Help and Advice for Self-Employed Businesses and Individuals

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30 Years' Experience
Covid-19 Business Advice
Covid-19 Business Advice
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UK's No.1 for Director Advice
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Rescue, Recovery, and Closure Options for Self-Employed Companies

If you are considering closing your limited company or contracting business due to the economic uncertainty surrounding the coronavirus pandemic, company liquidation may be the final resort for your insolvent business. As the government instructed employees to work from home in March 2020 and once again in September 2020 to reduce Covid-19 transmission rates, workplaces across the country faced mass closure. This led to the termination and postponement of contracts across the country, creating a hole in cash flow for limited companies, staggering the availability of capital and erasing the possibility of future income until the reopening of corporate offices.

As the future performance of PSCs working for clients in non-essential sectors is uncertain following the Covid-19 lockdown, this clashes with the impending IR35 reform which disrupts the flow of incoming contracts. 5 million self-employed individuals are contributing over £300 billion to the economy and representing 15.3% of employment in the UK. As businesses set out to minimise overheads and temporarily cancel the use of PSCs (limited companies) and contractors, sourcing contracts during the coronavirus pandemic is proving to be a challenging task.

A Creditors’ Voluntary Liquidation (CVL) is a formal insolvency procedure which consists of generating funds to repay creditors through the sale of assets, settling creditor affairs and bringing the business to an end. A CVL is administered by a licensed insolvency practitioner and is typically due to months of debt built up and Covid-19 trading pressures.  

If your company is insolvent and no longer has the necessary funds to repay creditors, you may have exhausted your chances of recovery. Although Covid-19 support from the government provides a much-required lifeline to distressed businesses, many companies are being loaded with great levels of debt, increasing their liabilities and commitments to creditors, leading them to their demise.

A CVL consists of a formal instruction to appoint a licensed insolvency practitioner following your decision to close the business. Creditors will then be notified and presented with the Statement of Affairs which clarifies the financial position of the business. The liquidation will then commence as your appointed licensed insolvency practitioner acting as the liquidator will direct the sale of company assets to generate funds for creditors. Your company will then be struck off the Companies House register. A licensed insolvency practitioner can help ascertain the best liquidation route for your business and assess the likelihood of successfully rescuing your company.

IR35 Company liquidation – If you are interested in liquidating your limited company in preparation for the IR35 private sector reform which is due to come into force in April 2021, the route you take will depend on whether your business is solvent or insolvent. If your business is insolvent, a Creditors’ Voluntary Liquidation as mentioned above may be the ideal route for you. If your business is solvent and consists of retained profits over £25,000, a Members’ Voluntary Liquidation (MVL) can facilitate a cost-efficient exit.  An MVL is a formal process for solvent companies with the ability to fulfil liabilities in full and settle outstanding affairs with creditors within 12 months. This route allows you to extract funds tax-efficiently and take advantage of Business Asset Disposal Relief, if eligible.

Our licensed practitioners are on hand to support you and can offer a free consultation to limited company directors. If you are struggling due to the coronavirus pandemic or wish to liquidate your business in light of the IR35 reform, a member of the Real Business Rescue team can help advise on a suitable solution.

Support available for Limited Companies & Contractors

If your limited company or contracting business has been adversely impacted by the coronavirus pandemic, you may be able to access financial support from the government to help keep your business afloat during this unprecedented period of trading. The Coronavirus Business Interruption Loan Scheme (CBILS) offers small to medium-sized businesses access to loans and finance up to £5 million, extended until the end of January 2021. The government guarantees 80% of the finance to the lender and interest and any fees are payable only after the first 12 months.

You can apply for the loan if you can show that your business would be viable were it not for the pandemic and is experiencing financial distress as a result. You must have an annual turnover of up to £45 million to qualify for the loan scheme.

If you are a smaller business, you may be able to access the Bounce Back Loan Scheme which offers between £2,000 and 25% of your turnover, capped at £50,000. The government guarantees 100% of the loan and interest and any fees won’t be applied in the first 12 months. The scheme is open until the end of January 2021 and can only be accessed by businesses registered before 1 March 2020 and those adversely impacted by the coronavirus pandemic.

