COVID-19 Financial Support

Please find below details of the major Government schemes available for individuals and businesses to support them financially during the COVID-19 crisis.

Should you have any questions, please contact us as soon as possible. 

 

For Individuals:

Mortgage Holiday / Tenants to not be evicted

On 17th March, it was announced that anyone facing financial distress due to the crisis will be eligible for a three-month mortgage holiday. Applications should be made to the mortgage lender directly by 31 October 2020. There is also a ban on lender repossessions to the same date.

It would appear that whilst the interest will continue to run on the mortgage and which will be caught up with later on, the payment holiday may be assessed as an agreed holiday and should not affect your credit rating - although this is not always the case. We would suggest that you confirm this with your lender of course.

Mortgage holidays will be available for residential mortgages and also for landlords with buy to let mortgages who are providing residential property to private tenants.

 

Self-employed Income Support Scheme

The first SEISS will provide a grant to self-employed individuals of 80% of average monthly profits up to a cap of £2,500 per month with applications to the first scheme required by 13 July. The grant will be subject to Income Tax and National Insurance.

The second SEISS opened on 17 August for applications and provides a grant to self-employed individuals of 70% of average monthly profits up to a cap of £2,190 per month. Applicants do not need to have claimed the first SEISS to be eligible for the second SEISS.

The third SEISS will open in November, covering the period from November 2020 to January 2021, and will provide a grant to self-employed individuals of 20% of average monthly profits up to a total of £1,875 (£625 per month).

The fourth grant will be made available from February 2021, covering the period from February to April 2021. No details of the value of this grant have been announced (as at 24 September 2020) and it is expected that this will be adjusted according to circumstances closer to the time.

As with the first SEISS, payments will be made as a single lump sum within a few days of claim.

The average monthly profits will be calculated from the profits of the last 3 submitted tax returns, although will be based on shorter periods where the person has been self-employed for less than the full 3 years.

To be eligible for this scheme, you must:

  • Have been adversely affected by the COVID-19 pandemic
  • Have been registered as self-employed in the 2018/19 tax year
  • Have continued to trade throughout the 2019/20 tax year and intend to continue to trade
  • Have submitted your 2018/19 tax return by 23 April 2020
  • Have the majority of your income from self-employment
  • Have average self-employed profits of up to £50,000 per annum over the 2016/17, 2017/18 and 2018/19 tax years

All those eligible will be contacted by HMRC directly and asked to complete an online form through the Government Gateway to request the payment of the grant. The payment will be made directly to their nominated bank account.

If you have not yet claimed, HMRC have an eligibility checker where you can check whether HMRC believes you will be eligible for the grant. You will need your personal Unique Taxpayer Reference and National Insurance number, and Government Gateway ID (if you are registered). If you do not have a Government Gateway account, you can also set this up through the eligibility checker. 

This tool does not allow you to make the claim itself but does allow you to check your eligibility and provide up to date contact details through the Government Gateway.

Those who are not eligible for this support will still be able to consider support via Universal Credit or the Coronavirus Business Interruption Loan Scheme, as well the deferral of July payments on account and mortgage payment holidays.

Those who pay themselves a salary and dividends through their own company are not covered by this scheme, but they will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes, and they can be furloughed.

 

Self-assessment - 2019/20 tax liabilities deferred

The July self-assessment payment on account were automatically deferred until January 2021, with no requirement requirement to apply for the deferment and no eligibility criteria having to be met.

This would usually mean that payments now due in January 2021 would be significantly higher. However, following the 24 September Winter Economy Plan announcement, any self-assessment tax liabilities due on 2019/20 - which would usually be due on 31 January 2021 - can be deferred for 12 months until 31 January 2022.

This may of course mean that a much more substantial tax liability could be due in January 2022, and we would suggest that this liability is certainly built into any financial budgets as soon as possible to ensure that you do not have a financial shock later on.

 

Universal Credit and Working Tax Credit

These will both be increased by £1,000 per annum with immediate effect.

Employed and self-employed individuals (including directors of owner-managed companies) may be able to apply for Universal Credit if they are 18 years old or over, under State Pension age, live in the UK and have less than £16,000 in savings between them and their partner.

