Key points about Government loans and grants for businesses
There are many types of Government loans and grants currently available. Some of the schemes relevant to businesses are outlined below.
*Update to Coronavirus Job Retention Scheme 29th May – see details below and Government update here*
*Update to Self-Employment Income Support Scheme (SEISS) 29th May 2020 – the self-employed will be able to claim a second and final payment in August up to £6,750. The grant will be worth 70% of average monthly trading profits (covering three months) – please click here*
*Update to Statutory Sick Pay rebate scheme on 26th May – please click here*
Coronavirus Bounce Back Loan – NEW GOVERNMENT LOAN SCHEME
27th April 2020 the Government announced a new loan scheme to help small and medium sized businesses quickly borrow between £2,000 and £50,000 (25% of turnover up to £200,000 but that is not the maximum turnover level).
4th May 2020 the Bounce Back Loan Scheme launches. The quickest way to apply is to complete an online form with your existing current account provider. Please note you do need full online banking access to be able to complete this process.
Which businesses can apply for this government loan?
- UK based, engaged in commercial or trading activity (unless a charity or further-education college), and established by 1st March 2020
- Negatively impacted by coronavirus
- Was not an “undertaking in difficulty” on 31st December 2019. Not in bankruptcy, liquidation or undergoing debt restructuring
- Businesses NOT already claiming under the CBILS. If you have a CBILS facility up to £50,000 this can be converted to a Bounce Back Loan by the existing provider
- The Government will guarantee 100% of the loan to the lender but the borrower remains 100% liable for the debt
- There will be no interest or fees for the borrower to pay for the first 12 months. The Government will make a Business Interruption Payment to cover these
- Interest rate set at 2.5% per annum for the remaining term of the loan – up to 6 years but no penalty for early repayment
- No repayments to be made in the first 12 months
- Lenders cannot take recovery action over a borrower’s personal assets (such as main home or vehicle) or take any form of personal guarantee
Coronavirus Business Interruption Loan Scheme (“CBILS”)
Under this scheme small and medium sized businesses can apply for a government loan and other types of finance from £50,001 to £5 million for between 3 years (overdrafts and invoice finance facilities) and 6 years (loans and asset finance facilities)
Which businesses can apply?
- UK based with a turnover up to £45 million
- A proposal which would be considered “viable” by the lender in normal times
- You can self-certify that coronavirus has adversely impacted your business
- 80% Government guarantee
- Government will cover the first 12 months of interest payments and any lender fees
- Few have been able to take advantage of the scheme – complex process (you will need to provide a lot of supporting documentation), slow delivery and potentially harsh conditions
- No personal guarantees of any form for government loans up to £250,000
- For loans in excess of £250,000 personal guarantees may be required but must exclude main home with capped recoveries
Government grant and further support
Coronavirus Job Retention Scheme – key information for employers
UPDATE – 29th May 2020 – the Chancellor has announced that the furlough scheme will be closed to new entrants from 30th June (employees must have been on furlough for a full 3 weeks ie from 10th June). Employers will be able to claim for the period up to 30th June until 31st July 2020.
Flexible working is being introduced from 1st July so employees can return to work part-time and be paid in full for the time they work. Moreover, the employee can remain on furlough at 80% of wages for the part of the working week they are not actually working.
CJRS will finish at the end of October:
- 1st August onwards employers must pay National Insurance and pension contributions
- 1st September onwards employers must pay National Insurance and pension contributions and 10% of the employee wage cost (government will pay 70% of wage cost)
- 1st October onwards employers must pay National Insurance and pension contributions and 20% of the employee wage cost (government will pay 60% of wage cost)
UPDATE – 12th May 2020 – Chancellor has extended the furlough scheme until the end of October 2020. Furloughed workers will continue to receive 80% of current salary up to £2,500. However, EMPLOYERS being asked to pay a percentage (not yet clarified) from 1st August. Flexibility to allow part-time return to work etc will also be introduced from 1st August.
If you need advice please use the Quest emergency HR advice line – one free call, unlimited time
4th April 2020 the government confirmed the grant scheme covers both Directors and Office holders, salaried members of a limited liability partnership as well as employees of individual employers (eg nannies).
20th April 2020 employers were able to start making claims for staff placed on furlough on the Government portal – claims to be paid within 6 days. Employers must note that amendments cannot currently be made on the portal so all details must be correct – you cannot make another claim for that period or one that overlaps.
Further updates were then issued to include using an agent, how to claim for 100 or more furloughed employees, the type of bank account that must be used and what to do in the absence of a National Insurance number.
Any type of organisation with a PAYE scheme and a bank account in the UK can apply.
Furloughed employees can be on any type of contract:
- Employees working full-time
- Employees working part-time
- Employees on flexible or zero hour contracts
- Employees on fixed term contracts
- Agency workers (including those working for Umbrella companies)
- Foreign nationals
One interesting point that employers could have missed is that HMRC have announced that not only must employers discuss the terms of furlough with their staff they MUST also confirm in writing to their staff that they have been furloughed. Although the employee does not need to respond there must be a record in writing. The Job Retention Scheme does not give an employer the right to furlough staff or pay them less without their agreement. Written confirmation of a “collective agreement” between a trade union and an employer is also acceptable.
The maximum grant that can be claimed is more than the headline £2,500. It is £2,500 plus minimum pension contributions and Employer National Insurance Contributions.
Employees are able to work for another employer or take part in training or voluntary work while placed on furlough.
Holidays and holiday pay
Annual leave while on furlough – the Government has confirmed that staff can take holiday while on furlough but if agreed employers must pay their full rate of pay not 80%. The Government has also amended The Working time Regulations to allow up to four weeks of this year’s accrued statutory holiday to be carried forward for up to two years where it could not sensibly be taken during the coronavirus pandemic.
Employee who is off sick, self-isolating or “shielding” – Statutory Sick Pay rebate
Staff who are self-isolating or sick cannot be transferred to furlough whilst receiving statutory sick pay (“SSP”) but they are entitled to receive SSP from the first day of their absence. They can, however, be transferred to furlough if they agree with their employer that their absence will come to an end (this is for use when an employee is absent on long-term sick leave).
Employers can reclaim SSP for up to two weeks absence due to COVID-19 for every eligible employee. Employers must retain records but staff will not need a note from the doctor.
A staff member who is extremely vulnerable (with specific cancers, organ transfer recipients, severe respiratory conditions etc) and therefore “shielding” or having to look after someone who is shielding can be furloughed. Early Government guidance stated that if the person was unable to work from home and would therefore have to be made redundant they could be furloughed. However, guidance subsequently changed and a shielding person can be furloughed even if their employer is not considering making them redundant. Staff who are shielding are also entitled to SSP if relevant.
Quest’s 60 of your key questions answered on Coronavirus Job Retention Scheme – read the questions here
Useful Government links
Businesses have until 31st March 2021 to make VAT payments due between 20th March 2020 and 30 June 2020.
Deferring self-assessment payments on account
All Self Assessment payments due by 31 July 2020 can be deferred until 31st January 2021 without penalty or interest charges.
Other useful Government links
A dedicated HMRC helpline for businesses and self-employed individuals who have difficulty with paying their tax due to COVID-19 promised at Budget 2020 is now in operation. The number of the helpline is 0800 0159 559.