COVID-19 Government Support For Business

Government Support for Businesses During the COVID-19 Pandemic

On 17th March the Chancellor, Rishi Sunak, announced a dramatic set of temporary measures designed to support people and businesses through the COVID-19 pandemic. As greater restrictions on personal movement are brought in, they aim to help those most effected by it through the forthcoming months. How successful they are only time will tell but there is no doubting the seriousness of the problem given the long-term fiscal implications of this response.

This is a brief summary of the measures for employers and small to medium sized business owners as we understand them today. Understandably, very little has emerged on implementation yet. Please feel free share this with anyone else you feel it would benefit.

Statutory Sick Pay

For businesses with fewer than 250 employees the cost of providing 14 days of Statutory Sick Pay per employee would be funded by the Government in full. This will also apply to those who are in self isolation. The three day waiting period for statutory sick pay will also be removed, but legislation will be needed to implement this so we await more information on this.

Job Retention Scheme

For all employees who remain on the payroll but would otherwise be laid off, the Government will pay 80% of their basic salary up to a cap of £2,500 per month. Employers will have the ability to top-up the salary to 100% of salary if they choose.

All businesses are eligible for this scheme but in order to access it they need to:

  • Designate affected employees as ‘furloughed workers’ (which just means they are being retained but would normally be laid off) and notify those employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation, so you should obtain employee law advice where necessary.
  • Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will provide more information soon on exactly what they need.

Businesses can apply from Monday 23rd March. It will be in place for three months and then reviewed every month. The money will be available from the end of April but will take affect from 1st March. HMRC are now working to set up a system for reimbursement as existing systems are not set up to facilitate payments to employers and will publish further guidance here once available.

Coronavirus Business Interruption Loan Scheme (CBILS)

The Government intends to support businesses who have short-term cash flow needs and need  money before the end of April when the Job Retention Scheme kicks in through business loans which will be interest free for 12-months, rather than the six months previously announced. The scheme provides the lender with a Government-backed guarantee against the outstanding facility balance.

It will be administered through the British Business Bank and is due to launch in the week commencing 23 March. It will be available through high street banks and 40 other accredited finance providers

The limit of funding has increased from the £1.2 million announced on the 11 March to £5 million for companies with a turnover of less than £45 million.

Finance terms are from three-months up to ten years for term loans and asset finance and up to three-years for revolving facilities and invoice finance.

To be eligible the Scheme, the business must:

  • Be UK-based, with turnover of no more than £45 million per annum.
  • Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support or subject to limitations – see link).
  • Be able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years.
  • Be unable to meet a lender’s normal lending requirements for a fully commercial loan or other facility but would be considered viable in the longer-term.

You can find out more here.

COVID Corporate Financing Facility (CCFF) and Bank Lending

Whilst not directly applicable to small to medium sized business, this fund aims to provide essential liquidity amongst banks and in turn allow them to lend to the small and medium sized businesses who depend on them. This adds to the previous week’s launch by the Bank of England of a new Term Funding Scheme (TFSME) with additional incentives for lending to SMEs. This will, over the next 12 months, offer four-year funding to banks of at least 5% of participants’ stock of real economy lending at interest rates at, or very close to, Bank Rate.  Additional funding will be available for banks that increase lending, especially to small and medium-sized businesses.

The CCFF is being made available through the Bank of England for the next 12 months who will purchase 1 year corporate bonds subject to an assessment of their credit rating prior to the pandemic.

The Government has pledged that it will make £330 billion (equivalent to 15% of GDP) of guaranteed funding available to any business that needs it. The Chancellor has also stated that, if demand is greater than the £330 billion of funding, he will provide additional funds.

With this in place, all of the UK’s main clearing banks are now creating funds which they will make available to small businesses under their own schemes. For example, Lloyds now has a £2bn fund and NatWest has earmarked £5bn. If you anticipate financial difficulties, you should begin discussions with your bank as early as possible.

Many businesses with banking covenants will be in danger of breaching them as the pandemic drags on. The breaches could be on performance covenants or an inability to provide financial information due to loss of staff. Banks will be expecting this so early communication is advisable and, where possible, covenant waivers should be sought. For businesses with serious cash constraints, it is also recommended that the subject of payment holidays is discussed.

Cash Grants and Business Rates

Businesses which pay minimal or no business rates and are eligible for small business rate relief (SBBR) or rural rate relief will be eligible for a one-off grant of up to £10,000 from April 2020 onwards. These grants will be provided by Local Authorities and it is understood that small businesses will be contacted by their Local Authority shortly (rather than having to proactively approach their Local Authority) with information on exactly how to access these grants.

A further grant of £10,000 to £25,000 is being made available to businesses operating from smaller premises in the retail, hospitality and leisure sectors, which have a rateable value of £15,000 to £51,000 and business rates for businesses in these sectors will be suspended for the 2020/2021 tax year.  This is designed to assist the payment of rent in particular.

If any business which qualifies for this relief does not receive a letter from their local council, they should contact them directly to claim it. You can check your business’ rateable value here.

Self-Employed and Universal Credit

The self-employed will not have to make a tax payment on account in July and the payment will be deferred until January 2021. The minimum income floor for Universal Credit has been removed and it has been increased by £1,000 per year, ensuring the self-employed will get this Universal Credit at the statutory sick pay level. He also announced a further £1bn to cover 30% of house rental costs for the self-employed.

Mortgage Holidays

Whilst much of the attention will be on personal home mortgages, three-month payment holidays are available for business mortgages also. Talk to your lender.

Deferred VAT payments

Business VAT payments for the next quarter (until 30 June 2020) will be deferred until the end of the year.

