Financial measures to support businesses through COVID-19

Our sister business, The FD Centre has shared with us the latest financial advice around Coronavirus.

“Following the announcement by Rishi Sunak on 20th March and the updated guidance from HMRC following that, I have set out below the support measures from Government for businesses in respect of the Covid-19 Pandemic. As additional clarifications are given, or changes announced I am highlighting them in green below. Appendix A is the current guidance on the Gov.uk website

The Measures Announced:

1)  A Coronavirus Job Retention Scheme.
2) Deferring of VAT and Income Tax payments
3) Loans and guarantees to support firms and help them manage cashflows through this period. The Chancellor will make available an initial £330 billion of guarantees, equivalent to 15% of UK GDP, with a commitment to make more available should demand require it. The Coronavirus Business Interruption Loan Scheme (CBILS) will offer loans of up to £5 million, committing that businesses can access the first 6 months of that finance interest free
4) Support for liquidity amongst large firms, with a major new scheme being launched by the Bank of England to help them bridge Coronavirus disruption to their cash flows through loans.
5) Providing £20 billion of business rates support and grant funding to help the most affected firms manage their cashflow through this period by:

• giving all retail, hospitality, leisure and nursery businesses in England a 100% business rates holiday for the next 12 months.
• increasing grants to small businesses eligible for Small Business Rate Relief from £3,000 to £10,000.
• providing further £25,000 grants to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value over £15,000 and below £51,000.

6) Statutory sick pay relief for up to 2 weeks of SSP for employers with less than 250 employees.
7) Ability for self-employed and businesses struggling to pay their tax to defer payment through HMRC’s “Time to Pay” scheme.

It has also been announced that Mortgage lenders will support customers that are experiencing issues with their finances as a result of Covid-19, including through payment holidays of up to 3 months, and that planning regulations will be relaxed to support the food industry help provide meals for people who need to self-isolate, so pubs and restaurants can start providing takeaways without a planning application.

In addition to these business support measures, it was also announced on 17th March that the Government were postponing the introduction of the proposed changes to IR35 Off Payroll working arrangements until April 2021.

More on the Coronavirus Job Retention Scheme

The Government would reimburse employers for up to 80% of the wages of any employees where there is no work for them because of the coronavirus.
The new scheme sits alongside the other measures that have been introduced (such as the changes to Statutory Sick Pay, noted later in this document). The key points are:

• All UK employers are eligible to claim this.
• The scheme creates the concept of “furlough” – a word which means “give a leave of absence to.” This is not a term which has previously had any specific meaning in UK employment law.
• The scheme enables employers to designate affected employees as “furloughed” and notify the employees of this. This is important because it is the employer who controls the process (although the employee may need to agree – see below).
• The scheme specifically states that “changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.” As it will be relatively unusual for an employer to have a contractual right to put an employee onto this scheme, this is really saying that in, most cases, it will need to be agreed with the employee.
• However, from the employee’s point of view, they are highly likely to agree, because the alternative is likely to involve a reduction in hours, unpaid leave or potential redundancy. It is strongly recommended that any agreement with an employee regarding furlough is recorded in writing.
• According to the information released so far, “HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.” This will be facilitated by a new online portal – details of the portal have not been given yet, but they are expected imminently.
• The scheme would apply to anyone paid through PAYE, so would apply to zero hours workers. How exactly it would work for them remains to be seen – presumably some sort of average would be required.
• The Government’s guidance for employers does not specify the start date, but in its guidance for employees it states that the scheme will apply for 3 months from 1 March 2020, with the potential for it to be extended if necessary.
• The guidance for employees states: “This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month.”
• Due to the way it has been phrased, it is not completely clear at this stage whether the maximum payment per month would be up to £2,000 (i.e. 80% of £2,500, so someone on a salary of £30,000 pa) or £2,500 (i.e. 80% of £3,125, so someone on a salary of £37,500 pa). It is more likely to be the former, but clarification on that is expected soon. It is also not clear what is meant by “for all employment costs” and what the position will be regarding things like pension contributions and National Insurance, although it is expected that these costs will be included in the £2,500 limit.
• During the period of furlough, the employment contract will continue, and the employee will receive 80% of their wages. The employer could top this up to 100% but is not obliged to do so.
• As the scheme is backdated to 1st March 2020, employers are urged by the Government to take back anyone they had already dismissed and convert them to this leave instead. Likewise, with anyone who is on unpaid leave.
• One of the issues noted about this scheme is that it appears to be ‘all or nothing’ – if an employee has some work to do (e.g. a 50% reduction), then they will not qualify for furlough. The Government have specified in its guidance to employees that “To qualify for this scheme, you should not undertake work for [your employer] while you are furloughed.”
• It also isn’t clear now whether employees would continue to accrue holiday during a period of furlough – it would be advisable for employers to specifically address this in any documentation that is agreed with the employee.

