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Summer Holidays Tips for Working parents

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This week marks the start of the school summer holidays for most in the UK.

🤯 It often brings about mixed feelings – a chance to spend extra quality time with the family whilst also raising huge challenges in terms of managing work and childcare.

Flexibility is probably the main reason you decided to be your own boss! Try to enjoy the extra time with your children as much as you can.

Here are a few tips below, shared recently by some of the wonderful parents that we work with:

1) Plan in advance your work schedule and don’t be tempted to take on too much additional work. Prioritise – what must be done and what can wait.

2) Manage expectations – be clear with customers and colleagues that timescales may be a little longer than usual if that’s the case. Your out of office message should clearly state when a response can be expected.

3) Build in flexibility to your work schedule to allow for unforeseen events.

4) Work from home when you can to decrease travelling time and to increase ‘working’ time. Set up a workspace area where you can work without distractions if you don’t have one.

5) Enlist the help of friends and family to share childcare where you can, helping each other out wherever possible. Set up play dates. If you have a partner, divide the responsibility wherever possible.

6) Make use of school summer clubs and other local clubs where needed – booking in advance is usually essential.

7) Book weekly grocery deliveries to keep the cupboards stocked (we all know how much children can eat!) and consider subscriptions for everyday items such as pet food that you’re constantly re-ordering. This can save time and is also one less thing to think about over the holidays!

8) Schedule in all the back-to-school stuff – uniform fittings, school shoes etc

9) Keep all the usual household chores to the necessary minimum – get the basics done and don’t worry too much about anything else.

10) Take time for yourself when you can as it should be a break for you as well!

What happens if I am late registering for VAT?

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When should I register for VAT?

A business must register for VAT once its turnover reaches the VAT registration threshold, currently £85,000 at the time of writing.

It’s important to understand that you will need to register for VAT when your taxable turnover exceeds £85,000 in any ‘rolling’ 12-month period, not in an accounting period.

What is a rolling 12 month period?

A rolling 12-month VAT period is any 12 month period of trading. After your first year in business, at the end of each month you will take your latest month and add it to the total figure, and remove the oldest month. So rather than looking a 12 month accounting period or tax year, a rolling period looks back at the previous 12 months of trading.

What happens if I am late to register for VAT?

If you’ve failed to register for VAT with HMRC on time, you will face penalties. It’s important to act quickly to reduce the penalties you will incur.

Penalties are calculated based on how much VAT is due as well as how late you were registering. The VAT that you owe from the point of registration will also be added to your penalty, so registering late can be very expensive.

You will be required to include VAT on all sales back to the date the business should have registered. That stands, even if no VAT was charged to your customers at that point. If most of your customers are VAT registered, this shouldn’t be too much of a problem, as you can raise a VAT only invoice to your customer and collect the payment. However, this could still cause cash flow problems depending on how quickly your customer pays the invoice.

If most of your customers aren’t VAT registered, you cannot charge the VAT onto them but you still need to pay that VAT to HMRC. Not only can this cause cash flow problems as mentioned above, but the additional costs will reduce your profits.

How much are the penalties?

As mentioned above, the penalties for failing to register for VAT on time will vary, depending on how late you were in registering. If you registered:

not more than 9 months late – 5%

more than 9 months but not more than 18 months late – 10%

more than 18 months late – 15%

There is a minimum penalty of £50.

HMRC will notify you of the amount in writing together with information on how you can appeal against the penalty if you think you should not be penalised or the amount of penalty is wrong.

What if I have a reasonable excuse for not registering for VAT?

If HMRC agree that there’s a reasonable excuse for the late registration, you will not be liable to a penalty.

There’s no legal definition of ‘reasonable excuse’ but HMRC will consider each individual case and the circumstances that led to the late registration.

If you can show that your conduct was that of a conscientious business person who wanted to comply with VAT requirements, then there may be a reasonable excuse. For example, if an individual is solely responsible for a business and they or a family member were seriously ill at the time when they should have registered for VAT, this will be taken into consideration.