More information including how to find our if you are eligible can be found at www.gov.uk/universal-credit

               

For Individuals and Business:

Dedicated HMRC Time to Pay Helpline

Anyone who is in financial distress caused by the fallout from Coronavirus and has outstanding tax liabilities, or has tax liabilities approaching in the next few weeks, can call the dedicated HMRC helpline on 0800 024 1222 to arrange a deferred payment plan.

  

For Business:

Coronavirus Job Retention Scheme

All employers are able to apply to receive a grant to pay up to 80% the wages of any employees who have been furloughed up to a maximum of £2,500 per employee per month (this maximum will decrease from September 2020). Eligible employees must have been notified to HMRC through the Real Time Information (RTI) system by way of a Full Payment Submission (FPS) on or before 19th March 2020.

Directors of owned-managed companies without work will also be able to furlough themselves provided that they are paid through a PAYE scheme and submissions had been made prior to the above date. Statutory duties of a director will not be counted as work, so the statutory duties may continue whilst the director is on furlough, although no income generating activities may be conducted. Note that the scheme does not cover anything taken as dividends.

The reimbursed amount will cover the gross wages (including PAYE and Employee's National Insurance) of any furloughed employees up to the maximum stated above, and until the end of July, the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.

In August, the Employer National Insurance Contributions and pension contributions will be payable by the Employer, but the maximum grant available will remain at 80% of the gross wages up to a maximum of £2,500 for the month.

In September, the maximum grant available will reduce to 70% of gross wages up to a maximum of £2,187.50 for the month. Employers will pay 10% of the gross wages of furloughed employees, as well as all of the Employer National Insurance Contributions and pension contributions.

In October, the maximum grant available will reduce to 60% of gross wages up to a maximum of £1,875 for the month. Employers will pay 20% of the gross wages of furloughed employees, as well as all of the Employer National Insurance Contributions and pension contributions. The furlough scheme will cease at 31 October 2020.

From 1 July, employers will have the flexibility to bring back furloughed employees on a part-time basis with the employer responsible for any hours worked. Any part-time working arrangement must cover at least a week and be agreed in writing with the employee. When making the grant claim, employers will need to report hours worked and normal working hours for each employee that they are claiming for.

In order to claim any furlough for an employee after 1 July, that employee must have been furloughed for at least one minimum period of 3 weeks prior to 30 June. No claims for newly furloughed employees will be available after 1 July.

For salaried employees, the gross salary paid in the last pay period before 19th March 2020 should be used to calculate the furloughed amount. Do not include commissions, fees or bonuses.

For employees with variable wages, the higher of the following can be used for the furlough calculation:

  • the same month's earning from the previous year
  • average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, use the average of their monthly earnings since the started work for the business.

To access the portal to apply for the Coronavirus Job Retention Scheme grant, employers will need to have access to 'PAYE for Employers' using the business's Government Gateway ID to apply (or an agent authorised to access this on their behalf).

Anyone who was employed on 28th February 2020 - but who has since been made redundant as a result of Coronavirus - may have this employer apply for the grant on their behalf, provided that employer is able to take that employee back on as furloughed (as if the redundancy did not take place).

Employers will be free to top up the payments to 100% as they wish, but they are not obliged to.

Please do seek assistance from your HR or employment law adviser as Employment Law will still apply, and some contracts may have to be negotiated further before an employee is furloughed.

 

Job Support Scheme

The current Coronavirus Job Retention Scheme (aka the furlough scheme) will still close at the end of October.

In its place, a new ‘Job Support Scheme’ will be introduced from 1 November and will run for 6 months until the end of April 2021.

The intention of the scheme is to help employers support their employees who are unable to come back to work on a full time basis, and to thus prevent redundancies.

