Financial Assistance for Businesses During the Coronavirus Crisis

coronavirus and business

Dixcart has prepared a summary of the assistance that the government has made available to businesses at this challenging time. It is split into several categories to make it as easy as possible to follow.

We are keeping this summary up to date detailing the current assistance available and removing the sections that no longer apply. The last time this advice was updated was after the Prime Minister’s statement on 31 October 2020.

Coronavirus Job Retention Scheme (The Furlough Scheme) and Job Support Scheme

The Chancellor announced that a new Job Support Scheme will be introduced from the 1st November 2020 and last for six months, on the 31st October 2020 this was put on hold and it was announced that the Coronavirus Job Retention Scheme was being extended until 31st March 2021. The details about the extended Coronavirus Job Retention Scheme can be found here.

Business Grant Scheme

For businesses under Tier 2 restrictions (which are not required to close) cash grants will be available from local authorities, who will decide how best to distribute them. Funding is being provided to support cash grants of up to £2,100 per month, primarily for businesses in the hospitality, accommodation and leisure sector who has been adversely impacted by the Tier 2 restrictions. These grants will be available retrospectively for areas who have already been subject to Tier 2 restrictions and in addition to the grants announced last week by the Chancellor for businesses in Tier 3 areas (up to £3,000 per month).

On the 23rd October the government released the following information about this scheme:

Local Restrictions Support Grant (Tier 2)

What is the scheme?

We are providing additional funding to allow local authorities to support businesses in Tier 2 areas which are not legally closed, but which are severely impacted by the restrictions on socialising. The funding local authorities will receive will be based on the number of hospitality, hotel, B&B, and leisure businesses in their area, and will assume that these businesses receive grants equivalent to 70% of the grants for which legally closed businesses are eligible.

This would be equivalent to:

  • For properties with an RV of £15k or under, grants of £934 per month
  • For properties with an RV above £15k and below £51k, grants of £1,400 per month
  • For properties with an RV of £51k or above, grants of £2,100 per month

It will be up to Local Authorities to determine what precise funding to allocate to each business – the above levels are only an approximate guide.

Local authorities will also receive a 5% top up amount to these implied grant amounts to cover other businesses that might be affected by the local restrictions, but which may not be in the business rates system.

This scheme will initially run until April, with a review point in January.

Who is eligible?

Local authorities have the freedom to determine the precise eligibility criteria for these grants in their local areas. The guiding principle for local authorities is to use the funding to support businesses which have not been legally required to close, but which are nonetheless severely impacted by reduced demand caused by Tier 2 restrictions on socialising.

How can businesses access the grants?

Grants will be administered by Local Authorities, and businesses are likely to need to apply to their local authority for support. It is up to local authorities to determine the payment schedule and timings for these grants.

What can businesses use the grants for?

Businesses can choose to spend the grants as they wish. We expect that many businesses will use the grants to cover high fixed property-related costs.

What about areas which have been living under Tier 2-equivalent restrictions for several months already? Will you help them?

Some areas have been subject to restrictions on socialising for several months, before the tiering system was introduced. Funding for these areas will be backdated until the point at which these restrictions began.

Coronavirus Business Interruption Loan Scheme (CBILS)

  • This scheme was launched on Monday 23rd March.
  • Loans will be delivered by lenders that partner with the British Business Bank, including all of the major banks. The lender will receive a guarantee of 80% of the loan amount from the government. The loan will be interest free for the first 12 months.
  • These loans are intended to support cash strapped small and medium sized business during the crisis. They are available for UK-based businesses with turnover of no more than £45 million and can provide for a facility up to £5 million.
  • The borrower remains liable for 100% of the debt.
  • It is expected that further measures for larger and medium size business will be announced shortly.
  • As the details of the scheme were announced by the individual banks, some stated that they were looking for personal guarantees.
  • The government has made it clear that the requirement for personal loans is at the discretion of the lender. However, a lender is not allowed to take a personal guarantee against a borrower’s principle residence under the scheme. Therefore, even if a personal guarantee is required under the lender’s credit policy, it cannot be taken against the borrower’s home.
  • Some major lenders have announced that they are not going to require personal guarantees on loans under the CBILS scheme (of any size). As a further update on the 4th April, the Government announced: personal guarantees are not required to secure lending below £250,000. For anyone borrowing above £250,000 personal guarantees will be capped at 20% of the outstanding value of the loan, as the Government is providing the guarantee for the remaining 80% of the finance. This will apply to all customers that have secured a loan under the scheme since its launch on 23rd March. 

