Bounce back loan scheme for small business

On 27 April the Government announced a fast-track new loan scheme to allow small businesses to borrow up to 25% of turnover, up to a maximum of £50,000.

The loans will be interest-free for the first 12 months, and not subject to business liability tests or complex eligibility criteria. Applications will be made through a simple online form and no payments will be taken during the first year.

• More information.
• Make an application.

Coronavirus Business Interruption Loan Scheme

An emergency interest-free loan scheme was launched on Monday 23 March. This will be one of the fastest ways for cash-strapped businesses to access money in order to survive.

Individual businesses will be able to apply for loans up to a maximum of £5 million. The Government will pay the interest for 12 months and will guarantee 80% of the loan.

The scheme is organised through the British Business Bank and will be delivered through commercial banking partners. Several types of finance will be available:

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

Eligibility: any company with a turnover of up to £45 million can apply.

To access: go to the British Business Bank website to get full details. The fastest approach will be to apply directly to one of the bank or finance companies that will supply the loans.

Tax and VAT bills delayed

Payment of key taxes will be automatically deferred to provide businesses with a further potential source of working capital.

• VAT – deferred automatically for three months from 20 March until 30 June 2020.
• Income Tax Self-Assessment – delayed for six months from 31 July 2020 will be deferred until the 31 January 2021.

If businesses have collected these taxes, the Government says they can be used to meet immediate needs.

HMRC Time to Pay service

Struggling businesses and self-employed people can ask HMRC for more time to settle tax bills. The Government says businesses can use any money set aside for these liabilities as emergency working capital.

Eligibility: decisions will be made case by case.

To access: call the HMRC dedicated helpline.

HMRC coronavirus helpline: 0800 0159 559.

Business rates

There will be a one-year business rates holiday for all businesses in England in the retail, hospitality and leisure sector. This will mean lower bills from April 1.

• Use this business rates calculator to work out how much the business rate rebate could save.

To access: this change will apply automatically from the next council tax bill in April 2020. However, some local authorities may have to reissue bills.

£25,000 cash grants for retail, hospitality and leisure

On top of the business rates holidays, cash grants of up to £25,000 will be available for smaller businesses occupying retail, leisure and hospitality premises.

Funds should be available sometime in April but exact timescales will depend on how quickly local authorities can respond.

Eligibility: businesses must have a rateable value between £15,000 and £51,000.

To access: local authorities will write to businesses that meet the criteria. Enquire with your local authority to confirm the position.

£10,000 grant for the smallest businesses

Approximately 700,000 of the smallest businesses in England will be entitled to a one-off, non-repayable grant of £10,000.

Eligibility: any businesses currently eligible for Small Business Rate Relief (SBBR) or Rural Rate Relief will qualify. Because the Government is building on existing schemes, these payments could be up and running in April.

To access: apply for the emergency funding direct from their local authority.

Support for workers

Coronavirus Job Retention Scheme

Under the Coronavirus Job Retention Scheme, the Government pays a portion of the salaries of workers who remain on payroll but are temporarily not working during the coronavirus outbreak

From August the grant provided through the job retention scheme will be slowly tapered.

• In June and July, the government will pay 80% of wages up to a cap of £2,500 as well as employer national insurance (ER NICs) and pension contributions for the hours the employee doesn’t work. Employers will have to pay employees for the hours they work.
• In August, the government will continue to pay 80% of wages up to a cap of £2,500, but employers will pay ER NICs and pension contributions. For the average claim, this represents 5% of the gross employment costs that they would have incurred if the employee had not been furloughed.
• In September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will pay ER NICs, pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
• In October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will pay ER NICs, pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.
• The scheme will close on 31 August.

After 12 June, it will no longer be possible to furlough employees who have not been previously furloughed. However, an exception will be made for employees returning from maternity and paternity leave.

Employers must:

1. designate affected employees as ‘furloughed workers,’
2. inform the employee of their new status
3. then inform HMRC about the employees that have been furloughed and their earnings.

The grant paid to the employer will be calculated based on the employees regular, contractual pay, such as wages, compulsory commission and past overtime.

The calculation will not include discretionary commission (including tips) payments or bonuses, non-cash payments or benefits in kind.

To access: Employers submit claims via an online portal.

• Agents authorised (with HMRC) to act on behalf of clients for PAYE matters, will be able to process claims on their clients’ behalf.
• File-only agents (non-authorised), including Payroll Bureaus, will not be able to access the service for data protection reasons.
• The information filers will be required to supply will include National Insurance number, salary, and pension contribution details.

Knowledge Hub resources

• Revised guide to the Coronavirus Job Retention Scheme (login required)
• Template furlough letter (login required)

Self-employed Income Support Scheme

Under the Self-Employed Income Support Scheme, the Government is to pay self-employed people across the UK a taxable grant worth 80% of their average monthly profit. This will be calculated from up to three years of tax filings (if available), and be capped at £2,500 per month.

The scheme was extended for a second iteration until the end of October to match the CJRS for employees. Self-employed individuals will be able to apply for the second iteration from July 14.

Eligibility: individuals must show they:

• earn the majority of their income from self-employment or a partnership.
• earn no more than £50,000 trading profit in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.
• are adversely affected by the coronavirus crisis – by demonstrating some loss of income (as yet undefined).
• already be self-employed and have filed a 2018-19 tax return.

