The outbreak of the COVID-19 coronavirus will place many businesses in a difficult financial position. As the chancellor, Mr Rishi Sunak stated at one of the daily briefings: ‘the coronavirus pandemic is a public health emergency. But it is also an economic emergency. We have never, in peacetime, faced an economic fight like this one’.
The virus is spreading across the world and we can already see the impact the virus has on businesses and the financial distress it is causing to many companies, partnerships and sole traders.
The prime minister, Boris Johnson said: ‘we must act like any wartime government and do whatever it takes to support our economy’.
We are here to assist and advise on what you can do to apply for financial help amid the crisis.
The scheme is provided by the British Business Bank with the aim to support small and medium businesses. The government will provide the lender with a guarantee of 80% on each loan, which means that this support should be possible for most, if not all businesses. The limit of funding is set at £5 million, which was increased from the original maximum of £1.2 million, for up to 6 years. Eligible businesses will also have access to the first six months interest free, as this will be covered by the government during the first six months.
The finance products available to business include the following:
It is important to note that although businesses will not be charged for the guarantee, they will remain 100% liable for the debt. If you would like to discuss what this might mean for you in the future then please contact our office to discuss in more detail.
To apply for the Coronavirus Business Interruption Loan Scheme, the business should consider the full eligibility criteria. To be eligible for a facility under CBILS, the business must have a turnover of less than £45 million per annum. Additionally, the British Business Bank made it clear that any business interested in the scheme, should approach one of the 40+ accredited lenders with their borrowing proposal. The accredited lenders include high street banks and asset finance companies based all over the country. Previously, the British Business Bank guidance stated that the borrowing proposal must be ‘sound’ without an explanation as to what this means exactly. The British Business Bank has since updated their guidance and confirmed that the business must ‘have a borrowing proposal which, were it not for the COVID-19 pandemic would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty’.
In general, the business must answer ‘YES’ to all of the below to be able to apply for the Coronavirus Business Interruption Loan Scheme:
The decision whether the business will be eligible for the scheme, is left to the accredited lenders and if they can offer finance on normal terms, rather than through the Coronavirus Business Interruption Loan Scheme, they will do so. The British Business Bank also stated that any enquires as to repayment terms should be raised with the individual accredited lenders and not the British Business Bank themselves as all lending decisions will remain fully delegated to the accredited lenders.
You will find full list of accredited lenders here. The accreditation process is ongoing and the list is being updated. Please note that not every accredited lender can provide every type of finance.
The full specifics of the scheme are not known yet as the government confirmed that the details are being confirmed and information campaigns are being launched, however, as of 23 March 2020, businesses can access this form of government support.
This is a new lending facility available through the Bank of England and aimed to support larger businesses. One year corporate bonds will have to be issued by businesses which the Bank of England will purchase to give business liquidity.
To be eligible for this scheme, companies should make a material contribution to the UK economy.
The Bank of England, on their website stated that in practice, eligible firms that meet this requirement will be ‘UK incorporated companies, including those with foreign-incorporated parents and with a genuine business in the UK; companies with significant employment in the UK; firms with their headquarters in the UK’. In addition, the Bank of England will review the balance sheets and cash flows of the companies, which is because the company must show that they were in sound financial health prior to the COVID-19 outbreak.
To provide businesses with further support, the Government announced that the retail, hospitality and leisure businesses with property with a rateable value between £15,000.00 and £51,000.00 will have an additional grant made available in the sum of up to £25,000.00.
A 12 month business rates holiday will be introduced for the year 2020 to 2021, provided that the business is based in England and is in the retail, hospitality or leisure sector. Businesses do not need to take any steps as the scheme will automatically apply to the next council tax bill in April 2020. Local authorities have been provided with guidance and therefore, any queries should be addressed to your local authority directly.
If you are a nursery business that pays business rates, a business rates holiday will also be introduced for the year 2020 to 2021.
A £10,000 grant will be available to small businesses that are currently eligible for small business rate relief, rural rate relief and tapered relief. This grant will allow businesses to help with their continuing business costs.
The government further introduced a three month suspension of VAT (Value Added Tax) for businesses. For self-employed persons, the Income Tax payments which were due this summer, will be now deferred to January 2021.
No action needs to be taken as this will be an automatic. Simply, you will not have to make any payments during this period.
If a business or a self-employed person has any outstanding tax liabilities and is likely to miss any payments due to the impact of COVID-19, they might be eligible for support. A call should be made to HM Revenue and Customs to discuss this individually on 0800 159 559.
The government advice to avoid pubs, theaters and any public places means that many businesses will be faced with loss of revenue. This caused a lot of criticism as many said that businesses would not be able to claim on their insurance as the advice was only advisory. However, during his speech on 17th March 2020, the chancellor stated: ‘let me confirm that, for those businesses which do have a policy that covers pandemics, the government’s action is sufficient and will allow businesses to make an insurance claim against their policy’.
The government is taking more action in an attempt to slow the spread of the virus, as we saw with the recent announcements of closures of schools, nurseries, shops selling non-essential products, libraries, playgrounds, community centers, places of worships, hotels and others.
In addition, vast number of businesses, whilst still allowed to trade, will suffer dramatic drop of revenue, as a result of the coronavirus crisis.
With this in mind, this means that businesses who have an insurance cover might be able to make a claim against their insurers. Each insurance policy will differ, depending on the provider and businesses are strongly encouraged to review the terms and conditions of their policies. It might be the case that pandemics are excluded from policies, however, it is definitely worth checking and making enquiries.
Please get in touch if you would like us to review the terms and conditions of your insurance policy and consider whether you have a right to make a claim.
On 20th March March 2020, the chancellor also announced a Coronavirus Jobs Retention Scheme, under which the government will pay salaries to employees at 80% of their current salary up to a maximum of £2,500. This will be done through a grant (rather than a loan) and employers should contact HMRC for the same.
All UK businesses are eligible for this scheme, which means that employees who would normally have to be let go under the current circumstances will be supported, even if businesses are forced to close temporarily.
To access the scheme, the government website states that individual employees will have to be considered as ‘furloughed workers’ and also notified to HMRC that they have been considered as such. However, it is important to adhere to employment law rules and employers are strongly encouraged to review the current employment contracts as there might be no contractual terms which would permit furlough. If you would like to discuss this is in more detail, then please contact us.
Once the above is established, you, as an employer, should use an online portal through the HMRC, to submit the information. The system is not yet set up, and we are told that the HMRC are working urgently to get this done.
For now, the scheme is set to last for three months, however, there is a possibility of an extension, and we assume that this will be announced in due course. It is also important to note, that the scheme does not apply to self-employed people or contractors and there are also uncertainties about the status of people who are self-isolating or are in fact ill.
If you require help or additional information, please contact one of the lawyers in our business team on 0330 107 0106 or email business@imd.co.uk.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
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