UWR 095 – Coronavirus & UK Business Update (22/04/20)

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Welcome to Uncover Wealth Radio Episode 095 – In this episode, we will be talking about Coronavirus and UK Business Update.

Today, Annette Ferguson, who is the host of Uncover Wealth Radio and a pro in helping entrepreneurs take home more money from their business for them and their family to enjoy, is here to tell you all about money, business wealth and creating financial freedom

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My name is Annette Ferguson – CEO of Annette & Co., a UK based accounting firm. I’m a chartered accountant and certified profit first professional who’s helping UK businesses make wiser and more impactful financial decisions. Welcome to Uncover Wealth Radio, a Podcast where I personally address current financial issues that affect thousands of companies in the UK and offer expert financial advice to, well, almost anyone who asks.


For today’s episode of Uncover Wealth Radio, I will be talking about Daily Coronavirus Updates as well as what these updates mean for businesses. I will be doing LIVE updates each day across different social channels: Facebook, YouTube, Twitter, Periscope, TikTok, and Instagram. You can catch me on podcast daily at 11:00 AM (Well, beginning tomorrow since I’m a little late today, and for the rest of the week!). 


For those of you who missed today, April 22’s Coronavirus and Business updates, feel free to download or listen to the podcast I have uploaded to this page. If you’re a tad pressed with time but still want to be on the loop with the latest updates, below are this episode’s highlights. Read on, and I look forward to seeing you join me on my next LIVE! 

UK’s Job Retention Scheme (Furlough)

It’s been a couple of days since the UK Job Retention Scheme has been launched. The date was April 20, 2020, Monday, when offices started accepting applications from companies. In just the first 24 hours, 185 companies who had submitted claims under the job retention scheme for furlough were granted. This number is equivalent to over 1.5 billion pounds or 1.3 billion workers supported with the financial grant. 


However positive and exciting this update may be, it is estimated that over 9 million workers are reportedly furloughed in the UK, and this does not even count those that have not been formally informed of the situation.

The Furloughing Process

Just so we’re clear on things, furlough is a two-way communication process. What should happen is that you need to tell the employee that they are going to be furloughed and they also need to accept that because it’s technically a change to their contract of employment. In other words, a notice needs to be given to the employee, and the employee needs to show proof of due acceptance before he/she can be officially recognized as a furloughed employee. 


It’s important to note that an employee can’t continue to do any work for the business whilst they are furloughed. I’ve heard that some companies rescind their employees’ access to things like email to make it very clear that they are not doing any work for the business. You may want to consider this for your business as well. Things such as changing their passwords or shutting off access to any company-related software or device can be an excellent way if you need to prove in the future that your employees were genuinely furloughed.

Annual Payroll

In yesterday’s episode, I also talked about the annual payroll and the issues surrounding it, so I’ve decided to discuss it a little more in-depth today.


What I found is that some business owners and directors are submitting annual payroll to HMRC. For these people who are accomplishing annual payroll, there’s been a problem with the furlough or job retention scheme system.


Basically, there are no numbers for them to claim as it looks like they are not employed even if they are already registered as an annual payer. Around 2016, the system for payroll changed to Real-Time Information Reporting System or RTI. This means that you basically have to start submitting your stuff to HMRC more regularly, except for those who’ve registered as annual payer from way before. 


As an annual payer, you could just submit one payroll for yourself annually. But then you would be able to do that without being knocked off the payroll system, and that seems to have fallen foul with the new furlough system and which is why some people aren’t eligible to claim.

Current Limitations Observed With The Furlough System

Since the Job Retention Scheme was launched last Monday, we have noticed a few grey areas or “limitations” in the prevailing furlough system.


For one, the system uses calendar days rather than working days. If employees are furloughed for an entire month, using the calendar days versus the working days can give you quite a different answer. Now, this has given inconsistent results for people, and it could mean that employers might potentially risk “overclaiming” because of the way it’s calculated. While it is unlikely to be massive amounts, the problem remains the same and shouldn’t be taken lightly. If you take a whole company, and you have a lot of employees, then it may start to become problematic, after all.


Two, if you have less than 100 employees, it requires manual input of data. You can upload CSVs when you have over a hundred, but if you’ve got 99 employees, 50 employees, or even just 10 employees, it’s going to take you a while to input everything manually. It can be time-consuming and, well, a hassle.


Third, the chances of limited company directors to be furloughed are unlikely at the moment and Mel Stride, the conservative chair of the Treasury Select Committee, has been urging the Chancellor to iron out the problems facing limited companies at the moment.


