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

This is one of a collection of articles we’ve created here at Timely with tools and information that you can use to help your business during COVID-19. If you’re not a UK business, we still have great content available for you on our COVID-19 resource hub.

Section 1: Where you should be now

  1. Close
    You should be closed
  2. Clients
    You should have informed your Clients and be getting regular updates and blogs out to them
  3. Staff
    For those off sick or on maternity leave, keep in contact with them. For the rest you should have agreed that they work from home (e.g. marketing) or have been granted a leave of absence.
  4. Job Retention Scheme
    Hold off – awaiting details
  5. SSP
    Keep in contact with any staff that are on sick leave and keep your accountant/payroll updated on their status
  6. Rates
    Hold off – awaiting details
  7. VAT
    Don’t pay any amounts due
  8. Business Interruption Loan
    Contact your business bank to let them know you need to apply
  9. Tax
    Don’t pay any amounts due
  10. Insurance
    Contact your insurers to see if you’re covered for business interruption and loss of earnings
  11. Mortgage
    Contact your own personal mortgage provider if you require a payment holiday

Section 2: Everything you need to know in detail 

I promised to do whatever it takes to support our economy through this crisis – and that if the situation changed, I would not hesitate to take further action. That is what I want to begin doing today. Chancellor Rishi Sunak

Last updated 23.03.20 @ 20:45

Stay open or close?

Spas have been told to close.

Salons have been told to close.

Keep your Clients informed

Use all your direct and indirect marketing channels to keep your clients up to date.

It might be some time off yet, but set up an easy process to get regular updates out there. When the ban is lifted, you are likely to be overrun with booking requests before you know it, so make sure you can handle them.

Check out Timely’s COVID-19 survival guide with practical tips to help your business while you need to stay closed, and get you ready to re-open when the time comes.

During the shutdown, why not get regular blogs out to your clients on how to keep their hair managed at home; washing tips, styling tips, photo ideas. Something to let them know you’re still there and you’re with them.

Keep your Staff informed

Use email, WhatsApp groups, and daily phone huddles to regularly keep your staff up to date. When the ban is lifted you’re likely to be overrun with booking requests, so make sure you can handle them. Maintain your staff rosters so that staff are prepped and ready to come in on short notice, and you can safely be open and up and running within hours of the ban being lifted.

Coronavirus job retention scheme

Businesses can apply for a grant of up to £2,500 a month per employee to cover 80% of salary/wages for those retained but not working (i.e. otherwise would have been laid off during this crisis).

You’ll need to:

  • Designate affected employees as ‘furloughed workers’ (which means they’ve been granted a leave of absence) and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
  • Submit information to HMRC about the employees that have been furloughed (granted a leave of absence) and their earnings through a new online portal – HMRC will set out further details on the information required.

HMRC will reimburse 80% of furloughed workers’ wage costs, up to a cap of £2,500 per month.

In practice, most contracts won’t have any mention of the word ‘furloughed’, so you’ll need to get agreement from each employee it affects. However, given the choice between whether they’re made redundant (and you may not have any cash available to pay their redundancy) or them agreeing to go home for a while on 80% pay, which one are they likely to go for?

While ‘furloughed’, the employee cannot come into work, or do any work for you (i.e. they can’t work from home). If they do, you can’t claim the 80% pay.

Under this scheme, you’re not required to top up the additional 20% as an employer – this would be your own decision.

We’re waiting for further clarity on some specific details of this scheme, including whether it would cover an employee who is partially furloughed (i.e. working fewer hours than normal). 

The scheme is expected to become operable in April, with payments backdated to March 1 if needed. HMRC are working urgently to set up a system for reimbursement as existing payroll systems are not set up to facilitate payments to employers.

SSP and employee time off

If an employee is displaying symptoms, if someone they share a home with is displaying symptoms, or if they’re able to work from home, they shouldn’t be at work.

This is our interpretation of the latest guidance.

