The current Covid-19 situation is affecting businesses worldwide and, as a result, the global economy is grinding to a halt – and, unfortunately, the UK is not immune from that. The Government has tried its best to give clear business advice to company owners and citizens as well as offers of financial aid through the official website, however, as is the nature of Government communications, the information is lengthy and sometimes difficult to follow.
Our accounting copywriter has looked through all the official Government advice with the goal of making each financial assistance scheme much easier for those who qualify for it to understand. Britain relies on its army of millions of business to keep people in work and to pay for everything – including the wonderful NHS – and UK plc will need you when we’re out the other side of this so we urge you to seek help if you need it.
In this article, we’ll cover:
- the Government Grant scheme in regard to commercial rates
- the Retail, Hospitality and Leisure Grant fund
- the Business Rates Holiday scheme
- the Government Furlough Scheme
- the Coronavirus Business Interruption Loan Scheme
- HMRC Time to Pay current rules and exceptions
- HMRC deferred payments
Coronavirus business grant
The UK Government has announced financial support for small businesses as well as companies trading in the retail, leisure and hospitality sectors. Click here to find the official business support website for the full terms and conditions but please read on for a simplified version.
The government’s response to Covid-19 includes a two coronavirus business grant schemes providing funding which does not need to be paid back:
- the Small Business Grant Fund and
- the Retail, Hospitality and Leisure Grant Fund
You will receive these payments from your Local Authority if you are eligible for the money – in other words, they’re the people you need to contact about the £10,000 or £25,000 you might be about to receive.
We understand that most Local Authorities involved will then contact you, the business owner, to arrange the payments of funds.
However, each authority may run the scheme differently so you may get the money faster by being proactive and contacting your Local Authority to find out the status of this in your area. Call them first, don’t wait for their call.
The Small Business Grant Fund
The Small Business Grant Fund (SBGF) states that all businesses in England currently in direct receipt of either Small Business Rates Relief (SBRR) or Rural Rates Relief (RRR) will qualify for £10,000.
A cash grant of £10,000 will be paid to those small businesses benefiting from SBBR and which are not eligible for the Retail, Hospitality and Leisure Grant.
Please note that businesses with a rateable value of over £15,000 do not qualify for this scheme. In addition, if you occupy serviced premises where you pay each month for rent and other services but you don’t pay business rates directly, you don’t qualify for the SBGF unfortunately.
In summary, which businesses will receive £10,000?
- Any business which whose premises was eligible on the 11th March 2020 for the Small Business Rate Relief scheme (SBRR) including those who had a rateable value of between £12,000 and £15,000 who would have been receiving tapered relief
- Any business whose premises on the 11th March 2020 was eligible for financial relief under the Rural Rate Relief Scheme.
- Eligible businesses will receive only one grant per property.
The Retail, Hospitality and Leisure Grant Fund
Similarly, the Retail, Hospitality and Leisure Grant (RHLG) will provide a grant of either £10,000 or £25,000 to businesses currently in the receipt of the Expanded Retail Discount whose premises attract a rateable value of less than £51,000.
Cash grants of the following amounts will be paid:
- £10,000 will be paid to businesses benefiting from SBBR and eligible for the Retail, Hospitality and Leisure Grant whose premises’ rateable value is less than £15,000
- £25,000 for companies eligible for the Retail, Hospitality and Leisure Grant whose premises’ rateable value is over £15,000 but less than £25,000
- Your premises must be used as either a live music venue, cinema, drinking establishment, restaurant, self-catering accommodation, guest and boarding premises, a hotel, or for leisure and assembly.
Exclusions to The Small Business Grant Fund and The Retail, Hospitality and Leisure Grant
The following premises types are not eligible for SBGF or RHLG:
- properties occupied for personal usage, such as private horse stables and loose boxes,
- beach huts and boat moorings, and
- car parks or parking spaces.
If, as of the 11th March 2020, your business was in liquidation or dissolved, you are not eligible to receive any funding.
Properties which have a rateable value of £51,000 and over are not eligible for funding. In addition, recipients cannot receive both SBGF and RHLG on the same property.
Who receives the funding and how?
The local authority to which your business pays non-domestic rates will transfer the grant to which you are entitled to the bank account it has on record.
They will contact you using the details they have about your business as at 11th March 2020.
If they have the wrong details about you, they may delay paying the funds or take steps to regain the any monies transferred if already released.