The scheme will work as follows:

  • Employers should pay their employees for any time worked as their normal contracted rate. 
      • For any regular hours not worked, the government will pay a third of the hours not worked at the normal contracted rate of pay up to a cap of £697.92 per month.
  • This grant will cover this element of the employee’s gross wage, but not the Employer’s National Insurance or Employer Pension contributions.
  • The employer will also have to pay a third of hours not worked at the normal contracted rate, plus the Employer’s National Insurance and Employer Pension contributions for the total wage for that employee.
  • The employer will make a monthly claim in arrears for the Government grant, and it is expected that this will be similar to the existing furlough scheme claims.
  • Likewise, any employees who are paid other than on a regular hourly/weekly/monthly rate, or who work variable hours normally, will be subject to a calculation similar to that used to calculate the furlough claims currently.

To be eligible:

The employer:

  • Must have a UK bank account
  • Must run a UK PAYE scheme
  • If a small or medium enterprise, there will be no further financial assessment for the business itself.
  • If a large business, satisfy a financial assessment to show that the business turnover is lower now than before experiencing difficulties as a result of COVID-19, and do not make any dividend or other distributions of capital whilst using the scheme.
  • Not top up their employees’ wages above the 2/3rd’s contribution to hours not worked at their own expense

The employee must:

  • Have been on an employer’s PAYE payroll – and in particular noted on a Real Time Information (RTI) submission - on or before 23 September 2020
  • Work at least 33% of their normal hours during November 2020, December and January 2021. The minimum hours threshold may be increased from February 2021
  • Work at least 7 days under each short-time working arrangement requested by the employer

Neither the employee nor the employer needs to have claimed under the Coronavirus Job Retention Scheme to be eligible for the Job Support Scheme.

In addition, employees may be put on and taken off the scheme as the business requires, and do not have to work the same pattern of hours each month.

Employers claiming under the Job Support Scheme will remain eligible for the Jobs Retention Bonus, payable in February 2021, where previously furloughed employees remain in their roles at the end of January 2021.

 

Coronavirus Business Interruption Loan Scheme (“CBILS”)

The Coronavirus Business Interruption Loan Scheme (“CBILS”) is intended to help SMEs with cashflow issues and is available now. We have included some of the key details and criteria below.

CBILS encourages lending to viable UK businesses that would otherwise be turned down for a loan or other form of debt finance, due to inadequate security.

It does this by providing accredited lenders with a Government-backed guarantee for 80% of the funding amount (subject to some limits below), and covers all of the following funding options:

  • Overdrafts
  • Invoice finance facilities
  • Asset finance facilities
  • Term Loans

To be eligible for support via CBILS, your business must:

  • Be UK based, with turnover of no more than £45 million per annum
  • Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support – see list of ineligible business sectors)
  • Have a sound borrowing proposal but have inadequate security to meet a lender’s normal requirements
  • Be up to date in respect of any accounts and tax filings due (even if tax is not necessarily fully paid)
  • Be able to confirm that they have not received other public support of de minimis state aid beyond €200,000 equivalent over the previous three years

CBILS guarantees facilities to fund the future growth or expansion of a business from £50,001 to £5 million. Finance terms are from three months up to 10 years for term loans and asset finance and up to three years for revolving facilities and invoice finance.

No interest will be due for the first 12 months of any CBILS backed lending. No personal guarantees will be required on lending agreed less than £250,000.

The current deadline for applying for CBILS is 30 November 2020.

How to Apply?

Any small business interested in CBILS should, in the first instance, approach one of the 40+ accredited lenders with their borrowing proposal. Note that a business plan and financial forecast will be required and we can assist you with this if you wish. We recommend that existing available plans are used as a starting base point to illustrate the impact of the virus on the trading and cash flows of the business.

Please contact us if you require assistance in your application for funding as we have a number of relationships with lenders who may be able to assist. 

What about Charities?

A specialist support scheme for UK charities is available instead of the CBILS arrangements called the 'Resilience and Recovery Loan Fund'. 

Charities that have been trading for a minimum of 2 years and have a turnover between £400,000 and £45million are eligible, provided that at least 50% of income is derived from trading activities, remain a viable business if it were not for COVID-19 and they have been adversely affected by the COVID-19 pandemic.

Loans of £100,000 to £500,000 - capped at 25% of turnover - can be applied for through Social Investment Business and three lending partners. Loans will be interest and fee free for the first 12 months, with interest charged at 6.5% for the remaining term. Loans will be available on 1-3 year terms.

