantastic to see that despite the many pressures and uncertainties we are facing at the moment that companies can also thrive, especially one in its infancy, which is testament to Richard’s talent and business acumen.

“Many of our clients are self-employed or start-up organisations and we are doing all we can to support them with information readily available for those who have concerns or questions.”