COVID-19 (Coronavirus) - UK Schemes for Businesses and Individuals

Assistance available to UK businesses

As the Covid-19 crisis continue to unfold, the UK Government have announced a series of financial assistance packages aimed at easing the financial impact on UK businesses during the COVID-19 pandemic.

The following is a breakdown of the packages introduced by the Government and guidance on how to seek assistance with your business finances. These schemes are subject to change on little or no notice and details are correct as at 28th April 2020.

Loans and Financing

Covid Corporate Financing Facility (CCFF)

The CCFF provides a means for larger, non-financial firms – including subsidiaries of overseas companies – affected by a short-term funding squeeze, to deal with their short-term liabilities such as wages and paying suppliers. CCFF is open to firms that can demonstrate they were in sound financial health prior to the shock.

The CCFF will support corporate finance markets overall and help to free up credit for SMEs from banks. The scheme was made available from the week commencing 23 March.

According to the Government, the scheme will run “for at least 12 months and for as long as steps are needed to relieve cash flow pressures on firms that make a material contribution to the UK economy.”

The Government, in conjunction with the Bank of England, are seeking a workaround for companies that don’t have a credit rating (required for the CCFF) to construct one with their banks, therefore making it easier for those companies to benefit from the scheme.

Key features of the CCFF are as follows:

  • Minimum loan sizes of £1m (max. TBC) with offers rounded to the closest £100,000.
  • Financing on “comparable terms to those prevailing in the market pre COVID-19”.
  • Designed to provide funding to pay wages, suppliers, or to boost cash flow.

Future Fund

A key announcement was made by the Government on 20 April regarding innovative businesses in the UK tech/R&D sectors, with initiatives that will provide co-investment, loans and grants totalling £1.25bn.

£500m of this will go into the Future Fund, which will offer convertible loans of £125k-£5m to UK companies in the innovative sectors. In return for the finance, the Government will take a share of the company’s equity.

The remaining £750 million in that pot will provide support to SMEs focusing on research and development through Innovate UK’s grants and loan scheme:

  • £200m of grant and loan payments will be allocated for its 2,500 existing Innovate UK customers on an opt-in basis.
  • The remaining £550 million will be made available to increase support for existing customers and £175,000 of support will be offered to around 1,200 firms not currently in receipt of Innovate UK funding.
  • The first payments are expected to be made by the middle of May 2020.

Key Features of the Future Fund are as follows:

  • Loans of between £125k and £5m are available.
  • Funding must be used for the purposes of the business’ working capital purposes only.
  • The term of the load is limited to a maximum period of 36 months.
  • An interest rate of 8% per annum to be paid on maturity of the loan.
  • The scheme is open until the end of September 2020.
  • Borrower’s must:
    • Be UK-based (unlisted) registered companies.
    • Have raised at least £250k from private third-party investors over the past 5 years.
    • Have a substantive economic presence in the UK.
  • Funding will automatically convert into equity on next qualifying funding round at a minimum conversion discount of 20%.
  • If the company is a member of a corporate group, the ultimate parent company (if a UK registered company) will receive the loan.

Start Up Loan

An additional scheme has been established to target smaller, early stage businesses, requiring lower borrowings, known as the Start Up Loan.

This is a government-backed personal loan available to individuals looking to start or grow a business in the UK. Successful applicants also receive 12-months of free mentoring and business offers.

Key Features of the Start Up Loan are as follows:

  • All owners or partners in a business can individually apply for up to £25,000 each, with a maximum of £100,000 available per business.
  • The loan is unsecured – no need to put forward any assets or guarantors.
  • Loans of £500-£25,000.
  • Fixed interest rate of 6% per annum.
  • Repayment terms of 1-5 years. and
  • No application fees or set-up fees.
  • Applicants must meet all of the following requirements:
    • You live in the UK.
    • You’re 18 or over.
    • You have started (or plan to start) a UK-based business that has been fully trading for less than 24 months.

Coronavirus Business Interruption Loan Scheme (“CBILS”)

The CBILS scheme for small and medium-sized businesses (“SMB”) will make finance facilities of up to £5 million available via loans, overdrafts, invoice finance and asset finance facilities. The facilities will be provided via accredited commercial lenders.

