Special Report Government support available in the wake of Covid-19 April 2020
Government support available in the wake of Covid-19
As the Coronavirus pandemic forces the UK population to stay at home, companies and employees alike are left with uncertainty regarding cash, debt and staff. In the past two weeks, the Government has set out a wide-ranging package of measures to support businesses through this period of disruption, further details of which are summarised below. These measures now include: • Government-backed financing schemes to support short and medium- term liquidity • a job retention scheme for workers paid via PAYE • an income support scheme for self-employed workers • a statutory sick-pay rebate scheme • business support grants for SMEs, with enhanced grants for leisure and retail businesses • business rates relief • deferred VAT and income-tax payments The Government is regularly reviewing the measures it has announced and in particular has recently made changes to the eligibility criteria for its SME loan scheme. While the information in this report reflects our understanding of the measures as at the 8 April 2020, it is important that businesses take professional advice before accessing the support outlined below. If you have any questions around any of the measures mentioned in this report, please contact Michael Hall at firstname.lastname@example.org or any member of the Keebles team.
Michael Hall Partner
Government backed loans
Coronavirus Business Interruption Loan Scheme (CBILS)
The temporary Coronavirus Business Interruption Loan Scheme ( CBILS ) launched on 23 March 2020 and is intended to support small and medium-sized businesses (those with turnover under £45M) with access to loans, overdrafts, invoice finance and asset finance of up to £5 million over terms of up-to six years.
On 3 April, the Government announced updates to the CBILS, which included:
• a removal for the requirement for personal guarantees for loans less than £250,000 • a cap on personal guarantees on loans above £250,000 to 20% (being the proportion of the loan which is not guaranteed by the Government) • a relaxing of the lending criteria to allow more businesses to access the scheme by removing the test as to whether the applying business could otherwise access finance The scheme is now open for applications. All major banks and a variety of other lenders are offering this scheme. James Burdekin, a Senior Associate in our Corporate team discusses these loans further here and here.
Government backed loans
Coronavirus Large Business Interruption Loan Scheme
In addition to updating the CBILS, the Government announced on 3 April that it would be establishing the Coronavirus Large Business Interruption Loan Scheme ( CLBILS ) to support those businesses who did not qualify for the CBILS but were not of a size where the Government’s large business scheme (discussed below) would be easily accessible. The CLBILS will be open to businesses with a turnover between £45M and £500M and will operate in a similar manner to the CBILS; with loans of up to £25M available, which will be 80% guaranteed by the Government. While we await full details of the scheme, the Government has confirmed that the 12-month interest free period available to borrowers under the CBILS will not apply to facilities under the CLBILS.
The CLBILS is due to launch in April 2020.
Covid Corporate Financing Facility Aimed at large companies that make a “material contribution to the UK economy”, the Covid Corporate Financing Facility ( CCFF ) scheme involves the Bank of England acquiring commercial paper of the relevant businesses at pre-Covid-19 market rates. The CCFF scheme will be open for at least 12 months and eligible companies should speak to their bank/finance provider for further information.
While the Government-backed loan schemes detailed above have been welcomed by business groups, there are concerns with the speed at which this funding can be made available to businesses, in particular SMEs, who are in many cases experiencing immediate and severe cash-flow pressure. The updates to the CBILS announced by the Government recently are intended to simplify the application process and many lenders are putting in place streamlined application processes for loans below £250,000, but we are aware that lenders are experiencing a large number of enquiries in relation to these loans and are in some circumstances having difficulty processing all applications at the speed businesses require. Businesses that are able to quickly provide accounting and other information which shows that, in normal circumstances, the loan would be affordable as well as evidence of the other action the business has taken in relation to its cash-flow (for instance, by taking advantage of some of the other measures highlighted in this note) will stand the best chance of getting applications approved and loans made available quickly.
Funding for Employees and the Self-Employed
Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme ( CJRS ) aims to support businesses in paying their employees in circumstances where those employees would otherwise be at risk of redundancy. Under the CJRS, an employer can designate workers as “furloughed”, meaning that they temporarily must cease to do work for the employer, and in return HMRC will reimburse to the employer 80% of the wage cost of that furloughed employee, up to a cap of £2,500 per month, plus associated Employer National Insurance contributions and minimum auto-enrolment employer pension contribution.
Coronavirus Self-Employment Income Support Scheme
The Self-Employment Income Support Scheme ( SEISS ) takes the form of grants of 80% of historic profits to those who are self- employed, capped at £2,500 per month, to mirror the Coronavirus Job Retention Scheme. To be eligible an individual must derive over 50% of their income from self-employment and must not have made profits of over £50,000 in 2018/19.
For all the latest employment updates and articles, including FAQs on the CJRS, click here.
Following announcement of the CJRS, in relation to which Keebles has received a large number of enquiries from businesses, the Government came under significant pressure to support self- employed workers and responded by launching the SEISS. While welcome, the SEISS is not expected to start making payments until June 2020, which is certainly going to cause problems for self- employed workers who haven’t got cash reserves to allow them to keep trading until this time. There are additionally a number of classes of worker, such as directors of small businesses, who feel that the two schemes fail to prove them with assistance due to their particular circumstances. Recent Government guidance has clarified that the CJRS can be accessed by directors, but it remains to be seen whether further changes to the two schemes will be made to address the concerns of these groups.
Grant Funding and Other Measures
Government Grants for Small Businesses The Government has announced that it will provide cash funding for small businesses in England in the form of two grant schemes: Small Business Grant Funding (SBGF) and Retail, Hospitality and Leisure Grant Funding (RHLGF). Under the SBGF scheme, small business in receipt of certain business rate reliefs will receive a grant of £10,000. Under the RHLGF scheme, retail, hospitality and leisure businesses occupying properties with a ratable value of less than £51,000 will receive grants of up to £25,000.
Partner, Mike Hall, outlines key considerations and eligibility here.
Statutory Sick Pay Rebate Scheme As a result of the pressures on the Statutory Sick Pay (SSP) regime from Covid-19, the Government announced changes to SSP so that SSP is payable from day one of the illness (rather than day four) and sick-notes are not required to allow a claim for SSP. In addition, the Government has created the SSP Rebate Scheme, under which 2 weeks of SSP costs for employees absent due to Covid-19 will be reimbursed by the Government. While this scheme is active, the actual rebate mechanism has not yet been determined and so businesses will need to cover the cost of SSP in the short-term.
Grant Funding and Other Measures
HMRC Tax Deferrals VAT payments to HMRC owed between 20 March and 30 June 2020 can be deferred until the end of the tax year.
Income tax self-assessment payments due on 31 July 2020 will be deferred until 31 January 2021
HRMC have also set up a dedicated helpline for business struggling to pay tax due to Covid-19. The helpline number is 08000241222. For those looking to access the CBILS scheme, we understand that applications to HMRC for deferrals will assist in evidencing loan requirements. Business Rates Relief A one-year exemption to business rates will apply to all businesses in the following sectors:
Retail, hospitality and leisure
• Nurseries on OFSTED’s Early Years Register
For further information around measures announced in relation to business rates, please see the article from our Real Estate team, here. Filing of Accounts Accounts due for filing after 25 March 2020 which are impacted by Covid-19 will be eligible for a three-month extension to their filing date. Applications must be made via the Companies House website prior to the filing deadline. Changes to Insolvency Laws The Government has proposed temporary changes to insolvency laws in response to the issues businesses are facing during the Covid-19 crisis. These include the temporary suspension of wrongful trading provisions for company directors.
For further information on these proposals, please see the article from our Insolvency team, here.
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