Last reviewed 26 October 2020
There are a number of schemes that the government is providing to help businesses during the coronavirus crisis. Some schemes are coming to an end, whilst new support is also being introduced. This is a summation of the main schemes that are available.
Job Support Schemes
The Coronavirus Job Retention Scheme (furlough) provides employers with grants of up to 80% of the salary of employees. This is capped at £2,500 a month. Employees had to remain employed but were not to undertake any work for the employer. It closed to new applications after 10 June 2020 but continues for registered applications until the end of October 2020. Any furlough arrangement from 1 July is a flexible arrangement that enables employees to return to work on a part-time working and part-time furlough arrangement. From 1 August employers are required to pay employer national insurance and pension contributions. From September employers have to contribute 10% of wages, with the government contributing 70%. From October the ratio is 20% employer contribution, government 60% contribution.
A new scheme is introduced from 1 November 2020, the Job Support Scheme (JSS). This will run for six months. There are two elements to the Scheme - JSS (Open) and JSS (Closed). Under the JSS (Open) employees working full time or less than a 1/5th of their normal hours will not be supported. The employer will pay the employee for the hours they work also 5% of pay for unworked hours to a cap of £125 per month. The government will pay the wages for 61.67% of the hours that are not worked. The government contribution will be calculated on the employee’s normal salary but capped at £1541.75 per month.
JSS (Closed) provides support for businesses that are required to close due to restrictions imposed by any of the four governments of the UK. Employers with a UK bank account and a UK PAYE scheme registered on or before 23 September 2020 can use the scheme. The scheme starts on 1 November 2020 and will last 6 months.
Grants will be paid to employers that have been instructed to close and have instructed the employee to cease work for at least 7 consecutive days. This includes premises that are restricted to delivery or collection services from their premises. The UK government will provide a grant to cover two-thirds of normal pay up to a limit of £2,083.33 per month. The grant covers employee wages and income tax (which needs to be accounted for back to the government), but does not cover National Insurance Contributions. Employers still have to pay employer National Insurance Contributions and pension contributions. Employers can make further contribution to wage costs but are not required to do so. Employees cannot be made redundant or put on redundancy notice whilst the grant is being claimed.
The Kickstart scheme pays the wages of 16-25 year olds on Universal Credit that go on 6 month work placements. In addition, employers can claim £1,000 for new traineeships for 16-24 year olds. Grants of £2,000 are payable for new apprenticeships created for under 25s, and £1,500 for new apprentices aged 25 or over in the period 1 August 2020 and 31 January 2021.
Self-Employed Income Support
Grants are available for the self-employed that were trading in 2019/20 with profits of less than £50,000 in 2018/19 or less than £50,000 on average in the three years to 2018/19. A grant (which was taxable) of up to 80% of average monthly profits, with a maximum grant of £7,500, and payable in a single amount covering three months of profits. A further grant was made available in June 2020 for 70% of average monthly profits for a further three months, and capped at £6,750. The government has recently announced it will make a third grant for the period 1 November 2020 to 31 January 2021 worth 20% of average profits up to a total of £1,875. A further grant may also be made for the period from 1 February to 30 April 2021 depending on the Covid-19 circumstances.
Business rates are no longer being charged in the retail, hospitality and leisure centres. The relief varies in each country of the UK.
The government is increasing the cash grants to businesses in England that are closed in local lockdowns. To help support fixed costs. These grants are linked to rateable values and up to £3,000 per month (payable fortnightly) is available compared to the £1,500 every three weeks that was previously available.
Loans for Businesses
Various loans are available to businesses. These are guaranteed by the government to ensure their availability and the rate of interest. The largest businesses can obtain a Covid-19 Corporate Financing Facility. This is a one-year commercial paper loan t rates similar to those charged before the Covid-19 crisis. Businesses with a turnover of over £45 million can apply for Coronavirus Large Business Interruption Loan Scheme loans. The government will guarantee 80% of the loan with a maximum loan of up to £25 million for borrowers with a turnover up to £250 million and £200 million for larger businesses.
SMEs are eligible for the Coronavirus Business Interruption Loan Scheme. These loans have no interest or fees in the first year and are 80% guaranteed by the government. Loans of up to £5 million are available to businesses with a turnover of up to £45 million with a personal guarantee from the business for the remaining 20%. Loans below £250,000 do not require any guarantee. It has recently been announced that the government guarantee is being extended so lenders will have the ability to extend the length of the loans from a previous maximum of six years to ten years.
The bounce back loan scheme for SMEs provides loans of between £2,000 and £50,000 with 100% of the loan guaranteed by the government. Loans originally had to be repaid in six years, but that has now been extended to ten years. Interest only payments can be made for a period of up to six months (and this facility can be utilised three times in the period of the loan) and an application can be made to suspend payments for up to six months (but only on one occasion and only after at least six payments have been made).
Applications can be made for these loan schemes up to the end of November (and this application period may be extended) and a new loan scheme will be introduced in January.
VAT and Income Tax
Employers are eligible for a temporary income tax and national insurance contributions exemption where they reimburse employee costs for necessary equipment purchased by employees to enable them to work from home.
VAT has been cut from 20% to 5% for food and non-alcoholic drinks from pubs, bars cafes and similar premises and for accommodation and attractions. This cut in the VAT rate will now end on 31 March 2021.
VAT payments to HMRC have been deferred for the period 20 March to 30 June until 31 March 2021. This no longer needs to be paid as a lump sum, but can be paid in 11 repayments in the 2021-22 financial year; no interest is due on these deferred amounts. HMRC will introduce and opt-in process in the New Year.
In addition, there is a deferral of the self-employed personal income tax for taxpayers with up to £30,000 in income tax liabilities. These payments will benefit from a 12-month extension. Thus, payments deferred from July 2020 and those due in January 2021 do not need to be paid until January 2021. Other time to pay tax liabilities can also be agreed with HMRC for other tax and VAT liabilities.
The government has created the future fund to support high growth companies that are facing financial difficulties.
Cash grants are available for small businesses and SMEs focusing on research and development.
Businesses with fewer than 250 staff will be refunded sick pay payments for two weeks.
Further information can be obtained from the UK government website at https://www.gov.uk/coronavirus/business-support