If your limited company employs staff, you may be able to claim employees’ wages through the Coronavirus Job Retention Scheme (CJRS) for furloughed staff due to the pandemic. The scheme has been extended until the end of March 2021, offering support to businesses over the winter months. If consumer demand has reduced due to Covid-19, you can furlough staff and apply for a grant to cover a fraction of their wages. If you require furloughed staff to return to work for a portion of their contracted hours, you can claim for the hours not worked.

VAT and & self-assessment payments have also been deferred to give limited companies more time to raise funds and focus on Covid-19 business recovery.

We offer a free consultation to limited company directors right across the country, either over the phone, virtually, or at an office location convenient to you, subject to Covid-19 public health guidance. In some cases, we may be able to offer support on the same day we are contacted. The earlier you reach to us can widen the options available to your business, so it is vital to seek advice before exhausting your chances of recovery.

Support available for Sole Traders

If your stream of income has been interrupted by the coronavirus pandemic, you may be able to access emergency Covid-19 support from the government.

The Self-Employment Income Support Scheme (SIESS) offers a series of grants to sole traders and freelancers covering a 3-month period. The SIESS grant has been extended to provide 2 further grants from November 2020 to January 2021, and February 2021 to April 2021. The grant will be worth 80% of trading profits, capped at £7,500, which is equivalent to the support available through the CJRS for limited companies.

Following the deferral of VAT payments to March 2021 for the period of 20 March to 30 June 2020, you now have the option to make smaller VAT payments up to the end of March 2022, interest-free. If you are finding it difficult to make your self-assessment payment, you can defer this until 31 January 2021 or request to pay in instalments after this date. If you have an active commercial tenancy agreement in place, you are protected from eviction from the property until the end of 2020.

The self-employed can claim Universal Credit and the government has boosted the standard allowance and suspended the Minimum Income Floor, extending this into 2021. Contributory Employment and Support Allowance (ESA) is also available for self-employed individuals affected by coronavirus, due to the likes of self-isolation.

How we helped Judy’s photography business

Help and Advice for Self-Employed Businesses and Individuals Help and Advice for Self-Employed Businesses and Individuals

Judy’s photography business was typically commissioned for capturing prominent events across the country, such as New Year’s firework displays, Christmas markets, marathons and high-profile charity fundraisers. After forecasting another record-breaking year, Judy’s business experienced serious cash flow issues after the cancellation of a series of cancelled events, ceremonies and trade shows.

Judy injected cash into her business by accessing her pot of emergency cash set aside for unexpected periods of trading. In addition to this, Judy significantly increased her overdraft facility and took advantage of personal payment holidays to lighten the load.

As she turned her focus to smaller events, such as weddings, the government announced that large gatherings could no longer take place and should be postponed until further notice. As the number of wedding guests allowed drastically reduced from 50, 30 to 15, customers scaled back on spending, resulting in a long line of cancellations and postponed events with no view of a new date.

As Judy began to fall behind on her studio rent payments and monthly instalments towards her hire purchase agreement for her commercial vehicle, it was clear that she required external support. After months of no income and the tapering of government support, Judy came to the understanding that without taking further action, her business would become insolvent.

After taking advice from Real Business Rescue, Judy entered a Company Voluntary Arrangement to restructure her liabilities into affordable monthly instalments to provide much-needed breathing space. Following creditor approval, we negotiated a payment plan which supported the interests of both parties, helping Judy get back on track, adapt to current trading conditions and prepare for post-Covid-19 consumer demand.

Sell my self-employed company

You may consider selling your distressed limited company as an alternative to company liquidation if the business still holds value. As a limited company director, it is your legal duty to maintain the daily operations of the business and to the protect the financial position of creditors, however, this may be increasingly challenging as a result of the economic pressures surrounding the coronavirus pandemic. Following drops in consumer demand and uncertain trading conditions, you may consider selling your business before it loses further value. Selling your limited company or contracting can be a cost-efficient way to exit from your business and to generate a return.

