Govt support for the Self Employed

My initial thoughts on the support for the self-employed:


1. You are eligible only if your self-assessment profits were below £50k and there is monthly limit of £2,500 – many will fall into this bracket which is good news.


2. If you have not been declaring your full income in your self-assessments, basically avoiding tax then you have a problem. I can see a large number falling victim to this.


3. HMRC will use your past three year self-assessment, being 2016-17, 2017-18 and 2018-19 to work out the average monthly income based on your average taxable profits. This will be done by HMRC.


4. HMRC will then pay 80% of this average monthly income as a grant directly to the self-employed bank account – this is not a loan and nobody will be required to pay this back.


5. People do not need to contact HMRC now, if they are eligible HMRC will contact them directly. I can see issues with many being missed due to wrong contact details. Please update your HMRC contact details.


6. The HMRC grant is taxable and you will be paying tax on this in your future self-assessments. This income should be treated same as sales in substance.


7. I don’t think there will be any VAT implications – many will not be VAT registered due to being below the threshold.


8. HMRC is sorting its house out so needs time to process this all, therefore they will make the payment in June 2020 for the past three months – the self-employed will have to survive from their own funds until then – this can create significant issues for many in the short term.


9. Those that played clever and set up companies to pay themselves dividends to save National Insurance, will now lose out as dividends are not covered by this scheme. They can only apply 80% of the minimum salary they were taking, which for many was equal to their personal allowance.


All in all those that declared all their income during the past 3 years will get something, be it three months late. The Government has also delayed tax payments to help cashflow.


Will this support be enough, time will tell – I am not sure.


If anybody needs to pick my mind, send me a message.

The reality of Furlough employees and Government support

Everyone is talking about Furlough employees and the fact the Government will fund 80% of the salaries of such employees from 1 March 2020.


Many think this Government scheme applies to ALL employees – this is not so and there is a small print.


The Government is not compensating organisations for loss of income. These organisations can be mosques, charities or businesses – the purpose of this funding is not that and the Government will not compensate for loss of income.


As a result of the current lockdown, organisations suddenly had staff that could not work anymore and businesses were at risk of going down under. The immediate response of businesses would have been to let staff go. This is when the Government stepped in and said that they will fund 80% of such staff that either have been made redundant or at risk of being made redundant.


This Government support is so that staff are NOT made redundant and kept on the business or charity payroll.


The Government said to treat such employees on leave “Furlough” and these employees MUST NOT work at all for their employers. If they do work, be it part time or with reduced wages that implies that they were not at risk of losing their jobs, so such employees are not covered by the scheme. In practice many employees will fall in this situation as businesses and charities will do whatever to keep the ball rolling.


The Government expects each employer to determine the employees that are or should be on leave for this lock down (i.e. 3 weeks) and declare them as Furlough employees by formally writing to them. These employees must not then work for that employer during this period.


Although this scheme keeps staff at risk employed, it does nothing to address the loss of income or donations in the short term or long term. The effected organisations must develop their own plans to address the impact of this interruption.


The Government has asked the banks to give loans to businesses or charities, backed by Government. The banks being banks have started to pick and choose. They are applying their normal due diligence and at times are requesting personal guarantees. Not sure how far this will address the issue in its current state.


There is some support for small cash donations from Local Councils – this is focused on small retail businesses and may take time to get through.


I sense turbulent times and it is imperative that organisations, be it large or small, plan ahead to weather this perfect storm.

Govt support for Businesses and Charities

This paper sets out my summary thoughts focused on mosques, charities and small businesses like gyms and tuition centres. Please contact Dua Governance (details below) if any further information is required on this topic or advise on how to manage the challenging financial circumstances.


Support through the Coronavirus Job Retention Scheme


1. All charities including mosques are eligible to claim this support.


2. The Govt will reimburse 80% of the salary of employees (those on payroll) up to a maximum of £2,500 per month – all Mosque employees will fall within this category.


3. This scheme applies to employees that would have been laid off as a result of the crisis. Mosques, tuition centres, gyms and leisure centres are all eligible. They had to shut due to Govt advise and now the employees in these establishments have no work – keeping them on payroll is not an option as the income that was funding their salaries is no longer available, for example no Friday prayers means no Friday cash collection, no evening schools, no fees. Same applied to gyms and tuition centres and similar businesses.




1. Employees on payroll will have to be formally sent on “leave of absence” as per their contracts. Many Establishments may not have employee contracts in place – this gap needs to be addressed urgently so that there are no issues of conflicts in the future.


2. The Govt is yet to work out the process of reimbursement – The Govt is expected to set up a online portal through which claims can be paid.