The UK government will guarantee 80% of amounts lent to participating business. In addition, the government will provide a business interruption payment to all businesses participating in the CBILS scheme covering the first 12 months of interest payments and any fees levied by the lender.

Key Features of the CBILS are as follows:

  • Facilities between £1,000 – £5,000,000.
  • Up to 80% guarantee to the lender on each loan (depending on size). The borrower is liable for 100% of the facility and any interest following the initial 12-month period.
  • Facility must be for UK-based business activity.
  • The business’ annual turnover cannot be more than £45 million in the preceding 12 months. If the applicant is a group company, this limit applies to the entire group combined.
  • The business must generate greater than 50% of turnover from trading activity.
  • No longer limited to businesses that have been refused loans on commercial terms.
  • No personal guarantee is necessary for any form for facilities below £250,000.
  • For facilities above £250,000, personal guarantees may still be required at a lender’s
  • However, these guarantees will:
    • Prohibit the Principal Private Residence (PPR); and
    • Be capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.

Applicants must:

  • Have a ‘sound borrowing proposal’ which the lender would consider viable, were it not for the current pandemic.
  • Self-certify that it has been adversely impacted by the coronavirus.

The following businesses cannot apply:

  • Banks, insurers and reinsurers (but not insurance brokers).
  • Public-sector bodies.
  • Further-education establishments (if they are grant-funded).
  • State-funded primary and secondary schools.

Repayment terms are up to six years for term loans and asset finance and up to three years for overdrafts and invoice finance.

De Minimis state aid has been removed as a restriction on applying for CBILS. This means that any funds administered to a company under this scheme will not be considered as part of the €200,000 limit of state aid that may be granted to a business over a consecutive three-year period.

CBILS now supports lending to smaller businesses even where a lender considers there to be insufficient security. This has made more smaller businesses eligible to avail of lending. Where there is sufficient security available, it is likely that the lender will take such security in support of a CBILS facility.

Applicants are advised to have the following documentation in order prior to their application (note that these requirements may vary from lender to lender):

  • A cash flow statement for the next 3-6 months.
  • A ‘sound borrowing proposal’ or business plan.
  • Details of assets.
  • Latest year end accounts.
  • Latest management accounts (profit & loss account and balance sheet).

Coronavirus Large Business Interruption Loan Scheme (“CLBILS”)

A further expansion of the CBILS comes in the form of the CLBILS, targeted at larger more established business.

Similarly, to CBILS, the government will provide a guarantee of 80% to enable banks to make loans of up to £50 million available through the British Business Bank’s accredited lenders to viable businesses.

Key Features of the CLBIS are as follows:

Basic eligibility requirements released so far are that applicants for CLBILS must:

  • Be UK-based in its business activity.
  • Have an annual turnover of over £45 million (upper cap of £500m has now been lifted).
  • Financing of up to £25m available to these firms, but up to £50m is available for firms with turnover of over £250m.
    • Finance terms of three months to three years.
  • Be unable to secure regular commercial financing.
  • Have a borrowing proposal which the lender:
    • Would consider viable, were it not for the COVID-19 pandemic.
    • Believes will enable you to trade out of any short-term to medium-term difficulty.
  • Have not have received a facility under the Bank of England’s Covid Corporate Financing Facility (CCFF).
  • Businesses from any sector can apply, except for the following: credit institutions, insurers and reinsurers; building societies; public-sector bodies; further-education establishments (if they are grant funded); or state-funded primary and secondary schools.

Borrowers will need to show evidence of their ability to repay the loan. The documents that banks are likely to seek out are:

  • Management accounts.
  • Cash flow forecast.
  • A Business plan.
  • Historic accounts.
  • Details of assets held by the business.

