Support for SMEs struggling to deal with the coronavirus pandemic

Produced by Tony Groom
Updated 5 May 2020

How we all deal with each other will be remembered when this pandemic is over and business resumes, inevitably we shall prioritise those who stood by us. Our behaviour towards others and the level of support we provide is a matter of character and leadership. Everyone should look in the mirror before making a decision that adversely affects others.

The list of support initiatives with my comments and advice below is aimed at helping SMEs but should not be regarded as definitive since every situation is different and we are dealing with a highly fluid situation.

Like turnaround situations we are all dealing with a crisis for which there has been no planning and rapid decisions must be made despite the prospect of some being wrong. This doesn't matter, providing they are corrected by other decisions along the way. The key is to prioritise what is important and try to avoid making wrong decisions that cannot be subsequently rectified. As an example, those firms that terminated employment contracts just before the government announced the Coronavirus Job Retention Scheme may regret their decision. 

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Free Coronavirus guide for SMEs

VAT

Source:  Available now from HMRC

Eligible: All VAT registered businesses

Support initiative: VAT liabilities for quarter ending or months ending between 20 March 2020 and 30 June 2020 do not need to be paid by the normal due dates and may be deferred. The deferred amount must be paid by 5 April 2021 being the end of the tax year 2020-2021.

Comments: All other VAT should be paid on time. VAT refunds will be paid as normal. This is an automatic offer with no applications required.  

Advice: File VAT returns on time as normal. If you need to defer payments then cancel the direct debit and defer payment but make sure all deferred amounts are paid by 5 April 2021. Do not cancel the direct debit if you wish to pay VAT or are expecting a refund. File and pay all other VAT returns on time.

PAYE

Source:  Available now from HMRC.

Eligible:  All Employers

Support initiative:  HMRC can agree to defer payment of PAYE as part of a Time to Pay (TTP) arrangement.

Comments:  TTP arrangements must be agreed with HMRC on an individual basis. HMRC will agree a payment plan based on weekly or monthly payments over a period that is normally less than 12 months but can be as long as 30 months. Please note that HMRC adopt a draconian attitude to TTP arrangements such that all future returns and payments must be made on time where any late returns or payments are likely to trigger a default rendering all outstanding PAYE becoming immediately due.

Advice: File PAYE returns as normal. If you wish to delay payment contact the dedicated HMRC Time to Pay helpline on 0800 0159 559 to discuss repayment terms.

CJRS
(Coronavirus Job Retention Scheme)

Source: HMRC via the employee RTI filing portal.

Eligible:  All employers who had a registered PAYE scheme before 28 February and whose employees including directors were registered on the scheme before that date. Scheme applies to employees who are available for work but cannot work due to the coronavirus and therefore designated as ‘furloughed workers’.

Support initiative: This is up and running and paying out to reimburse employers. It pays 80% of employees’ gross wages up to £2,500 per month for ‘furloughed workers’ and is currently set to run until 30 June 2020. The payment includes reimbursing employers Employer NI and auto-enrolment contributions but not for bonuses nor commission.

Comments: The term ‘furlough’ applies to workers and strictly means a temporary leave of absence from work. The intention is that CJRS is used to justify retaining employees rather than them being made redundant.

You should notify the furloughed employees in writing of the date from which they are ‘furloughed’. Please note that for all other matters they remain subject to their existing contract of employment with all other contractual benefits (e.g. holidays) continuing to accrue.

Furlough can only be claimed for a period of 3 or more weeks, but subject to this restriction employees can be brought back to work and re furloughed. The HMRC website handling split furlough and staff on different furlough periods is still clunky but the HMRC helpline is really helpful so give them a call.

The contribution applies to gross pay which should be run through the payroll with PAYE, NI and student loan deductions declared and deducted on pay slips and payments made as normal. Employers may top up the wages although it would appear that there is no obligation to top up the 20% shortfall such that topping up both the 20% and larger salaries is at your discretion. In due course we will learn whether this can be challenged as a breach of contract.

