Keeping as many businesses afloat and people in work as possible during the economic storm caused by the Coronavirus pandemic has been seen as key to avoiding widespread hardship and a wholesale collapse of our economy. It’s also, importantly, going to be pivotal to providing for recovery after the storm has passed.
Both the UK and Scottish Governments have made a number of financial support announcements for business since March 2020, including the recent Job Retention Bonus. In this insight article, we provide a summary of those measures, the eligibility criteria and how to apply.
The range of measures and their details have been an emerging picture. All are largely untested. This article has been updated to reflect the information available at 30 June 2020.
VAT payment deferral
HMRC granted a deferral of Valued Added Tax (VAT) payments for 3 months from 20 March to 30 June 2020. This referred to quarterly and monthly VAT returns for payments ending in February, March and April 2020, payments to account due between the dates stated above and annual accounting advance payments due between those dates.
All UK businesses were eligible; HMRC stated this was an automatic offer with no applications required.
During the deferral period, businesses had the option to defer payment until a later date or pay VAT due as normal. If you deferred any payment, you will be given until 31 March 2021 to pay any liabilities accumulated during the deferral period without any interest or penalties applying on the amount deferred.
VAT refunds and reclaims will be paid by HMRC as normal in the interim.
Now that the deferral period has ended, you should be submitting VAT returns as normal (and on time) and pay VAT in full on payments due after 30 June 2020. If you cancelled your direct debit to HMRC for VAT payment, remember to set it up again allowing sufficient time for HMRC to take payment.
The deferral concession did not apply to VAT MOSS or import VAT payments. HMRC has however said that duty deferment account holders who are unable to make payment of deferred customs duties and import VAT due on 15 April 2020 can extend payment times. To do so, you should contact the Duty Deferment Office 03000 594243 or by email email@example.com or the COVID-19 helpline on 0800 024 1222.
Job Retention Scheme – 'Furlough leave' support
As the response to the Coronavirus intensified so did fears of wholesale unemployment. On Monday 20 April, the UK Government opened applications for the Coronavirus Job Retention Scheme. The Scheme introduced a new concept in UK Employment Law – ‘furlough leave’. It allows employers to ‘furlough’ employees with the government paying cash grants of 80% of their wages up to a maximum of £2,500. It was originally to apply for three months from 1 March to 31 May. That period was extended to 30 June 2020. It has again been extended to 30 October, with flexibility to bring staff back from furlough part time from 1 July and with tapered employer contributions being introduced from August to October and a new Job Retention Bonus announced by the UK Government. For further details, please see our updated insight article on the Job Retention Scheme.
Grant Support for Self-employed
The UK Government’s Self-employment Income Support Scheme provides financial support to self-employed people by way of two taxable grants.
Applications for initial grants close on 13 July 2020, having opened on 13 May. Grants are of 3 months’ worth of 80% of average monthly trading profits for the last three years, subject to a cap of £2500 per month (i.e. £7,500 in total). They are paid as a single lump sum payment. That is the same level of government support as has been offered to furloughed employees by the Job Retention Scheme.
Applications for second and final phase grants will open in August 2020. They will be for a taxable grant of 70% of average monthly trading profits paid out in a single instalment covering three months and capped at £6,570.
To be eligible for either grant, you must be a self-employed individual or a member of a partnership who: (a) has submitted your Self-Assessment tax return for the 2018-19 tax year before 23 April 2020; (b) traded in the 2019-20 tax year; (c) intends to continue to trade in the current 2020-21 tax year; and(d) is in a trade which has(after 14 July 2020 to qualify for the second grant) been adversely affected by Coronavirus. HMRC detailed guidance including examples of what qualifies for being adversely affected can be found here: https://www.gov.uk/guidance/how-different-circumstances-affect-the-self-employment-income-support-scheme#adversely-affected-examples
Your trading profits must also be no more than £50,000 and constitute more than half of your total income for either the 2018-19 tax year or the average of that and the preceding two tax years.
The support will be in the form of a taxable grant from HMRC. The grant will be subject to Income Tax and National Insurance contributions but does not need to be repaid.
