The rapid disruption caused by the various social distancing measures has resulted in a liquidity shock to many businesses. Therefore, we would like to circulate what we have learned about the various financing and government support options expected to be available to date. This is our interpretation based on information available to date. The situation is developing and changing by the hour, before taking action based on the document please refer to CRM or the Government website. This document includes the main provisions that we believe are relevant to our clients, but does not cover all provisions made.
As a priority, reach out to your bank relationship manager: All major banks in the UK are introducing measures to help businesses. These include: capital repayment holidays (as long as 12 months), overdraft extensions, and working capital/trade financing facilities. The availability and terms of these products will depend on the individual circumstances but banks are able to move very fast (processing times could be as short as few hours). This has yet to be tested, but is what the banks are anticipating.
We still do not know enough about some of the announced schemes – and the banks themselves are still working them out. From our conversations we hear that bank lending teams have been busy in internal meetings this week to understand how the systems will work. But there is general consensus that they will have the new schemes up and running next week.
Coronavirus Business Interruption Loans (CBILs).
The UK Government has announced a new Coronavirus Business Interruption Loan Scheme will launch on Monday 23 March, to support businesses. The scheme is an extension of the current Enterprise Finance Guarantee scheme, and temporarily replaces it.
The key points to keep in mind are:
• Application: The scheme will be delivered through commercial lenders, backed by the Government-owned British Business Bank (BBB). There are 40 accredited lenders able to offer the scheme, including all the major banks. If you are a client of any of those banks, your relationship manager should be your primary contact in relation to the CBILs. Conversations we’ve had with some leading banks suggest that current clients will be given a priority
• Facilities: The scheme will support business loans and overdrafts of up to £5 million with no interest due for 12 months by providing a guarantee to the lender. Current indications are that the Government will provide a guarantee of 80% of the loan to the lender. No fees will be charged. We do not yet know on what basis the banks will decide how much each business can borrow.
• Processing times: Indications from some banks suggest that loans of up to £250k could be processes within days or hours as no security will be required. This has not yet been tested. For loans greater than £250k banks will be making a more thorough assessment resulting in processing times of several days.
o Be UK-based, with turnover of no more than £45 million per annum
o Business that were trading viably before the Covid19 disruption started. The first check banks will do is a ‘look-back assessment’ of trading pre Covid19. Barclays, for example, have indicated that they will assess the operations of the business in the months prior to the Covid19 disruption to make a decision on eligibility.
o Operate within an eligible sector (a small number of industrial sectors are not eligible for support or subject to limitations – see here)
o Current indications suggest EIS will be eligible but this is to be confirmed on Monday once the scheme is up and running. We will provide an update as we learn more.
• Other types of facility: Asset finance and invoice finance will also be available through your bank. We are not yet clear whether these will be subject to new terms or eligibility under CBILs.
NB: The CBILs scheme is still being finalised by the Treasury, the BBB and the participating banks. Updates to the T&C will be made in due course (even after Monday 23rd). To stay on top of latest developments monitor the British Business Bank website – and we will update as and when when we learn more.
Coronavirus job retention scheme
Any employer, irrespective of size, will be eligible.
• HMRC will be providing grants to cover most of the wages for those who are not working but kept on payroll.
• Government will pay for 80% of the salary up to a total of £2,500 a month for any employee that is furloughed rather than made redundant.
• The scheme will be backdated to 1st March with an initial period of 3 months. But it could be extended.
• There is no limit to the total amount of grants available.
• HMRC are expected to be paying the first grants within weeks (at the latest by end of April).
We will update on how this is working in practice as we work with clients on this initiative.
PAYE / NI support
HMRC has established a Coronavirus Helpline. It can be reached on 0800 015 9559 (https://www.gov.uk/difficulties-paying-hmrc).
HMRC has significantly expanded its existing ‘Time To Pay’ scheme, whereby companies can defer PAYE payments (and agree a repayment plan over time) if they are unable to pay.
So far this looks like deferral of payment of upcoming PAYE and NI for one or two months, with the potential for more to be agreed at a later date. Normally, HMRC charges 3.25% interest on late payments; this may be waived.
It is important to speak to HMRC rather than just not paying. We suggest you do so before your next PAYE payment is due. It is also important to keep them regularly updated.
We expect more measures to be delivered through HMRC and will update as we learn more.
The Government is deferring the next quarter of VAT payments (i.e. quarter to end of June). Companies will have until the end of the financial year to repay. This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.
Some businesses in England will be eligible for a Business Rates holiday for 1 year from 1 April 2020:
• if you are currently receiving the retail discount for your Business Rates bill, you will receive a revised bill with 100% relief shortly
• if your business occupies a property in the retail sector with a rateable value of £51,000 or more you may also be eligible for the 100% discount on your business rates bill
• you should expect further communication on this from your Local Authority. If you have any questions, you should contact your Local Authority
If your business is eligible for small business rate relief in England, you are entitled to a one-off cash grant of £10,000. If your business is in the retail, hospitality or leisure sector in England, then you may also be entitled to a cash grant. If you have a property with a rateable value of less than £15,000 then you will be entitled to a grant of £10,000, whether or not you are entitled to small business rate relief or rural rate relief. If you have a property with a rateable value of between £14,999 and £51,000 then you will be entitled to a cash grant of £25,000.
For Income Tax Self-Assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021.
If you are self-employed you are eligible.
How to access the scheme
This is an automatic offer with no applications required.
No penalties or interest for late payment will be charged in the deferral period.
HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of Covid-19 and have outstanding tax liabilities.