Understanding government support schemes for businesses during COVID-19
Rishi Sunak’s debut budget speech on March 11th was delivered under the shadow of the threat posed by the developing COVID-19 coronavirus crisis as the impact of the global pandemic began to be felt by businesses up and down the country.
Labelled by some as a ‘coronavirus budget’ Sunak announced a raft of measures to help stabilise the economy by offering companies various lifelines as they battled against the escalating situation. These included help with emergency funding as well as business rates relief for small companies.
Following on just days from the budget, Rishi Sunak was once again back in the spotlight detailing further measures to help beleaguered businesses and since that point, he has introduced new measures and extended existing initiatives as the situation continues to develop.
- Coronavirus Job Retention Scheme – The government pledged to step in and help pay peoples wages via the Coronavirus Job Retention Scheme. This will be available to all companies of all sizes and will cover 80% of the wages of people who are not working up to £2,500 a month. Employers can top up this amount if they choose. The hope is that this will allow a company which has been forced to close, or which is otherwise experiencing financial distress, to retain their staff rather than laying them off. The scheme has been extended multiple times and is currently expected to end in September 2021. Employers will be expected to contribute 10% of furloughed staff's wages from July, increasing to 20% in August and September.
- Self-Employed Income Support Scheme (SEISS) – This scheme offers a financial lifeline to the self-employed. The scheme so-far consists of five taxable grants. These have been of varying amounts but are all calculated based on average monthly profits up to a maximum of £2,500. Initially only those with a tax return for 2018-19 were eligible, however, it was announced in the 2021 Budget in March 2021 that those with a 2020 tax return would be eligible for the fourth and fifth grants. The fifth grant (covering May-July) will be targeted at those most affected by the pandemic who will be given a grant worth 80% of profits; those who have seen their profits dip by less than 30% will still be entitled to a 30% grant.
- Coronavirus Business Interruption Loan Scheme (CBILS) – First announced at the budget, the CBILS will temporarily replace the current Enterprise Finance Guarantee Scheme and will operate in much the same way. CBILS provides loans up to £5m. No interest will be payable on this type of borrowing for the first twelve months, and a range of finance options including loans, as well as asset and invoice finance will be available. Banks will not be permitted to request personal guarantees for loans under £250,000; instead the government provides security of 80% to the bank should they suffer losses. Borrowing through the CBILS will close 31st March 2021
- Bounce Back Loans - Government-backed 'bounce back loans' are aimed at SMEs. Capped at £50,000, companies can apply for a loan worth up to 25% of its turnover. No interest will be payable for the first 12 months with an interest rate of 2.5% kicking in after this point. The entire loan will be backed by the government. Applications for Bounce Back Loans will close 31st March 2021.
- Recovery Loans Scheme - The Recovery Loans Scheme was announced at the 2021 Budget and is designed as a direct replacement for the CBILS and Bounce Back Loan schemes. Companies of any size can apply for a loan of £25,000 - £10m, or an invoice finance agreement between £1,000 - £10m. The government will provide 80% security and personal guarantees will not be required for borrowing under £250,000. Applications will open from April and close at the end of 2021.
- The Future Fund - Aimed at innovative companies who typically rely on funding from outside investors, The Future Fund will provide convertible loans from £125,000 up to £5m. This is an investor-led scheme, with the government promising to match 100% of the funding introduced into a company from private investors. This money cannot be used to pay salaries or dividends, nor can it be used to repay existing borrowings to shareholders or related parties. The loan will mature after 36 months, at which point it will convert into shares. An interest rate of 8% will be levied on the loan although this will not need to be paid back on a monthly basis; instead the interest will accrue until the loan matures and at this point it will either be paid back or it will convert into shares. Announced 20th May, applications for The Future Fund will remain open until the end of September 2021.
- HMRC Time to Pay (TTP) Scheme Extended - Sunak has thrown a lifeline to those companies who fear being able to keep up with their obligations to HMRC during this time of upheaval. This will be done through an extension of the current Time to Pay (TTP) scheme which gives businesses additional breathing space when settling their tax bills including VAT, PAYE, and Corporation Tax. It is hoped that this will help to free up cash flow and help to keep money moving around the supply chain. There will be a dedicated helpline set up to help businesses discuss the possibility of setting such a payment plan up.
- VAT deferred - Companies could defer their VAT liabilities between 20 March - 30 June 2020. Payment was due in full by 31 March 2021, however, HMRC introduced a payment scheme for those businesses struggling to meet this deadline. The VAT deferral payment scheme is open until 21 June 2021 and this allowed deferred VAT to be repaid in a series of equal monthly instalments interest-free. The earlier a business joins the scheme, the more monthly instalments will be given. Repayment could be made in 11 instalments for those who joined the scheme when it opened in February; those who do not join until the 21 June 2021 deadline, will only be given 8 instalments.
- Additional help for the self-employed and sole traders – The minimum income floor for accessing benefits, including universal credit, will be suspended. In real terms this means the self-employed will be able to claim universal credit at rate which is equivalent to SSP. This will be useful to those that do not qualify for the Self-Employed Income Support Scheme.
- Business rates relief - One of the major announcements during the budget was that for businesses in the retail, hospitality and leisure sectors, with a rateable value of less than £51,000, they will be fully exempt from business rates for this year. Sunak has now sweetened the deal further by extending this for a further three months until the end of June, while the remaining nine months of the year will be discounted by up to two thirds up to a value of £2m for closed businesses.
This is a moving situation and we will update this page as and when further measures are announced by the government. This is not an exhaustive list of measures; additional schemes and grants are available to businesses in certain sectors.