There will come a time when furlough will end such that if redundancies are necessary then appropriate time should be allowed for consulting with staff.

If employees were made redundant after 28 February claims can be made providing they are rehired but employers must obtain employee's consent. If employees are on unpaid leave they can be offered furlough which can be backdated to 1 March. Furloughed employees remain employees subject to their contract of employment with continuing entitlements such as holiday.

Furloughed employees may do volunteer work or training but must not work for the employer.

Despite the good intentions of the scheme very few contracts of employment will have provisions such as a lay off clause that allows for such a scheme so I have no doubt that it will be used by employment lawyers with the benefit of hindsight pursuing claims for top up money, breach of contract and constructive dismissal.

Advice: Consider the ongoing needs of the company and plan for staff to come back to work. If you believe a change to contracts of employment is likely due to restrictions in coming back to work or where redundancies may be necessary then consult with all your employees.

CBILS
(Coronavirus Business Interruption Loan Scheme)

Source:  Available now from banks and other approved providers based on approved applications.

Eligible:  All UK businesses with annual turnover below £45 million. They must be able to demonstrate viability and how this has been impacted by the coronavirus. Businesses above this turnover threshold may apply for up to £25 Million under the CLBILS (Coronavirus Large Business Interruption Loan Scheme).

Support initiative:  Bank loans and other forms of finance including overdrafts and asset finance up to £5 million. No interest or arrangement fees are payable during the first 12 months. Since 3 April, loans below £250,000 do not require a personal guarantee (PG) from the directors. Loans above £250,000 are likely to require a PG to cover 20% of any shortfall in the event of recovery by the bank. Banks may not recover moneys owed under the PG if the director guarantor’s only asset is their primary home. The loans are underwritten by a government guarantee to reimburse the lender up to 80% of any shortfall once all recovery measures have been pursued.

Comments: Since CBILS was introduced six weeks ago, 25,000 loans worth £4.1bn have been approved. Those who have already borrowed less than £50,001 as a CBILS loan may switch to a BBLS loan.

Most loans are for 3 – 6 year terms where the larger ones to date have been provided by the main banks to their existing customers although there are about 45 approved lenders. For the moment, the major banks are still prioritising their existing customers.

Advice: Access CBILS by contacting your bank and other approved lenders from the list which can be found on the British Business Bank website at: british-business-bank.co.uk. Be aware of the implications of providing a PG and make sure you check the terms by reading the small print. Consider speaking with your accountant or a corporate finance adviser with bank contacts.

BBLS (Bounce Back Loan Scheme)

Source:  Available now from most main banks. BoS, Barclays, Clydesdale, Danske, HSBC, Lloyds, NatWest, Santander, RBS, Ulster and Yorkshire are all currently approved. TSB, Starling, Metro and Handelsbanken are also likely to become approved lenders.

Eligible:  All UK SMEs trading as a going concern that were established before 1 March 2020 that have been adversely affected by coronavirus and that have not claimed under CBILS. Credit rating is not a factor and there is no need to prove the viability of the business.

Support initiative:  Unsecured loans for amounts between £2,000 and £50,000 capped at 25% of total turnover, repayable over 6 years based on interest fixed at 2.5% and backed by a 100% government-backed guarantee for lenders. No arrangement fees. No interest charged nor repayments payable during the first 12 months.

Comments:  Launched on 4 May 2020 as online application via banks’ portals. Before applying you’ll need details of your annual turnover, account number, the amount you want to borrow, copy of your tax return and a narrative about how your business has been adversely impacted by coronavirus.

Innovate Startup Initiative

Source:  Available from Innovate UK.

Eligible:  Those businesses that are existing recipients of Innovate UK funds and those that claim R&D Tax Credits.

Support initiative:  This is a £750 million support package consisting of:

  • £200 million acceleration of grant and loan payments for existing Innovate UK customers on an opt-in basis;
  • £550 million of extra funds available to increase support for existing Innovate UK customers; and
  • £175,000 of support to be offered to approx. 1,200 firms not currently in receipt of Innovate UK funding.