The following guidelines show circumstances where there might be a reasonable excuse for failing to register on time.

  • Bereavement
  • Doubt about liability of supplies
  • Uncertainty about employment status
  • Serious illness

What isn’t considered a reasonable excuse?

Genuine mistakes, honesty and acting in good faith are not accepted as reasonable excuses for penalty purposes. Also the law provides specifically that you do not have a reasonable excuse if:

  • you cannot afford to pay
  • you or a person acting on your behalf acted in good faith

If the circumstances of your case fall short of reasonable excuse, there may still be grounds to mitigate (reduce) the penalty.

What about other mitigating circumstances?

A penalty can be reduced if there are mitigating circumstances that fall short of a reasonable excuse.

Like reasonable excuses, the law does not define the grounds for mitigation but it specifically excludes:

  • your lack of funds to pay any tax or penalty due
  • the fact that little or no tax has been lost
  • the fact that you acted in good faith

When HMRC consider mitigation, they will look at all the facts which led to the late registration. The amount of mitigation allowed will depend on the circumstances of the case. HMRC can mitigate the penalty to nil but such cases are likely to be exceptional.

What happens when I’ve registered for VAT?

As of April 2019, the Government introduced ‘Making Tax Digital’. That requires all VAT registered businesses to keep their accounting records on cloud-based software such as Xero, which is our recommended software.

You will be required to complete a VAT return for each quarter. The deadline for submitting your return online is one calendar month and 7 days after the end of the VAT quarter. For example, if your VAT quarter ends on 31st March, you will need to file the return by the 7th May. This is also the deadline for paying HMRC.

If you set up and pay by direct debit, you will receive an additional three days before payment is taken, i.e. 10th May.

What happens if I file my VAT returns late?

It’s important to file your VAT returns on time.

If you miss the deadline for submitting your return HMRC will record a ‘default’ on your account. Once you’ve defaulted, you’ll begin a 12 month ‘surcharge period’. A surcharge is an extra amount on top of the VAT you owe.

Are you struggling and in need of help?

If you have any questions about VAT registration, please get in touch and we will be happy to help! You can call us on 01386 366741.

Directors’ Salaries 2022

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How much is the Optimal Director’s Salary in 2022/23

The optimal salary for company directors is unusually a little different this year and has been adjusted because of the changes announced by Rishi Sunak in the Spring Statement on 23rd March, just after we’d prepared our annual directors salary guide for 2022-2023!

Very broadly speaking:

  • The optimum salary for a sole director in 2022/23 is £9,100.
  • The best salary if there are two or more directors is £11,908.

Increases to the rate of National Insurance and Dividends along with the increased threshold for National Insurance from 6 July 2022 and the increase in the employment allowance, have created some confusion for directors and accountants alike!

When working out how much to pay yourself, you need to consider National Insurance contributions as an employee and employer, how many people there are in the business, tax allowances for dividends and for income together with the corporation tax relief for employee salaries. Importantly, it’s important to remember that one approach does not fit all and your own personal circumstances should be taken into account. Be sure to seek professional advice which considers your complete position, both personal and business.

The personal allowance for 2022/2023 tax year is £12,570 which means you can pay yourself this level of salary without any tax being due. However, you also need to consider National Insurance contributions.

There are two relevant thresholds when it comes to NI:

  • The Primary Earnings Limit (£11,908) is the point at which directors start paying National Insurance
  • The Secondary Earnings Limit (£9,100) is the threshold beyond which the employer is liable.

Directors/Employees

From 6th April 2022 – 5th July 2022 employees can earn £823 per month before paying national insurance

From 6th July 2022 – 5th April 2023 employees can earn £1,048 per month before paying national insurance.

Monthly salary payments at these amounts will be equal to the primary earnings limit £11,908 so no National Insurance will be payable by the director although the company will be liable to Employers National Insurance.