Job and Income Protection

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme (“CJRS” but also referred to as the furlough scheme) will be available for any employer, who will be reimbursed for 80% of the salary of employees and workers paid through PAYE that would otherwise have been laid off/at risk of redundancy during this crisis, up to £2,500 per month (before the usual income tax and other deductions):

  • Will cover everybody on the PAYE scheme – i.e. those with a set of regular earnings – including businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities.
  • Employers having the option to top this up. This can be backdated to 1 March 2020.
  • The scheme will last until the end of June 2020.
  • PAYE staff can be furloughed multiple times but must be furloughed for a minimum of 3 consecutive weeks at a time.
  • The aim is that workers in any part of the UK can retain their job, even if employers can’t pay their salary.
  • The grant can be claimed by employers for any of the following groups, if they are paid via PAYE:
    • Office holders (including company directors, however, this must be done by way of formal resolution of the board of directors, recorded in the meeting’s minutes and confirmed in writing).
    • Salaried members of Limited Liability Partnerships (LLPs).
    • Agency workers (including those employed by umbrella companies).
    • Self-employed workers providing services for someone else.
  • The 80% now includes salary/wages, past overtime, ‘fees’ and contractual commission. However, it excludes discretionary commission and/or bonuses.
  • A furloughed worker cannot undertake work for or on behalf of the organisation. This includes providing services or generating revenue; however, training is permitted, and those workers can seek employment elsewhere but must be available to immediately return to work for their principal employer if requested to do so after furlough leave as ended.
  • Where training is undertaken at the request of their employer, furloughed workers are entitled to be paid at least the appropriate national minimum wage for this time. If the time spent training attracts a minimum wage entitlement in excess of the furlough payment, employers will need to pay the additional wages.
  • Employers can now also claim the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on those wages.
  • The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 19 March 2020, have enrolled for PAYE online and have a UK bank account.
  • The scheme will include those workers who pay themselves a salary and dividends through their own company that is operating a PAYE scheme.
  • Employers who have already issued P45s to any employees will need to seek specialist employment law advice.

Others eligible for CJRS include:

  • Employers/workers on any type of employment contract, including full-time, part- time, agency, flexible or zero-hour contracts.
  • Employees on unpaid leave, but only where that unpaid leave started after 28 February 2020.
  • Employees which have more than one employer can be furloughed for each job. An employee can receive a furloughed payment from one employer but continue working for another employer and receive their normal wages.

Self-Employed Income Support Scheme (“SEISS”)

The SEISS will provide taxable grants worth 80% of average monthly profits over the past 3 years. This grant is capped to a maximum of £2,500 per month.

The scheme is planned to begin paying funds to self-employed persons by the beginning of June and will cover 95% of those making money from self-employment. The remaining 5% have average incomes of over £200,000 and are therefore deemed illegible for the scheme.

The scheme will initially be available for 3 months and cover March to May 2020, with payments made from the beginning of June 2020. They may be extended to self-employed people:

  • With trading profit of less than £50,000 in 2018-19; or
  • With an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018- 19

Additionally, the scheme is available to those who are:

  • Making more than 50% of their income from self-employed work; and
  • Already in self-employed work with a tax return for 2019.

HMRC will contact those eligible workers directly once the scheme is operational based on information it holds. Eligible parties will then need to complete and online form to receive the grant, with payments made into the recipient’s bank account.

For those workers who have greater than one but less than three years’ tax returns:

  • Their profits for the relevant period(s) will be averaged out to calculate the grant.
  • If there is only one year of returns, then it will be assessed on that basis.

The SEISS grants can be backdated to 1 March in the same way as the CJRS. Before grant payments are made under the scheme in June, self-employed workers have access to:

  • Self-assessment deferrals (deferred to January 2021).
  • CBILS, and business continuity loans where they have a business bank account (subject to the lenders’ normal requirements).
  • Universal credit in full (subject to normal eligibility), Minimum Income Floor (MIF) suspended for the purposes of Universal Credit calculations, which can equate to up to £1,800 per month.

SEISS is not available to those who pay themselves a salary and dividends through their own company (covered by the Coronavirus Job Retention Scheme if they are operating PAYE schemes instead). However, the scheme is available to partners within a partnership.

Business Grants and Relief (England)

Cash grants are being made available to small businesses with business properties in England as a method of direct assistance. As of 1 April, local authorities had received more than £12 billion for the supply of these grants. Local authorities will contact eligible business, after which those business can apply for the relevant grants.

