Financial Assistance for Businesses During the Coronavirus Crisis

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.

Coronavirus Job Retention Scheme

At the end of May 2020, the government updated the scheme to make it more flexible as employees returned to work. The information published by the government at that time was:

Impact of the scheme so far:

  • As of midnight on 24 May 2020, the scheme had been used by 1 million employers, to protect around 8.4 million jobs and the total value of claims made was £15 billion.

Flexible Furloughing:

  • From 1 July, employers can bring back to work employees that have previously been furloughed for any amount of time and any shift pattern, while still being able to claim CJRS grant for their normal hours not worked.
  • From 1 July, employers will be able to agree any working arrangements with previously furloughed employees.
  • When claiming the CJRS grant for furloughed hours; employers will need to report and claim for a minimum period of a week.
  • This is a minimum period and those making claims for longer periods such as those on monthly or two weekly cycles will be able to do so.
  • To be eligible for the grant, employers must agree with their employee any new flexible furloughing arrangement and confirm that agreement in writing.
  • Employers can claim the grant for the hours their employees are not working calculated by reference to their usual hours worked in a claim period. Further details will be included in future guidance.
  • Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period.
  • For worked hours, employees will be paid by their employer subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts.
  • Further guidance on flexible furloughing and how employers should calculate claims will be published on 12 June.

Closure to new entrants from July:

  • The scheme will close to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full three-week period prior to 30 June.
  • This means that the final date by which an employer can furlough an employee for the first time will be the 10 June, in order for the current three-week furlough period to be completed by 30 June. Employers will have until 31st July to make any claims in respect of the period to 30 June.
  • From 1 July the scheme will only be available to employers that have previously used the scheme in respect of employees they have previously furloughed.
  • From 1 July, claim periods will no longer be able to overlap months, employers who previously submitted claims with periods that overlapped calendar months will no longer be able to do this going forward. This is necessary to reflect the forthcoming changes to the
    scheme.
  • The number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the current CJRS.
  • Employers can continue to make claims in anticipation of an imminent payroll run, at the point payroll is run or after payroll has been run.
  • Employers will be able to make their first claim under the new scheme from 1 July.

Employer costs:
From August 2020, the level of the grant will be slowly tapered to reflect that people will be returning to work:

  • In June and July, the government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance Contributions (ER NICS) and pension contributions for the hours the employee doesn’t work. Employers will have to pay employees for the hours they work.
  • In August, the government will pay 80% of wages up to a cap of £2,500 and employers will pay ER NICs and pension contributions for the hours the employee does not work.
  • In September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
  • In October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.

The cap will be proportional to the hours not worked.

Table 1 – Government contribution, required employer contribution and amount employee receives where the employee is furloughed 100% of the time

 

July

August

September

October

Government Contribution:

Employer NICs and pension contributions¹

Yes

No

No

No

Government contribution:

Wages

80% up to £2,500

80% up to £2,500

70% up to £2,187.50

60% up to £1,875

Employer contribution:

Employer NICs and pension contributions²

No

Yes

Yes

Yes

Employer contribution:

Wages

10% up to £312.50

20% up to

£625

Employee receives

80% up to £2,500 per month

80% up to £2,500 per month

80% up to £2,500 per month

80% up to £2,500 per month

¹ and ² Government contribution covers employer NICs and pension contributions (up to an amount equivalent to the minimum automatic enrolment employer pension contribution) calculated on 80% of wages up to £2,500 a month. 
  • As with the previous scheme, employers are still able to choose to top up employee wages above the scheme grant at their own expense if they wish.
  • An early assessment of CJRS claims suggest that around 40% of employers have not made a claim for employer NICs costs or employer pension contributions and so will be unaffected by the change in August if their employment patterns do not change.³
  • Indicative analysis of claims from large businesses suggests that around 25% of CJRS monthly claims are below the threshold where employer NICs and automatic enrolment pension contributions are due, and so no employer contribution would be expected for these payments to furloughed employees in August.⁴
  • Early analysis of CJRS claims suggests the equivalent wage on the average CJRS claim is around £1,380 per month. Requiring firms to pay the Employer NICs costs and pension contributions on the CJRS payments will introduce a cost of £69 per month on this figure⁵. This equates to 5% of total gross employments costs⁶ the employer would have incurred had the employee not been furloughed. This percentage will vary according to the wages of the employee who has been furloughed.
  • The employer cost per month on the average grant will rise to £207 in September and to £345 in October representing 14% and 23% of gross employment cost, respectively.
³ This estimate is based on HMRC analysis of CJRS administrative scheme level claims management information. 
⁴  This estimate is based on HMRC analysis of an employee level claims management information. This information only covers employees furloughed from large business. 
⁵ This assumes the employee is not an apprentice, is over 21 and the firm is not benefiting from the Employment Allowance. 
⁶ Gross employment costs are the full gross wage, Employer Nationals Insurance contributions and minimum pension contributions on this wage.