Employees and workers must receive any Statutory Sick Pay (SSP) due to them if they need to self-isolate because:

  • they have coronavirus
  • they have coronavirus symptoms, for example a high temperature or new continuous cough
  • someone in their household has coronavirus symptoms
  • they’ve been told to self-isolate by a doctor or NHS 111
  • they are self-isolating in line with Government advice (published by Public Health England (or the devolved health authorities). Current Government advice is here (particularly the table at the bottom of this link).

If someone has symptoms, everyone in their household must self-isolate for 14 days. Those who live alone must self-isolate for 7 days.

Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note.

What if an employee needs time off work to look after someone?

If any of the criteria above are met, then they will receive SSP. If not, employees are entitled to time off work to help someone who depends on them (a ‘dependant’) in an unexpected event or emergency. This could apply to situations to do with coronavirus.

There’s no statutory right to pay for this time off, but some employers might offer pay depending on the contract or workplace policy.

The amount of time off an employee takes to look after someone must be reasonable for the situation. E.g. they might take 2 days off to start with, and if more time is needed, they can book holiday leave.

What if an employee just doesn’t want to come into the salon but has none of the reasons noted above?

If an employee still doesn’t want to go in, they may be able to arrange with their employer to take the time off as holiday or unpaid leave, but the employer doesn’t have to agree to this.

What if you close your salon for a time?

In extreme cases employers may decide to close the workplace. In such circumstances, workers should be entitled to be paid, whether or not they’re told to work from home. This is unless the employer has a right under contract to ‘lay off’ workers without pay.

Those who are laid off without pay may be able to claim statutory guaranteed pay. This is only available to employees and is paid at a rate £29 per day for up to only five days.

Can I force employees to use holiday leave?

Employers have the right to tell employees and workers when to take holiday if they need to. For example, they can decide to shut for a week and everyone has to use their holiday entitlement.

If the employer does decide to do this, they must tell staff at least twice as many days before as the amount of days they need people to take. E.g. if they want to close for 5 days, they should tell everyone at least 10 days before.

How does a salon ‘lay off’ its staff?

A lay-off is where employees are not provided with work by their employer and the situation is expected to be temporary.

Employers can lay someone off where there’s an express contractual right to do so (i.e. it’s in their contract) or the Employer and Employee agree to do so (i.e. the employee knows that this is the best option for them).

In these circumstances only, you will need to pay them £29 per day for the first five days.

How long can a lay-off last?

This will depend on the terms specified in the contract or the agreement you’ve come to with them. However, after 4 weeks, the employee might be able to claim a redundancy payment off you.

Get Legal and HR advice before you go down this route.

SSP in more detail

  • SSP is now available for eligible individuals – those diagnosed with COVID-19, or those who are unable to work because they are self-isolating in line with Government advice (which is in a table at the bottom of this page)
  • If an employee has symptoms of COVID-19, however mild, they should stay at home and not leave their house for 7 days
  • Medical evidence is not required for the first 7 days of sickness
  • After 7 days, it’s for the Salon to determine what evidence it required from the sick employee
  • Salons should use their discretion around the need for medical evidence for a period of absence where an employee is advised to stay at home due to suspected COVID-19
  • HMRC is developing an alternative form of evidence to the current ‘fit note’ and this will shortly be available via NHS online
  • Statutory Sick Pay SSP will be paid from day 1 instead of day 4 for those affected by coronavirus.
  • SSP can now be claimed back by the Salon for 14 days but after that, it will be a cost of the salon
  • Salons can reclaim SSP paid for sickness absence due to COVID-19 (which it currently can’t for all other sickness)
  • SSP is paid at £94.25 per week for up to 28 weeks (increasing to £95.85 in April 2020)

Business Rates | England

12 month business rate holiday

There’s now a business rates holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year. ‘Retail‘ includes ‘hair and beauty’.

Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.

Eligibility

You’re eligible for the business rates holiday if:

  • your business is based in England
  • your business is in the retail, hospitality and/or leisure sector

Properties that will benefit from the relief will be occupied hereditaments (any item of property, such as land or a building) that are wholly or mainly being used:

  • as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
  • for assembly and leisure
  • as hotels, guest & boarding premises and self-catering accommodation

How to access the scheme

There’s no action for you. This will apply to your next council tax bill in April 2020. However, local authorities may have to reissue your bill automatically to exclude the business rate charge. They’ll do this as soon as possible.