How is the Government managing fraud on this issue?
The speed with which the response to the Covid-19 pandemic has been rolled out may mean that there are security vulnerabilities in the application process meaning that there may be a high likelihood that some may try to claim money fraudulently. We would hope no-one would take advantage of this situation in such a way.
The Government will clamp down hard on any deliberate manipulation of facts or figures which lead to fraudulent claims be paid. Any business caught falsifying records or data in order to qualify for funding will face prosecution in a court of law and any aid distributed to them will be subject to claw back. This also applies to any grants paid in error.
In order for this to be managed successfully, no changes made to a business’s rateable value after 11th March 2020 will be accepted for the purposes of applying for eligibility. Likewise, it is within the discretion of a local authority to withhold or award grants based on their opinion on which businesses are and are not entitled to receive them.
The Business Rates Holiday scheme
Retail, hospitality, and leisure businesses including those eligible for Cash Grant for Retail, Hospitality and Leisure funding will not pay business rates for the 2020/2021 tax year.
If you have already received a rates bill for the 2020/2021 year, you will receive a revised bill zeroing out any sum that was previously due. If you have already made a payment towards your non-domestic rates liability this year, this will be refunded to you.
The government’s employee furlough scheme
Furlough, by definition, is “the temporary leave of an employee due to a special need of the employer, business, or economy as a whole”.
The Government has implemented a special furlough scheme to last for the duration of the Covid-19 pandemic. Currently covering a three-month period beginning on the 1st March 2020, it may be extended if the Government see fit and it is available for all employers.
This is a temporary scheme available to businesses which cannot maintain their current workforce levels due to the economic disruption and reduced levels of trading caused because of the virus outbreak.
The scheme pays a grant to employees which will cover 80% of the usual monthly wage each of their employees would normally receive up to £2,500 a month per person. The scheme also covers the associated contributions such as National Insurance and minimum automatic enrolment employer pension contributions.
Click here to read the official statement from the Government website or please read on for a summary.
Who can claim?
All employers are eligible to apply for this scheme – be that a business, a charity, a public authority or recruitment agency. However, for your claim to be successful, your business must have:
- created and started a PAYE payroll scheme on or before 28th February 2020,
- enrolled for PAYE online, and
- a UK bank account.
If you employ apprentices in your business, you can furlough them in the same manner as you can with your normal employees. The only difference is that you must pay them at least the Apprentice Minimum Wage or National Minimum Wage as appropriate for their training period.
Private individuals can furlough employees such as nannies providing they paid their staff through the PAYE system on or before the 28th February 2020.
Which employees can you claim for?
There are strict guidelines that businesses must follow to qualify for funding.
To furlough an employee, they must have already been on your PAYE payroll system on or before the 28th February 2020. Unfortunately, if a worker was added to the payroll after this date, you will not be able to furlough them.
Any type of employment contract – including full time, part time, zero hour or agency work – is eligible for funding. You may also furlough foreign nationals working for you as long as they are working for you in the UK.
Any worker placed on furlough must not undertake work for or on behalf of the company. However, employers are free to trade and task employees to carry out certain activities and roles as long as those employees are not on the furlough scheme.
What if employment circumstances changed around this time?
If an employee was due to leave your business at the end of February or if an employee was made redundant after 28th February, you are permitted to reinstate them as an employer as long as:
- you confirm they will be furloughed and
- you claim for their wages using this scheme.
If you do so to help what would have been an ex-employee out, you are under no compunction to keep the employee on when the furlough scheme ends.
If one of your employees is temporarily working reduced hours, they may not be eligible to be included on this scheme – you should check the employment contract you have with that member of staff and, if in doubt, consult an employment solicitor.
You are also only able to claim for a worker that started unpaid leave after 28th February.
What if my employee is self-isolating, on sick leave, or caring for others?
If your employee is ill or self-isolating, your employee is entitled to Statutory Sick Pay (SSP) – whether that be the Government SSP or sick pay arrangements as stipulated in an employment contract.
While the employee is unwell, they may not be furloughed however, once they have a fit for work certificate or they are well enough to work again, they can then be included on your furlough programme.
Many of us need to shield members of our family who are more vulnerable in line with government advice
If this is the case with one of your employees and they are unable to work from home, you may furlough them. This also applies if you would otherwise have had to make them redundant.