Optimum amounts for Directors

Taking into account the above thresholds, the optimum salary for a sole director in 2022/23 is £9,100. (£758.33 per month)

  • It’s at the secondary earnings threshold so your company won’t need to pay employer’s NI on it
  • This salary is lower than the primary threshold, so you won’t need to pay employee’s NI
  • You will still earn NI credits, earning credits towards your state pension
  • This is less than the tax-free Personal Allowance threshold, i.e. £12,750
  • You cannot claim Employment allowances as a sole director. A sole director cannot claim the Employment Allowance
  • The salary is deductible for corporation tax purposes (generating a tax saving for the company about £1,729) (£9,100 x 19%)

If considering paying a salary at the Primary Earnings Limit (£11,908) as this still offers benefit to both the director and the company. The director’s salary is tax deductible, saving corporation tax of £2,263 (£11,908 x 19%).  The company is ineligible to claim Employment Allowance so will incur Employer’s National Insurance liability of £422 (based on the £2,808 salary difference at a 15.05% contribution). The total corporation tax saving based on receiving the higher salary becomes £2,263 – £1,729 = £534. There is also the Employers’ National Insurance cost which is also corporation tax deductible, saving a further £80.18. (£422  x 19% = £80). The total savings in corporation tax are therefore £534 + £80 = £614 by claiming a higher tax deductible salary expense.

OR

for limited companies with two or more directors or one director and at least one other employee, the most efficient salary in 2022/23 is £11,908. (£823 per month for April 2022 – June 2022 then £1048 per month for July 2022 – April 2023)

Having two or more directors on the company payroll means that you’re eligible to claim the Employment Allowance. In 2022/23 employers who are eligible to do so, can use the Employment Allowance to claim up to £5,000 in order to cover the costs of Employer’s National Insurance, increasing from £4,000 in recent years. To be eligible, employers must have at least one employee, or two directors, on the payroll, and the directors must not have another company that is claiming the Employment Allowance already. This means that sole directors can’t claim the allowance, which is why the optimum salary is a bit different for them.

  • It’s at the primary earnings threshold so you won’t pay employee’s National Insurance above this limit
  • Your company will incur employer’s National Insurance on your salary but if eligible, will be able to claim the Employers National Insurance allowance to offset against the cost
  • You will still earn National Insurance credits towards your state pension.
  • This is less than the tax free Personal Allowance threshold, i.e. £12,750, leaving some of your personal allowance free for other income
  • The salary is deductible for corporation tax purposes (generating a tax saving for the company about £2,263) (£11,908 x 19%).

Dividends

Further payments should be made as dividends to minimise tax liabilities without missing out on National Insurance contributions, which would mean you might not be eligible for the State Pension in the years ahead.

If you have any questions about your salary or dividends, please get in touch and we will be happy to help!

Can I still claim tax relief for working from home?

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Working from home tax relief rules are to be tightened for 2022-2023

Tax relief is available from 6 April 2022 onwards only if the employer specifically requires the employee to work from a home office.

During the Covid-19 pandemic, the rules were eased and people working from home have enjoyed a tax break to help with increased energy usage, meaning anyone who worked at least part of the week at home could get additional help, worth up to £125.

However, as of 6 April 2022 you can no longer claim tax relief if you choose to work from home.

To claim for the new tax year 2022/23, one of the following must apply:

  • there are no appropriate facilities available for you to perform your job on your employer’s premises
  • the nature of the job requires you to live so far from the employer’s premises that it is unreasonable for you to travel to those premises on a daily basis
  • you are required, under government restrictions, to work from home

The rules have not changed but as Covid restrictions gradually ease, less people are now having to work from home and as a result, HMRC’s updated guidance makes it clear that you cannot claim the tax relief if there is an element of choice in your working from home.

https://www.gov.uk/tax-relief-for-employees/working-at-home

Employees who have been claiming working from home tax relief during the Covid 19 pandemic, should review their tax codes to check whether HMRC has included the relief in their 2022-23 tax code notice because they may no longer be eligible for the relief.

Can I separate my businesses to avoid registering for VAT?

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The short answer is possibly, but we don’t recommend that you risk it unless there are valid commercial reasons.