As you can see, there are still several points where more detail is needed. Hopefully, further information will become available in the coming days, and I will continue to keep you updated.

Accessing the Support Announced

Some of the detail on how these measures will operate in practice needs to be filled in by the Government. In summary though:

• The Coronavirus Job Retention Scheme is open to all UK businesses. Employers will need to designate affected employees as ‘furloughed workers,’ and notify those employees of this change. Information about those ‘furloughed’ will need to be submitted through a new online portal (HMRC will set out further details on the information required). HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month, backdated to 1st March. Please note this system is not in place, HMRC are aiming to have it in place by the end of April.
• The deferral of VAT payments will apply from 20 March 2020 until 30 June 2020, and no application is required. Businesses will not need to make a VAT payment during this period. Businesses will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal. This should mean that no payment is due for the quarters ended:
  • 29 February due 7 April
  • 31 March due 7 May and
  • 30 April due 7 June
  No application is required, but if you pay by DD you will need to cancel it as HMRC will take it automatically, you will need to set up another DD in due course. Payment will be due before 5 April 2021.
• The self-employed are eligible for the deferral of Income Tax – payments due under self-assessment on the 31 July 2020 will be deferred until the 31 January 2021. As with the deferral of VAT no application is required and this is an automatic measure, and there will be no penalties or interest in the deferral period.
• For the Coronavirus Business Interruption Loan Scheme (CBILS) there is information on the British Business Bank website (see further details below), and initially, it would be advisable to contact one of the approved lending organisations. Businesses should approach their bank/an approved lender directly with their business plan.
• For business rates relief the key contact point will be your local authority – PLEASE NOTE, Local Authorities will contact the relevant businesses directly once the scheme rules are clarified, there is no need to contact the relevant Local Authority.
• For Statutory Sick Pay (SSP) refunds, the details are being worked out, more details will follow from the government.
• The Time to Pay (TTP) Scheme is operated on a case by case basis, contact HMRC to apply for this. HMRC have indicated that more staff have been deployed to assist with the surge in demand, however, our (anecdotal) experience so far is that it is difficult to get through on the helpline

Further Considerations to assist clients:

In addition to the measures above consideration can also be given to:

Corporation Tax payments: Corporation tax isn’t currently included within TTP but HMRC have indicated that a deferment can be requested through the Coronavirus helpline. Similarly, HMRC will consider whether late filing penalties and potentially late payment interest can be temporarily rescinded. A decision will be made on a case by case basis, but based on the feedback we have so far, HMRC is being sympathetic to business needs. Please note: It is critical in all cases to speak to HMRC proactively and in advance of the payment due date.
Quarterly instalment payments (QIPs) and expediting repayments: If your client is required to make QIPs it will be important they re-calculate taxable profit estimates for the current period based on revised forecasts. Making the right tax payments now can have a significantly positive impact on cash flow. If your client is a large business that has paid corporation tax by making QIPs throughout the year but circumstances have changed significantly as a result of the pandemic and profits have been revised downwards, it is possible to request a repayment of overpaid tax from HMRC, rather than waiting until the tax return is filed and processed by HMRC. This can significantly expedite the repayment process.

There are also ongoing discussions between HMRC and the large accounting firms in respect of:

• Earlier utilisation of losses: If your client is forecasting an overall loss for the current financial year, these losses may be able to be utilised to offset corporation tax in the previous financial year. Ordinarily a loss carry-back claim cannot be made until the tax return for the later period has been prepared and submitted to HMRC. HMRC have been lobbied to consider whether there is any flexibility to make a loss carry back claim at an earlier time, given the number of businesses that it could support, where losses generated are due to Coronavirus.
• If your client is not already making an R&D tax relief claim, but you think they may be eligible, consider this opportunity as soon as possible. Note it is possible to look back up to two financial years to make a claim. We are aware that HMRC is being lobbied to expedite the approval and payment process for R&D claims under both the Small Medium sized Entity (SME) and R&D Expenditure Credit (RDEC) schemes, which would provide welcome positive cash flow for businesses that have already submitted their claims, or are about to do so.

When I hear more on the discussions around earlier utilisation of losses and R&D tax relief, I will send further updates. Set out below is the guidance as on Gov.uk – this is now being updated quite quickly following announcements. To access the site directly click here.

Appendix A: Government Guidance

Set out below is the guidance as on Gov.uk – this is now being updated quite quickly following announcements. Access the site directly here.

Support for businesses through the Coronavirus Job Retention Scheme

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.

Eligibility
All UK businesses are eligible.
How to access the scheme
You will need to:

•  designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation

• submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.

Support for businesses through deferring VAT and Income Tax payments

We will support businesses by deferring Valued Added Tax (VAT) payments for 3 months. If you’re self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

VAT

For VAT, the deferral will apply from 20 March 2020 until 30 June 2020.
Eligibility
All UK businesses are eligible.
How to access the scheme
This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.

