COVID-19 Business Support Plan
Many businesses have faced difficult decisions in recent weeks because of the coronavirus pandemic. The outbreak has had a devastating impact on many areas of the economy as companies of all sizes consider their short and long-term viability.
This guide is designed to help businesses understand the government support that has been introduced in recent weeks. As the situation evolves, we will provide regular updates as required. This guide outlines the position as we understand it as at 27th April 2020.
SELF EMPLOYMENT INCOME SUPPORT SCHEME (SEISS)
The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) whose income has been negatively impacted by COVID-19. The scheme will provide a grant to self-employed individuals or partnerships, worth 80% of their profits up to a cap of £2,500 per month.
HMRC will use the average profits from tax returns in 2016-17, 2017-18 and 2018-19 to calculate the size of the grant where multiple years of accounts are available. The scheme will be open to those where the majority of their income comes from self-employment and who have profits of less than £50,000 per year. The scheme will be open for an initial three months with people able to make their first claim by the beginning of June.
Individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational. HMRC will then pay the grant directly to eligible claimants’ bank account. HMRC is urgently working to deliver the scheme; grants are expected to start to be paid out by beginning of June 2020.
For eligible individuals who have not submitted their returns for 2018-19, they will have until 23 April 2020 to file their returns and therefore become eligible for this scheme.
HMRC are publishing guidance on the scheme, available here. This guidance will continue to be updated.
INCOME TAX DEFERRAL
For self-employed individuals, the payment on account that was due on 31 July 2020 has been deferred until 31 January 2021.
This is an automatic deferral, so no application to HMRC needs to be made. HMRC has also confirmed that no interest or penalties for this late payment will apply.
STATUTORY SICK PAY DUE TO COVID-19
The government has announced that businesses with fewer than 250 employees (as at 28 February 2020) will be able to reclaim up to two weeks’ Statutory Sick Pay (SSP) per employee for absence arising due to Covid-19.
This is payable at a rate of £94.25 per week, in the form of a rebate. This rebate not only includes employees who are too ill to work, but also those who cannot work due to a household quarantine.
The rebate is available from the first day of self-isolation, commencing from 13 March 2020.
Employers will need to keep records of any payments of SSP. If your business requires evidence of the SSP being Covid-19 related, the employee can obtain an isolation notice from the NHS website, and you should advise staff to do so.
The process for the rebate will be developed by the government over the coming months.
JOB RETENTION SCHEME
We have now received updated information from the Government. With government advice resulting in a nationwide lockdown, many businesses have been forced to close. This can have a huge impact on those firms who have employees unable to work remotely, and this has led to very difficult decisions regarding the future employment of staff.
If there is no requirement for your business to keep employees on because, for example, your business premises are closed or the demand for your trade has fallen, there are now options available that avoid you having to lay off your staff.
In the anticipation that the economy will recover, and your business will reopen, the Chancellor announced the Coronavirus Job Retention Scheme. This gives you the option of identifying affected employees as ‘furloughed’, effectively granting them a leave of absence with the ability to return to their jobs. Eligible staff needed to have been hired on or before 28 February 2020. Employees can be furloughed, for a minimum of three weeks, if they were on the company’s PAYE payroll on or before 19 March 2020 and were notified to HMRC on a Real Time Information (‘RTI’) submission on or before 19 March 2020 (which is an extension from the original date of 28 February 2020), and are either agency workers or are on full, part time, flexible or zero hour contracts.
The government has also confirmed that the furlough arrangement can be applied to salaried company directors.
The government has confirmed that Individual Employers are included in the scheme and hence domestic employees, such as nannies, are covered by the Scheme. Such employers are eligible provided they pay the employee through PAYE and sent HMRC an RTI submission notifying a payment in respect of the employee on or before 19 March 2020.
Furloughed workers must not work for the employer during the furlough period, but they are permitted to undertake training, as long as this does not generate revenue for the employer. They can, however, undertake voluntary work or work for another organisation if their contract permits.
HMRC will reimburse 80% of the wage costs of furloughed employees (as at 28 February 2020, excluding fees commissions and bonuses) up to a limit of £2,500 per month. Employers then have the option (but not a requirement) to fund the additional 20%.
HM Revenue & Customs (“HMRC”) will reimburse 80% of furloughed employees wage costs (defined as actual monthly salary at 19 March 2020 (or 28 February 2020 if that date has already been used as the calculation for the first claim), or, for employees with variable pay, the higher of their earnings for the same pay period in the previous year or their average earnings in the 2019/2020 tax year, (which includes past overtime) up to a limit of £2,500 per month, plus the associated employer’s National Insurance Contributions and the minimum statutory employer’s Auto Enrolment pension contributions. Employers then have the option (but not a requirement) to fund the additional 20%, albeit they may wish to highlight the cost savings to employees of the absence of commuting costs which could be relevant.
In all cases, the definition of ‘wage costs’ excludes fees, commissions (assuming these were not compulsory) and bonuses. Only amounts that are not conditional on any matter, and cannot vary due to the performance of the business or any contribution or performance of an employee, can be included.
The business needs to have the employees’ consent to send them home on reduced pay, as the furlough is effectively a variance of the contract. Given the extreme situation, it is thought that a pragmatic approach to varying contracts will be accepted by employees (and the courts in due course) as it is difficult to follow the normal rules relating to the time to consult on variations. It is noted that employers can require employees to take holiday when in a period of furlough, unless the employment contract states otherwise.
The scheme is made available, with retrospective effect, from 1 March 2020, and will apply for at least 4 months, but this could be extended beyond 30 June 2020. It is important that a record is kept of the furloughing correspondence between the employer and employee, and that there is a record that the employee acknowledges that they cannot undertake any work for the employer (bar some types of training); this record must be kept for a minimum of 5 years.
In order to qualify for the scheme, you will need to designate the relevant employees as furloughed and submit information to HMRC about these employees as set out below.
You’ll need the Government Gateway user ID and password you got when you registered for PAYE online.
You can submit your claim by clicking on the below link.
You need to submit your claim in one session – you cannot save it and return later. Sessions will time out after 15 minutes of inactivity.To make a claim, you will need:
- to be registered for PAYE online
- your UK bank account number and sort code (only provide bank account details where a BACS payment can be accepted)
- your employer PAYE scheme reference number
- the number of employees being furloughed
- each employee’s National Insurance number
- each employee’s payroll or employee number (optional)
- the start date and end date of the claim
- the full amount you’re claiming for including employer National Insurance contributions and employer minimum pension contributions
- your phone number
- contact name
You also need to provide either:
- your name (or the employer’s name if you’re an agent)
- your Corporation Tax unique taxpayer reference
- your Self-Assessment unique taxpayer reference
- your company registration number
After you’ve claimed
Once you’ve claimed, you’ll get a claim reference number. HMRC will then check that your claim is correct and pay the claim amount by Bacs into your bank account within 6 working days.
- keep a copy of all records, including:
- the amount claimed and claim period for each employee
- the claim reference number for your records
- your calculations in case HMRC need more information about your claim
- tell your employees that you have made a claim and that they do not need to take any more action
- pay your employee their wages, if you have not already
HOLIDAY CARRY FORWARD INCREASED
The amendment to the Working Time Regulations, which was announced on 27 March 2020, has been put in place to support employees unable to take time off during the Covid-19 (Coronavirus) pandemic and will apply to almost all workers, including agency workers, those who work irregular hours and workers on zero-hours contracts.
Employees will be able to carry over up to four weeks unused annual leave, which needs to be taken over the next two years, easing the requirements on employers to guarantee that staff take their full annual leave in the current year. This means employees can continue working against the Covid-19 (Coronavirus) pandemic without fear of losing out on annual leave entitlements and key industries do not find themselves short staffed during this peak demand period.
Whilst VAT has not been suspended, and VAT should continue to be charged by businesses to their customers and paid to their suppliers (where applicable), the government has announced a deferral of the VAT liability on current returns.
Any VAT payments due on your current VAT returns (liabilities from now until 30 June) will be deferred until the end of the 2020/21 financial year. Depending on when your VAT quarters fall, this will be 31 March, 30 April or 31 May 2021 (or 31 March 2021 for those who complete monthly returns).
You will still need to submit a VAT return as usual. However, any payment from the current return should not be automatically collected (for direct debit payers) nor need to be paid until next year. If you are in a ‘VAT refund’ situation, all refunds will continue to be received in line with current arrangements.