On a similar note, if one of your employees has caring responsibilities resulting from the current health emergency (for example looking after a child), you may place them on the furlough scheme.
What if your employee has more than one job?
Many part-time workers have more than one job. If this is the case, they can either be furloughed for each job as long as there is no co-ownership between the employers.
It may be that an employee is furloughed from one job but they continue to work from home for another job. This is allowed.
They should receive the furloughed pay from the appropriate employer and their usual pay from the other.
Information regarding contracts and eligible individuals who are not employees
If your employee is on a fixed term contract, they may be furloughed. You may also extend their contract during the period of time that the Government’s furloughing scheme is in existence. If you do not extend or renew the contract, you may not continue to claim for them.
If you pay individuals for their services to your business and they are usually paid via the PAYE system, you may claim for them to be on furlough.
This applies to the following types of employees:
- salaried members of Limited Liability Partnerships (LLPs)
- office holders (including company directors) – furlough will need to be agreed between the office holder and those in charge of the PAYE. Company directors are able to undertake essential duties required by their company during this time.
- agency workers (including those under employment by an umbrella company) – where agency workers are paid via PAYE, they are eligible to be furloughed and to receive support under the furlough scheme including when they are employed by umbrella companies. Again, this should be agreed between the agency and the agency worker.
- Limb (b) workers. If limb workers are paid through PAYE, they may be furloughed and they will receive support through this scheme. Those who pay tax on their trading profits through self assessment may instead be eligible for the Self-Employed Income Support Scheme (SEISS). SEISS was announced by the Chancellor on 26 March 2020 so you should check which outcome would be most advantageous to you before applying.
Is volunteer work allowed during furlough?
Yes. These are unprecedented times and many vulnerable people are relying solely on volunteers for essentials such as food. A furloughed employee may take part in voluntary work as long as it does not generate revenue or add value to your business or any other commercial enterprise.
Similarly, an employee may want to undertake volunteer opportunities at this time to improve their range of in-work skills once the country returns back to normal. Furloughed employees are allowed to engage in training towards their job as long as it does not bring money into the company at that time.
In fact, the Government is encouraging employers to generate training opportunities for their staff during these challenging time.
When an employee is undertaking training and on furlough, they are entitled to be paid at least their appropriate national minimum wage but you, their employer, have to request it. The Government has stated they will provide funds for employers to be able to pay their staff a minimum of 80% of their usual earnings.
What about maternity, adoption, or paternity leave?
The usual rules apply. You are able to claim through the scheme for enhanced contractual pay for employees who are on:
- maternity pay,
- paternity pay,
- adoption pay, or
- shared parental pay.
How is the process of furlough arranged?
First, you need to discuss the situation with their staff either over the telephone or via email. Any changes to the employment contract which are required should be made. Your employee then needs to confirm their agreement to the furlough scheme in writing and you need to keep this document safe for at least five years.
When an employer is deciding who needs to be on the scheme, standard equality laws apply – in other words, the employment discrimination laws which apply in normal times must still be obeyed. Not all of your employees should be placed on furlough if this is not necessary.
Claims should be started from the date that the employee finishes work and starts furlough and not when:
- the decision to be furloughed is made or
- your employee has written to confirm their agreement to a furloughed status at work.
How much can you claim?
This depends on:
- how much the employee earns,
- what kind of contract they are on, and
- when they started working for you.
If your employee in question is on a full or part-time contract, you may claim for 80% of what their usual salary would be, before tax, as of 28th February 2020.
If the employee has been employed for 12 months or more, you can claim the highest of either
- the same month’s earning from the previous year or
- the average monthly earnings for the 2019-2020 tax year.
If they have been working for you for under a year, you should claim for 80% of their usual monthly wages since they started employment with you.
If your employee only started with you recently, work out what their pro-rata earnings would be and then claim for 80% of that. If you only furlough a member of staff for part of a pay-period, the amount should be pro-rated.
Are Employer National Insurance and Pension Contributions covered?
You can claim for them but you will still need to pay them on behalf of the furloughed staff initially.
As an employer, what should I not claim for?
The following points are not covered by this scheme so they should not be included in the amount you claim for:
- if you choose to top up your employees salary to the full 100%, you should not claim for the additional NI or pension contributions. You must cover these yourself.
- any further pension contributions that are above the mandatory contribution required
- historic overtime, fees, commission, bonuses, tips or non-cash payments owed to the employee.
