Covid-19: Financial Support Packages
The Government has announced a range of measures to assist businesses in dealing with the financial impact of COVID-19.
Support Packages Available
On 26 March 2020, the Chancellor announced initial details of a Self-Employed Income Support Scheme. The scheme is intended to mirror the support given for furloughed employees and will pay qualifying self-employed individuals up to 80% of their average monthly income (as a taxable grant) up to a limit of £2,500 per month.
Self-employed individuals (including partnership members) will qualify for the scheme if:
- They have made at least one tax return showing a year’s worth of trading income
- Their annual profits are no more than £50,000 in 2018/19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.
- They have submitted their self-assessment tax return for 2018/19 (those who have yet to submit their return must do so within 4 weeks)
- They earn more than 50% of their annual income from self-employment (eg it is expected that those with high levels of rental income in addition to self-employed profits would not qualify)
- They were trading during 2019/20 and will carry on (when the Covid-19 crisis is over) and have lost income as a result of the crisis.
Individuals who commenced self-employment after 5 April 2019 will not be able to apply for the scheme as they have no tax records on which payments can be calculated. Individuals trading through a personal service company will not be eligible but may be able to claim under the Coronavirus Job Retention Scheme.
For those who can claim, in calculating the amount of grant payable, HMRC will average the individual’s profits over the past three tax years (or a shorter period, provided profits have been declared on at least one tax return).
The scheme will operate for a minimum of three months but it is not expected that HMRC will be able to make payments to individuals until the beginning of June 2020 (when the three month grant will be paid as a lump sum). Individuals who are already registered as self-employed will be contacted by HMRC and asked to complete an online claim before payments are made.
On Budget day, the Chancellor announced that the Government would make it easier for those not able to work as a result of the Covid-19 crisis to claim state benefits. For those who are sick or required to self-isolate, the Employment Support Allowance will be paid from Day 1 of the sickness period. In addition, the requirements of the Universal Credit Minimum Income Floor will be temporarily relaxed for those who have COVID-19 or are self-isolating in line with official guidance. This means that all self-employed individuals should be able to make a claim and receive support at the same weekly amount as employees receiving SSP are entitled to (currently £94.25 per week).
Self-employed individuals who are normally required to make a self-assessment tax payment on account on 31 July 2020 will not now need to make this payment – it can be deferred until 31 January 2021.
Local Authorities will also operate a Hardship Fund for families and businesses in financial difficulties: support for individuals is expected to take the form of Council Tax relief.
On 17 March, the Chancellor also announced that mortgage lenders would offer an initial three-month mortgage payment holiday for those in financial need as a result of the Covid-19 crisis. This payment holiday can also be claimed by buy-to-let landlords. To support private tenants struggling to pay their rent, the government has announced a three-month ban on all evictions from residential property, and housing benefit and Universal Credit will be increased to allow the local housing allowance to cover at least 30% of market rents.
On 20th March, the Chancellor of the Exchequer issued a statement encompassing an unprecedented and comprehensive package of support for businesses and employees across all sectors. Details of the package can be found below.
This support package is indeed unprecedented and it will go a long way to reassure employees and employers alike. The combination of Grant assistance, tax payment deferrals, extended interest free periods and support for the rental sector will give employers confidence to plan for the future, without the threat of accumulating debts.
Accessing the support and next steps
It is therefore essential that proactive action is being taken by business owners to consider their financial position and establish what support they need and can avail of. We at BDO NI are working with businesses to assist in this process and to find practical solutions to protect staff and to preserve the underlying trades.
The below document (dated 24th March) contains a summary of the immediate next steps that we are helping businesses to progress.
Engaging with your Bank
Communication is key and an open and transparent approach is the best option, particularly when engaging with Banks and other financial institutions.
The Banks have collectively pledged their support to the business community in this crisis, but there are still processes that need to be followed. In order to ensure that engagement with your Bank or alternative Funder is productive, we suggest that you adopt a structured approach based on the key issues that your business is facing, the 'BDO 5 point plan'.
Further information about specific schemes can be found below.
Coronavirus Job Retention Scheme
Details regarding the Coronavirus Job Retention Scheme have been released and can be found at the link below. The information includes details surrounding;
- How much you can claim;
- Employees whose pay varies;
- Pension contributions and Employer National Insurance contributions;
- National Living Wage & National Minimum Wage;
- What you need to do to make a claim; and
- What happens after a claim is made.
Frequently asked questions about the scheme can also be found here but please do contact a member of the tax team if you have any further queries.
Business Interruption Loan Schemes
Coronavirus Business Interruption Loan Scheme (CBILS) provide financial support to businesses across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.
This scheme has been enhanced (as of 2 April) and significantly expanded inlcuding changes to the scheme’s features and eligibility criteria. These changes significantly increase the number of businesses eligible for the scheme. The expanded scheme is now operational with lenders.
In addition the Governnment has launched a new Coronavirus Large Business Interruption Loan Scheme (CLBILS) for companies of turnover between £45m and £500m. This will give the banks the confidence to lend to more businesses who may otherwise not be eligible for the support.
This scheme for large businesses is due to be launched later this month.
In making a CBILS application businesses should consider adopting BDO’s ‘5 Point Plan’ so as to fully communicate the business’s position and needs in a focused and transparent manner.
Small Business Support Grant Scheme
The NI Economy Minister announced on Thursday 26th March that the first payment in the Small Business Support Grant Scheme would be made on March 31, if not before.
The Minister also announced that an online portal, set up to support the payments, has gone live. The portal provides the facility for business to register their bank details in order to receive their grant payment.
A link to this online portal is here.
A grant of £10,000 will be provided to all small businesses who are eligible for the Small Business Rate Relief Scheme. A grant of £25,000 will be provided to companies in the retail, tourism and hospitality sectors with a rateable value between £15,001 and £51,000.
Further detail on this scheme can be found here.
Technology and Research Company Funding
On Friday 3rd April 2020, the Government announced a new £20m fund to help boost the UK’s resilience to the long-term impact of the Coronavirus outbreak and similar situations in the future.
Run as a competition from Innovate UK, grants of up to £50,000 will be available to technology and research-focussed businesses to develop new ways of working and help build resilience in industries such as delivery services, food manufacturing, retail and transport, as well as support people at home in circumstances like those during the Coronavirus outbreak.
More information and how to apply can be found here.
Further information on the Government's support packages can also be found here.