Andrew Barraclough has been a chartered accountant for more than 20 years, and is a company director for UK-based Salon Frog, a specialist accounting company for the owners of hair salons, beauty salons, barber shops and spa. In this article he details all of the financial relief options available for UK businesses.

Covid-19 Relief for UK businesses: A checklist for your salon or spa to follow

Last updated: 3.05.20

1. Stop trading

Your salon, spa, studio, barbershop, must be closed.

You should not be providing services to anybody (not even if this is at your home).

2. Keep your Clients informed

You should inform your Clients that you are closed.

Keep in contact with them with regular updates and blogs.

3. Furlough your staff to get 80% of their wages back

For all staff who are not on SSP, not on SMP/SPP, or cannot work from home, you should furlough them.

Furlough means to grant a leave of absence and is pronounced “fur-low.”

You must get their written permission to furlough them.

Coronavirus job retention scheme CJRS

Later in April, you can then apply for a JRS grant from HMRC of up to £2,500 per employee, per month.

This covers 80% of furloughed employees wages + 100% of Employers’ NIC + 100% of employers 3% auto enrolment pension contribution.

Furlough key criteria

They must have been on your payroll on 19 March (updated from 28 February 2020).

They must have been furloughed after 28 February 2020.

How much can you claim

The grant is based on the lower of

  1. i)  80% of the monthly salary/wages and
  2. ii) £2,500

plus the associated employers NIC and pension contributions.

How to work out what monthly salary/wages you can claim

For employees on a regular salary, use 80% of the employee’s gross salary as at 19 March 2020.

For an employee who has been employed for more than 12 months, but whose pay varies, use the highest of the:

  1. i)  Same month’s from the same month last year
  2. ii) Their average monthly earnings for the tax year 2019/20.

For an employee who has been employed for less than 12 months, claim for 80% of their average monthly earnings since they started work.

If the employee only started in March 2020, pro rate their earnings to date and use that as a base.

Salary/wages includes any regular payments the employer is obliged to pay the employee.

This includes wages, past overtime, fees and compulsory commission payments.

However, discretionary bonuses (including tips) and commission payments and non-cash payments should be excluded.

Other practicalities

You can pay them 80% of their usual wage but you must get their written permission to do this.

Furloughed staff cannot do any work for you, even from home.

You must furlough an employee for a minimum of 3 weeks.

Continue paying your staff through PAYE as usual.

You will still need to pay any PAYE and NIC’s due to HMRC.

Your furloughed employees can get another job if they want.

For those that resigned and left after 28 February to start a new job, so are not eligible under the scheme, they can ask their old employer to rehire them, then furlough.*

*This new guidance appears to use very generic wording nor any guidance on how it would work; and remember, there is no obligation to re-hire, and we advise employers to be cautious.

Acas has confirmed that employees on furlough can take holiday at the same time.

Company Directors

We await further guidance and therefore our comments below should be seen as provisional and may change.

HMRC confirms that directors can be furloughed as long as they are within the usual criteria of any employee (as above).

Additionally to this:

i) The 80% grant is only based on their PAYE salary – dividends cannot be included.

ii) They are not undertaking any work for the business that “they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.” They are allowed to undertake “duties to fulfil the statutory obligations they owe to their company.”

This means: they can’t do marketing or organising staff rosters for example.

They can however scan invoices to their accountant, sign their VAT returns and the like, since this is a statutory obligation.

iii) This must be “formally adopted as a decision of the company” by holding a Directors Meeting, recording in writing that the Director is furloughed, with the start date and this should be signed. The Director then needs to be formally told.

For most of us then, just get the decision in writing, sign it and then store it somewhere.

For Directors who need to do some revenue generating activity each month, there is an option:

The rules state that you must furlough for a minimum of 3 weeks at a time.

So you are able to furlough a Director for (say) 3 weeks per month and let them work as usual for the remaining week.

i.e. a cycle of 3 weeks furlough, 1 week work, 3 weeks furlough, 1 week work, and so on, only claiming the 80% on the 3 weeks each month and so keeping within the rules.

4a. Get 2 types of business rates relief | Salons in England

There are 2 reliefs available to you.

Relief 1 is an automatic 12 month business rates holiday:

All retail businesses pay no business rates for the 2020 to 2021 tax year.

‘Retail’ includes ‘hair and beauty’.

You receive this automatically.

Relief 2 you need to apply for one of the following:

Either:

i) Small Business Grant Scheme of £10,000

If you receive small business rates relief (SBBR), or rural rate relief (RRR).

Apply for a one-off grant of £10,000.

or:

ii) Retail, Hospitality and Leisure Grant Fund of £25,000

If your property has a rateable value of up to £15,000 apply for a grant of £10,000.

If your property has a rateable value of over £15,000 and less than £51,000 apply for a grant of £25,000.

Property with a rateable value of £51,000 or over is not eligible for this scheme.

How to access the schemes

You should contact your own relevant local authority.