- taxable Benefits in Kind.
What do I need to make a furlough claim?
To begin a claim for the Government furlough scheme, you will need to have the following information to hand:
- your businesses ePAYE number
- the total number of employees being placed on furlough
- the start and end date of the claim period (this can be extended)
- the amount claiming for (as per the minimum length of furloughing of 3 weeks non-stop)
- your contact name and number
- your bank account and sort code
- the correct, total amount for which you are claiming for. It is up to you to work this out – but remember, HMRC retain the right to audit every claim. You need to work out what 80% will be, as this adjustment will not be done by HMRC.
Is there a minimum furlough period?
Under the current Covid-19 furlough scheme, any employees you place on furlough must remain so for a minimum period of 3 consecutive weeks.
When they return to work, they must be taken off furlough. It is possible for employees to be furloughed multiple times but each separate instance of furlough must be for a minimum period of 3 consecutive weeks.
How do I claim?
The first payments under the scheme are due to be made at the end of April. You will be able to apply via the HMRC website however, at time of writing, the application form is not ready. If your business needs financial assistance now, you should consider applying for the Coronavirus Business Interruption Loan Scheme (covered later in this article).
What happens after I have put my claim in?
Your claim will be checked by HMRC for eligibility. On approval, the funds will be processed into the bank account of which details you supplied. This must be a UK bank account. HMRC have guaranteed to process all claims before the scheme comes to an end.
Once you have received the money, you then must pay the staff who have been placed on furlough. No fees may be deducted from the money you receive from the Government for any reason. You also may not use this money as redundancy payment for an employee.
What will happen when the Government ends the scheme?
We know this cannot go on indefinitely. The Government will end the scheme when it sees fit and, at this point, you must decide whether:
- an employee may return to their usual duties or,
- you terminate their contract making them redundant.
Do employees still have the same legal rights during this period?
Yes. Any employee is still entitled to the same legal entitlements including:
- SSP, maternity and other parental rights, and
- rights against unfair dismissal and redundancy payments.
Coronavirus Business Interruption Loan Scheme (CBILS)
What is the coronavirus business loan?
To help both small and larger businesses through these unprecedented times, the UK Government has launched the Coronavirus Business Interruption Loan Scheme (CBILS) which offers support for small and medium enterprises (SMEs) in order to survive.
This temporary scheme offers access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years.
The first 12 months of interest payments or lender-levied fees are covered by the Government so technically there are no upfront costs thus relieving some of the financial pressure caused because of decreased revenues. Businesses accessing the scheme also benefit from lower initial repayments.
Each loan has a guarantee of 80% from the Government subject to pre-lender cap on claims in order for lenders to gain confidence in providing this finance to the businesses in need. This scheme will be delivered through your usual commercial lenders but supported by the government-owned British Business Bank.
Lenders will provide up to £5 million in the form of:
- invoice finance, and
- asset finance.
Despite the 80% guarantee provided by the government, the borrower does still remain fully liable for the entire debt.
So far, there are 40 accredited lenders offering the scheme including all of the major banks. High street banks, challenger banks, asset-based lenders, and smaller specialist local lenders are all partaking in this new scheme.
Initially, this scheme was only available to larger businesses who had very large turnovers. However, because the impact of Covid-19 has affected companies of all sizes, it has since been expanded to be able to offer help to smaller businesses.
Personal guarantees of any form may not be taken for facilities below £250,000 under this scheme.
For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, however:
- recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the receipts from recovered business assets (for example, unpaid invoices) have been collected and
- a Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBILS-backed facility. In other words, it won’t be secured on the home in which you and your family live.
How do I know if my small business is eligible for CBILS?
- your turnover must be primarily derived from UK companies, organisations, and consumers,
- your annual turnover must be no more than £45 million,
- you must self-certify that the performance of the business has been adversely hit by Covid-19 and
- your borrowing proposal must be considered as commercially viable by the lender regardless of the current health pandemic.
The following organisations are not eligible:
- state-funded primary and secondary schools
- establishments of further education if they are grant funded
- public sector bodies
- banks, insurers and reinsurers (insurance brokers are eligible to apply)
How do I apply for CBILS for my SME?
You must approach the lender yourself to apply for the financial aid. You may also use a broker to help you. Brokers package loans for clients and present the request for funding in the manner required by the bank together with preparing necessary paperwork.
