Basic Overview of Financial Help From The UK Government For Businesses During Covid-19
Following the original speech by the Chancellor, Rishi Sunak on 20th March, we have included today's updates in the below sections, and shall continue to update as and when changes are announced.
Self-employed people who face financial difficulties will be able to access 80% of their monthly wages covered by the government, initially for three months. The amounts will be calculated on the basis of average monthly profits over the last three financial years. This will be capped at £2500 per month. The scheme is available for those who are already self-employed and have a self-assessment tax return for 2019. It will apply to those with trading profits up to £50,000 a year. This should benefit approximately 95% of the self-employed Mr Sunak advised. The government self-employed scheme is now LIVE and can be accessed here.
We understand that the remaining 5% may have average incomes of £200,000 however no doubt there will be those who have recently started and did not fall into either category. We shall clarify this further once we have more information. Should you fall into this, as a newly established business, then please contact us and we will do our upmost to clarify the situation for you.
The scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.
Cleaners, plumbers, electricians, musicians, hairdressers and many other self-employed people who are eligible for the new scheme will be able to apply directly to HMRC for the taxable grant, using a simple online form, with the cash being paid directly into people’s bank account. HMRC will contact you once the scheme is up and running. HMRC have advised claims made will be processed and funds in your account within 6 days.
The Chancellor announced that every self-employed person can now access, in full, Universal Credit at a rate equivalent to Statutory Sick Pay for employees. To add further support for the self-employed through the tax system, the next self-assessment payments will be deferred until January 2021.
Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme (see below section) if they are operating PAYE schemes.
Those who are set up as a partnership will straddle both schemes.
SME’s to reclaim SSP paid to employees.
The government has agreed to bring forward legislation to allow small and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP). This means paid amounts for sickness absence due to COVID-19. There is an eligibility criteria for claiming, these are as follows:
• Reclaim will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
• Businesses with fewer than 250 employees will be eligible, employer size as of 28/02/2020
• Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
• Ensure you maintain records of staff absences and payments of SSP, PLEASE NOTE: employees will NOT need to provide a GP sick note.
• Period for the scheme will start the day after the regulations on the extension of Statutory Sick Pay to those staying at home comes into force
• Repayment processes are still being set up; therefore immediate refunds will not be made at this time.
The online service you’ll use to reclaim SSP is not available yet. HMRC will announce when the service is available and this guidance will be updated
The government has introduced a “Business rates retail holiday”. This will be available for retails, hospitality and leisure businesses in England for the 2020/21 tax year.
Businesses that received the retail discount in the 2019 to 2020 tax year will be re-billed by their local authority as soon as possible.
Businesses operating from smaller retail premises with a rate-able value of £15,000-£51,000 will be provided with a £25,000 grant.
Enquiries regarding the full eligibility for the rates retail holiday and grant will be published by the government by 20th March 2020.
Businesses That Pay Low or No Rates (SBRR)
The government have agreed additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR). A one-off grant of £10,000 to businesses that is currently eligible for SBRR, or rural rate relief, to help meet their ongoing business costs.
If your business is eligible for SBRR or rural rate relief, you will be contacted by your local authority – you do not need to apply.
Funding for the scheme will be provided to local authorities by government in early April. Guidance for local authorities on the scheme will be provided shortly.
You can check if your business is eligible for SBBR here.
Coronavirus Business Interruption Loan Scheme
A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, has launched to support primarily small and medium sized businesses to access bank lending and overdrafts.
You can apply for a loan if your business:
1. is based in the UK
2. has an annual turnover of up to £45 million
3. You need to show that your business:
a. would be viable were it not for the pandemic
b. has been adversely impacted by the coronavirus
c. If you want to borrow £30,000 or more, you also need to confirm that your business wasn’t classed as a business in difficulty on 31 December 2019.
The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs.
The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value. Businesses can access the first 12 months of that finance interest free, as the government will cover the first 12 months of interest payments.
There are over 50 lenders participating in the scheme including all the main retail banks. You should approach a suitable lender yourself via the lender’s website.
You’ll need to provide documents that show you can afford to repay the loan. These may include:
1. management accounts
2. cash flow forecast
3. business plan
4. historic accounts
5. details of assets
The documents required will vary from lender to lender and depend on how much you’re asking for. If you’re asking your existing lender for a small loan, the process may be automated and not require all of the documents.