 

Bounce Back Loan Scheme

The Bounce Back Loan Scheme is an 'easy to apply for' loan scheme aimed at small and medium businesses.

The loans provided under the scheme will range from £2,000 to £50,000 (capped at 25% of the business's turnover) and will be 100% guaranteed by the government. Funds will be available within a matter of days from application.

An eligible business is one that can self-declare it:
  • Has been affected by the COVID-19 pandemic
  • Was not a ‘business in difficulty’ as at 31 December 2019 (broadly this means that accumulated losses did not exceed more than half of business’s capital at this point)
  • This point does not apply to SME’s less than 3 years old
  • Is not currently in bankruptcy or liquidation
  • Has not already obtained BBLS lending
  • Has not obtained CBILS lending in respect of the COVID-19 pandemic unless the BBLS will refinance the whole of this lending facility
  • Is engaged in trading or commercial activity in the UK and was established by 1 March 2020
  • Will use the loan only for business - not personal - purposes, and are able and intend to meet the repayments in the future.
  • Derives more than 50% of its income from trading activities
  • This point does not apply to charities or further education colleges
  • Is not a credit institution, insurance company, public-sector organisation or a state funded primary or secondary school

No repayments will be due, and no interest or fees charged, in the first 12 months of the loan with the government covering these costs during this period. No personal guarantees will need to be given on the loans, and whilst the loans will be 100% guaranteed by the government, the applicant business remains responsible for the repayment of the loans.

After the first 12 months, the rate of interest on the loans will be set at 2.5% per annum with loan length being a maximum of 10 years, repayable on a flexible 'Pay as You Grow' basis including interest-only repayment period and payment holidays. There will not be any early repayment penalty on the loans.

The deadline for applications for BBLS is 30 November 2020.

How to apply?

A short standard online self-certified application will be required for these loans and will not require the business to provide any detailed future forecasts. The loans are being provided through a selection of banks and other lenders - the list of which is available at the British Business Bank website. It is recommended that the business's bank is approached first, although the business may use any provider it wishes.

If the business has previously obtained a loan of up to £50,000 through the Coronavirus Business Interruption Loan Scheme (CBILS), it will be possible to transfer this to the Bounce Back Loan Scheme via the lender up to 4 November 2020.

 

Coronavirus Future Fund

The Future Fund is a government convertible loan scheme for UK based innovative companies which otherwise were unable to access the Coronavirus Business Interruption Loan Scheme. 

The loans range from £125,000 to £5million and should be used for working capital purposes only. Directors are not required to provide personal guarantees.

In order to access the scheme, the company will need to have raised at least £250,000 in equity investment from third party investors (presumed to include SEIS and EIS arrangements) with the past 5 years, and also be able to access funding from private investors at least equal to that sought from the scheme.

The scheme will be open to applications until the end of November 2020.

The loan will be subject to a minimum non-compunding interest rate of 8% which could be increased if a higher rate is agreed with private investors. The interest would be payable on maturity of the loan which itself will be a maximum of 36 months.

The loan will be automatically converted to equity shares in the company when the company next seeks to attract equity investment ('funding round') with a minimum discount of 20% to the price set in that funding round. The company will have the right however to repay the interest rather than also have this convert to equity.

Alternatively, if the company were to be sold or listed within the term, the loan will convert to equity under similar terms to the above (based on the price set in the last funding round prior to sale) or be repaid in full.

 

Coronavirus Large Business Interruption Loan Scheme

The Coronavirus Large Business Interruption Loan Scheme ('CLBILS') is available to UK based businesses with an annual turnover between £45-500million to access loans of up to £25million.

The scheme is available through commercial lenders, with the government providing lenders with an 80% guarantee on individual loans for viable businesses (were it not for the Coronavirus pandemic) that would otherwise struggle to access the finance they require at this time.

Banks, insurers and re-insurers, public sector bodies, grant-funded further education establishments and state-funded primary and secondary education schools are not eligible for this scheme.