Exclusions: those who pay themselves a salary and dividends through their own company are not covered by the scheme. The newly-self-employed will also miss out.

Availability: payments should be received within 6 working days.

• Knowledge Hub Guide to the Self-Employment Income Support Scheme (members)

Prompt payment

Now is a time for prompt payment. AAT is a signatory of the Prompt Payment Code and has campaigned for best practice to be mandatory. We will be stepping up our efforts.

Large businesses are signalling their determination to help small business creditors. Supermarket Morrisons has confirmed it will pay all suppliers with a turnover below £1m immediately, instead of between 14 and 30 days as was its standard practice.

The Small Business Commissioner advises small businesses to ask for advance payments from large customers.

Welfare benefits

Universal credit has been boosted by £1000 a year during the coronavirus crisis. This benefit could provide a modest safety net to struggling self-employed people or workers who have been made redundant.

Self-employed workers can claim income support if they need to self-isolate. They can claim immediately and will not have to satisfy the requirements of  the minimum income floor.

Hardship fund

A £500 million hardship fund is to be made available through local authorities. This is a further source of funds for those without income, including the self-employed.

Statutory sick pay

Any business with fewer than 250 employees will have the cost of providing 14 days of statutory sick pay (per employee) refunded by the government in full. It will also apply from day one rather than the usual day four of illness — even if individuals have no symptoms.

This will help 2 million businesses by providing up to £2 billion to cover sick leave costs.

See here for government guidance.

Mortgage holidays

The Government has negotiated with banks for a three-month mortgage holiday for individuals hit by the pandemic. There are no similar measures in view to help those in rented accommodation.

Administration

Making Tax Digital end-to-end data delayed

HMRC has postponed plans to require businesses to maintain end-to-end dynamic data in VAT records due to the coronavirus (Covid-19) crisis. The requirement for linked data was to apply from 1 April.

IR35 paused for 1 year

The Government is delaying the IR35 scheme for off-payroll working by one year to ease the burden on business.

Insolvency rules to be changed

The Business Secretary said the Government will change elements of the insolvency system to help UK companies keep trading. Details have not been given yet, but the main points are expected to be:

• A suspension of the wrongful trading rules.
• A moratorium period for struggling companies to put a rescue plan together.
• Safeguards for creditors and suppliers.

Gender pay reporting

The enforcement of the gender pay gap reporting deadlines will be suspended for the current reporting year, 2019-20.

AGM requirements relaxed

The requirement on companies to hold AGMs will be relaxed so health advice can be followed – either by holding them via video or postponing them.

Preliminary results delay

Financial Conduct Authority (FCA) has asked firms about to report preliminary results to delay for at least two weeks so they can better assess how the pandemic will affect their business. The emergency bulletin can be read here.

The FCA is in talks with the Financial Reporting Council and the Prudential Regulation Authority (PRA)  about a package of measures aimed at easing pressure on the audit profession and listed companies. The three bodies hope to announce details shortly.

Companies House

Companies House has confirmed that any companies unable to file their accounts on time due to Covid-19, can make an application to extend the period allowed for filing by up to three months.

On 17 April Companies House announced temporary relaxations to thestrike-off policy and late filing fines.

Insurance

For the vast majority of businesses, insurance cover is unlikely to mitigate their losses.

The Association of British Insurers (ABI) issued a statement on 17 March 2020 which made clear that “…irrespective of whether or not the Government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by Covid-19.”

The ABI went on to explain, “…standard business interruption cover – the type the majority of businesses purchase – does not include forced closure by authorities as it is intended to respond to physical damage at the property which results in the business being unable to continue to trade.”

National variations

Scotland, Wales & Northern Ireland

In addition to the UK-wide support that is being provided, an extra £780 million for the Scottish Government, £475 million for the Welsh Government and £260 million for the Northern Ireland Executive was announced this week.

Grants for small business

Scotland, Wales and Northern Ireland will make their own arrangements for small business emergency grants.

Scotland has already announced an £80 million fund to provide grants of £3,000 to small businesses in sectors that suffer the worst economic impact of COVID-19, available via a helpline on 0300 303 0660.

Chancellor of the Exchequer, Rishi Sunak, said,
“We will do what is right to help businesses and individuals in every part of the UK… this additional funding will ensure the devolved administrations can support vulnerable people, businesses and vital public services, including the NHS, in Scotland, Wales and Northern Ireland.”

He told a press conference “help is on its way” with the “announcement of new measures and more to come – businesses don’t need to rush into decisions”.

Areas for improvement

Sick pay levels

Whilst the government has waived the usual seven-day wait for employment support allowance (ESA), and made statutory sick pay (SSP) available immediately, instead of after four days, critics argue ESA and SSP are both paid at very low rates. Indeed, SSP is £94.25 a week whereas average pre-tax earnings are over £500 a week. This means vulnerable workers required to self-isolate for 12 weeks will be at a huge financial disadvantage.

Private landlords

Concerns have also been raised that the financial implications of Covid-19 may result in an increased number of evictions as people struggle to pay their rent. The Labour Party has called for a complete ban on evictions. Increased help to address this specific problem seems realistic, a complete ban seems doubtful.

Medium-sized companies

Medium-sized firms say that they need more help. Some are too large for the Coronavirus Business Interruption Loan Scheme, but financially not strong enough to secure credit on their own (BBC report).