COVID-19 UK Insight: TCG – Government assistance and support for SMEs

March.25.2020

The global outbreak of Coronavirus (COVID-19) is having a significant impact on businesses globally. This is particularly true for the start-up industry as companies may be facing immediate cash-flow, debt and staffing problems. There have been a number of government initiatives that have been implemented in the UK over the past two weeks which are aimed to support small and medium businesses that are dealing with the consequences of coronavirus. This update sets out the latest support measures that have been announced.   

  1. Job retention scheme – Furlough leave
     
    • All UK employers will be able to access support to continue paying part of their employees’ salaries. This will apply to any PAYE qualifying employee that would have been dismissed as a result of the COVID-19 crisis ("furloughed workers").
    • Employers can submit information to HMRC about the furloughed workers they have identified, as well as their earnings, through a new online portal.
    • HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. Payments will be available from 1 April 2020, backdated to 1 March 2020 to cover a three-month period. The government has stated that the three-month period will be extended if necessary.

    For more information on the job retention scheme, please see our UK employment law update.

  1. Deferring VAT – all UK businesses are eligible
     
    • Businesses can defer VAT payments for three months; the deferral will apply from 20 March 2020 until 30 June 2020. This is an automatic offer so companies will not need to make a VAT payment during this period. The VAT is then due at the end of the 2020/21 financial year.
  1. Support for statutory sick pay
     
    • Small and medium sized businesses (UK based and employing fewer than 250 employees as of 28 February 2020) will be able to reclaim statutory sick pay ("SSP") for absence as a result of COVID-19. This applies to both employees who are showing the relevant symptoms, as well as employees who are self-isolating as a result of a household member showing symptoms.
    • Once legislation has been passed, the scheme will apply retrospectively from 13 March 2020. It is therefore worth noting that as the legislation and rebate scheme are still being developed, this initiative is not immediately available.
    • Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website.
  1. Coronavirus Business Interruption Loan Scheme ("CBILS")
     
    • The CBILS scheme is being delivered by the British Business Bank and can provide lending facilities for smaller businesses across the UK who are experiencing lost or deferred revenues. The CBILS will operate in a similar manner to the Enterprise Finance Guarantee scheme whereby lenders will benefit from a government-backed guarantee.
    • Businesses that are eligible must be UK based, with turnover of no more than £45 million per year.
    • The following products will be available: overdrafts; invoice discount facilities; asset finance facilities; and term loans.
    • The maximum value of a facility will be £5 million, available on repayment terms of up to six years. For overdrafts and invoice finance facilities, terms will be up to three years.
    • The government-backed, partial guarantee (80%) is available against the outstanding facility balance, subject to an overall cap per lender. There is no guarantee fee for smaller businesses and the Government will cover the first 12 months of any interest payments.
    • The scheme is available from 23 March 2020. It is intended that all major banks will provide the scheme.
  1. The Covid Corporate Financing Facility (CCFF)
     
    • The CCFF is a joint HM Treasury and Bank of England lending facility, which has been made available from 23 March 2020. The facility is designed to support liquidity among larger businesses, helping them to bridge coronavirus disruption to their cash flows through the purchase of short-term debt in the form of commercial paper.
    • Companies showing a "material contribution to the UK economy" can use the facility. For example: UK incorporated companies, including those with foreign-incorporated parents and with a genuine business in the UK; companies with significant employment in the UK; and firms with their headquarters in the UK.
    • The facility will purchase commercial paper (sterling denominated) which must have: maturity of one week to twelve months; where available, a credit rating of A-3 / P-3 / F-3 / R3 from at least one of Standard & Poor’s, Moody’s, Fitch and DBRS Morningstar as at 1 March 2020; been issued directly into Euroclear and/or Clearstream.
    • The scheme is open to firms that can demonstrate that they were in sound financial health prior to the impact of COVID-19. A company does not need to have prior commercial paper in issue in order to use the scheme.
  1. Retail, hospitality and leisure business support
     

    Business rates holiday

    • There will be a business rates holiday for retail, hospitality and leisure businesses in England for the 2020/21 tax year. Properties that will benefit will include (but are not limited to) shops, restaurants, cafes, drinking establishments, cinemas and live music venues, hotels and properties used for assembly and leisure.
    • This will be an automatic relief that local authorities will assess via the next council tax bill for each relevant business.

    Cash grants

    • The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.
    • Businesses in these sectors with a rateable value of under £15,000 will receive a grant of £10,000. Businesses in these sectors with a rateable value of between £15,001 and £51,000 will receive a grant of £25,000.
  1. Business rate relief support
     
    • The Government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief, rural rate relief and tapered relief, in the form of a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.
  2. Time to pay service
     
    • HMRC has a set up a phone helpline to support businesses and self-employed people concerned about not being able to pay their tax due to COVID-19.
    • Small companies which cannot afford to pay their tax bills can ask HM Revenue and Customs for a “time to pay” agreement which could suspend debt collection.
    • Arrangements will be decided on a case by case basis and can include agreeing an instalment arrangement, suspending debt collection proceedings, and cancelling penalties and interest if an individual or business has administrative difficulties contacting or paying HMRC immediately.