20 Mar 2020

Coronavirus – Financial support for businesses

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This briefing was written on 20 March 2020. For updates and further developments and government guidance, please follow this link.

The Government has announced a series of tax and financial measures to support businesses affected by the COVID-19 disruption. The key measures are summarised below, together with links to further guidance.

COVID-19 corporate financing facility

Under this scheme the Bank of England will purchase sterling denominated Commercial Paper of up to one year maturity issued by companies (or the finance subsidiaries of companies) that make a material contribution to the UK economy.

The Bank of England’s guidance states that companies with significant employment in the UK or with their headquarters in the UK will normally be regarded as meeting the material contribution to the UK economy requirement. The Bank of England will also consider whether the company generates significant revenues in the UK, serves a large number of customers in the UK or has a number of operating sites in the UK.

Commercial Paper issued by banks, building societies, insurance companies and other financial sector entities or leveraged investment vehicles will not be eligible.

How to access

Application forms for the Facility are now available on the Bank of England's Website.

The terms and conditions and operating procedures for the Facility have also been published on the Bank of England’s COVID-19 CFF information page.

Further information

Further information, including credit rating and other eligibility requirements, is available in the Bank of England’s COVID-19 CFF Guidance

Coronavirus business interruption loan scheme

The British Business Bank will make this scheme available through participating lenders   (which include many high street banks) during the week commencing 23 March 2020. 

The scheme aims to ensure that small and medium sized UK businesses are able to access the financing facilities they need, and that their ability to access these facilities is not affected by the financial impact caused by COVID-19. It will include bank term loans, overdrafts, invoice finance facilities and asset finance facilities.

Under the scheme, participating lenders will benefit from a free Government-backed guarantee for 80% of the value of the facility taken out by borrowers. The facility value that a borrower can access under the scheme is limited to £5 million

The purpose of the Government-backed guarantee is to enable lenders to give credit approval for borrowers whose financial position may have been affected by the COVID-19 disruption. It is important to note that the borrower taking out the facility will remain personally liable for the full amount, as with any other finance facility.

One very favourable aspect of the scheme is that the Government will bear the cost of the interest charged under the finance facility for the first twelve months, meaning that businesses can borrow interest-free for the first twelve months.

How to access

The key eligibility requirements are that borrowers must:

  • be UK-based businesses with a turnover of no more than £45 million per annum (note that certain limited types of business are excluded from the scheme, including certain financial sector businesses);
  • be able to confirm that they have not received de minimis State Aid beyond €200,000 equivalent over the current and previous two fiscal years; and
  • be unable to meet a lender’s normal lending requirements for a fully commercial loan or other facility, but be considered viable in the longer-term.

Decisions on eligibility are made by participating lenders and you should contact your bank or finance provider (not the British Business Bank) as soon as possible to discuss your borrowing proposal and business plan. The British Business Bank advice on applying is as follows: 

Given there is likely to be a big demand for facilities once the scheme goes live, businesses should:

  • Consider applying via the lender’s website in the first instance. Telephone lines are likely to be busy and branches may currently be shut to enable social distancing.
  • Consider the urgency of their need – it is possible that some businesses may be looking for regular longer-term finance rather than ‘emergency’ finance, and there may be other businesses with a more urgent need to speak with a lender.
  • If the accredited lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

Further information

Further information is available in this British Business Bank Guidance.

VAT payment deferral

All UK businesses are able to defer their VAT payments for three months. The deferral will apply from 20 March 2020 until 30 June 2020.

Businesses that defer their VAT payments will be given until the end of the 2020 to 2021 tax year to pay VAT liabilities that accumulate during the deferral period. VAT refunds and reclaims will be paid by the government as normal.

How to access

This is an automatic offer with no applications required. UK businesses are simply not
required to make VAT payments during the deferral period.

Deferral of self assessment income tax payments

Individuals who are self-employed and pay income tax under self-assessment are able to defer payments that would otherwise fall due on 31 July 2020 until 31 January 2021 instead.

