As the national state of affairs shifts rapidly day by day, independent production companies across the UK continue to face a multitude of challenges. Val Cazalet, partner at media accountants and business advisers, Moore Kingston Smith sets out the road ahead for indies.
The outlook for TV and film companies seems to be a much more positive one than back in the Spring with many businesses back in production and more projects in the pipeline. However, navigating this tumultuous working environment is no mean feat – and companies continue to have concerns about cashflow, maintaining an affordable headcount and mapping out the next steps for their business as the country heads into 2021.
Chancellor of the Exchequer Rishi Sunak recently extended the furlough scheme until the end of March 2021 and, whilst much of this is similar to the previous furlough scheme, there are some significant differences.
As it stands, the furlough scheme will pay up to 80% of a worker’s wage up to £2,500 a month, essentially pushing the previously announced – and far less generous – Job Support Scheme into the long grass.
Whilst not as generous as the first round of furlough back in March, it has essentially gone back to the levels of support available in August with employers responsible for NI and pension contributions, and has kept the flexibility of part time working.
However, one downside of the extended scheme that many have missed is that HMRC will publish the names of the companies who have claimed under this scheme with an indication of the amount they have claimed from December onwards. This could potentially be viewed negatively, especially for any companies that expect to report strong profits as we hopefully move towards recovery in the new year.
For freelancers, the Self-Employment Income Support Scheme (SEISS) will remain in place, with the next taxable (third) grant calculated at 80% of average trading profits up to a maximum of £7,500. The fourth grant will go through to April – although we won’t know the level of that support until the new year.
But of course, this still doesn’t begin to mitigate the understandable financial uncertainty that so many indies or freelancers may still have. So, as we head towards the end of 2020, here are some pointers to help ensure you are in as strong a financial position as possible:
Make use of the ‘flexi-furlough’ scheme
One of the main differences between the extended furlough scheme and the now redundant Job Support Scheme it replaces is that it is far more flexible. The Job Support Scheme required employees to work a minimum number of hours to be eligible for any claim. The new furlough scheme allows staff to work part time and, as there is no minimum furlough period, staff can be brought back at short notice if needed for a production. Any days worked by the employee will need to be paid at their normal daily rate. With productions getting back up and running, this flexibility makes this a much more manageable process.
Draw up a proper business plan
Compared to a few months ago, more productions are taking place – and that can only be a good thing. However, indies need to factor in the significant additional costs that come with complying with the Covid guidelines. These seem to be adding in a further 10% to 25% on budgets. If broadcasters won’t pay for the additional costs they will eat into profit margins so indies need to be clear from the outset who is going to bear them. This makes having a thorough business plan in place more important than ever as we head into the new year – one that contains integrated profit and loss, cash flow and balance sheet and one that can be flexed for all eventualities so any gaps in cash flow are identified early on.
The same goes for freelancers too. Just like other businesses, they need to have a business plan in place and see what help is available to them, including SEISS.
Make sure you have enough resource
It remains vital to keep a close eye on current trading levels – know what productions are in the pipeline and what staff resource they require. This is always a difficult task, but even more so as things continue to change day by day and visibility of projects is relatively short term. The original scheme back in March was essentially “all or nothing” with furloughed staff unable to work at all, leaving many of those remaining extremely busy as employers took a cautious approach by furloughing as many employees as possible. Using flexible working instead can help ensure productivity and morale are kept intact for the long term.
Take advantage of any help you need now
As with all of Government’s support schemes, there is a caveat in that the scheme is being reviewed in January and changes could be made at that point. If companies have gaps in cash flow and need to take advantage of any of the loan schemes, the Coronavirus Business Interruption Loan Scheme (CBILS), Future Fund and Bounce Back Loans Scheme (BBLS) have all been extended to 31 January.