Last reviewed 14 September 2020
A summary of Government Covid-19 assistance available to businesses. There are different assistance packages for England, Wales, Scotland and Northern Ireland, mainly effecting rates relief and grants.
Government backed loans
Bounce-back loans for small businesses. Between £2,000 and £50,000 is available to be borrowed. Loans are interest and fee free for the first 12 months. No repayments are due for the first 12 months of the loan. Applications are available through on online form and the cash will be available within days. Applications can be made from Monday 4th May 2020. Crucially, these will be 100% government guaranteed and consequently should be easier to obtain, but borrowers are liable to repay the loans. An interest rate of 2.5% will be charged on these loans. Loan terms will be for up to six years.
Most businesses should be able to apply for the scheme. To apply, the business must be based in the UK, been negatively affected by the coronavirus and not an ‘undertaking in difficulty’ on 31 December 2019. Public sector bodies, state funded schools and further education bodies, banks and insurers cannot apply.
An application cannot be made for these loans if a loan is already being made under the Coronavirus Business Interruption Loan Scheme. But, where a loan of up to £50,000 has been provided under that scheme it can be transferred to this new Bounce Back Loan Scheme if this is arranged before 4 November 2020.
The Government has determined that the interest rate to be charged on bounce back loans is to be set at 2.5%.
Applications for the scheme and more information can be found on the British Business Bank website.
The government introduced changes to the insolvency laws. This allows businesses that are suffering a cash flow crisis and become technically insolvent to continue trading. Usually, where a business continues trading when insolvent (wrongful trading) the directors incur a personal liability for any debts accrued in the period of wrongful trading. The threat of personal liability is removed retrospectively, on a temporary basis, with effect from 1 March. The objective is to allow businesses extra time to overcome the crisis. Advice should be sought if the business does trade when insolvent as the government will still require directors to fulfil their other fiscal obligations.
Support package for innovative firms
Two funds have been announced to provide support to innovative businesses. There is a £500 million investment fund for high-growth businesses and a £750 million fund for SMEs focusing on research and development.
£500 million future fund
This fund, launched in May, provides UK based companies with between £125,000 and £5 million from Government. Private investors are also to provide matching funding. The loans will convert to equity on the company’s next qualifying funding round or at the end of the loan if not repaid. To be eligible the company must be an unlisted UK registered company that has raised at least £250,000 in equity investment form third parties in the last five years.
£750 million SME support
Innovate UK is the national innovation agency. Innovate UK funds £200 million in grant and loan payments to its existing customers. £550 million is made available to increase support to existing customers of Innovate UK and up to £175,000 of support provided to businesses not currently receiving funds from Innovate UK. This scheme started in mid-May.
Eligibility criteria and further details will be announced in the next few weeks.
Online platform to identify available financial support
The Government has launched a new online portal to help businesses identify and access the support they are eligible for during the coronavirus pandemic. Once a few questions have been answered the relevant government loans, grants and financial support will be identified.
The questionnaire asks about the location of the business, the number of employees, turnover, rateable value of premises, whether the applicant is in receipt of rates support or due to pay a self-assessment payment on account and other similar questions. The questionnaire can be found at https://www.gov.uk/business-coronavirus-support-finder
Coronavirus Job Retention Scheme
Claims can now (from 20 April) be made for grants for the Job Retention Scheme. The application can be made by the business or by using an agent and will be made through the government portal at https://www.access.service.gov.uk/login/signin/creds
Details needed to make a claim
To make a claim, the business needs:
to be registered for PAYE online
the business’s bank account number and sort code
PAYE scheme reference number
the number of employees being furloughed
each employee’s National Insurance number and payroll or employee number
the start date and end date of the claim
the amount claimed including employer National Insurance contributions and employer minimum pension contributions
contact phone number.
The business will also need to provide their Corporation Tax/Self Assessment unique taxpayer reference and the company registration number.
Where more than 100 employees are being put on furlough a file needs to be uploaded that shows each employee’s:
National Insurance number.
payroll number (optional).
furlough start date.
furlough end date (if known).
full amount claimed.
The format of the file must be in .xls, .xlsx, .csv, or .ods format.