How to access

This is an automatic offer with no applications required. No penalties or interest for late
payment will be charged in the deferral period.

Business rates holiday for the retail, hospitality and leisure sectors

Businesses based in England that operate in the retail, hospitality and leisure sectors will benefit from a 12 month business rates holiday for the 2020 to 2021 tax year. The relief is given by extending the Business Rates Retail Discount to 100%. This will include business properties used wholly or mainly:

  • as shops, restaurants, cafes, pubs and bars, cinemas, and live music venues;
  • for assembly and leisure, including sports grounds, theatres and gyms; or
  • as hotels, guest & boarding accommodation or self-catering accommodation.

How to access

No action is required to access the relief. The relief will be applied automatically to eligible businesses’ next council tax bills.

Further information

Further information is available in this Local Authority Guidance on the expanded Business Rates Retail Discount.

Cash grants for small businesses in the retail, hospitality and leisure sectors

In addition to the 12 month business rates holiday, a £25,000 cash grant is available for smaller retail, hospitality and leisure businesses that have premises with a rateable value between £15,001 and £51,000. For businesses in those sectors with a rateable value of less than £15,000, a £10,000 cash grant is available

How to access

No action is required. Your local authority will write to you if you are eligible. For any
enquiries as to eligibility for these cash grants you should Contact your Local Authority.

Cash grants for small businesses in any sector

A £10,000 cash grant is available for smaller businesses in any sector that pay little or no business rates as a result of small business rates relief, rural rate relief and tapered relief.

How to access

No action is required to access this grant. Businesses that are eligible will be contacted by their local authorities without the need to apply.  For any enquiries as to eligibility for these cash grants you should Contact your Local Authority.

HMRC Time to Pay Service

HMRC have set up a dedicated Helpline for businesses that may be struggling to pay their tax on time as a result of financial distress or practical difficulties caused by the COVID-19 disruption. Arrangements will be dealt with on a case by case basis but may include:

  • Deferral of tax payments;
  • Arrangements to pay tax in instalments; and
  • Waiver of relevant interest and late payment penalties.

How to access

HMRC’s dedicated Time to Pay Helpline number is 0800 0159 559.

Coronavirus Job Retention Scheme

This scheme aims to encourage employers to retain their staff on the payroll even where
those employees are unable to work as a result of the COVID-19 disruption.

If an employer notifies affected employees that they have been designated as “furloughed workers”, HMRC will reimburse the employer for 80% of furloughed workers’ wage costs, up to a cap of £2,500 per month (per furloughed worker). It has been announced that payments will be backdated to 1 March 2020.

It should be noted that changing an employee’s status to that of a furloughed worker remains subject to existing employment law and may, depending on the terms of the relevant employment contract, require the consent of the employee. For advice on employment law aspects, please contact our specialist employment team.

How to access

In order to claim reimbursement, employers will be required to submit information to HMRC via an online portal. Further information on this process will be provided by HMRC.

Statutory Sick Pay support for SMEs

Regulations have been introduced to extend entitlement to Statutory Sick Pay (“SSP”) to employees who are self-isolating to prevent infection or contamination with COVID-19. Once fully implemented, the arrangements will mean that SSP will apply in these circumstances from the first day of sickness or absence.

The Government has announced that legislation will be introduced to allow all small and medium sized businesses to reclaim SSP paid for sickness or absence due to COVID-19.

The rebate will cover up to 2 weeks’ SSP per eligible employee. 

Employers are advised to maintain records of staff absences and SSP payments, but there will be no formal requirement for a GP fit note to be provided by the employee.

How to access

Businesses will be eligible for the rebate scheme if:

  • they are UK-based; and
  • employed fewer than 250 employees as of 28 February 2020.

The Government will provide further detail on how to access the rebate scheme once the relevant legislation has been passed.

Further information

Further information on the extension of SSP entitlements is provided in this briefing from our employment team.

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John Meehan

John Meehan
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T:  +44 20 7809 2375 M:  + 44 7826 550 699 Email John | Vcard Office:  London

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