Coronavirus Job Retention Scheme (CJRS)
Some form of job support scheme had been expected after the 17 March announcement and the CJRS is similar to schemes that have already been set up elsewhere in Europe. Under the CJRS, “HMRC will reimburse 80% of a furloughed worker’s wage costs, up to a cap of £2,500 per month’, provided the worker was on the employer’s PAYE payroll on or before 19 March 2020 and was notified to HMRC on an RTI submission by that date. The cut-off date was originally announced as 28 February but was changed to 19 March (the day before the Chancellor announced the CJRS) on 15 April.
The time frame for the CJRS was extended to the end of June on 17 April, with the scheme opening to applications from 20 April.
In this context ‘furloughed workers’ are non-working employees (including part timers and employees on agency, flexible or zero hours contracts) who are kept on the payroll, rather than being laid off. The employee must be furloughed for at least three consecutive weeks. The employer has to designate these employees and submit relevant information to HMRC via a “new online portal” available “by the end of April”. The HMRC payments will cover 80% of “usual monthly wages” plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
NEW ANNOUNCEMENT
Employees who left or were made redundant after 28 February can be re-employed and placed on furlough, with the (former) employer then claiming under the CJRS for their wages through the scheme. This applies even if re-employment does not start until after 19 March.
The CJRS is available to one person companies whose director/owner furloughs themselves. However, only salary is covered, not dividends, and like all other furloughed workers, the director “cannot undertake work for or on behalf of the organisation”. According to press reports the Treasury nevertheless accepts that the director may continue with their statutory obligations in that role.
Statutory sick pay (SSP)
Businesses with fewer than 250 employees as at 28 February 2020 will be refunded the full cost of providing SSP to any employee off work for up to 14 days because of coronavirus.
Loan guarantees
A government-backed loan guarantee scheme announced in the Budget has since been regularly extended and enhanced. The Government will now provide loan guarantees up to “an initial” £330 billion for all sizes of businesses. In all instances businesses remain responsible for repaying any facility they may takeout – any guarantees are for the lender:
- For large firms (with more than £4 5million turnover), the Bank of England has launched a Covid Corporate Financing Facility (CCFF), which “will provide funding to businesses by purchasing commercial paper of up to one-year maturity, issued by firms making a material contribution to the UK economy”. The company must satisfy Bank of England lending criteria, which originally meant having an investment grade credit rating from a ratings agency but has since been changed to also allow lending banks to judge credit worthiness. However, the ultimate decision remains with the Bank of England. As at 3 April, about £3.5 billion had either been provided or committed.
- For medium sized businesses (turnover between £45 million and £500 million) On 3 April the Chancellor announced the Coronavirus Large Business Interruption Loan Scheme (CLBILS). The scheme is due to launch later in April and will fill a finance gap that had emerged between the two existing loan support schemes. The CLBILS will have a loan ceiling of £25 million and is targeted at businesses that are too large for the CBILS (see below) but fail to meet the criteria for the CCFF. The new scheme will provide a government guarantee of 80% on individual loans and other forms of finance (e.g. overdrafts) for businesses.
The aim is to provide support for businesses that were viable before the Covid-19 pandemic but now face significant cash flow difficulties that would otherwise make their business unviable in the short term. Lenders will be expected to conduct their usual credit risk checks and charge commercial rates of interest.
- For small and medium sized businesses (turnover up to £45m) The loan limit on the Coronavirus Business Interruption Loan Scheme (CBILS) is £5 million (originally £1.2 million), with no interest charged for the first twelve months and lender-levied fees will be covered. The scheme is delivered through 40 accredited commercial lenders, backed by the British Business Bank. Eligible SMEs must be UK-based and meet “the other British Business Bank eligibility criteria”. The government has made clear that this now means the CBILS is available to all SME businesses affected by Covid-19 and not just those unable to secure regular commercial financing elsewhere. Lenders cannot require personal guarantees on borrowing of under £250,000, nor can primary residential property be taken as security under the scheme. When a personal guarantee is required, it is capped at 20% of the outstanding value of the loan. As at
15 April, the CBILS had provided £1.1 billion of loans to just over 6,000 businesses. Applications received had reached nearly 28,500, although inquiries had exceeded 300,000.
NEW ANNOUNCEMENT
Support package for innovative firms
On 20 April the Chancellor announced a two-part support package for ‘innovative firms’, which means mainly start-ups and other venture capital backed business that would be unable to raise CBLIS or CLBILS finance.
- The Future Fund will launch in May and be delivered with the British Business Bank. The fund will provide loans between £125,000 and £5 million, with private investors at least matching the government commitment. These loans will automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if they are not repaid.
To be
eligible, a business must be an unlisted, UK registered and UK based company
that has previously raised at least £250,000 in equity investment from third
party investors in the last five years. To begin with the government is
committing
£250 million to the scheme. It will initially be open until the end of
September, with its scale kept under review.