When a business reaches a turnover level of £85,000 or more, in any 12 month period, it needs to register for VAT.

Some business owners when operating two trades, believe that they can run two or more businesses separately from each other to avoid reaching the VAT registration threshold which is £85,000. This approach is often considered as a way of avoiding charging 20% VAT to their customers who aren’t VAT registered, typically the general public. An example of this would be a hairdressing business who has not VAT registered individuals as customers.

 

Don’t Think Like Bob

Bob’s Builders & Carpentry has a total taxable annual turnover of £130,000 and is a VAT registered business, supplying a range of building services to domestic customers.

However, Bob believes that if he separates his business and splits them into two entities, he will no longer need to be VAT registered.

Bob feels that he offers two very different services and that they should be separated for VAT purposes.

Bob’s Builders expected annual turnover is £80,000 and Bob’s Carpentry is £50,000 – individually, both levels of turnover fall under the VAT registration but total £130,000.

Bob’s plan is to run Bob’s Buiders as a sole trader business and form a partnership business with his wife to run Bob’s Carpentry.

 

HMRC’S View

Although neither of Bob’s businesses exceed the VAT registration threshold individually,

HMRC consider the above approach as ‘artificial separation’ because when combined, the total turnover from both trades exceeds the VAT threshold. In this situation, HMRC would force VAT registration to take place.

 

What are the rules?

As always with most tax matters, deciding if business splitting and VAT avoidance has taken place is not always straight forward.

HMRC has detailed guidance surrounding on this subject here.

HMRC will look to see if:

  • The separate entities supply both VAT registered and unregistered customers
  • Both entities use the same equipment and premises
  • Splitting up what is usually a single supply (i.e. a hotel separating bed and breakfast)
  • Separating two businesses which maintain the appearance of a single business (see Bob above!)
  • Both entities being control by the same management

A key question that a HMRC tribunal will ask to establish if the businesses are artificially separated is:

“Are the businesses closely bound by financial, economic and organisational links?”

Financial links

  • Is financial support given by one business to another?
  • Would one part not be financially viable without support from another part?
  • Is there a common financial interest in the proceeds of the business?

 

Economic links

  • Are both entities seeking to realise the same economic objective?
  • Is there a mutual benefit to each business from the activities of the other?
  • Do the activities of one entity benefit the other?
  • Are both entities supplying the same customers?

 

Organisational links

  • Are both entities ran by the same management?
  • Do both entities employee the same staff?
  • Do they use the same premises?
  • Do they share equipment and resources?

 

HMRC will also consider structural separation of the businesses:

Structural Separation

HMRC will also consider how the businesses are structured:

  • Do both entities have separate bank accounts?
  • Is there separate advertising and marketing activities?
  • Is there separate bookkeeping and accounting?
  • Does each entity have it’s own branding, logo and website?
  • Are there separate insurance policies? 

 

But can it be done?

There can be valid commercial reasons for having two or more businesses when they are genuinely different businesses. However, before considering splitting any business, you need to consider if separately, they have any financial, economic and organisational links.

If separated properly, there can be useful savings whilst VAT registration is postponed but both businesses must be operating completely separately and independently from each other.

Business owners must use common sense and reasonable judgement, but every case is unique and so consulting with a specialist tax adviser is always advised. HMRC rules are applied on a case by case basis and you must carefully plan to avoid falling foul of these regulations. There is no one single factor that decides whether your particular business split is acceptable.

Can I claim my mobile phone as a business expense?

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Can I claim my mobile phone as a business expense?

 

Limited Companies

If you’re a Director of a limited company, it is possible that can claim the cost of your mobile phone bills as a business expense, providing only one mobile phone is provided to each Director/Employee.

HMRC allow the full costs of your mobile phone bills as a tax allowable expense, providing the mobile phone contract is held in the name of the limited company and the payments are made directly from the business bank account. This applies even if the phone is used for personal use as well as business use.

There are no personal tax liabilities, such as having to complete a P11D every year or pay personal tax on the benefit of the mobile phone.