Extension to the furlough scheme
The furlough scheme has been extended until October. It closed to new entrants on 1 July which means that anyone who is to be furloughed from that date onwards must already have been furloughed before this date. The last date that a first time furlough could begin (in order to fulfil the necessary three week minimum period) was 10 June 2020. This cut-off date does not apply to the following employees, provided that the employer has furloughed any other employee for at least three weeks between 1 March and 30 June:
employees who began maternity, paternity, adoption, shared parental and parental bereavement leave before 10 June 2020 and ended it after this date
Employees who began a period of mobilisation with the Reserve Forces before 10 June 2020 and ended it after this date.
The Scheme will continue to funds a portion of wages of furloughed workers, but on a reducing scale.
Since July 2020, employers have been able to combine work with furlough by using the flexible furlough scheme. This scheme allows employers to agree that employees will work part-time hours and remain furloughed for the remainder of their normal working hours. The employer pays the employee in full for the hours they work and can claim wages for the furloughed hours according to the reduced rate of funding.
To ensure that businesses can continue to build the skills capabilities they will need, the Government is amending and proving support to the apprenticeship scheme. Perhaps the most important is that furloughed apprentices can continue with training (as can other employees) as long as this does not provide services to or generate income for the employer. Where the apprentice is not furloughed but put on unpaid leave or redeployed to a role that does not support the apprenticeship, the apprentice, employer and training provider needs consider a break in training and learning.
Where an apprentice is made redundant the Government aims to assist them in finding alternate employment to enable them to continue the apprenticeship within 12 weeks. This 12-week period may be extended. The training provider must also support the apprentice in finding another employer. Where the redundant apprentice is ready to go through the gateway training providers and end point assessment organisations will make assessment arrangements to assist the apprentice.
Where end-point assessments are due, these can be undertaken remotely where possible and practical. If this is not possible the end-point assessment can be rescheduled. Where the gateway is delayed an extension to the assessment time frame will be given, a break in learning is permitted and is to be recorded in the ILR. Where there is a specified time limit for EPA post gateway, a further pause of 12 weeks is allowable.
Apprentices are required to acquire and study for English and maths functional skills qualifications. Students due to take functional skills assessments this summer will receive a calculated grade and the skills assessments are not taking place. More detail of skills assessments is provided at https://www.gov.uk/government/publications/direction-issued-to-the-chief-regulator-of-ofqual.
Currently, awarding organisations cannot issue certificates of completion (but will be issued in due course). As a temporary measure a confirmation e-mail from the awarding organisation is to be accepted as evidence of achievement. This must contain the learner’s details, the certification run date and the unique number.
Rules already exist for breaks in learning. Breaks may now occur due to illness, self-isolation, difficulties in getting to the place of employment or training centres, due to the need to redeploy apprentices, or due to difficulties in providing training or assessment (due to staff absences or closure of facilities). Where the break is less than four weeks there is no need to report the break and the apprentice end date remains the same; funding does not alter. A break of over four weeks must be reported and payment of funding is suspended during the break period. Usually, a break of greater than four weeks is to be reported by the apprentices, but employers and training providers can now, temporarily, report and initiate a break where the break is greater than four weeks.
Where there is a break in learning, it is not necessary for the apprentices to comply with the minimum of 20% off-the-job training requirement. This 20% off-the-job training will apply during the remaining period of the apprenticeship when it recommences.
Further information and a list of frequently asked questions is at https://tinyurl.com/C19appren
Amount to claim
Between 1 March and 31 August 2020, 80% of the employee’s wages could be claimed up to a maximum of £2,500 a month. National Insurance and pension contributions need to be paid and, until 31 July 2020, could bebe claimed as well. A business could notclaim for additional NI or pension contributions that were paid to top up employee wages or any pension contributions over the mandatory pension contribution. Members of a Limited Liability Partnership are included as they are employees and can include both fixed and variable amounts as long as the variable amount is not calculated with reference to the profits or losses of the LLP.
The financial assistance provided by the scheme began to reduce from August 2020. In August, the Government continued to pay 80% of wages up to a cap of £2,500 and employers took on the liability of paying employer NICs and pension contributions for the hours the employee does not work.
In September, the Government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will also pay employer NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
In October, the Government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will also pay employer NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.