- Targeted Support for Research and Development (R&D) £750 million of targeted support for the most R&D intensive small and medium size firms will be made available through a grants and loan scheme operated by Innovate UK, the national innovation agency.
- Innovate UK will accelerate up to £200 million of grant and loan payments for its 2,500 existing customers on an opt-in basis. An extra £550 million will also be made available to increase support for existing customers and £175,000 of support will be offered to around 1,200 firms not currently in receipt of Innovate UK funding. The first payments will be made by mid-May.
Deferral of VAT and Income Tax Payments
For the period between 20 March 2020 and 30 June 2020, businesses will not be required to make a VAT payment. Instead they will be able to defer this payment until the end of the 2020/21. VAT refunds and reclaims will be paid by the government as normal. No applications will be required as the process will be automatic.
Self assessment income tax payments due on the 31 July 2020 (the second payment on account for 2019/20) will be deferred until the 31 January 2021. This also will not require an application and is not limited to just the self-employed, although the Treasury says “If you are still able to pay your second payment on account on 31 July you should do so”. Penalties and interest for late payment will not be charged in the deferral period.
Business Rates Retail Discount
All shops, cinemas,
restaurants, music venues and business operating in the leisure and hospitality
sectors will have no business rates to pay in 2020/21.
Grant Funding Schemes
There are two grant schemes based on rateable values:
- Small Business Grant Fund All eligible businesses in England in receipt of either Small Business Rates Relief (SBRR) or Rural Rates Relief (RRR) in the business rates system will be eligible for a payment of £10,000.
- Retail, Hospitality and Leisure Grant Eligibility All eligible businesses in England in receipt of the Expanded Retail Discount (which covers retail, hospitality and leisure) with a rateable value of up to than £15,000 will be eligible for a cash grants of £10,000 per property and those with a rateable value of more than £15,000 but less than £51,000 will be eligible for a cash grant of £25,000 per property.
Nursery businesses that pay business rates
For nursery school businesses based in England, there will be a business rates holiday for 2020/21. The nursery property must be:
- occupied by providers on Ofsted’s Early Years Register
- wholly or mainly used for the provision of the Early Years Foundation Stage.
Commercial insurance
The question of the extent to which any insurance policy provides cover for the Covid-19 outbreak has proved contentious. Pandemic cover is not a feature of most business disruption cover, a point underlined by the Association of British Insurers (ABI) in a statement it issued on 17 March. The ABI has since launched an information hub dealing with the impact of the virus on a range of insurance policies, from trade credit to private health.
NEW ANNOUNCEMENT
On 15 April the Financial Conduct Authority (FCA) issued a ‘Dear CEO’ letter to insurers, setting out its expectations of regulated firms and a reminder that for some SMEs, complaints will fall within the remit of the Financial Ombudsman Service.
Off-payroll working in the private sector (IR35)
On 17 March, the Chief Secretary to the Treasury,
Steve Barker, said in a statement to the House of Commons that the start date
for the new IR35 tax rules would be deferred to
6 April 2021.
Time to Pay (TTP)
In the Budget, the Chancellor announced that HMRC would
scale up its Time to Pay service, giving businesses and the self-employed the
chance to defer tax payments.
Protection from property forfeiture
Commercial tenants who cannot pay their rent because of COVID-19 are protected from forfeiture of their business property if they miss a payment up until 30 June 2020. Reports suggest that only 40% of the commercial property rents due on Lady Day (25 March) were paid on time.
Going concern
The Financial Reporting Council (FRC) has issued financial guidance in conjunction with the Financial Conduct Authority (FCA) and Prudential Regulatory Authority. This includes extensive information for auditors covering areas such as how to deal the question of whether a business is a going concern.
Wrongful Trading and business restructuring
On 28 March the UK Business secretary announced changes to insolvency law “to enable UK companies undergoing a rescue or restructure process to continue trading, giving them breathing space that could help them avoid insolvency”.
The wrongful trading law is being temporarily suspended, retrospective from 1 March 2020. for three months. This gives company directors the ability to keep their businesses in being without risking personal liability.
Coronavirus Act
The day before the Chancellor’s latest statement, the Coronavirus Act 2020 received Royal Assent. This 348-page Act deals with a broad range of Covid-19 related measures (many of which exclude Scotland because of its devolved powers), including:
- Food supply.
- Statutory Sick Pay (SSP) modifications, e.g. funding of the employer’s liabilities.
- Suspension of the complex abatement rules that either reduce or suspend NHS pensions on an individual’s return to work.
- Uprating of working tax credit.
- Protection from eviction for residential tenancies to 30 September 2020.
- Protection from forfeiture for commercial tenancies to 30 June 2020.
The explanatory notes for the original Bill (introduced on 19 March ) are here.
Updated government Covid-19 guidance on business support is here and for employees is here.
If you need any help interpreting any of the governement’s latest announcements contact one of our Accounting & Business Advisory on 01142 664 432 or info@smhca.co.uk
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