If the company is VAT registered, you can also claim all the VAT.

Self Employed

If you’re trading as a sole trader or a partner in a business, you have two choices for charging mobile phone costs to your business.

You can have a mobile phone which is used for business purposes only, enabling you to claim all the costs relating to the business phone through your business (including claiming the VAT if you’re VAT registered). Or, if you already have a personal mobile phone that you wish to use for business as well, you can claim a proportion of the mobile phone costs.

To achieve this, you will need to calculate a reasonable split of your bills (and VAT) between business and personal usage. There’s no set way of performing this calculation, but it should be reasonable. One method is to take a sample of mobile phone bills and work out what percentage of the calls related to personal usage. That percentage is then subtracted from the full costs incurred. Providing, your method is reasonable and you review the percentage regularly, HMRC are unlikely to dispute your calculations.

VAT registered sole traders can claim back the VAT after deducting their personal use percentage.

If you have any questions about mobile phone expenses, please get in touch and we will be happy to help!

What is the VAT reverse charge for construction?

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10 things you need to know

 

From 1 March 2021, those working in the UK’s construction industry may have to handle and pay VAT in a different way following the introduction of the new VAT reverse charge system. The system is designed to combat VAT fraud in the building and construction sector.

1. The VAT reverse charge for construction is effectively an extension of the Construction Industry Scheme (CIS) and applies only to transactions that are reported under the CIS and are between VAT registered contractors and subcontractors.

 

2. The scheme means that those supplying construction services to a VAT registered customer will no longer have to account for the VAT. Instead, the customer will account for the VAT and pay it to HMRC directly, rather than to the supplier. In simple terms, subcontractors will require the contractor they are working for to account for the VAT and pay the VAT to HMRC.

 

3. The reverse charge will have a significant impact on how businesses within the construction sector account for VAT and manage their cash flows. If you’re using cloud accounting software, the changes will be automatic in terms of the accounting. The new system may also affect your cash flow because the VAT you previously held onto before passing it quarterly/monthly to HMRC will no longer be available for any uses you might have put it to. Also, because you no longer pay VAT on your sales you might find you become what HMRC calls a repayment trader, meaning your VAT return always results in a reclaim of money from HMRC, rather than making a payment. Such businesses may wish to consider applying to move to monthly VAT returns, to speed up repayments received from HMRC.

 

4. The system applies only to VAT registered businesses who are supplying/receiving services that are reported under CIS. Therefore, it applies to services supplied between the majority of construction subcontractors and contractors in the UK but not non VAT registered individuals.

 

5. If your construction business is not VAT registered then the reverse charge cannot be applied to you, and standard VAT rules apply for the supplier (so they will charge you the VAT and account for it as usual).

 

6. Reverse charge transactions are excluded from the VAT cash accounting scheme but you can remain on the scheme and continue to account for non-domestic reverse charge work on a cash accounting basis. However, if you act as a sub-contractor and all of your sales will be subject to domestic reverse charge, then you may want to stop using the scheme so that they can start to reclaim their input tax earlier on an invoice basis, rather than a cash basis.

 

7. The VAT reverse charge applies to standard and reduced-rate VAT supplies, but not to zero-rated supplies.

 

8. The reverse charge will only apply to suppliers of specified construction services to other businesses within the construction sector. These include the following:

  • Construction, repair, extension, alteration, demolition and dismantling of structures or buildings (including offshore installations) whether they are permanent or not.
  • Installation of heating systems, air-conditioning, lighting, power supply, drainage, ventilation, water supply, sanitation and fire protection in any structure or building.
  • Painting or decorating the external or internal surface of any structure or building.
  • internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration.

 

9. If you’re invoicing a customer for mixed supplies, some of which are not affected by the reverse charge, you should apply the VAT reverse charge to the whole invoice. This is to enable the system to be as easy to administer as possible.