The reference here to the hours the employee does or does not work relates to the fact that employers may now bring furloughed employees back to work on a part time basis under the flexible furlough scheme and still claim from the scheme for the days the employee would usually work but has not worked, to the maximums set out above.
An employer can choose to top up wages, but this is not compulsory. Employees are not to work or provide services for the business whilst furloughed, but can undertake training or volunteer work. It can be difficult to furlough directors especially for small businesses where they are closely involved in the running of the business. Where a board decides a director is to be furloughed, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned. Where a furloughed director has to fulfil a statutory obligation owed to the company they can do provided no more is done than would reasonably be necessary for that purpose. As with other employees they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company although they are permitted to undertake payroll and make a claim under the Job Retention Scheme.
Claims are to start from the date that the employee finishes work and starts furlough, not the date of decision of when the employee is written to confirming their furlough status. Employees employed on 19 March 2020 and on payroll (i.e. notified to HMRC on an RTI submission on or before 19 March) are eligible for these grants. You could re-hire and furlough someone who left after 28 February 2020 provided they were on your payroll on 28 February 2020 and had been notified to HMRC on an RTI submission on or before 28 February 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020. You could also re-hire anyone who left on or after 19 March 2020 but they must have been on your payroll on 19 March 2020 and have been notified to HMRC on an RTI submission on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.
The amount to include in the claim is the regular wage paid to the employee including overtime, piece rate payments and any non-discretionary fees or commission paid. Discretionary payments are not to be included, this can include tips, discretionary bonuses and commission, non-cash payments and any non-monetary benefits in kind.
The Apprenticeship Levy and Student loans should continue to be paid as usual, but the Job Retention Scheme does not cover these amounts.
A step-by-step guide has been issued by the government for making a claim for wages under this scheme. This can be accessed at https://tinyurl.com/CV19Claim. This shows how to calculate the claim for wages, NI contributions and pension contributions. Further examples are shown in government guidelines are https://tinyurl.com/Cvd19pay. A calculator has also been provided so that a business can work out the figures needed when you complete an online claim through the scheme. It is designed for organisations with a small number of employees and can be accessed at https://tinyurl.com/Cvd19calc.
Holidays and leave periods
Holidays are a complex area and it will be under continuing review by the Government.
Furloughed employees accrue leave as per their employment contract. The amount of leave can be varied but the majority of workers are entitled to 5.6 weeks holiday per year and any agreement cannot go below that.
Where an employee takes leave during the furlough period, holiday pay is to be paid at the normal rates of pay. Consequently, amounts in excess of the grant payment will be required to be paid (as this only covers a portion of the usual wages); this includes leave taken due to a bank holiday. Where an employee usually works on a bank holiday then the employer can agree that this is included in the grant payment. Where leave is taken on a bank holiday the employer will either have to top up the payment or give an additional day of holiday in lieu. An employer can, however, restrict when leave is taken including during the furlough period.
Where employees return from family related leave (maternity leave, paternity leave, shared parental leave, adoption leave, parental bereavement leave and unpaid parental leave) their pay for furlough purposes is to be calculated as their usual salary before tax and not the pay received whilst on the family related leave. The same principle applies to those returning from being on sick pay.
A person returning to work that was paid a variable rate has their pay calculated by using either the same month’s earnings from the previous year of the average monthly earnings for the 2019 to 2020 tax year.
Employees with caring responsibilities
Employees that are unable to work as they have caring responsibilities due to the coronavirus (such as those that need to look after children) can be furloughed.
Minimum period of furlough
Until the end of June, the minimum period of furlough was three weeks. From 1 July, however, the minimum furlough period was removed, however, claims made to the scheme must be for a minimum seven calendar days.
Tax treatment of furlough payments
The grants received are treated as income for the business. The payment of the wages, including the grant payment is a deductible expense and offsets the amount of grant received.
Employees still have the same rights at work, including:
Statutory Sick Pay
Maternity and other parental rights
Rights against unfair dismissal
Grants cannot be used to substitute redundancy payments.
Furloughed employees that become ill must be paid at least Statutory Sick Pay. The employer can decide whether to move the employee onto SSP or retain them on furlough. Where an employee is moved onto SSP the furloughed grant can no longer be claimed. Employers pay the SSP themselves but may qualify for a rebate of up to 2 weeks SSP.