We understand that this payment deferral is only available to UK businesses. The regular VAT payment deadline still applies to overseas businesses that are registered for UK VAT (known as Non-Established Taxable Persons), namely the 7th of the month following the end of the VAT return period.
TIME TO PAY SERVICE
HMRC has set up a dedicated Covid-19 helpline (0800 0159 559) as a part of its Time To Pay Service (TTPS) for businesses who want to defer their current outstanding tax liabilities. It is envisaged that payment will be made through a series of instalments over a period of up to 12 months and will cover all taxes collected by HMRC.
Applications for deferral under TTPS will be assessed on a case-by-case basis. You will need to provide specific evidence if you want to apply, but you should note that HMRC expect that other funding sources will have been considered and explored before they are approached.
Full details regarding this evidence will follow. The key issue is that you will have to substantiate that your inability to pay has been directly caused by the coronavirus pandemic. Other supporting documents that you will have to present are likely to be similar to those for TTPS applications pre-coronavirus.
STATUTORY ACCOUNTS FILING EXTENSIONS
From 25 March 2020, businesses impacted by COVID-19 can apply for a 3-month extension to the filing of their statutory accounts at Companies House. This extension can be applied where the filing deadline has not yet passed.
The fast track application, which is estimated to take 15 minutes, can be made online at https://beta.companieshouse.gov.uk/extensions
INSOLVENCY – PROTECTION FOR DIRECTORS
Under English law, a company director can be found personally liable for the losses suffered to creditors as a result of their company continuing to trade even in the face of unavoidable insolvency. This can lead to a court ordered contribution to the assets of the insolvent company.
As part of the measures recently announced by the government, restrictions around wrongful trading are to be suspended retrospectively from 1st March for an undefined period.
This news is likely to be a relief if you’re a company director whose business is struggling as a result of contract cancellations, supply chain issues, staff illness and the other pressures currently contributing to the hostile trading conditions.
As a director, if you continue to trade in this period knowing that your company faces insolvency, you will not be penalised for doing what you can to keep your business afloat.
BUSINESS RATES SUPPORT
The government has announced that a business rates holiday for the 2020/21 tax year will be available to businesses based in England that operate in the retail, hospitality and leisure sectors. There is no action required to access this relief as it will apply automatically on your next business council tax bill in April 2020.
Properties that benefit from the relief must be occupied and used wholly or mainly:
- As shops, restaurants, cafes, drinking establishments, cinemas and live music venues
- For assembly and leisure
- As hotels, guest and boarding premises and self-catering accommodation.
A similar business rates holiday will also be applied for OFSTED Early Years Foundation Stage nurseries.
In addition, the Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant.
- Businesses in these sectors with a rateable value of under £15,000 will receive a grant of £10,000
- Businesses in these sectors with a rateable value of between £15,000 and £51,000 will receive a grant of £25,000.
In addition to the above, Small Business Grant Scheme funding in the form of a one-off £10,000 grant will be available for businesses eligible for Small Business Rate Relief, Rural Rate Relief or Tapered Relief. You do not need to do anything to claim this grant as your local authority will write to you if you are eligible.
BOUNCE BACK LOANS
The government has launched a new loan scheme for small businesses where loans of up to £50,000 or 25% of the business turnover can be provided with 100% government guarantees and with the government paying the first 12 months of loan interest.
The loans are designed to be easy to administer, with a “quick” standard form to be completed by the applicant. Loans are expected to be made within 24 hours of approval. At the time of writing eligibility criteria has not been made available, this guide will be updated in due course once details are known.
These loans will be available to eligible businesses from 9am on Monday 4 May.
CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS)
The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to smaller businesses (SMEs) across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.
A lender can provide up to £5 million in the form of:
- term loans
- invoice finance
- asset finance
CBILS gives the lender a government-backed guarantee for the loan repayments to encourage more lending. The borrower remains fully liable for the debt.
