Claiming for trading losses during the pandemic period

Many businesses have struggled and are continuing to struggle to survive during the pandemic period. Business Interruption insurance is often cited as an opportunity to make a claim for some much-needed cash flow. However, such claims are not straightforward, and insurance policy wording requires careful scrutiny to establish the scope of the loss.

What will a claim include?

Typically, Business Interruption insurance during the pandemic period covers the following items:

Profits: Based on prior months’ performance, a policy will provide reimbursement for profits that would have been earned had the pandemic not occurred.

Fixed costs: These can include operating expenses and other incurred costs of doing business.

Temporary location: Some policies cover the costs involved with moving to and operating from a temporary business location.

Extra expenses: Business interruption insurance will provide reimbursement for reasonable expenses (beyond the fixed costs) that allow the business to continue operating while the business gets back on a solid footing.

Employee wages: Coverage of wages is essential if a business does not want to lose employees while shutting down.

Taxes: Businesses are still required to pay taxes, even during a pandemic. Tax coverage will ensure a business can pay taxes on time and avoid penalties.

Set off against the above are savings such as:

• Furlough and wages
• Rates
• Grants
• Other cost savings eg variable costs which have been saved by the business during periods of closure

What you will need to make a claim

1. Policy schedule (name of policyholder, policy number, policy period, business interruption sum insured and maximum indemnity period).
2. Your VAT status
3. Last 2 years accounts (i.e your business’s detailed profit and loss accounts for 2 accounting years)
4. Monthly turnover commencing January 2018(or the most recent if you have been trading for less than 3 calendar years to the month prior to completion of your claim form)
5. Employee details (if applicable-monthly, number of employees, furlough details and wage costs)
6. Details of any savings /costs not incurred due to the closure of your business (such as commission that would have been charged, heating & light costs, wages for casual employment, normal cleaning charges etc.)
7. Any additional costs incurred (to help mitigate the loss and copies in electronic form to upload)

Past performance can be an accurate reflection of how the business performed had it not been for the pandemic. Careful consideration of the Insurance Policy needs to be given as to what the business is eligible to claim for, whether this can be substantiated and what steps have been taken to mitigate the loss

It is important for the survival of the business for a claim to be made as soon as possible. Should you require any assistance in preparing your claim please contact us at info@davidsonsforensic.co.uk.