 

10.If you’re unsure whether the reverse charge applies to the services you provide, you should contact your professional advisor or HMRC for advice. As a general rule, HMRC advise that if in doubt, provided the recipient is VAT registered and the payments are subject to CIS, it is recommended that the reverse should apply. HMRC’s technical guide also has further detailed guidance.

Can my garden office be claimed as a business expense?

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Are you considering the addition of a garden office to help you work from home? This is a great idea for many reasons. You can have privacy and quiet to stay focused and productive, while keeping disruptions from family to a minimum. And the garden office can even be used for other purposes, such as a spare bedroom for guests and more. 

 

Is my garden building claimable as a business expense? 

It’s not possible to fully deduct the garden office as a business cost. However, you can deduct the fixtures, fittings, office furniture, and more. 

 

What items of the build are claimable? You can claim for certain items within the building and this is where it is important to ensure that you have your invoice itemised correctly prior to the work being completed. 

Electrics – power, lighting, CCTV 

Thermal insulation of the building Water heating system, a powered system of ventilation, air cooling or air purification 

Kitchen equipment and fittings 

Washbasins/sinks/sanitary ware 

Furniture and furnishings 

Sound insulation 

Computer, telecommunication and surveillance systems including their specific wiring

 

Can I reclaim VAT paid? 

If you’re VAT registered, VAT incurred on the cost of the structure itself or any furnishings or furniture can be reclaimed if it is solely used for business. VAT can also be reclaimed on the ongoing running costs. You must ensure there is a VAT invoice addressed to the business to support any claim, as per the usual VAT rules. 

 

Is capital gains tax an issue? 

This is only a future issue on sale of your home if you are building a brick type new build rather than a more ‘temporary structure’ such as a ‘posh shed’. Our advice would be to speak with your tax advisor prior to construction. 

 

Are there any other issues? 

As the structure will be separate from your home, local councils may seek to charge business rates – check with your council. Planning permission is also an issue that is best to discuss with your local planning department before undertaking work.

What documents do I need to apply for a CBILS loan?

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Guest blog post from Fluidly, our cashflow and funding partner.

If somebody had told you a year ago that you could take out a large unsecured loan with no interest or repayments for a year, you probably wouldn’t have believed them. But this crisis has turned traditional lending on its head.

Almost £20bn in government-backed CBILS loans were approved in 2020, helping thousands of businesses invest in stock and equipment, refinance or top-up existing loans, or simply give themselves a cash safety net.

But just like applying for a passport, a lender can’t process your application without the right documentation. In this article, we’re giving you everything you need to know about getting your documents in order, so you can take advantage of CBILS before it ends in March.

What documents do I need for a regular business loan?

First, it’s worth understanding what you need to apply for a normal business loan, as the same fundamental principles apply for CBILS. Although some requirements vary from lender to lender, there are at least two key documents that you need to collate and submit as part of the application process.

Lenders always need to see business bank statements and company accounts. These documents allow a bank to build a picture of your financial situation, so they can decide whether you’re likely to be able to pay the loan back.

How do I share my business bank statements?

It’s easier to apply for a mortgage if you can prove how much you earn. The same goes for business bank statements, which give lenders confidence in the regularity and amount of money moving in and out of your business.

There’s a couple of ways you can send your bank statements to a lender. You could manually export PDF versions of the statements yourself, by logging into your online banking, finding your statements and then downloading them. After that, you can attach the downloaded files to an email and share it that way.

But these days most lenders allow you to share your statements via Open Banking, which provides a simple and secure way to give providers access to your financial information. As Open Banking takes just a few clicks, it’s a lot faster and easier than exporting individual statements.

It’s best to supply 12 months of statements (to today’s date if you can) and to make sure there’s no days missing, which can slow down your application. Another thing to double-check is your account name, which should match your company name. If you’re not using Open Banking, make sure you supply a PDF version, rather than an image or a spreadsheet, that shows your sort code and full account number.

How do I share my company accounts?

Financial accounts are equally important, as lenders will want to gain an insight into the finer details of your company’s full financial year.