The grants require the properties to be occupied and wholly or mainly being used:

  • As shops, restaurants, cafes, drinking establishments, cinemas and live music venues.
  • For assembly and leisure.
  • As hotels, guest and boarding premises and self-catering accommodation.

Properties that were not eligible for percentage SBRR relief (including those eligible for the Small Business Rate Multiplier) are excluded. Businesses cannot receive both SBRR and RRR.

Other reliefs and measures

Protection against eviction for commercial tenants

The Government have ensured that no businesses will be forced out of their premises if they miss a payment in the next three months as a result of COVID-19. The Government is also considering the impact on commercial landlords’ cash flow and will build in support for them in the near future.

  • No business will automatically forfeit their lease and be forced out of their premises if they miss a payment up until 30 June. There is the option for the government to extend this period if needed.
  • This is not a rental holiday. All commercial tenants will still be liable for the rent.
  • As a result of The Coronavirus Act 2020, there is no need for commercial tenants to make an application.

New insolvency rules

The UK government intends to suspend the wrongful trading regime governed by sections 214 and 246B of the Insolvency Act 1986.

The Insolvency Act requires a director to act in the best interests of a company’s creditors and take all steps necessary to minimise losses to creditors in the event it becomes apparent the company will not be able to avoid an insolvent liquidation or administration.

The government intends to retrospectively suspend the wrongful trading regime from 1 March 2020 for a period of three months. The suspension will permit directors to continue to trade even where they believe the company may not be able to avoid insolvency. The measure will allow directors to prioritise making payments to employees and suppliers in place of creditors, without incurring personal liability. As yet, the government has not provided detailed guidance on the suspension.

Further changes are planned to the UK’s insolvency regime that will enable companies to continue trading and purchasing basic supplies, including energy, raw materials and internet connectivity, while they are seeking or undergoing a rescue or restructure.

Statutory Sick Pay (SSP) Rebates

The Government will be providing support by way of rebates on SSP for staff members who decide to self-isolate. An extra £2billion is being made available to up to 2 million businesses that had fewer than 250 employees on 28 February 2020.

  • The rebates will cover the first two weeks of SSP per eligible employee. SSP is currently £95.85 per week – this was increased on 6 April from £94.25 per week.
  • SSP will be available to staff required to self-isolate, without the requirement to obtain a sick note from a doctor and even if they are not displaying symptoms. After seven days of absence, staff will be able to obtain an “isolation note” via the NHS 111 online service.

Tax payment deferrals

You do not need to tell HMRC that you are deferring payment. No interest or charges will be payable either.

VAT payment deferral – No VAT will be payable from now until the end of the quarter. This means a direct injection of £30bn (1.5% of GDP) until end of financial year. The deferral will apply from 20 March until 30 June 2020. If you choose to defer your VAT payment as a result of coronavirus (COVID-19), you must pay the VAT due on or before 31 March 2021.

Self-Assessment payment on account deferral – If you’re due to pay your second self-assessment payment on account by 31 July 2020, you have an option to defer payment until January 2021. You do not need to self-employed to be eligible.

Insurance claims

Businesses (such as venues, pubs etc.) will now be able to claim under business interruption insurances which cover pandemics due to the Government’s actions/policies.

Businesses with event cancellation policies that include unspecified notifiable disease extensions should be able to make a claim for the necessary and unavoidable cancellation, abandonment, curtailment, postponement and disruption of their event for reasons beyond the control of organisers and participants. Specific policy wording should be checked.

Time to Pay service

All businesses and self-employed people in financial distress (and with outstanding tax liabilities) could be eligible to receive support with their tax affairs from HMRC.

These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. HMRC’s dedicated helpline – 0800 0159 559.

Research and Development (R&D) cash acceleration

Companies can obtain between 10% and 33% in cash from HMRC on qualifying R&D spend. There are also specialist lenders who will provide finance against the credits which will assist in generating and maintaining cash flow.

Accounts filing extension

From 25 March 2020, businesses will be able to apply for a 3-month extension for filing their accounts. This is a joint initiative between the Government and Companies House, meaning businesses can prioritise managing the impact of Coronavirus ahead of filing accounts.

Article written with the assistance of Kevin Keenan.

Philip Lee - Andrew Tzialli
24 April 2020