Comments:  The focus of support on existing Innovate customers suggests it is key for all start-ups to apply for Innovate grants independent of this initiative.

Advice: Apply via the Innovate UK website.

Future Fund

Source:  Yet to be confirmed but it will be administered by the British Business Bank.

Eligible:  UK high growth companies with turnover between £125,000 and £5 million that have previously raised at least £250,000 from third-party investors in the last 5 years.

Support initiative:  This is matched funding from a £250 million Government fund providing unsecured bridge financing via 3-year 8% convertible loan notes against an equivalent amount to be invested by private investors or institutions.

Comments:  The funds may only to be used for working capital purposes which although not defined should be assumed to mean that it cannot be used to repay connected party debt. The Fund is due to be launched in mid May and available until 30 September 2020 although it is likely the fund will run out well before then.

Advice: Apply via the British Business Bank website after mid May.

Small Business Grant Fund

Source:  Available now from the Local Authorities who have all received funds from the Government and are now ready to distribute them to applicants who qualify.

Eligible:  Those businesses that occupy property that is eligible for small business rate relief or rural rate relief. You should already be registered with them for business rates and will have received a Rate Demand Notice for April 2020 even though you are Zero rated.

Support initiative:  This is a one-off grant of £10,000.

Comments:  It is intended to help SMEs meet their ongoing business costs. It will be provided in due course by local authorities.

Advice: Apply now online via the Council website although some Councils will send a form for you to complete. When applying you will need to have available your full business address, account number, premises unique reference number and rateable value (these are on your zero rated ‘Rate Demand Notice’), company, VAT and bank details. If you don’t have a recent Rate Demand Notice then call your Local Authority who will give you the details you need.

Retail, Hospitality and Leisure Rates Relief

Source:  Available now from the Local Authorities who will send out a new Rate Demand Notice.

Eligible:  All retail, hospitality, leisure and nursery businesses in England including shops, restaurants, cafes, drinking establishments, cinemas and live music venues and premises used for assembly and leisure. It also covers hotels, guest & boarding houses and self-catering accommodation. You should already be registered with them for business rates and will have received a Rate Demand Notice for April 2020.

Support initiative:  This provides for a 12-month business rates holiday.

Comments:  It will be applied to your next council tax bill that is imminently due for the year from April 2020 although local authorities may have to reissue bills since many have already been prepared.

Advice: Do nothing but check your rates bill and if necessary, contact your local authority but give them time to send out a revised bill before contacting them.

Retail, Hospitality and Leisure Grant Fund

Source:  Available now from the Local Authorities who have all received funds from the Government and are now ready to distribute them to applicants who qualify.

Eligible:  All retail, hospitality and leisure businesses. You should already be registered with them for business rates and will have received a Rate Demand Notice for April 2020.

Support initiative:  This will provide cash grants based on the rateable value of the business property. Those with a rateable value of under £15,000 will receive a grant of £10,000. Those with a rateable value of between £15,001 and £51,000 will receive a grant of £25,000.

Comments:  This will be paid via your local authority.

Advice: Apply now online via the Council website although some Councils will send a form for you to complete. When applying you will need to have available your full business address, account number, premises unique reference number and rateable value (‘Rate Demand Notice’), company, VAT and bank details. If you don’t have a recent Rate Demand Notice then call your Local Authority who will give you the details you need.

HGV & Commercial Vehicle Operators

Eligible:  Lorry, bus or trailer and HGV owners of vehicles over 3.5 tonne and O-licence holders.

Support initiative:  HGV MOTs have been suspended from 21 March 2020 for 3 months.

Comments:  There is no suspension for the need to carry out PMI (Preventative Maintenance Inspections) Vehicle safety inspections.

Advice: In most cases you do not need to do anything as the MOT extension is automatic. O-licence operators should continue with PMIs. Tax must be current for all vehicles so renew as normal or register as VOR (Vehicle Off Road) if vehicles are not needed buy make sure they are parked off the public highway.