Your accounts include the balance sheet, which shows the value of everything your company owns, owes and is owed on the last day of the financial year. The other key statement is the profit and loss account, which shows the company’s sales, running costs and the profit or loss it has made over the financial year.

Sometimes a shortened, or ‘abbreviated’ set of accounts is filed at Companies House. However, lenders need a ‘full’ set to make a decision, so make sure you either send this across or request this information from your accountant.

If you’re working with a provider like Fluidly, which allows you to compare a range of options, we can also liaise directly with your accountant on your behalf.

How does it work with CBILS? What documentation is required?

CBILS works in a similar way to other business loans, but there are handful of criteria your business needs to meet in order to to apply for the scheme:

  • Be UK-based in its business activity
  • Have an annual turnover of no more than £45 million
  • Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic
  • Self-certify that your business has been adversely impacted by coronavirus

Again, the most common requirement is a full set of financial accounts and the last 12 months of business bank statements. Some lenders may also require a cashflow forecast or business plan, but in our experience this is fairly unlikely with CBILS.

Ultimately, If you’re not sure what you need, it’s worth talking through with a specialist who can help you make most of your existing info.

Applying with Fluidly is easier than going directly to a lender, as we allow you to compare a range of options. We help you look at multiple lenders and get offers quickly – plus our dedicated team of funding specialists will work to get you the best deal.

Can I take out a second CBILS loan?

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Guest blog post from Fluidly, our cashflow and funding partner.

Most business owners don’t realise, but the government’s flagship coronavirus loan scheme actually allows you to take out more than one loan.

With the deadline to apply for government CBILS loans extended once more, some business owners are making the most of the extension to do just that.

How does having a second CBILS work?

The key thing to remember if you’re looking to take out another CBILS loan is that you can’t borrow more than 25% of your annual turnover. For instance, if your first loan was worth 20% of what your business turns over in a year, the value of your second loan can’t be over 5%.

We’re generally seeing businesses take out a second CBILS in order to borrow more. This might be to boost cashflow during the third lockdown, invest in stock or equipment or simply cover a gap in revenue.

But you could also use a second CBILS loan to refinance existing CBILS funding, a bit like a balance transfer card. Here businesses take out a second CBILS loan purely to shift the existing debt onto that.

In this “balance transfer” scenario, you can delay repayments and interest by another 12 months. Once you pay off the old loan with the new loan, you start afresh and no longer have any business with the first lender you borrowed from.

Theoretically, if you took out a CBILS loan in March 2020 and refinanced with it a new one of the same amount in March 2021, you could have a full 24 months of no repayments or interest.

What would an example look like?

Let’s say you run a shop called Wendy’s Wines. During the first lockdown your store experienced a significant slump in sales, so you decide to take out a £50k CBILS loan to tide the business over and build an online shop.

When lockdown three hits you decide it might be worth exploring your options again. Rather than going to your bank, this time you go to an alternative lender like iwoca or Funding Circle.

Since Wendy’s Wines turns over £400k and your first loan of £50k is equal to 12.5% of the business’ annual turnover, you’re entitled to borrow up to another £50k with CBILS. A second CBILS loan of £50k would take your borrowing to a total of £100k, or 25% of your turnover, which is the maximum you can borrow via the scheme.

At this point you have a choice:

Option A: You take out an additional loan of up to £50k and run both facilities at the same time. The interest and repayments for the second loan start a year from now, but the terms for your first loan remain unchanged.

Option B: You refinance the £50k loan from your bank with a fresh £50k CBILS loan from an alternative lender, where you don’t get any additional funds, but get a new 12 month interest and repayment free period.

If you need to invest in more stock or spend more money on marketing, you might go for option A. If you don’t think you’re going to be able to pay back the first loan for a while, you might be more interested in option B.

How do I apply for a second CBILS?

It’s simple – you can apply for a second CBILS loan via Fluidly here. With Fluidly you can review options across the entire market, rather going directly to a single lender.

We help you get offers quickly and a loan in days. Our team of funding specialists provides free advice too, so you know you’re getting the best deal.