3. Once the online portal is made available, I expect teething issues and delays due to the volume of businesses applying and the limited HMRC capacity for responding – In the meantime, organisations may need to consider the Coronavirus Business Interruption Loan Scheme (see below).


4. The Govt will not be funding 100% of the salary – businesses, Mosques and charities will need to determine if they will fund the 20% gap – this will have to be negotiated between the employees and employers. No organisation is obliged to cover the 20% gap.


5. Unfortunately, the consultants (self-employed) will not be covered by this scheme. This is applicable to many mosques and charities where many workers are on consultancy contracts. Maybe these organisations need to consider placing such workers on payroll to retain their services – again this is a conversation many of these Establishments need to be having with workers on such consultancy arrangements.


Support through the Coronavirus Business Interruption Loan Scheme


1. All mainstream banks will provide this and the Govt is providing a guarantee of 80% on each loan – This scheme will support loans of up to £5m. Banks will issue guidance shortly.


2. This is also applicable to all Mosques and charities and for the first 12 months – there is no interest rate charged as the Government will cover this.


3. There is a cap of income of £45m to be eligible, making all mosques and Muslim charities eligible expect for a few with annual income above £45m.


4. Many Mosques have ongoing construction projects that depend on qard-e-hassan. Due to Mosques closing, suddenly this option may no longer be available to Mosques.


5. I don’t envisage international relief charities to benefit from this unless they have committed costs and they are not able to raise the budgeted funds during Ramadan. They may want some cashflow support in the medium term and this is where this support becomes relevant.


6. Small businesses like gyms and tuition centres, may need cashflow support for various reasons to pay salaries, rent or other bills. This scheme then becomes relevant to them.




1. Banks will have their own eligibility criteria – this will focus on how the Mosque or charity intend to pay the loan back – historic numbers with good forecasts will be required. Many Mosques and charities can provide this as these are sustainable businesses.


2. How fast will the banks process the applications is also a question mark when their own staff are expected to be impacted by the virus. I expect some time lag between application and cash hitting the organisations bank account. In the meantime, organisations must prepare all the historic costs / accounts and potential forecasts need to be prepared for the bank applications.


Business rates


Councils should cover business rates for charities and mosques – normally they cover 80%, I can see the exemption being extended to 100%. The Govt will waive this for leisure businesses, gyms may fall into this category. Again, local councils will use the existing business rates system to cover this.


Support for businesses that pay little or no business rates – mosques and charities that occupy a building can potentially qualify for this as they pay little or no business rate – the local council will be able to make a one off grant of £10,000. Again, local councils will manage this process.




Cash grants of £10k are available for small retail, hospitality and leisure businesses – this may include gyms – the local councils will introduce a process for this.


Written by Nasir Rafiq, (BA, FCA)

The Camel and Muslim Charities – Risk Management

In a well-known saying Prophet Muhammad (PBUH) advised Muslims to tie their camels before placing trust in God for its protection. This concept has some very important lessons for Muslim charities:


1. Charities should recognise their risks like the risk of losing the Camel. Charities face the risk of fraud, loss of reputation; loss of income; loss of key staff, fines and penalties, litigation and most importantly the risk of not achieving the charity or fund objectives… to help those in need. The impact of these risks will depend on the nature and size of a charity; they nevertheless apply to all.


2. Recognised risks should be controlled. God will not protect the Camel unless it’s properly tied up. Trustees and Directors of Muslim charities should ensure that adequate and effective controls are introduced to mitigate risks. Application of these controls should be in the context of risk, for example, the Camel can be tied up with a metal chain (expensive and excessive) or a weak rope (camel will break free). Moderation and proportionate risk control is therefore the way forward, and those charged with governance should put in place the capability to allow them to exercise this role effectively.


3. Place your trust in God. No control is perfect to eliminate risks. According to the values of Islam, it is because of God’s mercy and blessings that charities are often protected and make a difference to their beneficiaries. It is important however not to abuse this beautiful concept by leaving risks unattended… like that Camel.


By Nasir Rafiq (Founder and Principal Dua Governance)


An Expert in Governance and Internal Control

Overheads in Charities – Good Governance

Overheads are support and administration costs that Charities incur in delivering their charitable objectives. In a small organisation this may be borne by Trustees with no impact on charity accounts whereas in large charities this cost becomes unavoidable.


Overhead costs and activities either incurred by the charity or by the donors directly are important, as without these costs or activities, it is impossible to deliver charitable objectives.


Trustees and Directors have a legal duty to ensure that charity funds are spent wisely, properly and according to charity objectives. Consequently, robust administration of funds becomes a necessity for Muslim charities and the wider charity sector generally.