Income Tax

For Income Tax Self-Assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021.
Eligibility
If you are self-employed you are eligible
How to access the scheme
This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period. HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of Covid-19 and have outstanding tax liabilities.

Support for businesses who are paying sick pay to employees

We will bring forward legislation to allow small-and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:

• this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
• employers with fewer than 250 employees will be eligible – the size of an employer will be determined by the number of people they employed as of 28 February 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
• employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website
• eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force
• the government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible

Eligibility
You are eligible for the scheme if:
• your business is UK based
• your business is a small or medium-sized and employs fewer than 250 employees as of 28 February 2020
How to access the scheme
A rebate scheme is being developed. Further details will be provided in due course once the legalisation has passed.

Support for businesses that pay business rates

Business rates holiday for retail, hospitality and leisure businesses

We will introduce a business rates holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year. Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.
Eligibility
You are eligible for the business rates holiday if:
• your business is based in England
• your business is in the retail, hospitality and/or leisure sector

Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used:
• as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
• for assembly and leisure
• as hotels, guest & boarding premises and self-catering accommodation

How to access the scheme
There is no action for you. This will apply to your next council tax bill in April 2020. However, local authorities may have to reissue your bill automatically to exclude the business rate charge. They will do this as soon as possible.
You can estimate the business rate charge you will no longer have to pay this year using the business rates calculator. Further guidance for local authorities is available in the expanded retail discount guidance.

Cash grants for retail, hospitality and leisure businesses

The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.
For businesses in these sectors with a rateable value of under £15,000, they will receive a grant of £10,000.
For businesses in these sectors with a rateable value of between £15,001 and £51,000, they will receive a grant of £25,000.
Eligibility
You are eligible for the grant if:
• your business is based in England
• your business is in the retail, hospitality and/or leisure sector
Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used:
• 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
How to access the scheme
You do not need to do anything. Your local authority will write to you if you are eligible for this grant. Guidance for local authorities on the scheme will be provided shortly. Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority.

Support for nursery businesses that pay business rates

We will introduce a business rates holiday for nurseries in England for the 2020 to 2021 tax year.
Eligibility
You are eligible for the business rates holiday if your business is based in England Properties that will benefit from the relief will be hereditaments:
• occupied by providers on Ofsted’s Early Years Register
• wholly or mainly used for the provision of the Early Years Foundation Stage
How to access the scheme
There is no action for you. This will apply to your next council tax bill in April 2020. However, local authorities may have to reissue your bill to exclude the business rate charge. They will do this as soon as possible.
You can estimate the business rate charge you will no longer have to pay this year using the business rates calculator.
Further guidance for local authorities is available in the nursery discount guidance.

Support for businesses that pay little or no business rates

The government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.
Eligibility
You are eligible if:
• your business is based in England
• you are a small business and already receive SBBR and/or RRR
• you are a business that occupies property
How to access the scheme
You do not need to do anything. Your local authority will write to you if you are eligible for this grant. Guidance for local authorities on the scheme will be provided shortly. Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority.

Support for businesses through the Coronavirus Business Interruption Loan Scheme

A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch early next week to support primarily small and medium-sized businesses to access bank lending and overdrafts.

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 government will cover the first 12 months of interest payments.
Eligibility
You are eligible for the scheme if:

• your business is UK based, with turnover of no more than £45 million per year
• your business meets the other British Business Bank eligibility criteria
How to access the scheme
The scheme is now open for applications. All major banks are offering this scheme.
To apply, you should talk to your bank or one of the 40 accredited finance providers (not the British Business Bank) as soon as possible, to discuss your business plan. You can find out the latest on the best ways to contact them via their websites. Please note that branches may currently be shut down to enable social distancing.
The full rules of the scheme and the list of accredited lenders are available on the British Business Bank website.
If you have an existing loan with monthly repayments, you may want to ask for a repayment holiday to help with cash flow.

Support for larger firms through the COVID-19 Corporate Financing Facility

Under the new Covid-19 Corporate Financing Facility, the Bank of England will buy short term debt from larger companies. This will support your company if it has been affected by a short-term funding squeeze, and allow you to finance your short-term liabilities. It will also support corporate finance markets overall and ease the supply of credit to all firms.
Eligibility
All non-financial companies that meet the criteria set out on the Bank of England’s website are eligible.
How to access the scheme
The scheme is now available for applications. More information is available from the Bank of England

Support for businesses paying tax: Time to Pay service

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.
Eligibility
You are eligible if your business:
• pays tax to the UK government
• has outstanding tax liabilities
How to access the scheme
If you have missed a tax payment or you might miss your next payment due to COVID-19, please call HMRC’s dedicated helpline: 0800 0159 559. If you’re worried about a future payment, please call us nearer the time.

Insurance

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 as long as all other terms and conditions are met.
Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.