There have been some big announcements this week from the UK Government about support for businesses affected by Covid19.
Not all of the details have been made available, but I wanted to write to you setting out what I have interpreted from the announcements and what I see happening in terms of getting access to these funds.
Grants
Grants of £10,000 are available to businesses that occupy a rateable premises, in other words if you are paying business rates then you are eligible to get the grant. These are going to be administered by your local authority and the word is don’t call them, they will call you. As you know, local authorities were decimated in the years of austerity so it’s going to take some time before they have this scheme up and running properly. It could well be the end of April before the grants start flowing, but it will happen.
Loans
The Coronavirus Business Interruption Loan Scheme (CBILS) was announced earlier in the week. This is a scheme that is being funded through the state-owned British Business Bank. They will be guaranteeing up to 80% of the value of loans to SME businesses, and the loans themselves will be administered by the banks. You will still need to apply to your bank for a loan and will need to meet their lending criteria. Loans of up to £5 million are going to be available, and the government will cover the interest cost of CBILS loans for the first 12 months of the loan. According to the British Business Bank, these loans will be available from next week.
Whilst the government is providing a guarantee, the borrower remains liable for the amount borrowed. The guarantee is really designed to assist those businesses which would not normally have passed the bank’s credit committee to gain access to funding.
Deferral of VAT
Payment of VAT that would otherwise be due in the period from 20 March to 30 June 2020 has been deferred. Payment of any deferred VAT must be made by 5 April 2021. No application is necessary. You simply don’t need to make a VAT payment in this period. Keep the cash.
Salary covered for employees on furlough
This was the biggest announcement yesterday, the Coronavirus Job Retention Scheme. The government will cover 80% of “furloughed” employees wages up to £2,500. Details of this are thin on the ground at the moment, but it’s designed to stop companies from laying off or making their staff redundant because there is no work for them to do. The wording on the gov.uk site is: “support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.”
This payment will be coming via HMRC and is very much linked to the PAYE system. It does not apply to staff who are contractors (whether individually or through a limited company), only those who are already employed and subject to PAYE. This one is a huge giveaway, and no doubt there will be rules imposed on how, what, when, who, etc but the key message is: the government will support you in keeping your staff employed and on the payroll – up to £30K per annum per employee (£2,500 x 12). However, they have made clear that “furloughed” employees should not undertake work for their employers. It is not simply a scheme whereby the government covers your wage bill and your employees keep working. Based on the announcements yesterday, this money is expected to be available by the end of April, and it can be applied for with effect from 1 March 2020. It will run for at least 3 months and could be extended. Reporting will be done through a new portal on HMRC’s website that is expected to go live in the next week or so.
For example, a staff member on £2K per month would get £1,600 (£2K x 80%). On £3K per month they would get £2,400 (£3K x 80%) and on £4K per month they would be capped at £2,500.
Statutory Sick Pay
For anyone on your payroll who is receiving SSP, this cost has previously been borne by the employer. The government will now be covering this cost for all SMEs.
Time to Pay for tax liabilities
This is an existing scheme that HMRC offers to businesses in distress. This applies to any type of tax liability, and you must contact HMRC to ask for support on Time to Pay. Word on the street is that they are being more lenient than normal, but it’ll be a long wait on the phone before you can speak to someone.
I will keep you updated as things develop, and If you’d like to discuss any of the above with me or need help in applying for any of this funding, please contact me on dbh@addthenmultiply.com.
Stay safe and stay healthy
David
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