Applications should be made online via https://www.gov.uk/
HMRC has highlighted that you must make grant claims yourself. It has stated that having an agent or adviser apply for you will trigger a fraud alert which will cause significant delay.
If you submitted your 2018-19 Self Assessment Return between 26 March and 23 April 2020, HMRC has indicated that you should check your eligibility again as their online service has now been updated.
You can make a claim for Universal Credit while you wait for the grant. You should record the grant as part of your self-employment income, and it may affect the amount of Universal Credit you get. This will not affect Universal Credit claims for earlier periods.
The government has also clarified that if you receive the grant you can continue to work or take on other employment including voluntary work.
If you have other employment as a director or employee paid through PAYE your employer may be able to get support using the Job Retention Scheme.
Income Tax Deferral for self-employed
If you’re self-employed, HMRC has stated that Income Tax payments due by 31 July 2020 under the Self-Assessment system can be deferred until 31 January 2021. HMRC has stated that this is an automatic offer with no applications required. No penalties or interest for late payment will be charged provided any deferred amount is paid 31 January 2021.
Nonetheless, you will still need to submit your Self Assessment tax return to HMRC on time.
Scottish Government Newly Self-Employed Hardship Fund
If you’re newly self-employed on or after 6 April 2020 and facing hardship, you may be eligible for a £2,000 grant through this Scottish Government fund – further details and applications are available from your local Council website.
HMRC 'Time to Pay' service
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 have missed a tax payment or you might miss your next payment due to COVID-19, you can call HMRC’s dedicated helpline: 0800 0159 559.
Statutory Sick Pay cost reclaim for SMEs
The Coronavirus Statutory Sick Pay Rebate Scheme will repay employers the current rate of Statutory Sick Pay (SSP) that they paid to current or former employees for sickness absence due to COVID-19 starting on or after 13 March 2020. If you pay more than the current rate of SSP you can only claim the current rate amount.
To be eligible your business must (a) be UK based and (b) be small or medium sized employing fewer than 250 employees as of 28 February 2020 and (c) have had a PAYE payroll scheme that was created and started on or before 28 February 2020.
The scheme covers all types of employment contracts, including: full-time employees; part-time employees; employees on agency contracts; employees on flexible or zero-hour contracts.
The repayment will cover up to 2 weeks starting from the first day of sickness, if an employee is unable to work because they either: have Coronavirus; cannot work because they are self-isolating at home; or are shielding in line with public health guidance.
Employees will not need to provide a GP fit note for you to make a claim. If evidence is required by an employer, those with symptoms of Coronavirus can get an isolation note from NHS 111 online and those who live with someone who has symptoms can get a note from the NHS website.
You will however need to keep records for all the SSP payments that you want to claim for from HMRC, including: the reason why an employee could not work; details of each period when an employee could not work, including start and end dates; details of the SSP qualifying days being claimed; and National Insurance numbers of all employees who you have paid SSP to. You’ll have to keep those records for at least 3 years following your claim.
Here is the link to HMRC’s online claims service for this scheme: https://www.gov.uk/guidance/claim-back-statutory-sick-pay-paid-to-your-employees-due-to-coronavirus-covid-19
Non-Domestic Rates Relief
All non-domestic properties in Scotland get 1.6% rates relief, effectively reversing the change in poundage for 2020-21.
The Scottish Government has stated that this will be directly applied to business rates bills from 1 April 2020.
If you are struggling to pay your non-domestic rates bill, contact your local Council to ask about payment options. Before doing so, check if you are eligible under any of the specific schemes noted below.
Non-Domestic Rates Holiday – retail, hospitality and tourism
Retail, hospitality and leisure businesses in Scotland are to get 100% rates relief from 1 April 2020 to 31 March 2021.
To get this relief, a property has to be occupied. Nonetheless, the Scottish Government has stated that properties that have closed temporarily due to the Government's COVID-19 advice will be treated as occupied.
The Scottish Government has confirmed that you do not need to apply for this relief, as it will be applied to your bill by your local council.
Scottish airports will get 100% rates relief from 1 April 2020 to 31 March 2021, as will organisations providing handling services for scheduled passenger flights at Scottish airports.