Support for businesses that pay little or no business rates

The government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.

Eligibility

You’re eligible if:

  • your business is based in England
  • you are a small business and already receive SBBR and/or RRR
  • you are a business that occupies property

How to access the scheme

You don’t need to do anything. Your local authority will write to you if you are eligible for this grant.

Guidance for local authorities on the scheme will be provided shortly.

Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority.

Business Rates | Scotland

There’s now business rates help for retail (including ‘hair and beauty’), hospitality and leisure businesses in Scotland for the 2020 to 2021 tax year. They include:

  • Retail, hospitality and leisure businesses will get 100% rates relief. To get this relief, a property has to be occupied.
  • Retail businesses with a rateable value between £18,000 and up to and including £51,000 will be able to apply for a one-off grant of £25,000.
  • A one-off grant of £10,000 will also be available to small businesses who get:
    Small Business Bonus Scheme relief
    Rural Relief

You can find all the details here.

To apply: you’ll need to complete an application form. You can find this form on your local council website.

VAT

VAT for all businesses is being deferred until the end of June. In other words, if you were due to pay your VAT bill you now don’t have to until the end of June.

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.

Business Interruption Loan Scheme

The biggest single element in the Chancellor’s rescue package is a package of £330bn bank loan guarantees to help small and large businesses manage cash flows during the pandemic.

“That means any business who needs access to cash to pay their rent, the salaries, suppliers, or purchase stock, will be able to access a government-backed loan, on attractive terms,” said Sunak.

The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value.

The money will be provided by more than 40 lenders who have signed up to the scheme, including High Street banks like Barclays, HSBC, Lloyds and NatWest as well as more specialist finance companies.

Businesses are asked to contact their own bank first (if they are taking part in the scheme) via the company website if possible, and only approach other lenders if they need to.

The British Business Bank which is running the scheme said that it expected money to start flowing “this week” (being w/c 23 March).

Loans will be interest free for 12 months.

You can find all the details here.

Can self-employed people apply to the Business Interruption Loan Scheme? No

Support for businesses paying tax

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.

If you’re concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.

Insurance

Sunak confirmed that if your business is told to close (e.g. pubs) that this is sufficient for those businesses to claim insurance if they have appropriate business interruption cover for pandemics in place.

All salon and spa owners should check with their insurance provider if they are covered.

However, many businesses are unlikely to be covered as most business interruption insurance policies are dependent on damage to property, which will exclude pandemics.

Some businesses may have purchased a specific add-on relating to notifiable diseases, but some of these will still specify damage to the building. Some businesses may have purchased supply chain or denial of access cover which may meet their needs in this case.

As many smaller salons don’t have such insurance, the government is making cash grants of £25,000 per business available. We’re still waiting to see how you can claim.

Mortgage/rent

If you have a mortgage, you can take a 3 month payment holiday. To do this, contact your mortgage advisor directly.

Tenants can apply for a three-month payment holiday from their landlord. No one can be evicted from their home or have their home repossessed over the next three months.

Personal Tax

Your usual income tax ‘payment on account’, usually due by 31st July 2020, will no longer be required. Instead, your full tax bill will be payable by 31st January 2021.

Final thoughts

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, they’ll be there for you in return: Staff and Clients.

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Sources of info

We took all our guidance from here:

HMRC Guidance for Employers:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/guidance-for-employers-and-businesses-on-covid-19

HMRC Guidance for Employees:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-guidance-for-employees

House of Commons Library statement:

https://commonslibrary.parliament.uk/social-policy/health/coronavirus-employment-rights-and-sick-pay/

ACAS:

https://www.acas.org.uk/coronavirus

Lay offs overview:

https://archive.acas.org.uk/index.aspx?articleid=1639

Lay offs – employer info:

https://archive.acas.org.uk/index.aspx?articleid=3840

 Contact us for any questions on MTD.