Accountancy firm Anderson Anderson and Brown (AAB) has called on the UK Government to implement a series of “wide-reaching” measures aimed at helping businesses to survive the disruption caused by the Covid-19 pandemic.
Lyn Calder, managing partner and also the firm’s head of deals for the Central Belt in Scotland, has welcomed the measures announced so far, but warned that “too many businesses will fall through the cracks” unless further action is taken.
Calder said the Coronavirus Business Interruption Loan Scheme (CBILS) will “undoubtedly” prove to be a lifeline for many businesses. However, depending on their financial status, “all too many will not qualify under the current stipulations”.
She added: “For example, part of the eligibility criteria for access to CBILS requires lenders to assess whether a business is ‘viable’, which could well result in banks turning down loss-making businesses.
“However, this term is very much open to interpretation by the banks. Many early stage businesses, or those which are in the process of scaling up, were indeed ‘viable’ before the crisis but haven’t been able as yet to demonstrate a recent profitable history.”
Additionally, concerns had also been raised for businesses in the mid-cap tier, who currently fall outside the two flagship loan schemes, with CBILS for businesses with turnover up to £45m, and COVID Corporate Financing Facility (CCFF) requiring an investment grade rating or equivalent.
While AAB welcomed the chancellor’s announcement last week of the new government backed scheme, Coronavirus Large Business Interruption Loan Scheme (CLBILS) which will now support these businesses with a turnover between £45m and £500m, it said “clear guidance” on criteria for applying will be needed and it awaits this “with interest”.
Calder said: “We are also keen to understand what, if any, other support measures will be made available through the CLBILS scheme, should interest payments not be covered by the government for the first 12 months as with CBILS.”
Calder has also called for increased support for company directors under the job retention scheme, where they have a low salary / high dividend remuneration package.
She said the Government has been quoted as saying it will not cover limited company dividends as “they are not income”, and added: “However, they are taxed as earnings (albeit at different rates to salary) and so not allowing them to be included is unfair to those who have undertaken legitimate tax planning by paying their remuneration in this way.”
AAB also raised concerns for employees who live and work in the UK but are employed by businesses with no UK bank account. The firm said currently these employers cannot claim furlough support for their UK-based employees, unless the scheme is extended to include this group.
Calder added: “Whilst these are uncertain times, there are a number of key areas businesses should consider, and various proactive steps they can take to mitigate impact. Here at AAB we see this very much as a partnership; we are all in this together and we are here to support businesses through these challenging times.”