Working from home costs
Employees that are working from home as their workplace has closed or are self-isolating will incur costs, some of which will be eligible for deductions by the business. This will not apply to furloughed employees as they are not working for the business. There are no specific rules for deduction of employee expenses due to the coronavirus, but HMRC has published guidance as to the expenses that may be eligible for deduction due to working from home in this period: https://tinyurl.com/expC19. Some of these expenses are detailed below.
HMRC permits the cost of one mobile phone or SIM card per employee even if it does not have a restriction on private use. Similarly, the cost of office supplies, computers and tablets mainly used for business purposes are deductible. Office equipment bought by employees where the expense is reimbursed by the business is, however, taxable and must be reported through the PAYE Settlements Agreement.
It is likely that employees will incur additional costs due to working from home, such as electric, gas and internet costs. Payments to employees of up to £6 a week (from 6 April 2020) is non-taxable for employees working from home. Receipts will need to be obtained and kept if reimbursements are made above this amount. Where a broadband connection is installed specifically for working from home this can be reimbursed and is non-taxable. Any private use must be limited. It is expected that most employees will already have a broadband connection and the cost of that connection would not be deductible.
If a loan is provided to the employee, it will be non-taxable if the value of the loan is £10,000 or less.
Employers can pay a mileage allowance for business journeys of up to 45p per mile up to 10,000 miles in a tax year (25p a mile for mileage above 10,000 miles). These payments are non-taxable.
VAT Changes for E-publications
It had been intended to zero-rate e-publications with effect from 1 December 2020. This was to bring electronic works in line with traditional books and magazines. The date for zero-rating was advanced to 1 May 2020 to reduce the cost of online publications during the Covid-19 crisis as people are locked down in their homes and schools are closed. This change is, however, permanent.
It should be noted that publications that are predominately advertising or audio or video content will remain subject to 20% VAT.
From 1 May 2020 electronic supplies of:
journals, periodicals and magazines
children’s picture and painting books
Income Tax Self-Assessment payments due on 31 July 2020 can be deferred until 31 January 2021, although if the business is able to make the payment it should still do so. No application is required to defer the tax due.
Time to Pay
HMRC operates a time to pay scheme for businesses and self-employed persons that are in financial distress. HMRC can be contacted on 0900 0159 559 if a tax payment will be missed due to Covid-19.
Where a tax return has been filed and less than £10,000 is owed, instalments to pay can be arranged online through the government gateway. The self-assessment helpline can also be called between 8am and 4pm Monday to Friday on 0300 200 3822. The help line for other taxes is 0300 200 3835 using the same opening hours.
Sick Pay and Coronavirus
From 26 May small and medium sized businesses can recover Statutory Sick Pay (SSP) payments that they have made to employees through an online portal. Where claims cannot be made electronically, the government will provide alternate methods.
The repayment of costs will cover up to two weeks starting from the first qualifying day of sickness where the employee cannot work because they:
have coronavirus symptoms
are self-isolating; or
are shielding and have a letter from the NHS or a GP telling them to stay at home for at least 12 weeks.
Claims can be made for periods starting on or after 13 March 2020 if the employee has coronavirus or is self-isolating from on or after 16 April 2020 if the employee is shielding. In general, shielding has now been paused in England, Scotland and Wales although it may be re-started in localised areas due to a local lockdown.
The weekly rates of SSP was £94.25 before 6 April 2020 and is currently £95.85. Employees can pay more than these amounts, but these amounts are the maximum that can be claimed.
A doctor’s fit not is not required for a claim, but employees can be asked to provide an isolation note from NHS 111 or a track and trace notification identifying them as someone who has been in close contact with someone who has tested positive for the virus if they are self-isolating or a NHS or GP letter telling them to stay at home for at least 12 weeks as they are at high risk of severe illness due to coronavirus.
Claims can be made for the employees that are sick, self-isolating or shielding if the business had a PAYE payroll scheme on or before 28 February 2020 and had fewer than 250 employees on that date (connected companies must have a combined number of employees of 250 or fewer). This scheme covers all types of employment including agency contracts, fixed-term, flexible and zero-hour contracts. Claims must not exceed the EU State aid limits. These limits are €800,000 for must businesses but €100,000 for agriculture and €120,000 aquaculture and fisheries.
