Businesses throughout the UK have been hard-hit by the Coronavirus pandemic. The UK government has brought in timely rescue measures and is working as fast as possible in mobilising them so that they can feed in to businesses that desperately need them.
We have briefly summarised some of the measures becoming available and would strongly recommend that you make use of them to help your business with this unprecedented economic downturn.
Coronavirus Job Retention Scheme
All UK employers will get financial help from the government so that they can avoid laying off staff. Such staff will need to be designated as ‘furloughed workers’, meaning that such staff are temporarily being asked to stop working because there is insufficient work for them currently, but they are not being made redundant.
The chancellor has promised a grant of up to £2,500 per month for any such employee. HMRC will reimburse 80% of such furloughed workers’ wage costs, up to a cap of £2,500 per month. The employer can choose to fund the difference between this and the employee’s normal salary, but does not have to.
Therefore, the employer will make the wage/salary payment to the furloughed worker and then be reimbursed by HMRC.
This scheme will run for 3 months from 1 March 2020, but will be extended if necessary. HMRC is working urgently to set up a system for reimbursement, as existing systems are not set up to facilitate payments to employers. Employers will need to submit information to HMRC about the employees that have been furloughed and their earnings through this new system.
If workers are given ‘furlough’, they are told to stay away from work for a certain period because there is not enough for them to do. Employers will therefore need to be careful when designating staff as ‘furloughed’, and in particular:
- Ensure that all employment laws are complied with. Being able to place an employee onto the scheme is likely to depend on their contract, be subject to negotiation, and be by mutual agreement.
- A fair selection process must be adopted, and employers must not discriminate or have any bias in their selection of employees for the scheme.
- Care will be required to ensure that a furloughed worker does not carry out any work, whether directly or indirectly. This could cause a breach of the scheme’s expected requirements and could be seen as a tax misdemeanour rendering the clawback of any grants received with the additional scope of heavy penalties being levied.
This scheme aims to provide businesses and their employees with continuity so that they can resume activities with as little disruption as possible when the crisis is over.
Business rates holiday
Retail, hospitality and leisure businesses which are based in England will receive a business rates holiday for 12 months from April 2020. The rates holiday will become available automatically through the local authorities and no action is required by the eligible business.
Hotels, guest & boarding premises, shops, restaurants, cafes, drinking establishments, cinemas, live music venues, and other venues used for assembly and leisure will be able to benefit from the business rates holiday.
The business rates holiday is also available to ‘Ofsted’s Early Years Register’ and ‘Early Years Foundation Stage’ children’s nurseries.
Business owners in these industry sectors should keep an eye on their business rates bill which would normally be issued by the local authority in March/April each year, and ensure that they benefit from the business rates holiday. Businesses outside of these designated industry sectors should also contact their local authority to understand what relief, if any, is available to them.
A grant of £25,000 will be provided to retail, hospitality and leisure businesses in England operating from smaller premises. Smaller premises are those with a rateable value between £15,000 and £51,000. Those with a rateable value of under £15,000 will receive a grant of £10,000.
A grant of £10,000 will also be provided to small businesses in England which are already eligible for the ‘small business rates’ or ‘rural rate’ reliefs, and pay little or no business rates. This is to help them meet their ongoing business costs.
These grants are to be automatically channelled through the local authorities who will write to eligible businesses. We recommend business owners to follow up with their local authority if they feel that their business is eligible for a grant.
Coronavirus Business Interruption Loan Scheme (CBILS)
CBILS is available to small and medium enterprises. The British Business Bank will be responsible for administering this new loan scheme under which the government will provide lenders with an 80% guarantee of each loan. The loan scheme will cover various products including loans, overdrafts, invoice finance and asset finance.
The scheme will support financing facilities of up to £5m and the government will cover the first 12 months of interest payments. Loans are available to businesses which have a turnover of £45m or less. The scheme is to be available from the week beginning 23 March 2020.
CBILS is available through the British Business Bank’s 40+ accredited lenders, listed here: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/
In the first instance, businesses are advised to contact their existing banks for details on how to access the scheme.
Further details of the scheme can be obtained from https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/
COVID-19 Corporate Financing Facility (CCFF)
Larger businesses which are fundamentally strong but have begun to suffer a sudden cash flow crisis, will be able to use a new financing facility announced by the Bank of England.
The government will purchase short-term debt (commercial paper) of up to one year maturity from businesses which can show that they were in sound financial health before the Coronavirus economic shock.
The facility will look through the temporary impact on balance sheets and cash flows by basing eligibility on the company’s credit ratings prior to the Covid-19 situation. Businesses do not need to have previously issued commercial paper in order to participate.
The CCFF is to become available through the Bank of England from the week beginning 23 March 2020, and further details can be found at https://www.bankofengland.co.uk/markets/market-notices/2020/ccff-market-notice-march-2020.
Deferral of VAT and Income Tax payments
VAT: All UK businesses will be automatically eligible to defer any VAT payment that needs to be made between 20th March 2020 and 30th June 2020. These payments can be deferred until 5 April 2021.
Income Tax: Only self-employed people are eligible for this income tax deferral. The 2nd payment on account becoming due on 31 July 2020 may be automatically deferred to 31 January 2021 without any interest or penalties.
Statutory Sick Pay (SSP) – Support for businesses and the self-employed
The government will cover 2 weeks’ SSP for each employee who has been off work due to COVID-19. Businesses with fewer than 250 employees will be eligible and a rebate mechanism is being developed. Self-employed people can now access full universal credit at a rate equivalent to statutory sick pay.
HMRC Time to Pay
HMRC’s Time to Pay scheme can enable firms and individuals in temporary financial distress as a result of COVID-19 to delay payment of outstanding tax liabilities. HMRC’s dedicated COVID-19 helpline provides practical help and advice on 0800 0159 559. Taxpayers wishing to take advantage of this assistance must contact HMRC to agree terms as these are decided on a case-by-case basis.
Mortgage and rent holiday for individuals
Mortgage borrowers can apply for a three-month payment holiday from their lender. Both residential and buy-to-let mortgages are eligible for the holiday. Interest will continue to be charged on the amount they owe.
Tenants can apply for a three-month payment holiday from their landlord. No one can be evicted from their home or have their home repossessed over the next three months.
Ban on evictions for commercial tenants who miss rent payments
Commercial tenants unable to pay rent in the next three months because of coronavirus will be protected from eviction, though liability for those rents remain. Further detail can be found at https://www.gov.uk/government/news/extra-protection-for-businesses-with-ban-on-evictions-for-commercial-tenants-who-miss-rent-payments
Other precautionary measures which your business may already have in place such as insurance should not be ignored. You should check the terms of cover. If there is cover in place for pandemics and government-ordered closure, then your business is likely to be eligible for a claim.
Similarly if property owners have insurance in place to protect their rental yields this should also be considered.
If you wish to discuss any of the keys points and receive advice on how best to manage the next steps, then please contact us. We understand the difficulties that businesses face during this challenging time, and we can offer guidance to you, your business and your employees.
To help you plan through this pandemic, we have put together a checklist to help you mitigate some of the business impacts. Please click the link below to view the checklist: