Financial Support for Businesses during Coronavirus – 6 April 2020 update & summary

We will update this page as often as possible. Thanks to Monty Accounting for providing daily analysis of the situation for businesses. Information from some other organisations can be found at the foot of the post.

“Stand by your employees, stand by your workers, because we will stand by you.” (the Prime Minister, 16 March 2020).

Information from Monty Accounting

If you have any questions on the following or if you need any help with planning for what might be on the horizon, please contact Charlotte or Tim at Monty Accounting

For other advice about Coronavirus, click here.

Friday 27 March 2020

We have listed the support available a rough order of most useful to least useful. ‘Useful’ inthis context is a combination of size, speed and accessibility.

The government now has a business support website which is very usable and worth regular review.

Lease forfeiture moratorium

This has been tacked on to the Coronavirus bill. Until 30 June 2020 a commercial tenant will be protected from eviction if they cannot pay their rent due to the impacts of covid-19.

At present, tenants will still be liable for the rent which is falling due for the next three months, however you cannot be forced out of your premises, as long as you pay your rent by 30 June. This date will be kept under review and will be extended if needed.

The government seem to be hoping that they will not need to get further involved as they do not want to also be bailing out landlords.

This now gives businesses a chance to enter proper negotiations with landlords – for hospitality & retail business, it seems almost unthinkable that landlords do not shoulder some hardship as their assets are rendered almost worthless with current Governmentactions, however many large landlords are holding firm. After today’s announcement theremay be some further movement.

If a large number of landlords do not reach agreement voluntarily, it is likely that the government will have to get involved. So far we’re seeing most landlords looking to come to some form of compromise.

If this impacts you, spend more time reviewing this on the government sources and consider getting a legal opinion from a property solicitor.

Wage support – Coronavirus Job Retention Scheme

Essentially, by using this scheme you will pay your employees 80% of their salary (up to a cap of £2,500) through the company payroll. This includes all the normal tax deductions, employers NI and employers pension.

The government then give you a grant covering the 80% salary/wage plus the cost of ERs NI and ERs pension.

So essentially, you operate an 80% payroll, but at no cost to the company.
It is a very generous scheme and is intended to keep millions of people off Universal Credit.

You can pay more than the 80% – but that is as far as the government will fund you (and it goes without saying, you need to pay the whole 80% to employees).

Eligibility

  • Any employer is eligible.
  • It is available for employees who were on your PAYE payroll on 28 February 2020, so March new starters are not covered here.
  • If you have had to let people go, you may be able to bring them back and look after them (in a way which is possibly quicker and more beneficial than Universal Credit).
  • Employees will need to be designated as ‘furloughed workers’ – you need to inform them of this change, they need to agree it with you and they cannot work for you (and we are reminded that changing someone’s employment status is still subject to employment law).
  • Employers can claim the grant for employees for a minimum of 3 weeks and up to a maximum of 3 months.

Calculations

There are a few calculations to look at when working out an employee’s average earnings.

  • Commissions and bonuses should NOT be used to calculate earnings. (There is no specific exclusion to tronc here, and this is a question which has been raised a number of times. Based on the current guidance we believe tronc should be included in the calculations, however, when paid it should be treated as normal earning for NI and not as tronc – these points will be investigated further).
  • For Salaried workers, the employee’s average earnings is the worker’s actual salary on 28 February 2020.
  • For variable pay; If an employee has worked for you for over one year you can claim the higher of (1) their earning in the same month last year or (2) average monthly earnings from the 19/20 tax year.
  • For variable pay; If the employee has been working for less than 1 year, use the average of the employee’s monthly earning since they started work. If they started in February and have less than 1 month of earnings, you pro-rata their February earnings

This give you the 80% that the Government pay and you should pay your staff.

Once you have the 80% you need to add on the additional claims for ERs NI and ERs pension to work out what you need to claim from HMRC – details yet to be released from the Government on how this calculation works.

Getting the grant

Companies will need to use a new system/portal HMRC is setting up – the grants will be available to be backdated to 1 March and will currently be available for three months, so until the end of May, but it may be extended.

The Chancellor has said, and guidance states, that they are aiming for these grants to come through by the end of April, so if you have a weekly payroll you are likely to have difficulty meeting this commitment in the interim.

You can submit claims every three weeks for payrolls that have been paid or are about to be paid imminently. Once the claim is received funds will be transferred to your nominated bank account (which you set up when registering on the new system presumably).

Other interesting points on CJRS

  • Multiple employment – If an employee has two employers, they can be furloughed by one and continue to work for the other, or they can be furloughed by both and receive two furlough payments.
  • Changing status – Employees can move between furloughed status and employed status, but the minimum period the government will support a furloughed worker is three weeks. If they are furloughed for less, you will not get a grant to cover it.
  • Maternity – It appears that being on Furlough will impact maternity pay calcs, if it falls in the earning period. Essentially, this scheme sits on top of existing legislation and does not seek to make any adjustments to existing legislation.
  • Redundancy – Following on from this point, you can make employees redundant whilst they are on furlough.
  • Minimum wage – National Minimum Wage / Living wages only applies to hours an employee is working, therefore Furlough falls outside of this and you can paid 80% of average earnings and not fall foul of NMW legislation.
  • Holiday – With regard to holiday, one for the employment lawyers to comment on. It looks like employees would accrue holiday whilst on Furlough. However, employees are entitled to 5.6 week of paid leave per year – we’re unsure whether Furlough meets this definition and whether you can use Furlough days as holiday days to avoid holidays accruing.

This is a brief summary of the CJRS, there is lots of guidance now in the employee and employer guides – links for these are below.

If you have any specific questions, drop us a line.

Deferral of tax

All VAT payments are now automatically deferred for three months, with no penalties. This runs until 30 June. You have until 5 April to pay back anything which is deferred.

HMRC has confirmed that if you have a Direct Debit with them, its system will still try and collect your VAT so if you do not want to pay the VAT you must cancel your DD.

VAT reclaims will still be processed as normal.

For other taxes, or VAT that falls outside this window, you need to call the COVID-19 HMRC line on 08000 241 222 (new number – lines open weekdays from 8am to 4pm).

Business rates holiday for businesses

Hospitality businesses and most shops are getting 12 months – the advice is not to contact the local authority; they will reissue bills asap.

The definition of who will get this relief is quite wide (and has now been extended to include Bingo halls, estate agents and letting agencies). You can check out this list but if you are in hospitality or if you have a high street shop, you should be covered.

Grants for small business (England only)

This one has been changed about a bit, renamed the Retail and Hospitality Grant Scheme.

  • If you are in hospitality, leisure or retail sector and your property rateable value is under £15,000 then you will receive a grant of £10,000.
  • If your rateable value is above £15,000 but below £51,000 you will be in for a grant of £25,000.

Now the instructions on the Government website is NOT to contact your local authority, it will contact you. Guidance has been provided to the local authorities but it still looks like it will be a few weeks until funds get moving (once they contact you, you need to give them banks details etc).

Interestingly from the guidance, it looks like multi-site operators will benefit multiple times from this Grant, if they have lots of different premises their ‘shops’ qualify.

The guidance published to local authorities is here if you want to dig through it all, but not much more info than above.

Non-hospitality/leisure/retail

If you are a non-hospitality business and you benefit from small business rates relief you may be eligible for a grant up to £10,000. Again, the local authority will be in touch.

Loan scheme (CBILS – Coronavirus Business Interruption Loan Scheme) UPDATED 6 APRIL 2020

There is a temporary loan scheme, backed by the British Business Bank, which businesses impacted by COVID-19 can apply for. Loans are up to £5m. This will mainly be provided through high street banks (which are also offering additional support for their customers –check your bank’s website).

Up until 1 April, CBILS loans were close to useless. They were structured in such a way that banks had every reason not to issue them and directors would be taking on huge amounts of personal risk to obtain them. However, the scheme has been revised and now, as of today, these loans are much more usable. We are getting a lot of questions about the loan scheme so we decided to pull something together which is a mix of our experiences, official guidance and conversations with people in the know.

Please remember, all the below comments are general – each bank applies its own rules to this, and these comments cover multiple loan products.

The scheme

No arrangement fees and no interest for 12 months, thereafter you will pay interest to the bank at a commercial rate.

How much will the interest be

At the moment there is little detail on this – it is not fixed by the Government and every bank has the ability to set the interest rate they want to set, however we have heard a number of banks are expecting an average of 6% per annum. We expect this would depend on the type of financing you are looking for (be it overdraft or term loan) but do not expect it to be cheap.

How much you can borrow

Under the scheme rules most SMEs can borrow ‘up to’ £5m. When thinking about how much to ask for you need to remember that the banks will be assessing whether you can pay back the loans or not. We expect banks to be using the following figures when assessing maximum loan amounts: 25% of annual turnover; 2.5 times annual wages bill.