The Scottish Government has announced that due to the unique role that Loganair plays in providing connectivity in the Highlands and Islands, they will also get 100% rates relief for the year. No other airline will receive rate relief in Scotland.
Eligible ‘handling service’ providers are those who do one or more of - de-icing, re-fuelling, moving aircraft, waste servicing, allocation of seating, handling of baggage or supervision of boarding at a Scottish airport.
Scottish Government Coronavirus Business Support Fund
The Scottish Government has announced one-off grants for certain categories of business. This scheme too has been adjusted since first being announced. The application closing date is 10 July 2020.
There are two types of grant available:
- £10,000 - this grant is for eligible small businesses who are registered non-domestic rates payers (even if you do not need to pay because you get reliefs) or are a business who leases the property from the registered non-domestic rates payer.
- Registered ratepayers of businesses are eligible if in receipt of the Small Business Bonus Scheme relief or Rural Relief.
- You can also get this grant if you applied for Nursery Relief or Disabled Relief but are eligible for the Small Business Bonus Scheme. That eligibility has now been extended to applicants for Business Growth Accelerator Relief, Fresh Start, Discretionary Sports Relief or Enterprise Areas Relief too.
- You can also apply for this grant if you do not pay non-domestic rates but lease space from the registered ratepayer (e.g. shared office, business incubator or industrial space) and you are a registered business or partnership, have a lease signed before 17 March 2020, employ at least one person and have a business bank account.
- £25,000 – this grant is for retail, hospitality and leisure business ratepayers with a rateable value between £18,001 and up to and including £51,000.
- Self-catering accommodation and caravans are now eligible for these grants if they are a primary source of income for the ratepayer (one third or more), and were let out for 140 days or more in financial year 2019-20.
- Although the list of eligible properties is extensive, there are some exceptions – please see the Scottish Government link below.
These grants are being administered by Local Authorities on behalf of the Scottish Government. You will need to apply to your local Council using the application form and email address on its website. Some are easier to find than others. Please contact us if you need help finding the link.
When initially announced, the scheme was limited to one grant per business, even if you have multiple properties. The scheme has now been amended such that from 5 May 2020, if you have more than one retail, hospitality or leisure property with a rateable value of up to £18,000 each, you can apply for a 75% grant for additional properties – so if eligible you’ll be awarded £10,000 or £25,000 on the first property and £7,500 or £18,500 on each additional property depending on the scheme you qualify for. All your properties much have a combined rateable value of between £35,001 and £500,000.
The closing date for the fund has changed to 10 July 2020.
Finally, as noted below, there are comparable schemes in other parts of the UK; it remains to be seen whether or not it will be possible to get a grant in more than one of the four nations where there are operational premises for those to whom that might apply.
Scottish Government Third Sector Resilience Fund
The Scottish Government has also announced £20 million of funding to assist third sector organisations with cash flow and other problems due to the pandemic. For further details on this and other help for charities and third sector organisations, see our separate article here.
Bounce Back Loan Scheme (BBLS)
BBLS aims to enable smaller businesses to access finance more quickly during the Coronavirus outbreak.
This scheme is for small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000. See below for other government support which may be available if you need a larger loan.
The UK government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months, the interest rate will be 2.5% a year.
The loan will be for 6 years, but you can repay early without paying a fee. No repayments will be due during the first 12 months. You will however be responsible for repaying 100% of the loan.
There are 11 lenders participating in the scheme including many of the main retail banks. Application is via the lender’s website with a short online application form and self-declaration that you are eligible.
You can apply for a loan if your business (a) is based in the UK, (b) was established before 1 March 2020 and (c) has been adversely impacted by the Coronavirus.
If your business was classed as a business in difficulty on 31 December 2019, you’ll need to confirm that you’re complying with additional state aid restrictions.
Businesses from any sector can apply, except: banks, insurers and reinsurers (but not insurance brokers); public-sector bodies; and state-funded primary and secondary schools.
You cannot apply for BBLS if you’re already claiming under Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) or COVID-19 Corporate Financing Facility (CCFF). If you’ve already received a loan of up to £50,000 under one of those other schemes, however, you can transfer it into the BBLS if you arrange to do so with your lender by 4 November 2020.