There is a vast market made up of company turnaround experts on the search to acquire distressed businesses, in the hope to conduct restructuring exercises and rejuvenate the financial health of the business through investment. This can often be a cost-efficient and sustainable way for prospective buyers to achieve their business goal and a quicker alternative to establishing a new business from the ground up. Your appointed licensed insolvency practitioner will be able to assess the value of company assets and determine if this route is available to you.

In some cases, prospective buyers may look to purchase the most profitable parts of your business, excluding the least performing to maximise the chances of driving the business to success. If your business has a strong historic track record, now hindered by the effects of Covid-19, buyers are likely to consider your past performance as the virus has left no sector untouched.

If you are interested in selling your limited company, we can help source a serious buyer by marketing to our extensive database of actively searching buyers. After years’ of facilitating the sale of both strong performing and distressed business, we understand exactly what it takes to maximise the final sale value.

Rescue my Self-Employed business

If your business can be rescued, a Company Voluntary Arrangement (CVA) can help negotiate a legally binding repayment plan with creditors, typically over a 3 to 5 year period. This formal insolvency procedure can help turnaround your insolvent or contingently insolvent business by lowering the monthly instalments. If your business is in the firing line of creditor pressure and legal action, a CVA can protect your business against this.

A Fast Track CVA is a supercharged version of a traditional CVA, compressing the process in as little as six weeks. If your business is forecasted to fail imminently, a Fast Track CVA can act urgently to halt the deterioration of your business.

If your business has realistic prospects of survival and holds asset value, company administration is a formal insolvency procedure which can be administered by a licensed insolvency practitioner.  If your limited company is on the receiving end of creditor pressure and impending legal action, company administration can shield you from this during the recovery process.

Company Administration can prevent your business from being pushed into company liquidation, preserving the health of your business. Your appointed insolvency practitioner will uphold the role of company administrator and will be responsible for overseeing the affairs of the business and directing the sale of assets to generate funds to repay creditors.

Alternatively, if your self-employed limited company requires a cash injection to allow for growth, expansion and reach greater heights, commercial finance can help remove the restriction to cash flow. There are numerous forms of finance options which can help protect the financial position of your business and expand the service offering.

Invoice finance can help unlock funds tied up in invoices which are yet to be paid for services fulfilled, removing the waiting time between contracts and tightening the cash flow gap. If you need to invest in machinery, equipment or tools to enhance your service, asset finance can help fund the purchase, tailored to your preferred repayment style. For example, hire purchase allows you to split the cost of a high-value product into affordable instalments over a long-term period, resulting in a final payment which will transfer asset ownership to your business.

At Real Business Rescue, we have a close working relationship with over 50 trusted finance lenders offering finance options at competitive rates. Get in contact with our finance team to obtain a quote and for advice on the best form of growth capital for your business.

Director redundancy for Self-Employed Company Directors

If you are the director of a limited company, you may be able to claim redundancy pay as company directors are technically classed as an employee of their limited company and taxed through PAYE. It is a common misconception that limited company directors are not eligible for director redundancy, for which the average claim is £9,000. Claims for director redundancy are managed by the Redundancy Payments Service (RPS) and payment is made from the National Insurance Fund, including for other payments you may be entitled to, such as notice pay, holiday pay and unpaid wages.

Redundancy pay for company directors can only be claimed if your business has entered company liquidation or company administration. You can begin your claim for director redundancy pre-liquidation or post-liquidation; however, you must do so within 12 months of your company entering the process or within 6 months of the liquidation of your company. You must have worked for your limited company for a minimum of two years, worked a minimum of 16 hours and paid a salary through PAYE.

As part of the liquidation process, your appointed licensed insolvency practitioner at Real Business Rescue will refer you to a fully regulated claims management firm who will be able to assess your claim.

Sole traders are not typically entitled to statutory payments, such as redundancy pay.

Did you know - Limited Company Directors may be entitled to Director Redundancy Payments. Largest successful claim to date is £22,608.

  •   £9,000,000 Claimed Last Year
  •   Authorized and Regulated by the FCA
  •   3,000+ Directors Helped
  •   Service provided by RedundancyClaims UK
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