For further information and assistance in applying, please contact our Corporate Finance team.

 

Larger firms - Covid-19 Corporate Financing Facility

To support liquidity amongst larger firms, the Covid-19 Corporate Financing Facility (CCFF) means that the Bank of England will buy short-term debt from larger firms, who are in otherwise sound financial health but suffering short-term cashflow difficulties.

The CCFF will operate for at least 12 months and for as long as assistance is required to relieve cash flow pressures on larger firms. 

The minimum size of funding per firm will be £1million and all offers must be rounded to the nearest £0.1million.

To obtain further details, it is recommended that you first discuss your options with your current bank, but our Corporate Finance specialists will also be able to offer their assistance if you wish to access this funding.

 

VAT payments deferred

VAT payments due between 20th March and 30th June 2020 were to be deferred automatically. Prior to the Winter Economy Plan announcement by the Chancellor on 24 September 2020, these deferred liabilities were due to be paid in full by 31 March 2021. However, businesses will now be given the opportunity to pay the deferred liability over 11 months with no interest or penalties to pay.

VAT returns should continue to be filed in the normal manner.

   

Business Rates Holiday and Grants

All businesses in the retail, hospitality or leisure sector will be provided with a 12-month business rates holiday

In addition, those businesses in these sectors with premises on which the rateable value is less than £51,000 (and are not eligible for Small Business Rates Relief) will be eligible for a cash grant of up to £25,000 (Retail, Hospitality and Leisure Grant Fund). As with all grants, this will not be repayable.

Any enquiries on eligibility for, or provision of, the business rate relief should be directed to the relevant local authority.

For those businesses – in any industry sector - who already qualify for the Small Business Rates Relief in England and thus pay no business rates, a cash grant of £10,000 will be available (Small Business Grant Fund). This figure was increased on 17th March from £3,000 as announced at the Budget.

Local authorities should contact all businesses who are eligible for Small Business Rates Relief automatically and there will be no need to apply for this, although we are aware of some local authorities requesting claims through their websites.

 

Local Authority Discretionary Grants Fund

Any small or micro businesses who are ineligible for either the Small Business Grant Fund or the Retail, Hospitality and Leisure Grant Fund may be able to apply for the Discretionary Grants Fund.

To be eligible, businesses must:

  • Be based in England
  • Have fewer then 50 employees
  • Have fixed building costs such as rent (which is typically less than £51,000 per annum)
  • Have been trading on 11 March 2020
  • Have been adversely affected by Coronavirus
  • Not have been an 'undertaking in difficulty' as at 31 December 2019
  • Not be in receipt of any other COVID-related government grants (other than CJRS or SEISS)

Businesses will still be able to make a claim if they received either a Bounce Back Loan or a Coronavirus Business Interruption Loan.

Local authorities will prioritise businesses such as:

  • small businesses in shared offices or other flexible workspaces
  • regular market traders
  • bed and breakfasts paying council tax instead of business rates
  • charity properties getting charitable business rates relief, which are not eligible for small business rates relief or rural rate relief

Local authorities may also prioritise other business types, but may also impose other restrictions to those shown above.

This fund may award a taxable, non-repayable grant of £25,000, but more commonly the grants paid will be up to £10,000, dependent on the size of the business.

The larger grant of £25,000 will be paid in exceptional circumstances where a larger small business with high property costs has been severely impacted by lockdown and would signifcantly impact local residents if the busienss were to fail. The threshold of £51,000 of fixed building costs will not necessarily apply in these exceptional circumstances.

Applications should be made through the business's local authority website.

 

Small business technology grant

A non-repayable grant of £1,000-£5,000 is now available to all small and medium sized businesses based in England.

The grant may be used for the business to:

  • Access new technology or other equipment to assist or improve the existing business operations, or to help diversify; or 
  • To help pay for professional, legal or financial advice (including accountants, legal professionals, HR or IT/digital specialists)

There is no requirement for the business to contribute financially in order to obtain the grant.

The funding is available through local Growth Hubs - details of your local Growth Hub can be found at www.lepnetwork.net/local-growth-hub-contacts and clicking on your local area.

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