Deferral of IR35

HMRC have confirmed that the proposed changes to IR35, which were due to take place with effect from 6 April 2020, have now been pushed back to 2021.

Extension to Filings with Companies House

Companies House and the Financial Reporting Council have confirmed that all companies with imminent filing deadlines – predominantly 30 June 2019 year-ends which are due for filing by 31 March 2020 – will be granted a two-month extension.

If your annual accounts are not yet finalised and may not get completed by the filing deadline, you must still contact Companies House, but they are automatically accepting Coronavirus as a reason and providing a two-month extension. In extreme circumstances they can grant a further one-month extension.

You will need to provide them with your company number, an e-mail address  and state that you are extending due to Coronavirus via this link, but make sure you apply for the extension before the deadline or it will be rejected.

If you have passed the filing deadline and are receiving notices concerning the overdue accounts, you must contact Companies House to explain the circumstances behind the delay. If Coronavirus is a factor, let them know this by emailing enquiries@companieshouse.gov.uk.

Time to Pay HMRC

HMRC has set up a dedicated helpline at 0800 0159 559 to help businesses and self-employed individuals in financial distress and with outstanding tax liabilities so they can receive support with their tax affairs.

It may be possible to agree a ‘Time to Pay’ arrangement with deferrals being agreed on a case by case basis.  This arrangement will see the usual 3.5% annual interest on deferred tax being waived.

Late Filing of VAT and PAYE Returns

If your business is unable to file a VAT or PAYE return due to staff absence, you should contact HMRC before the due date to explain the situation and mitigate any surcharges that may be levied.


Arrange a free no obligation consultation with an experienced and local Independent Financial Adviser today.

Coronavirus & Investment Update for Clients

An Investment Update for Clients

It’s difficult writing about financial and economic matters when health is quite rightly at the top of everyone’s agenda. We aren’t qualified to tell you how long this epidemic will last, but we can give you some information about investing which might give you some peace of mind now and ideas for the future.

How long will this market downturn last?

The circumstances behind this market downturn are unique. We’ve seen people go back to the 1918 Spanish Flu pandemic for comparisons. So any attempt to predict when we will reach the bottom of the market and how long it will last is really guesswork at this stage. However, history can give us some comfort, if we take previous crashes as a series of unique events.

inv1

The table above shows almost 100 years of market conditions. A bear market, where market prices fall more than 20%, is not uncommon. This can be expected as part of the normal functioning of equity markets, and your own financial plan is built to expect them. We don’t know how long this one will last but we do know that in each unique circumstance since 1926, human ingenuity has responded to changing market conditions within an average timescale of 1 year 8 months.

As you can see from the alternative way of viewing the same data in the illustration below, bull markets have always rewarded patience by more than compensating for downturns over the long term.

inv2

Diversification

This might be small comfort for those of you watching a FTSE index drop dramatically on the news right now but remember, your own portfolio is not a replica of the FTSE100, although it will have some of those businesses in it. The FTSE100 should paint a far worse picture than the reality for your own portfolio.

Your money is invested in a globally diverse portfolio of investments, and not just in equity markets. So whilst the UK is coming to the forefront of the pandemic, your own money is invested elsewhere. Diversification not only helps buffer you a little against downturns, it will also increase your chances of capturing a recovery early as things improve at different times in other countries around the world.

We can’t predict the future but we can rely on mathematics

It sounds glib but so many people buy at the top of the market and sell at the bottom. Panic selling investments is as common as panic buying in supermarkets, however irrational both may be.

We don’t know when the equity markets will hit rock bottom and start their recovery. If we did, we would invest all of our spare cash precisely then. Some investors will be comfortable investing spare cash to top up pensions and ISA allowances right now. Some may be more cautious and want to drip money in each month. The benefit of dripping money every month is that whilst you will never benefit from investing at the best possible time, you are also ensuring that you are not investing at the worst time. You effectively buy at the average price. This is known as ‘pound cost averaging’. It’s a good defensive strategy although over the longer term, as the general market trajectory is upwards, its not always the optimal one.

There is no right or wrong way to invest money as it depends on individual circumstances. You might have a small amount of money left to invest into your pension or ISA before the tax year end which necessitates a lump sum. You might want to establish some long-term behaviours and pound cost averaging is a good way to start saving on a monthly basis. This is where our advice will differ from client to client.

Equally for anyone drawing an income from their portfolio, pound cost averaging works in reverse. Withdrawing income from an equity portfolio during a significant market downturn such as this one, has a damaging impact on the recovery rate of your investment portfolio. Again this is simply a case of using maths and not predicting market changes. In a market downturn, creating income by selling investments in equal and regular intervals means selling funds when prices are low and fewer when they are high, exactly the opposite of what you want.

Sticking with it

This is a core aspect of our approach to managing not just your money but your behaviour towards it. Many people who do not have an adviser will act impulsively at this time and lose the long-term benefits of their hard-earned investments. Even with all the right investment decisions made previously, one impulsive or impatient decision can undo it all.

It might seem counter intuitive to do little or nothing with your investment portfolio at this time, but we will advise you of everything that you need to do at the right time.

Our service to you will continue almost as usual over the forthcoming months, and we will be in contact with you as planned, albeit certain work may take a little longer and we will begin to use online meetings or telephone to conduct review discussions rather than face-to-face, for obvious reasons.

For reasons outlined above, you need not be concerned that we aren’t recommending wholesale changes to your portfolio. You should also feel free to contact us at any time if you are concerned or have questions about your investments or broader financial affairs, we are available and ready to help.