Table 2 – Employer contribution costs for the average claim 

   

July

August

September

October

Implied wage of average claim (£1,380/month)

Monthly employer cost

£0

£69

£207

£345

As a percentage of gross employment costs

0%

5%

 14%

 

23%

Holidays for Employees

It is unlikely that many employees will wish to take much holiday whilst there are restrictions on the ability to travel. The government have recognised this and are relaxing the rules on carrying over annual leave. Employers need to recognise the difficulty and communicate to their employees what their policy will be. The policy needs to be fair and clear. It also needs to be applied to all. It will be easy to consider that furloughed staff and others, that are having to stay at work and cannot work, are ‘already on holiday’ and therefore should not accrue holiday time through this period, which they could take afterwards. This however, will be seen as unfair by the employees in question, who probably had little choice about whether they were told to remain at home and not work. What will be of particular concern to the business, is that after the crisis is over that the whole workforce may rush to take their whole year’s entitlement to holiday, in the remainder of 2020. This is why the government is extending the period to use this holiday over the next 2 leave years. Employers should reflect the new rules in their holiday procedures, but at the same time protect their business from all staff trying to take holidays at once.

All workers who have not taken all of their statutory annual leave entitlement due to COVID-19, will now be able to carry it over into the next 2 leave years.

Currently, almost all workers are entitled to 28 days holiday including bank holidays each year. However, most of this entitlement cannot be carried between leave years, meaning workers lose their holiday if they do not take it.

There is also an obligation on employers to ensure their workers take their statutory entitlement in any one year – failure to do so could result in a financial penalty.

The regulations will allow up to 4 weeks of unused leave to be carried into the next 2 leave years, easing the requirements on business to ensure that workers take the statutory amount of annual leave in any one year.

This will mean that staff can continue working as part of the national effort against the coronavirus without losing out on annual leave entitlement.

The changes will also ensure all employers affected by COVID-19 have the flexibility to allow workers to carry over leave, at a time when granting annual leave could leave them short-staffed in some of Britain’s key industries, such as food and healthcare.

The changes will amend the Working Time Regulations, which apply to almost all workers, including agency workers, those who work irregular hours, and workers on zero-hours contracts.

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. 

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.

If you have already received a loan under the Coronavirus Business Interruption Loan Scheme, you cannot also apply for a Bounce Back Loan, but you may be able to transfer the CBILS loan into a Bounce Back Loan. You will have to arrange this with your lender before 4 November 2020.

Future Fund – to be launched in May 2020

  • This Scheme will issue convertible loans between £125,000 to £5 million to innovate companies, which are facing financing difficulties due to the Coronavirus outbreak.
  • The Future Fund will provide government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equally matched funding from private investors.
  • These convertible loans may be a suitable option for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme.
  • The scheme will be delivered in partnership with the British Business Bank.
  • You are eligible if:
    • Your business is based in the UK
    • Your business can attract the equivalent matched funding from third party private investors and institutions
    • Your business has previously raised at least £250,000 in equity investment from third party investors in the last 5 years

Full eligibility criteria will be published in due course. 

Coronavirus Large Business Interruption Loan Scheme

The Government has announced a new Coronavirus Large Business Interruption Loan Scheme (CLBILS) which 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. It is believed that 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.

It is expected that this scheme will 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 financial products including; short term loans, overdrafts, invoice finance and asset finance. 

Businesses would remain responsible for repaying any facility that they may takeout. 

To be eligible, the bushiness must:

  • Be UK based in its business activity
  • Have an annual turnover of between £45 million and £500 million
  • Be unable to secure regular commercial financing
  • Have a borrowing proposal with the lender:
    • Would consider viable, were it not for the Covid-19 pandemic
    • Believes will enable you to keep trading through any short-term to medium-term difficulty

Businesses from any sector can apply, except the following:

  • Banks and building societies
  • Insurers and reinsurers (but not insurance brokers, who can apply)
  • Public-sector organisations, including state-funded primary and secondary schools

Further detail on eligibility will be confirmed later this month. 

Coronavirus Corporate Finance Facility

  • The Bank of England has set up a scheme to finance working capital by purchasing debt from larger business ‘making a material contribution to the UK economy’.
  • Businesses do not need to have previously issued debt in order to participate.
  • The scheme will operate for at least 12 months.

Help for Self-Employed Individuals

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

Business Rates Holidays and Cash Grants

  • No rates payable for the 2020-2021 tax year, for any business in the retail, hospitality or leisure sectors.
  • The list of businesses eligible for relief was expanded on the 25th March 2020 and again on the 2nd May 2020.  Following the announcement on 23th March 2020 of further measures to limit the spread of coronavirus, the government has subsequently confirmed that that some of the exclusions for this relief, such as estate agents and letting agents, have been removed. Retail, leisure, and hospitality properties, therefore, that will have been forced to close as a result of the COVID-19 restriction measures, will now be eligible for the relief.
  • In those sectors, if your rateable value is between £15K and £51k, you will also receive a cash grant of up to £25,000 per property.
  • Any business which receives small business rates relief, including those in the retail, hospitality or leisure sectors, will receive a cash grant of £10,000 (increased from the £3,000, announced in the 11 March Budget).
  • The rates holiday and cash grants will be administered by local authorities and should be delivered automatically, without businesses needing to claim.

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.

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.