Support costs however can be rationalised, if charities are able to effectively capture, control and plan their support costs, for example:

  • The business case for support costs should be reviewed against the risk management and accountability needs of charities.

  • Consistent good financial controls and robust year end reporting of support costs through the annual accounts and internal reports;

  • Effective budget monitoring of support costs through out the year; and

  • Smart business planning to reduce the impact of support costs on public donations, for example the use of trading income, specific business donors.

By Nasir Rafiq (Founder and Principal Dua Governance)


An Expert in Governance and Internal Control

Islamic Schools the Untold Story of Governance

I recently visited an Islamic school that had not prepared its last 3 years of annual accounts. The Charity Commission had threatened to take them over, so in response they sought my help. After giving the Chairman a roasting for not giving financial accountability the due importance demanded by the regulators and Islam, I discussed the underlying reasons and explored solutions.


This is not the first time, I have come across a private Islamic school in financial difficulty. The same story repeats itself. Having worked as a senior Auditor in the Education sector with KPMG, I have a good understanding on how good governance looks like in the Education sector.


With Islamic schools there is an often an untold story – they are criticised when things go wrong but nobody tries to actually understands the underlying issues, never mind coming up with solutions.


The reality

Islamic schools are often set up by someone passionate about Islamic education on a voluntarily basis and with the support of the community. Personal funds, donations and Qard-e-Hassan loans are the traditional funds that are used to purchase the building, employ teachers and for other upfront costs.


I am yet to find a school where student fees alone cover the running costs therefore reliance is placed on donations and ongoing Qard-e-Hassan loans.


The Governors are never fully remunerated from the School due to Charity Commission restrictions. They often dedicate their full time as Chief Executive and give personal guarantees on the personal loans for the school. Their reputation becomes intertwined with the school. The founding Governor is often consumed by the day to day operations and cash flow challenges.


It is surprising how some of these schools sometimes achieve good Ofsted reports on their academic achievements despite lack of resources. I put this down to the barakah placed by God due to the sincerity of the Governors, staff and parents.


So what does this mean?

These unique features of Islamic schools have some implications. These are symptoms from the issues highlighted earlier.


Qualified staff and teachers cannot be afforded by such schools – reliance is placed on staff working for religious reasons and not for money, volunteers, family friends or on inexperienced staff. This directly impacts on the overall governance and standards of the school. As staff gain experience, they often leave for better paid positions elsewhere.


Due to personal sacrifices by the founding Governors, it becomes difficult for the Governors to delegate authority to Management giving rise to internal conflict and high senior staff turnover.


Cash flow becomes a bigger priority over financial control and accountability due to the loss making situation of the school. Unrecorded debt, the reasons for losses, spend without invoices to avoid VAT is not challenged or addressed. This very attitude contributes to a culture of ambiguity and secrecy.


Those among the community that give significant donations or Qard-e-Hassan loans to the school ascertain a position where they start to influence student admissions and staff employment. This compromises quality and standards.


So what should be done?

In my view and based on my professional experience, some simple steps can significantly improve this dire situation.


1.Before embarking on setting up a school, always prepare a business plan – Good business plans help to explore eventualities, mitigate risk, assess financials at the outset and plan accordingly and helps to ensure stakeholders are engaged in a transparent manner.


2.The school must be self-sustaining. If student fees alone cannot help to breakeven then the school must be supported by other reoccurring income i.e. trading activities, grants. Again this should be explored through business planning. Donations and Loans should not be used to fund core activities. This poses financial uncertainty.


3.As a Governor the following financial KPIs must not be ignored:

a. Bank reconciliations – never underestimate the importance of this. The Governors should ensure it regularly happens and must be aware of the implications. Bank reconciliations are the back bone of financial control.

b. Always be backed by a good Independent Accountant – Volunteers or sympathisers as Accountants may not be forthcoming in making sure issues are highlighted.

c. Ensure the annual accounts preparing process takes place. This provides a good opportunity to assess the financial health to plan for future.


4. It is not sufficient for Management / staff of schools to demand one way delegation – Management / staff should also introduce sufficient checks and balances to provide independent assurance to Governors that delegated authority is not abused.


5. Regular self-assessment against readily available checklists or by professional can help to high light issues before they are picked up by external regulators. These assessment should cover financial and non-financial aspects. Regular self-assessment is common feature among good governed organisations.


These simple steps can instantly make a difference and promote Good Governance in Islamic schools. There is no such thing as a perfect organisation.


In my view gaps are not issues as long as these gaps have action plans against them. Issues and Gaps are growing sins without action plans.


By Nasir Rafiq BA ACA – Governance Expert


Managing Director Dua Governance Chartered Accountants and Business Advisors