Limited company contractors: How to keep your PSC going through this crisis
The coronavirus outbreak presents a special kind of business crisis for limited company contractors.
Many industries have already experienced a sharp contraction and analysts suggest that things are going to get worse before they get better. Thankfully, however, they’re also forecasting a relatively quick turnaround.
Businesses that were viable before the international pandemic will be viable again, limited company contractors just need to keep their personal service companies (PSCs) going for long enough to see the economy return to pre-crisis levels.
We would like to share some tips to help your business and your family keep going.
Paying your staff
The biggest government support package for most businesses will be the Coronavirus Job Retention Scheme.
In this scheme, the government will pay 80% of any staff salaries up to £2,500 per month, as long as employees are ‘furloughed’.
Furloughing is a kind of temporary redundancy, where employees can’t undertake any work for the company, but they will still receive some money from the government.
If you have any employees that you can’t afford to pay, the Coronavirus Job Retention Scheme is a great way to cut down on your expenses.
As a limited company contractor, you are effectively an employee of your PSC. This means that you can also furlough yourself and the government will pay up to 80% of your wages too.
Again, under the Coronavirus Job Retention Scheme, you won’t be able to carry out work for the company while you’re furloughed. But the government has confirmed that you will still be able to perform your statutory director duties, such as filling out company accounts.
The Job Retention Scheme only covers salary income, so if you take the majority of your earnings out as dividends then you may not receive as much support.
It may be necessary to borrow money in order to keep your business going through this difficult period.
The Coronavirus Business Interruption Loan Scheme is a new government-backed scheme that provides loans of up to £5m in value that are interest free for the first 12 months.
This scheme is available for all UK businesses with a turnover of less than £45m and is delivered through a range of UK banks.
Cash is king in times of crisis. And limited company bosses should do everything possible to keep cash in the business.
One way to do this is to defer tax payments under two new government schemes. The government will allow all VAT-registered businesses to defer VAT payments between March 20 and June 30 2020.
HMRC is also opening up its Time to Pay scheme, giving businesses and self-employed people in financial difficulty time and support to restructure payments and manage tax affairs.
Need more help with your limited company? Contact your Umbrella Accountant today or email email@example.com
Keep well and stay safe. We will continue to update you with any relevant information.