For businesses who have taken a loan under this scheme, the Chancellor, under the Winter Economic Plan announced on the 24th September 2020, that the borrower will be able to speak to their lender to extend the length of the loan to a maximum of 10 years. Further applications for these loans were to close at the end of September, but have been extended until the end of January 2021.

Coronavirus Bounce Back Loan

  • The scheme was announced on 27 April and was launched on 4 May.
  • The Bounce Back Loan scheme will help small and medium-sized businesses to borrow between £2,000 and £50,000.
  • The government will guarantee 100% of the loan and there will not be any fees or interest to pay for the first 12 months.
  • Loan term loans will be up to 6 years. No repayments will be due during the first 12 months. The government has worked with lenders, to agree a low rate of interest of 2.5% for the remaining period of the loan.
  • The scheme will be delivered through a network of accredited lenders.
  • Applications will be made through a short online form. There will be no forward looking tests of business viability.
  • You can apply for a loan if your business:
    • is based in the UK
    • has been negatively affected by Coronavirus
    • was not an ‘undertaking in difficulty’ on 31 December 2019.

For businesses who have taken a loan under this scheme, the Chancellor, under the Winter Economic Plan announced on the 24th September 2020, outlined the ‘pay as you grow’ flexible repayment system. The system extends the length of the scheme from 6 years to 10 years, with interest only periods of up to 6 months and payment holidays also available. Further applications for these loans were to close at the end of September, but were extended until the end of January 2021. The Bounce Back Loan Scheme rules are also being amended to allow businesses who have borrowed less than their maximum (i.e. less than 25% of their turnover) to top up their existing loan. This option will be available to businesses from next week and can only be used once. 

Help for Self-Employed Individuals

There is a separate Article specifically for the self-employed which can be found here.

VAT

The Chancellor, under the Winter Economic Plan announced on the 24th September 2020, that where business have deferred their VAT payments, which were due to be paid in one lump sum on 31st March 2021, through a new payment scheme, businesses will have the option to pay back the VAT deferred in 11 smaller interest free payments during the 2021-2022 financial year. He also stated that the previously announced reduction in the VAT on hospitality and tourism from 20% to 5%, would be extended to 31 March 2021. More details to follow.

Insurance Claims

  • Businesses that have cover for both pandemics and government-ordered closure should be able to make a claim.
  • 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. There is more certainty now that these businesses have been ordered to close.
  • Insurance policies differ significantly, so businesses should check the terms and conditions of their specific policy and contact their providers.

Statutory Sick Pay (SSP)

  • If you are a director of a limited company with less than 250 employees, you can pay yourself two weeks of SSP if you need to self-isolate, subject to meeting the minimum payroll requirement for SSP.
  • The government will refund £94 per week, maximum £188, to your company.
  • It will also refund SSP for staff of businesses with less than 250 employees, for up to two weeks.
  • The method of refunding has not yet been announced.

Corporation Tax

  • If you are a limited company and make a loss in your current year, carry it back by a year, to generate a tax refund.
  • The sooner you complete and file, the accounts and the tax return, the sooner you can benefit from the tax refund.

Off Payroll Working (IR35) Deferral

  • Freelancers and consultants worried about getting taxed as an employee from 6 April 2020, have a year’s reprieve until 6 April 2021.

Assistance

Dixcart has lawyers, accountants and tax advisers that can assist your business to apply for financial assistance, at this challenging time.  Please phone: 0333 122 0000 to speak to one of our directors or email: hello@dixcartuk.com. If you are already a client, please speak to your usual contact.

Further advice can be found on the Government website

The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.