COVID Working Capital Loans
Under the Scottish Growth Scheme, Business Loans Scotland (BLS) is offering small and medium-sized businesses (SMEs) in Scotland working capital and cashflow loans of between £25,000 and £100,000.
These loans have an initial three-month interest and capital repayment holiday and a fixed interest rate of 6% for the term. Loans can be repaid over a period of up to 5 years. There are no additional charges or early repayment fees. Security will be taken where it is available.
You must be able to show your business was financially viable at 31 December 2019 and demonstrate that with the support loan you trade through this pandemic.
The loans are available in addition to other Government grant and loan schemes and you should have previously applied for BBL or CBILS support.
Application is via the BLS website - https://www.bls.scot/apply-now
Coronavirus Business Interruption Loan Scheme (CBILS)
CBILS aims to support small and medium sized businesses that are experiencing lost or deferred revenues, leading to disruptions to their cash flow. The scheme supports access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years (3 years for overdrafts and invoice finance). It has been refined since it was first announced.
The government will provide lenders with a guarantee of 80% on each loan (subject to pre-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The scheme will be delivered through commercial lenders, backed by the government-owned British Business Bank.
This is not a grant scheme – as the borrower, you will remain liable for 100% of the outstanding facility debt.
The government will however make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments. Fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.
The scheme is now open for applications, which are made via one of the accredited lender’s websites. The initial list of 40 accredited lenders has expanded to 90 including all the main retail banks. Application is via the lender’s website.
If your main lender is not in the scheme, or otherwise declines your application, you may have to address how to deal with existing securities as well as being on-boarded to a new bank.
You’ll need to tell the lender the amount you’d like to borrow, what the money is for and how long you’d like to pay it back.
You’ll need to provide documents to show you can afford to repay the loan. The requirements will vary from lender to lender and depend on how much you’re asking for. They may include management accounts, cash flow forecast, business plan, historic accounts and details of assets. If you’re asking your existing lender for a small loan, the process may be automated and not require all of the documents.
To be eligible, your business must be UK based with an annual turnover of no more than £45 million.
You must have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and self-certify that your business has been adversely impacted by Coronavirus. The requirement that the lender believes the provision of finance will enable you to trade out of any short-to-medium term difficulty has been removed.
If you want to borrow £30,000 or more, you also need to confirm that your business wasn’t classed as a business in difficulty on 31 December 2019.
There were reports that some banks are requiring personal guarantees from business owners as a condition of CBILS funding. That would have put personal saving and other assets at risk to cover the 20% of the loan for which the bank is otherwise exposed to under the scheme. The UK Government has now amended the scheme, such that lenders will not take personal guarantees of any form for facilities below £250,000. For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but they exclude the Principal Private Residence (PPR), and recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.
Insufficient security is no longer a condition for access to the scheme. Where there is sufficient security available, it is likely that the lender will take such security in support of a CBILS facility. A borrower’s / guarantor’s Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBIL-backed facility
There have also been reports of very high interest rates being demanded. To date, no caps on interest rates charged under CBILS have been set. As noted above, however, obtaining finance from a new lender may be more complicated than usual in the current climate.
Any business can apply, except banks, building societies, insurers and reinsurers (but not insurance brokers) and the public sector including state funded primary and secondary schools. Grant funded further education establishments and employer, professional, religious or political membership organisations or trade unions are no longer excluded.
Any previous de minimis state aid does not impact your eligibility for CBILS and the lender does not need to take it into account.
The full rules of the scheme and the list of accredited lenders are available on the British Business Bank website.
If you have an existing loan with monthly repayments you may want to ask your funder for a repayment holiday to help with cash flow.
Coronavirus Large Business Interruption Loan Scheme (CLBILS)
CLBLIS aims to support large businesses, with an annual turnover of over £45 million.
The scope of this scheme has been increased such that eligible businesses can apply for up to 25% of annual turnover. The maximum amount you can borrow is £200 million subject to a £50 million cap on invoice finance and asset finance.
