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.

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 Chancellor’s statement on the 24th September 2020 about the Winter Economic Plan.

Job Support Scheme

The Chancellor announced that a new Job Support Scheme will be introduced from the 1st November 2020. The furlough scheme will cease at the end of October. The government is endeavouring to keep employees in employment where there is some level of activity and are offering to contribute toward the cost of their salaries for up to 6 months over the winter, but this is only for positions which are judged as ‘viable’, this being where the employee will be able to work at least 33% of their usual hours. The employer will pay as normal for hours worked. For hours less than the ‘normal hours’ that are not worked; the government will pay a grant of a third of the hours not worked up to a cap of £697.92; the employer will also pay a third of the salary for the hours not worked and the employee will also contribute a third, by not receiving a third of their ‘normal salary’ for the hours not worked. This will ensure that employees will earn a minimum of 77% of their normal salary up to the capped level.

Grant payments will be made in arrears, reimbursing the employer for the Government’s contribution. The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer. Employees will be able to cycle on and off the scheme and do not have to be working the same pattern every month, but each short-time working arrangement must cover a minimum period of seven days. Employees must have been on the employer’s PAYE payroll on or before the 23 September 2020. For the first 3 months of the scheme (November through January) the employee must work 33% of their usual hours. After 3 months the government will consider whether to increase this minimum hours threshold. Employees cannot be made redundant or put on notice of redundancy during the period within which the employer is claiming the grant for that employee.

All SME’s will be eligible for these grants. The government will be issuing further details on this scheme.

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 November 2020.

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 November 2020.

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.

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.