If you are asking for more than this, you are unlikely to get the loan (as it would almost certainly be unaffordable).

What you need to tell the bank

Banks will be looking for the following basic bits of information;

  • How much you need
  • Why you need this much
  • How long you need to pay it back (and whether or not you can pay it back).

As much as possible, the above needs to be backed up with figures (i.e. forecasts to show your thinking and historic figures so the bank can test your assumptions).

The banks are likely to be overwhelmed with applications. The easier you can make it for them to understand the loan request, the more likely you are to get it approved.

What the bank will want from you

  • Annual accounts (historic)
  • Management accounts (historic and current – ensure historic management accounts tie to annual accounts)
  • Business plan including overview of your business
  • Cash flow forecast
  • Details of assets

If you already have a banking relationship it is likely you will be able to skip some of these as the bank will already have them.

Security & guarantees

Like a normal loan, if you have some decent assets, such a long lease or a property, the bank can secure the loan against these business assets – this can be for a loan of any value.

The bank may also ask for a personal guarantee (PG) from a director. If you are looking for borrowings below £250,000, you will not have to give a PG. If you want to borrow more than £250,000 banks may ask for a director PG: this will, however, be limited to 20% of the loan amount (a better position than before).

Which bank to go to

First port of call is your existing bank, even if they are not registered for CBILS. Officially, having an account is not a pre-requisite to applying for a CBILS loan, however a lot of banks are saying ‘no’ to new business. Banks which are not on scheme are still offering regular commercial financing and you should consider starting the process with them whilst you look for a CBILS bank who will allow you to apply.

How long it will take

It is very early days so there is not much practical experience out there on these. As at Thursday, the British Business Bank confirmed less than 1,000 loans had been issued out of a total of 130,000 applications (over a two week period). That is not to say there were 129,000 rejections. Banks are not set up to take on this kind of volume, so CBILS will be slow. We’re seeing people have their current lending facilities extended whilst the CBILS application is being considered – so if you already have some form of financing or overdraft in place, you will likely get immediate relief through your bank via an extension of facilities.

Do you need this loan?

The gut reaction for most businesses will be that they need the loan.

I would say that most businesses which have had to stop dead will need some kind of cash pile to get going again, so in the long run I expect a huge amount of these loans to be issued. Businesses will have rent to pay whilst closed and creditors that they need to settle before they will supply again (as most businesses are still carrying at least March creditors, if not February).

We do not know how long hospitality and retail businesses will have to remain closed. Even when they do re-open, it is likely that sales will be lower than before for a prolonged period. Reduced opening hours, the possibility of continued physical distancing and a recession are all possibilities as well. There may be things that can be done to your set up to mitigate the above issues but this requires investment.

So given the above, do you have enough cash to get going again? Obviously it’s impossible to answer this as so much is unknown, but these points need serious and careful consideration.

For some, grants and insurance will cover most of their issues (and these are areas you should ensure you have exhausted).

You may decide you need a loan, but if you do not need it yet, do not apply now. There is no harm waiting a couple of weeks and see what is happening with additional support and clarification on the situation as this will help you make a better decision.

More details on the British Business Bank website.

Sick pay

Potentially the least useful at the moment – the government will cover the first 2 weeks of statutory sick pay (including for self-isolation). It has not been confirmed exactly how businesses can claim this back but it is likely to be through the standard payroll submissions,but it doesn’t look like you’ll get cash back for a couple of months at the earliest.

For workers who have worked for you for less than three months, or earn on average below £118 per week – you do not have to pay these workers statutory sick pay but they will be entitled to benefits which are similar.

Insurance

The government has confirmed that if you have business interruption insurance which covers pandemics, you should now be in a position to claim. The devil is in the detail with these things, but this statement clearly shows that the government is putting pressure on the insurance industry to honour claims. Speak to your insurance company asap – out of all the options, business interruption insurance is by far and away the best, if you can get it.

So far we have only spoken to people who have been told by their insurance companies that they are NOT covered – it seems unlikely that many people will have insurance that will pay out.

Tourism Businesses

Tourism South East advice for tourism businesses.

Information from local councils

West Berkshire Council (see in particular this page) ~ Wiltshire CouncilSwindon CouncilVale of White Horse CouncilSouth & Vale Business Support.

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