Finance is available in the form of term loans, revolving credit facilities (including overdrafts), invoice finance and asset finance for three months to three years.
This UK Government scheme follows the CBILS format with funding available through accredited lenders listed on the British Business Bank website. The government will provide lenders with an 80% guarantee on individual loans. The government has stated that facilities backed by a guarantee under CLBILS will be offered at commercial rates of interest. Personal guarantee provisions are as with CBLIS.
The aim of this scheme is to allow lenders to support businesses that were viable before the Coronavirus outbreak but now face significant cash flow difficulties that would otherwise make their business unviable in the short term.
To be eligible for CLBLS, your business must be UK based, have an annual turnover of over £45 million, self-certify that it has been adversely impacted by Coronavirus and have not received a facility under the Bank of England’s COVID-19 Corporate Financing Facility (CCFF) (on which, see below).
You must also have a borrowing proposal which the lender would consider viable, if not for the Coronavirus pandemic, and believes will enable you to trade out of any short-term to medium-term difficulty.
If you’re borrowing more than £50 million you must agree to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan.
As with CBILS, your business will be responsible for repaying 100% of the loan.
For further details see the British Business Bank website.
COVID-19 Corporate Financing Facility (CCFF)
Under CCFF, the Bank of England will buy short term debt from larger companies.
This will support your company if it has been affected by a short-term funding squeeze, and allow you to finance your short-term liabilities.
All companies - and their finance subsidiaries - that make a material contribution to the UK economy and meet the criteria set out on the Bank of England’s website (notably that they can demonstrate they were in sound financial health prior to the shock) are eligible – see further information here.
The scheme is now available for applications. More information is available from the Bank of England via the link above.
The Bank of England will also support corporate finance markets overall and ease the supply of credit to all firms.
The UK Government’s Future Fund scheme is aimed at businesses that rely on equity investment and are unable to access other government business support programmes because they are either pre-revenue or pre-profit.
It offers government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors. These loans will automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if they are not repaid.
To be eligible, your business must be: an unlisted UK registered company, incorporated before 31 December 2019 (if part of a group, only the ultimate parent company may apply); which has previously raised at least £250,000 in equity investment from third party investors during the 1 April 2015 to 19 April 2020 period; and has either half or more of its employees based in the UK or 50% or more of its revenues are from UK sales.
Under the terms of the scheme, you cannot use this investment to:
- Repay any borrowings from a shareholder or a shareholder related party (other than the repayment of any borrowings to any bank or venture debt facilities);
- Pay any dividends or other distributions;
- Make any bonus or other discretionary payment to any employee, consultant or director of the company other than as previously contracted or as paid during the ordinary course of business; or
- Pay any advisory or placement fees or bonuses to any corporate finance entity or investment bank or similar service provider.
Applications are now open via the British Business Bank website (see link above), with the scheme initially open until the end of September 2020.
Innovate UK Sustainable Innovation Fund
Innovate UK, the national innovation agency, has launched its first two competitions from its £191 million Sustainable Innovation Fund to help all sectors of the UK recover, grow and create new opportunities from the aftermath of Covid-19.
Round 1 (temporary framework) is offering an investment of up to £55 million to fund single and collaborative research and development projects to help organisations across the economy recover from Covid-19 in a clean and resilient way. Each organisation working alone or in a collaboration can claim a maximum of £175,000. The competition closes 29 July 2020.
Sustainable Innovation Fund SBRI phase 1 is for larger clean-tech projects of up to £3 million that are pathfinders to the UK’s net-zero ambitions. Phase 1 will focus on exploring the feasibility of proposals. Phase 2 will concentrate on continued research, development and testing. Only successful applicants from phase 1 will be able to apply to take part in phase 2. Phase 1 projects total costs are a maximum of £60,000. This competition closes 5 August 2020.
- Access UK Government support for business information here
- Access Scottish Government support for business information here
Other measures applicable elsewhere in the UK
In this article we have focused on measures applicable in Scotland to Scottish based businesses and premises. Although often broadly comparable, there are separate business support measures applicable in other parts of the UK. If you would like information on measures which may affect your business or its premises or operations outside Scotland, please contact Neil Amner.