SSP - Statutory Sick Pay relief

Source:  Available now from HMRC.

Eligible:  Employers with fewer than 250 employees experiencing sickness absence due to the coronavirus.

Support initiative:  This is a refund to cover up to 2 weeks’ SSP per eligible employee.

Comments:  No evidence is required for the claim but employers are advised to ask employees with symptoms of coronavirus to get an isolation note from NHS 111 online or from the NHS website. Legislation is required for this but in due course the Government will advise employers of the repayment mechanism.

Advice: File SSP as normal. Maintain records of staff absences and payments of SSP.

SEISS
(Self-employment Income Support Scheme)

Source:  HMRC are not yet ready for filing claims.

Eligible:  Self-employed individuals (including members of partnerships) who have filed at least one tax return and are affected by the coronavirus whose majority (more than 50%) of their income comes from self-employment and who have profits of less than £50,000.

Support initiative:  The scheme offers a grant to self-employed individuals or partnerships, worth 80% of their profits up to a cap of £2,500 per month.

Comments:  My covering this initiative is intended to encourage SMEs to help others and in particular those self-employed people they work with. The scheme will be open for an initial three months from 1 March with people able to make their claim by the beginning of June which means waiting for payment although this will be backdated. Payment will be a single lump sum covering the claim up to end June. Those who have not yet filed their tax return for 2018-19 have a late filing concession but must file before 23 April 2020 to be eligible. HMRC will use filed tax information to check eligibility and invite applications in May once the scheme is operational. HMRC will then pay the grant directly to eligible claimants’ bank account in June.

Advice:  Make sure your tax returns are up to date. Do not contact HMRC now. Look out for HMRC correspondence in May inviting applications. Complete and return application. Contact HMRC in late May if you haven’t heard from them.

Self-employed - Income Tax Deferment

Source:  Available now from HMRC.

Eligible:  Self-employed who file tax returns.

Support initiative:  Payments due on 31 July 2020 may be deferred to January 2021.

Comments:  My covering this initiative is intended to encourage SMEs to help others and in particular those self-employed people they work with. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period. Despite this measure no deferment can be assumed for the 31 January 2021 liability so anyone withholding tax must ensure they can pay this amount plus their January Income Tax by 31 January 2021. For many who are not affected they may like the discipline of paying this tax knowing they will not have to pay it in January.

Advice: The self-employed do not need to pay their Income Tax due on 31 July 2020 but must ensure that they can pay this amount plus their January Income Tax by 31 January 2021.

Self-employed – Universal Credit Claims

Source:  Available now online from Government via  https://www.gov.uk/apply-universal-credit.

Eligible:  Anyone claiming Universal Credits.

Support initiative:  The minimum income level for claiming Universal Credit has been suspended to allow the self-employed to claim the recently increased level of Universal Credit up to the level of Statutory Sick Pay that applies to employees.

Comments:  My covering this initiative is intended to encourage SMEs to help others and in particular those self-employed people they work with. There are other provisions such as mortgage suspension and housing benefit to cover rent but these are not covered as my focus is on helping SMEs.

Miscellaneous support measures

Companies House – Filing Annual Accounts:  Companies will be granted a 3-month extension to file year end accounts providing they cite coronavirus as the reason for requesting the extension. Applications can be made by phone to 030 1234 500 or online via the normal filing gateway.

Company compliance – (AGMs):  those companies required by law to hold Annual General Meetings (AGMs) will be able to hold them online or postpone them but we are waiting for the legislation to be enacted so check first.

I invite you to provide feedback on the above and cite examples of initiatives that you come across about survival initiatives, both good and bad examples.

Please consider the second and third order consequences of any decisions before acting on them but despite this caution don't delay action if you are experiencing disruption to your business.

Also keep an eye on onlineturnaroundguru.com for updates to this advice and for tips on business survival.

Otherwise please stay safe, you do not need to deal with this alone.

Click here to download guide in PDF

Free Coronavirus guide for SMEs

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