COVID-19: Support for Businesses

COVID-19: Support for Businesses

Chancellor of the Exchequer Rishi Sunak has set out a package of temporary, timely and targeted measures to support public services, people and businesses through the period of disruption caused by the coronavirus.

The state loan guarantees worth £330bn along with a further £20bn of financial handouts will help struggling businesses cope with the economic catastrophe caused by the rapid spread of coronavirus in the UK. The rescue package comes on top of £7bn of financial support for businesses announced in last week’s Budget.

In brief, the new measures to support businesses will include:

  • a statutory sick pay relief package for SMEs
  • a Business Rate Relief for small businesses and pubs
  • small business grant funding of £10,000 for all business in receipt of Small Business Rates Relief (SBRR) and Rural Rates Relief
  • £25,000 grants to be provided to retail, hospitality and leisure businesses
  • the Coronavirus Business Interruption Loan Scheme to support long-term viable businesses who may need to respond to cash-flow pressures by seeking additional finance
  • the HMRC Time To Pay Scheme

Support for businesses that are paying sick pay to employees

The government will bring forward legislation to allow small- and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to the coronavirus. The eligibility criteria for the scheme will be as follows:

  • this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
  • employers with fewer than 250 employees will be eligible – the size of an employer will be determined by the number of people they employed as of 28 February 2020
  • employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
  • employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note
  • eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to those staying at home comes into force
  • the government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible

Support for businesses that pay business rates

The government will increase the Business Rates retail discount in England to 100% for the 2020 to 2021 tax year for properties below £51,000 rateable value.

The relief will also be expanded to the leisure and hospitality sectors in response to the coronavirus. Further £25,000 grants will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value over £15,000 and below £51,000. All retail, hospitality and leisure businesses in England will get a 100% business rates holiday for the next 12 months, irrespective of their rateable value.

That means every single shop, pub, theatre, music venue, restaurant – and any other business in the retail, hospitality or leisure sector – will pay no business rates whatsoever for 12 months, and if they have a rateable value of less than £51,000, they can now get a cash grant as well.

Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.

Those businesses eligible for the newly expanded retail discount and/or the new pubs discount may need to apply to their local authority to receive the discount.

Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority. Guidance for local authorities on the application of the expanded retail discount will be published by 20 March.

Support for businesses that pay little or no business rates

The government will provide an additional £2.2 billion funding for local authorities to support small businesses that already pay little or no business rates because of Small Business Rate Relief (SBBR). This will provide a one-off grant of £10,000 to business currently eligible for SBRR or Rural Rate Relief, to help meet their ongoing business costs.

If your business is eligible for SBRR or Rural Business Rate Relief, you will be contacted by your local authority – you do not need to apply.

Funding for the scheme will be provided to local authorities by government in early April. Follow updates on gov.uk with details as these are decided.

Support for businesses through the Coronavirus Business Interruption Loan Scheme

A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch by the start of next week to support businesses to access bank lending and overdrafts.

The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The first 6 months of that finance will be interest free as the government will cover the first 6 months of interest payments.

The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value. This new guarantee will initially support up to £1 billion of lending on top of current support offered through the British Business Bank.

Support for investment-grade companies

The Bank of England said it would set up a new fund with the finance ministry to buy commercial debt with a term of up to one-year issued by investment-grade companies making a “material contribution” to Britain’s economy.

The fund will be financed out of the creation of central bank reserves — in other words with new money, much like the BoE’s quantitative easing programme.

New Bank of England Governor Andrew Bailey promised “prompt action” on Monday, less than a week after an emergency rate cut by the BoE which took its benchmark rate to just 0.25%.

Support for businesses paying tax

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.

If you are concerned about being able to pay your tax due to the coronavirus, call HMRC’s dedicated helpline on 0800 0159 559.

Insurance

Businesses should check with their insurance provider if they are covered. Many businesses are unlikely to be covered as most business interruption insurance policies are dependent on damage to property, which will exclude pandemics. Some businesses may have purchased a specific add on relating to notifiable diseases, but some of these will still specify damage to the building. Some businesses may have purchased supply chain or denial of access cover which may meet their needs in this case.

Most companies in Britain don’t have insurance cover for closures caused by the coronavirus outbreak, the Association of British Insurers (ABI) said on Tuesday. The government recommended on Monday that people should avoid restaurants, bars and clubs, and work from home where possible, but stopped short of ordering businesses to shut their doors. “An enforced closure could help them make the claim, but this will depend on the precise nature of the cover they have purchased so they should check with their insurer or broker,” the ABI said.

The scale of the borrowing

The new support for business and workers is truly unprecedented. An initial £330 billion of new guarantees is equivalent to 15% of UK gross domestic product (GDP).

At last week’s Budget, the Chancellor provided £30 billion of support to the economy to deal with the crisis by investing in public services, increasing support for vulnerable people and providing business with tax reliefs and loans.

The unlimited loans and guarantees announced today are intended to support firms of all sizes and help them manage cash-flows through this period. Any business that needs access to cash to pay their rent, the salaries, suppliers, or purchase stock, will be able to access a government-backed loan, on attractive terms. And if demand is greater than the initial £330 billion made available today, the Chancellor will go further and provide as much capacity as required. “This is a time to be bold, a time for courage,” he said.

“This struggle will not be overcome by a single package of measures or isolated interventions,” he added. “This national effort will be underpinned by government interventions in the economy on a scale unimaginable only a few weeks ago.”

Britain’s budget forecasters said the scale of the borrowing needed to fight the coronavirus hit to the economy might resemble the country’s immense debt splurge during World War Two.

“Now is not a time to be squeamish about public sector debt,” Robert Chote, head of the Office for Budget Responsibility, told lawmakers. “We ran during the Second World War budget deficits in excess of 20% of GDP five years on the trot and that was the right thing to do.”

Image: Brew & Brownie, York, United Kingdom / Andy Falconer

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