MHA Carpenter Box Covd-19 hub

Offering you general business guidance and short-term action planning during these uncertain times.

The spread of the Coronavirus (COVID-19) continues to dominate the news, with major implications for businesses across Sussex, the UK, and the World.

The current economic conditions mean businesses are having to trade under extremely challenging and unprecedented conditions.

We would urge businesses foreseeing a requirement for additional support or finance to act promptly, even as a precautionary measure.

Government support for businesses

The Government continues to announce news measures to support businesses during the COVID-19 outbreak. There have also been a number of financial support schemes introduced. Access to the schemes depends on level of funding required and size of the applicant business.

Coronavirus Job Retention Scheme (CJRS)

Under the CJRS, all UK employers with a PAYE scheme will be able to access support to continue paying part of their employees’ salary for those that would otherwise have been laid off during this crisis to avoid redundancies.

Any employer in the country (small or large, including charitable or non-profit) will be eligible for the scheme.

• Employers can contact HMRC for a grant, via a new online portal, to cover most of the wages of their workforce who remain on payroll but are temporarily not working during the Coronavirus outbreak. Employers will need to identify ‘furloughed worker’s’ and notify any affected employees of the change in status.

• UK workers of any employer who is placed on the CJRS can keep their job, with the government paying up to 80% of a ‘furloughed worker’s’ wage costs, up to a total of £2,500 per worker each month.

• This will be backdated to 1st March and will be open until 31 October with some changes to the Scheme from 1 August.

• It can apply to anyone who was on the payroll at 19 March 2020, even if they have subsequently been made redundant, as long as they are reinstated on the payroll.

Self-Employed Income Support Scheme (SEISS)

Self-employed individuals can apply for a grant of up to 80% of average monthly trading profits for a 3-month period. This will be calculated by looking at average trading profits over the last 3 tax years (2016/17 to 2018/19) or shorter period where applicable. Like the Coronavirus Job Retention Scheme (CJRS), this is subject to a maximum claim of £2,500 per month.

In order to qualify for SEISS the individual must have satisfied all of the following:

• Income tax return for 2018/19 must have been submitted by 23 April 2020 – there is therefore a short window to submit late returns

• Must be self-employed or a member of a partnership

• Must have traded in the 2019/20 tax year

• Must be intending to trade in the 2020/21 tax year

• Must be trading at the time the grant application is made, or would be trading if it weren’t for COVID-19

• Trading profits from self-employment must be at least 50% of total income

• Trading profits from self-employment must be less than £50,000 in the 2018/19 tax year OR less than £50,000 on average over the 3 tax years 2016/17 – 2018/19

• Must have lost trading profits due to COVID-19

This scheme does not apply to company owners or directors who pay themselves dividends. However, it has now been officially confirmed that company directors can be furloughed on the Coronavirus Job Retention Scheme just like other employees.

Bounce Back Loan Scheme (BBLS)

BBLS is a small loan scheme launched on 4th May 2020 for businesses experiencing cashflow disruption as a result of the COVID-19 outbreak. The scheme is aimed at providing access to loans from £2,000 up to 25% of a business’ turnover, capped at a maximum loan of £50,000.

The scheme is delivered through a network of accredited lenders. Lenders receive a 100% government-backed guarantee, as such lenders cannot take personal guarantees or take recovery action over a borrower’s personal assets. However, the borrower remains 100% liable for the debt.

BBLS loan terms are set at 6 years with no capital repayments during the first 12 months, and interest rates fixed at 2.5%per annum. While BBLS loans are have a 6-year term, early repayment can be made without early repayment fees. Interest for the first 12 months of the loan is paid by the government via Business Interruption Payments (BIP).

Coronavirus Business Interruption Loan Scheme (CBILS)

As with BBLS, CBILS provides financial support to SME businesses experiencing cashflow disruption as a result of the COVID-19 outbreak. The scheme provides larger financial support facilities than BBLS Loans, with a maximum facilities of £5m available to eligible UK based SME businesses with a turnover of no more that £45m. Businesses looking to apply for a CBILS facility will need to have a borrowing proposal which would be considered viable, were it not for the current pandemic, as well as providing other financial documentation to support their application.

Under the scheme, personal guarantees cannot be taken for facilities below £250,000, with lender discretion on personal guarantee requirements for facilities above £250,000. Like BBLS,  CBILS is delivered through a network of accredited lenders. Under CBILS lenders receive a 80% government-backed guarantee to encourage more lending, however, the borrower remains 100% liable for the debt.

CBILS provide facilities with up to 6 years repayment terms. Most lenders offer facilities with no capital repayments during the first 6 to 12 months. Interest and fees for the first 12 months of the loan are paid by the government via Business Interruption Payments (BIP).

Coronavirus Large Business Interruption Loan Scheme (CLBILS)

For mid-sized and larger UK businesses suffering disruption due to the COVID-19 outbreak and with turnover of more than £45m, CLBILS provides finance facilities of up to £200m for term loans and revolving credit facilities, or up to £50m for invoice finance and asset finance facilities. Finance terms under CLBILS are for 3 months to 3 years.

As with the other schemes, CLBILS is delivered through a network of accredited lenders who receive a 80% government-backed guarantee, with the borrower remaining 100% liable for the debt.

Businesses looking to apply for CLBILS will need to have a borrowing proposal which the lender would consider viable, were it not for the current pandemic, and for which the lender believes the provision of finance will enable the business to trade out of any short-term to medium-term difficulty, supported by other financial documentation.

Those borrowing more than £50m will be subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan.

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Businesses, or wider groups, can only access one facility under any of the above facilities.

For more information on other key support measures, visit the MHA Carpenter Box website and their dedicated COVID-19 hub: www.carpenterbox.com/coronavirus