Because of the high level of demand for assistance and lack of available staff currently, phone lines are extremely busy. Bank branches are also asking you to not come into branch due to social distancing, so enquiries in person are also likely to be difficult.
Even though the funding is available, it’s currently quite hard to apply for.
Can someone else apply for me?
No – you must apply yourself although, according to reports, many are choosing to use a broker to package their proposal. The benefits of using a packager include:
- initially vetting of your application
- checking to see that all parts of the application are complete
- compilation of the documents likely to be required for an application (covered below)
- when complete, the application will conform to the lender’s standards meaning a faster decision
Most brokers charge a small fee – please make sure you understand any fees you may be charged before deciding to proceed with a broker.
What will I need to apply for a CBILS?
As with standard loan requests, you will need to tell the lender:
- how much you need to borrow
- what the money will be used for
- the period of repayments suitable
You may also need to have ready:
- a cash flow forecast
- management accounts
- historic accounts
- a business plan
- details of any assets
Can I approach other lenders if my request is turned down?
Yes – as with any type of personal or commercial finance, it does not mean that every lender will refuse your application if one has done already.
In addition, the Government are keen for businesses to access the help they need and, as a result, they are changing their guidance to financial institutions based on feedback from lenders and borrowers (successful and unsuccessful). You may wish to apply to the same institution again if the guidance institutions are following has been changed.
CBILS for large businesses
In the original loan scheme launched by the Government, larger businesses with an annual turnover of between £45 million and £500 million were eligible to apply for financial aid if they are facing cash flow difficulties which would make a previously healthy business unviable in the short term.
Loans are available up to £25 million for these companies. This funding is also delivered to market through commercial lenders and it is also backed by the 80% guarantee from the UK Government. Any loans offered must be done so at standard commercial rates of interest.
Who is eligible for this loan?
To apply for CBILS for larger businesses, your company must:
- be a UK based business with UK business activity
- have an annual turnover of between £45 million and £500 million
- be unable to secure regular commercial financing
- have a viable borrowing proposal which a lender would still consider viable regardless of the Covid-19 situation
- demonstrate that it could trade through any short to medium term difficulty with the help of the loan.
The following businesses are not eligible to apply:
- banks and building societies
- insurers and reinsurers (insurance brokers may apply)
- any public sector organisations e.g. primary and secondary schools
When will the CBILS launch for larger businesses and how do I apply?
We are still waiting for this to be launched. According to the government website, it will launch later in April 2020. We anticipate that the scheme will offer a mixture of short term loans, overdrafts, invoice finance and asset finance.
HMRC Time to Pay for VAT
Due to the Covid-19 pandemic, HMRC have altered their Time to Pay guidelines. If your business has been affected, you may be able to delay paying some tax payments without receiving a penalty.
You can delay VAT payments which were due before 30th June 2020 for 9 months, until 31st March 2021. You can also defer your self-assessment payment on account which would have been payable on July 2020 until 31st January 2021.
If there are other bills you are struggling to pay, HMRC advise you call their helpline.
Each business is handled on a case-by-case basis and HMRC look at your individual circumstances and possible liabilities.
Time To Pay for other tax liabilities
The Time To Pay facility has been available to businesses for over a decade now not only on VAT but on PAYE payments, corporation tax, and a selection of personal taxes.
You may still apply for a Time To Pay arrangement on other taxes owed by your business however you will need to demonstrate that:
- paying the outstanding tax on the due date will affect your ability to trade and
- you have attempted to raise the money from other sources (including debt financing) but you have been unsuccessful
You may ask to split the payment over 12 months – HMRC may not offer you as long as 12 months however. They will require a direct debit payment for each instalment (in addition to the first instalment being paid by bank transfer or debit card (not credit card)) and, if you miss a repayment, the remaining debt will likely become due for immediate repayment.
Coronavirus business support
In the past few weeks, the Government has unveiled many different coronavirus business help schemes. We understand that many businesses will be reluctant to take out debt financing to trade through this period as there is no guarantee that levels of trade will spring back to normal following the lifting of the lockdown.
The next few weeks and months are going to be difficult to navigate because, as a country and as business owners, we’ve never been through a situation like this before. Britain does need its businesses so please do take advantage of any support you feel is suitable.
Coronavirus business links
The British Chambers of Commerce is running a coronavirus business impact survey – to take part, please click here.