The Big Four banks have agreed that they will not take personal guarantees as security for lending below £250,000 under CBILS. For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:
- recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied;
- a Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBILS-backed facility
The government will cover interest payments for the first 12 months as well as any lender-levied fees. The lender has the authority to decide whether to offer you finance. If it can do so on normal commercial terms without having to make use of the scheme, it will. The key features of the scheme are set out below:
|Finance of up to £5 million
||Guarantee to the lender to encourage them to lend
||Government pays interest and fees for 12 months
|The maximum value of a facility provided under the scheme is £5 million, available on repayment terms of up to six years.
||The scheme provides the lender with a government-backed, partial guarantee against the outstanding balance of the finance.
The borrower remains 100% liable for the debt.
|The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied charges.
||No guarantee fees for businesses
|For term loans and asset finance facilities: up to six years.
For overdrafts and invoice finance facilities: up to three years.
|Insufficient security is no longer a condition to access the scheme.
For all facilities, including those over £250,000, CBILS can now support lending to smaller businesses even where a lender considers there to be sufficient security, making more smaller businesses eligible to receive the Business Interruption Payment.
No personal guarantees for facilities under £250,000.
Personal guarantees may still be required, at a lender’s discretion, for facilities above £250,000, but they exclude the Principal Private Residence (PPR) and recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.
|There are no guarantee fees for SMEs. Lenders pay a fee to access the scheme.
The loans are available to businesses with a turnover of no more than £45 million and which generate more than 50% of their turnover from trading activities. The loans will be 80% backed by a government guarantee.
The scheme is now open and, to apply, you should talk to your bank or one of the accredited finance providers to discuss your business plan (Current-accredited-lenders-and-partners-list). You will need to provide a borrowing proposal which, were it not for the current pandemic, would be considered viable by the lender.
CORONA LARGE BUSINESS INTERRUPTION LOAN SCHEME (CLBILS)
The new Coronavirus Large Business Interruption Loan Scheme (CLBILS) will provide a government guarantee of 80% to enable banks to make loans of up to £25m to firms with an annual turnover of between £45m and £500m. This will give banks the confidence to lend to many more businesses which are impacted by coronavirus. Facilities backed by a guarantee under CLBILS will be offered at commercial rates of interest.
The scheme is expected to be delivered through commercial lenders. The Government will provide lenders with an 80% guarantee on individual loans for businesses that would be otherwise unable to access the finance they need
Lenders will still be expected to conduct their usual credit risk checks, but this scheme allows them to specifically support business that were viable before the COVID-19 outbreak but are facing significant cash flow difficulties, that would otherwise make their business unviable in the short term.
The new scheme will launch later this month and will support a wide range of businesses to access finance products including short term loans, overdrafts, invoice finance and asset finance.
Businesses would remain responsible for repaying any facility they may takeout.
CORPORATE FINANCING FACILITY
In addition to the CLBILS scheme, to assist larger businesses with financing their outgoings in the short term, the Treasury and the Bank of England are introducing a new Covid-19 Corporate Financing Facility (CCFF) to buy short-term debt from larger companies.
This will support companies which are fundamentally strong but have been affected by a short-term funding squeeze. It will also support corporate finance markets overall and ease the supply of credit to all firms. The scheme will be funded by central bank reserves – in line with other Bank of England market operations. It will operate for at least 12 months, and for as long as steps are needed to relieve cash flow pressures on firms that make a material contribution to the UK economy.
CCFF is in place for UK incorporated companies with genuine business operations in the UK and who are making ‘a material contribution to economic activity’ in the UK.
The scheme will operate through businesses issuing Commercial Paper (via a bank), which is unsecured short-term debt with:
- A minimum credit rating of A-3 / P-3 / F-3 / R3 from at least one of Standard & Poor’s, Moody’s, Fitch and DBRS Morningstar respectively, as at 1 March 2020
- A maturity period of between one week and one year
- A value of at least £1m (rounded up to closest £0.1m thereafter).
Businesses without a credit rating will need to approach credit rating agencies to obtain one specifically for application under the CCFF.
Eligibility will be assessed on a case-by-case basis. The application forms and supporting documents that you will need to provide were released by the government on 23 March 2020. It is understood that once approval is granted, Commercial Paper can be issued and sold to the Bank the following day. CCFF is anticipated to be in place for at least 12 months.
Please contact your usual HFMC Wealth contact should you require further information or any assistance with the above or email email@example.com for more information.