To make the claim it is necessary to use the Government Gateway user ID.
Records for the claim must be kept for three years and are to include:
the dates the employee was off sick
the dates that were qualifying days
the reasons for absence; and
the employee’s National Insurance number.
To make the claim it will be necessary to have:
the employer PAYE scheme reference number
contact details of a person who can deal with queries
amount of SSP paid in the claim period
number of employees that are being claimed for
the start and end date of the claim period.
Business Rates in England
A business rates holiday is introduced in England for the 2020 to 2021 tax year for retail, hospitality and leisure businesses. Further details and the definitions of the type of eligible businesses are contained in: https://tinyurl.com/ratesc19.
In addition, a nursery business in England will also be eligible for a business rates holiday if it is on the Ofsted Early Years Register and the property is used wholly or mainly for the provision of the Early Years Foundation Stage. Businesses in England that pay little or no business rates and eligible for the small business rate relief, rural rate relief or tapered relief on 11 March 2019 will be eligible for a grant of £10,000.
There is no need to apply for any of these schemes as the local authorities that issue the rates demand will reissue the rates bill for the year or write to the relevant businesses.
Cash grants in England
Retail, hospitality and leisure businesses in England will be provided with cash grants. Those with a rateable value of up to £15,000 may be eligible for a grant of up to £10,000. Those with a rateable value of between £15,000 and less than £51,000 may be eligible for a grant of up to £25,000 per property. No application is necessary and local authorities will write to the business where it is eligible for the grant.
Top up grants
The Government has created a fund to provide discretionary grants to small businesses that are outside the scope of existing business grant fund scheme ssuch as the; Small Business Grants Fund and the Retail, Hospitality and Leisure Grants Fund, Fisheries Response Fund, Domestic Seafood Supply Scheme, Dairy Hardship Fund or Zoos Support Fund. Recipients of funds from these schemes are not eligible for these discretionary grants.
The grants are to be paid to small businesses (those will less than 50 employees) with continuing fixed property related costs. Local authorities will prioritise businesses in shared spaces, market traders, small charities and other businesses that meet the criteria for Small Business Rates Relief, and bed and breakfast businesses that pay council tax rather than business rates. Local authorities will also have discretion to provide grants to other businesses. To obtain the grant the business must be able to show they have suffered a significant drop in income due to the coronavirus restriction measures.
A business cannot apply if it pays business rates (as it is aimed at small businesses) or is in administration, insolvent or has received a striking-off notice.
The discretionary grants will be a maximum of £25,000. Grants may also be made of £10,000 with discretion for payments under £10,000.
Applications for these grants are to be made through the business’s local council’s website.
Coronavirus Business Interruption Loan Scheme
This scheme encourages commercial lenders to provide loans, overdrafts, invoice finance and asset finance of up to £5 million for up to six years. The government will guarantee 80% of each loan to provide support and encourage the provision of finance.
Any UK based business with a turnover of £45 million or less can apply to a commercial lender for this loan (about 40 commercial lenders are partaking in this scheme). Loans under this scheme will be provided where the lender would consider it a viable loan if it were not for the COVID-19 pandemic. This is to enable the business to trade out of short- or medium-term difficulties. Lenders will not ask for a personal guarantee as security for lending below £250,000. Banks, building societies, insurers, public sector organisations, employer, professional, religious or political membership organisations and trade unions are not eligible for the loans. Further information is available from the British Business Bank at https://tinyurl.com/Brbnkc19.
There is also a financing facility for larger businesses.
Businesses are required to hold AGMs each year. This is difficult when social distancing is required. It is proposed that businesses be able to postpone their AGM or hold it online or by phone and use proxy voting to ensure public health guidance is complied with.
It should be noted that grants, such as the Small Business Grants and the Retail, Hospitality and Leisure Grants, are subject to tax. A business is only subject to tax if it is making a profit, so if after receiving the grant the business remains loss making, no tax is payable. Where a profit is made this is subject to tax in the usual way.
HMRC have introduced a new helpline with extra capacity – 0800 024 1222. Information is also available at https://tinyurl.com/hmrcc19.