He’s also said that there is a suspicion that the Chancellor is seeing dividends as part of tax planning and therefore is not sympathetic to it. Now, this is interesting wording from Mel Stride to say that fundamentally paying a mixture of salaries and dividends is a method of tax planning. But it’s an incredibly basic one, and it has been around for a very long time. Also, its advantages have significantly decreased over the last few years. If it was 15 years ago, then it could have been a different case.


Nowadays, however, there are some marginal gains, but it’s not close to what it used to be. So saying that the Chancellor sees it as tax planning, it’s still very mild tax planning (if we’re going to put that label on it). Therefore, it seems like if they had a problem with this part of the legislation, should they not have closed the loophole before? Should they not have put stuff in place long before this so that this can be done? That is my argument.

Lastly, Freitas also suggested providing emergency funds to directors through a “pay now call back later” model, which might involve self-reporting in a way that a portal will be set up for employees to claim employees’ wages. It’s a system that lets you submit a claim, and then they would be able to review and audit it afterwards. They can then claw back any amounts that they need to, which is potentially a decent idea from Mel Stride and something that could very much work as well.

Businesses Should Strengthen Their Buffer Against Shocks

Now, many people might think that this has come a little late because we are already in the middle of a “shock.” But they’re basically saying that the businesses that are having the biggest problems right now are the same ones we’ve seen suffer from a number of high street failures. Businesses that are now in dire financial straits are the same ones which are highly indebted and or relying on short term contractors. 


Now, there’s a little bit of irony here because they’re saying businesses need to strengthen their buffer against shocks. And the businesses that are having a problem right now are those that are ridden with a high level of debt. And the solution they have come up with is to offer a loan to “see you through this time.” It is completely disjointed, and it does not make sense at all. Those two things just don’t work together. Saying “strengthen your business” that is already indebted with yet another loan is just counterproductive and may put the business in a worse position after this crisis.


Crazy, in my opinion.


But that is where we are at the moment, unfortunately. Anyway, they’re also saying that the first priority for businesses that survive this pandemic is to build up cash reserves – which I do agree on. It can be incredibly tricky, though, to build up cash reserves. If you are a business that is quite a hand to mouth or if you are in a situation where you’re struggling for revenue even if you come out of this recession, it can be difficult to build a cash reserve.


However, you still need to. What I can say is, even if you only squirrel away, half a per cent of your revenue to start building a cash reserve, even just point 1% of revenue, to squirrel away for a cash reserve and you start building that up, that’s still far better than nothing.


So my advice is that once you come out of this or even while you’re still in this, but you’re generating revenue, you can start squirrelling away small amounts from your income to build your cash reserve. This way, should things happen in the future (although I do hope and pray that we won’t have something like this again); you have a bit of a buffer in there.

Podcast Episode 95: Q & A

Q: I pay my staff weekly, should I claim every week?

A: No. The minimum furlough period is three weeks. With that said, if you’re furloughing staff, you need to do for a minimum period of three weeks. You need to write them a letter telling them their furloughs, including their furlough start date. They also need to accept the letter then you can furlough them initially for three weeks and then extend that if needed. Or it might be that they are going to be furloughed for a longer period of time, in which case, you can do it for a longer period of time. Still, you can’t claim furlough for more than 14 days in the future.



Q: I’m a Landlord, can I apply for a claim under the furlough scheme?              


A: It’s very unlikely. And the reason is that you are technically not an employee. Furlough is for employees, whether that be an employee of any business, or whether you are a director of your own limited company and therefore an employee of your own limited company as well. I truly feel that it’s really unlikely that directors are going to be able to furlough themselves because the only thing you can do whilst furloughed as a director is the preparation and submission of documents required for annual and monthly filings. This means that the work you can do for your role is rather limited. At most, what landlords can claim is a holiday mortgage, if you have a mortgage. 



Q: I have over 40 properties, am I eligible to claim?


A: It depends on your setup. Like, I have some clients who have properties under business rates and are therefore able to claim the grants under business rates. I have other clients who have a number of properties that are not under business rates and are under council tax and therefore cannot claim the grant relief. So in the end, it depends on your setup.


Q: Which bank should I borrow from for the business interruption loan scheme?