4b. Get 2 types of business rates relief | Salons in Scotland

There are 2 reliefs available to you.

Relief 1 is an automatic 12 month business rates holiday:

All retail businesses pay no business rates for the 2020 to 2021 tax year.

‘Retail’ includes ‘hair and beauty’.

You receive this automatically.

Relief 2 you need to apply for:

Either:

If you receive small business rates relief (SBBR), or rural rate relief (RRR).

Apply for a one-off grant of £10,000.

or:

If your property has a rateable value of over £18,000 and less than £51,000 apply for a grant of £25,000.

Property with a rateable value of £51,000 or over is not eligible for this scheme.

How to access the schemes

You can find the application form on your local Scottish authority website.

5a. Don’t Apply for a Coronavirus Business Interruption Loan

These loans are available to any business that has been affected by the coronavirus.

Interest free for the first 12 months.

Low interest after this.

6 years to pay them back.

Businesses are not getting them – the scheme is just not working.

Instead, apply for a Bounce Bank Loan (below)

5b. Apply for a Bounce Back

These loans are available to any business that has been affected by the coronavirus.

Lend up to £50k

No forward-looking business viability tests or eligibility criteria

No capital or interest repayments during first 12 months

Then repay over 6 years and will have low interest rate

You can transfer your CBILS until 4 Nov 2020

Applications open from 4 May

Apply through your own business bank

6. Check your insurance

Contact your insurance company to see if you are covered for business interruption and loss of earnings.

7. Take a mortgage holiday

Contact your own personal mortgage provider if you require a payment holiday.

Don’t put it off. The sooner you contact them, the better.

8. Hold off paying tax due

i) VAT

VAT due to HMRC between 20 March 2020 and 30 June 2020 can be deferred.

Instead, you have until 31 March 2021 to pay the amount.

e.g. For the VAT quarter ending 31 March 2020, your payment would have been due by 7 May 2020.

You can now delay this payment until 31 march 2021.

If you normally pay by direct debit, you need to cancel this with your bank.

You do not need to inform HMRC.

You do need to submit VAT returns as normal.

ii) Personal tax

Your next income tax instalment would usually be 31 July 2020.

You do not have to pay this until 31 January 2021.

iii) All taxes

If you cannot pay any amounts due to HMRC, contact them and let them know.

Do not bury your head in the sand!

9a. Chair renters and contractors

If you are self employed (e.g. renting a chair in a salon) there is support for you.

If you are a salon that rents chairs to others, look after them – you want your self employed businesses to be with you when you re-open!

Coronavirus Self-Employment Income Support scheme

Self-employed people will be able to apply for a grant worth 80% of their average monthly profits over the last three years, up to £2,500 a month; for the next 3 months.

To get this:

You must have submitted a tax return for 2018-19 (if you haven’t, HMRC has given you until 23 April 2020 to do so).

At least half of your annual income from this return needs to have come from being self-employment.

Your profit must have been less than £50,000 (or has been when averaged between 2016-17, 2017-18 and 2018-19 tax years).

You must have started trading on or before 5 April 2019.

You are self employed and would still be trading if it hadn’t been for the interruption to business due to the coronavirus (or you are still trading).

You can continue to work.

Property letting businesses are not regarded as a trade, so landlords will not qualify.

Grants will be paid in a single lump sum covering all 3 months, and will start to be paid at the beginning of June.

Individuals should not contact HMRC; they will contact those taxpayers who are eligible and will invite them to apply for the payment online.

9b. Owner/Directors of salons

Where you run your salon through a Ltd company (i.e. you are the Shareholder/Director):

You are not self-employed, so not eligible for the self-employment income support scheme.

You could furlough yourself and apply for the Coronavirus job retention scheme, but there are issues around this:

  1. i) You cannot do any work for your company. No admin, no sales, no payroll. Nothing. Your business would become dormant.
  2. ii) As most Owner/Directors take a small salary and larger dividends, the 80% only applies to the smaller salary.

You must furlough someone for a minimum of 3 weeks, so you could furlough yourself for 3 weeks (undertaking no work for your salon),

then go back to work for a couple of days, then re-furlough yourself for a further 3 weeks, and so on…

iii) To be eligible, the Director would have to have been on the payroll at 28th February and previously paid through the company’s PAYE system. If a Director takes fees (rather than salary) not through the PAYE system, they would not be eligible.

10. Look after yourself

These are unusual and stressful times.

Don’t panic.

Eat well.

Get some sleep.

Look after your loved ones.

When this is all over, your clients will soon forget how they couldn’t get their last hair cut when they wanted it from you.

Your staff will forget that you closed the salon when they most feared they wouldn’t be able to pay their own mortgages.

But they will remember how you treated them. How you handled the situation. That you were open and honest with them. That you did the right thing by them.

And when this is all over, and it will be, they’ll be there for you in return: Staff and Clients.

Want to know more?

We’re happy to talk, Client or not! Contact us.