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:
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:
Key Features of the Future Fund are as follows:
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:
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:
The following businesses cannot apply:
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):
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:
Borrowers will need to show evidence of their ability to repay the loan. The documents that banks are likely to seek out are:
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):
Others eligible for CJRS include:
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:
Additionally, the scheme is available to those who are:
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:
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:
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:
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.
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.
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.
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