A: Well, the best thing to do is to go to your own bank if your own bank is lending under the Coronavirus Business Interruption Loan Scheme. There are more banks being added all the time. I spoke yesterday about how Corp Funding Circle and Starling Bank have been added (see Episode 94 of Uncover Wealth Radio). So if you have a relationship with any bank that is currently offering it, I would go to that bank whether that is a standard bank or whether that is a funding circle. If you already have a relationship with them, that’s going to be by far the easiest and quickest route to getting lending. If you don’t have an existing relationship with any of the banks that are offering to fund, then it’s a tricky one. I don’t know how fast someone like Starling bank is processing applications. I think some of the newer ones that have joined might be faster. We also have heard that the Royal Bank of Scotland is the bank that has given out the most loans. 


Q: My friend registered a business in 2016 but up until last year was in employment, which made up most of her income. She, therefore, has less than one year of self-employment. Does she or does she not qualify for new business as she’s been registered since 2016. Any ideas?


A: Give me a bit more detail on what she does. And I assume that she didn’t have anything in her 1819 self-assessment meant for self-employed or it didn’t make up at least 50% of her income. I think that’s probably the problem. There are many people in this boat as well, and I know that it is being petitioned. 


Q: She’s a self-employed photographer who’s been self-employed for less than a year. Can she apply for any grants?


A: So the only things that are really available to her is about deferment. If she’s not registered, she may very well not be a photographer, even if she’s started to work as one long before she’s registered. So technically, she’s not been operating for that long. The short answer is that it doesn’t sound like she is qualified for a grant. It doesn’t sound like there is any support for her at this time. There is a group that’s fallen through the net as well as self-employed people who are in this exact position. And they started up their self-employment after the end of the previously gone tax. There are also those who had a side business, and then they’ve transitioned into full-time who have fallen under the net. There’s really not much in the way of support for that. We see that with various groups experiencing similar situations, and there are petitions going forward to the government. 


Other Notable Updates

  • Over 100 UK Opposition MPs Calling For A Universal Basic Income For All UK Adults

What they’re saying, basically, is that they want a flat income for all UK adults during this time, not only because of COVID-19 but also as a coping measure when we come out the other end of this. It is likely that people are going to be acting differently and spending differently because we’re going to be in a recession. So what they’re calling for is a universal basic income during this time and extending well after the crisis is averted to try and support people so that they don’t fall into extreme poverty.

  • Increase Of 20,000 Unemployed People In The UK

  • 1.5M New Universal Credit Claimants March

Wrapping Up!

There are a growing number of people who have fallen out of the net and are not allowed to claim grants. This is a scenario the government is looking into right now, and a lot of petitions are in place because of these grey areas. For example, if you are in service offices, you may have fallen out with being able to apply for grants. There’s currently a petition going around it which has over 12,000 signatures on it. 


There are various lobbying groups, and there are various people who are shouting from the rooftops for the various groups that exist where support is not widely available at the moment. At this time, we don’t know what else might be coming down the pipe and what else might be available, which is why you must keep tuning in for further updates.


There have been some questions in today’s podcast episode that I wasn’t able to get into fully, but I’m taking note of them, and I hope to address them as soon as I get more information. In light of limited companies and directors of smaller companies, I will be further discussing them in the following episodes, so be sure to reserve your front-row seat.


I’ve also been asked whether applying for Universal Credit will affect the credit report that you have. This, too, is something I hope to delve into tomorrow. So as you can see, there are a lot of things that are still left to discuss, and I hope to gain more insights about the current situation so that I can give you more updates in the following days.


I incidentally also want to mention that I am doing an interview with Kachi of Harbor Nova around this time tomorrow morning. It will be all around profitable content marketing. It will be live on Facebook, Instagram, YouTube, Periscope and Twitter. I don’t think I can go live on Tik Tok because I’m still figuring out how I can go live at the same time with the interview through this system, but if I can figure something out, I’ll let you know.


You can also catch previous Uncover Wealth Radio episodes through our website, Annette & Co. Be sure to follow our social media channels so that we can keep you updated with the latest news and updates surrounding COVID-19 and how it’s affecting businesses. If you enjoyed what has been talked about in today’s podcast, be sure to share it with your friends, family, and colleagues who may be interested in the latest happenings. I hope you learned a lot and I wish to see you during my LIVE tomorrow and in the following days.


If you have any questions or inquiries about what we do or if you’re hoping to gain some new insights about your business especially during these challenging times, don’t hesitate to DM me or leave me a message on any of my social media channels. I would love to hear from you! Stay tuned for more updates!

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About the Author

Annette Ferguson 

Owner of Annette & Co. - Chartered Accountants & Certified Profit First Professionals. Helping online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.