Further details, and a full list of the 50 lenders can be found here.
The Bounce Back Loan Scheme
The scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000.
The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.
You can apply for a loan if your business:
1. Is based in the UK
2. Was established before 1 March 2020
3. Has been adversely impacted by the Coronavirus.
The length of the loan is 6 years, but you can repay early without paying a fee. No repayments will be due during the first 12 months.
There are 11 lenders participating in the scheme including many of the main retail banks. You should approach a suitable lender yourself via the lender’s website, a full list of lenders can be found here.
The lender will ask you to fill in a short online application form and self-declare that you are eligible.
The lender will decide whether to offer you a loan or another type of finance and you’ll be responsible for repaying 100% of the amount borrowed. Interest will be covered for the first 12 months by the government, thereafter your business will be responsible for payments and interest. No payments are due for the first 12 months. The loan is a fixed term of 6 years at a rate of 2.5%. Early repayment of the loan is available with no penalty fees.
To apply for The Bounce Back Loans Scheme (BBLS) click here.
The Scheme is intended to be a temporary response to the unprecedented challenges to businesses as a result of coronavirus (COVID-19). The Scheme will initially open until 4 November 2020, with the government retaining the right to extend this.
You cannot apply if you are already applying or receiving help under the CBILS, CLBILS or Corporate Financing Facility.
Coronavirus Job Retention Scheme
The Chancellor announced further support in his speech on 12th May 2020 aimed at extending the Job Retention Scheme to continue safeguarding jobs. Employers can claim grants equivalent to 80% of employee's gross salaries capped at a maximum of £2500 per month per employee. This applies to those who are unable to work due to the coronavirus. These grants are available up to the end of July, however an extension to October has been discussed but the exact terms are yet to be finalised, as a company contribution is looking likely. Claims made can be backdated to 01.03.2020 for all businesses. Employers can apply here. Our blog on the Job Retention Scheme covers this in further detail.
Larger Businesses and the COVID-19 Corporate Financing Facility
The Bank of England has announced a new lending facility to provide a quick and cost effective way to raise working capital via the purchase of short-term debt. This will support companies which are fundamentally strong, but have been affected by a short-term funding squeeze, enabling them to continue financing their short-term liabilities. It will also support corporate finance markets overall and ease the supply of credit to all firms. Further details, including on how to access this funding will follow in the coming days, and the scheme will be available from the week commencing 23 March.
Outstanding Business Tax
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s "Time To Pay" service.
These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
If you need help on any of the above, contact BR Accounting, where we can look at your eligibility and guide you on the next steps.
If you are unable to pay your tax, contact HMRC’s dedicated helpline on 0800 0159 559.
All VAT due for the next quarter will be deferred until the end of June, and then up till the end of the year for full payment. This means no business will pay any VAT payments from now until the end of June; and you will have until the end of the financial year to repay those bills.
Businesses that have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc. is sufficient to make a claim on your policy.
All insurance policies differ significantly, so check the terms and conditions of your policy and contact your provider if in doubt. Be aware, most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.
On a personal financial level, the Bank of England cut the base rate from 0.75% to 0.10% which is way below the last cut back in 2016.
This is historically the lowest rate, in 2008 during the banking crisis the rate was 0.50%. If you are concerned about mortgage payments and loans, you can check to see how your banks are responding via Martin Lewis’ website Money Saving Expert, whereby details will be updated as soon as banks make announcements on their personal banking products. Alternatively, you can contact your bank direct or visit their website for further details, as and when they release them.
Tax Credits & Universal Credits
The Chancellor has also advised help for those on universal and working tax credit. There will be an increase from 20.03.2020 the Universal Credit standard allowance, for the next 12 months, by £1,000 a year. For the next twelve months, the Working Tax Credit basic element by the same amount as well. To check if you are eligible click here.
Whilst this is a difficult and uncharted territory we’re entering, it is worth remembering that it’s not just you, it affects all businesses, so let’s try to work together, stay positive and not over panic the situation. As this we know always inflates the problem and your mental resilience to deal with it. If you are worried, you can always contact the National Debt Helpline or The Samaritans
If you need any help and advice on any of the above topics, please do get in touch with us by phone or email, so we can help guide you in the right direction.
BR Accounting & Business Services Team.