The UK government has announced a series of loans, grants, tax relief and wage support to help businesses through the Covid-19 pandemic.
There are £330billion in government-backed loans under two schemes, including the Coronavirus Business Interruption Loan Scheme, as well as £20billion in tax relief. Added to that there Coronavirus Job Retention Program for cover some salary costs and hopefully prevent companies from laying off workers.
With three separate announcements from Chancellor Rishi Sunak in a matter of days, it can be hard to know exactly what is available to whom. Here is an overview of the government assistance that has been announced so far.
Wages – “the coronavirus job retention program”
The government will reimburse employers 80% of the wages of all employees they pay through the pay-as-you-go (PAYE) system if those employees are temporarily out of work – what the government calls “furloughed”.
The maximum government payment will be £2,500 per month. This will be paid for an initial period of three months and will be extended if necessary.
Payments will be backdated to start March 1, opening up the option for employers to bring back staff they recently laid off and furlough them. Employers do not have to repay the money and they can choose to top up salary payments beyond the government-funded 80%.
Payments will be calculated based on the amount earned by each furloughed employee in February. This is simple for people who have a regular salary, but for those whose schedules change, it can mean that they receive more or less than their average monthly salary.
Are zero hour contract workers covered?
The coronavirus job retention program is available to any worker who is on the PAYE system, so this will include a lot on zero hour contracts.
Rishi Sunak promised last week that detailed guidelines would be released soon.
He said: ‘Zero Hours covers a variety of situations, but you may be on a PAYE plan and have a regular set of income and it may be covered depending on your particular situation.’
If you’re on PAYE, the government payment toward your salary should be 80 percent of what you earned in February.
The self-employed are not covered. Details of the new support for workers in this category are expected this week. This article will be updated if and when new support is announced.
How does a company request this money?
Businesses must apply through a new portal on the HMRC website which is not yet operational. Employers must log in to designate employees who will temporarily be out of work as “workers on leave.” For more information, check with HMRC.
How long will it take?
The grants will be disbursed through HMRC “in the coming weeks”, the government has announced. HMRC says it is working to urgently put in place a system to allow it to reimburse employers.
This can leave businesses struggling with cash flow in the interim. Companies in this position can apply for a loan under a £330billion scheme announced by the government early last week (see below).
Employers can choose whether or not to join the plan. Currently, there is no obligation to retain staff and furlough them if an employer does not think they need them. They can choose to discharge people in any case.
Right now, an employer has to make a binary choice between keeping someone employed (and paying their full salary) or furloughing them, with the state covering 80% of those costs.
Employers might find that they need a staff member to work, say, half of their hours during the outbreak, but cannot afford to pay them for those hours. In this case, they may have to choose between furloughing the worker (meaning they can’t work), trying to find the money to pay all their wages, or firing them.
The new system is being rolled out quickly and demand will be high. HMRC has set up a dedicated helpline, but there are reports of waits averaging around an hour. The government announced that it would hire 2,000 more people to help with the changes.
Companies with a turnover of less than £45m can borrow up to £5m for up to six years under the Coronavirus Business Interruption Loan Scheme.
The lending program opens March 23 through 40 participating lenders. Businesses in need of shorter-term financing during the Covid-19 outbreak can access overdraft and on-bill financing for up to three years through the program.
They can apply through any participating lender and the government will cover up to 80% of the bank’s loan losses. The loans are interest free for the first twelve months. Businesses are advised to apply online whenever possible, as demand for loans is likely to be high.
Big companies can apply for what the chancellor called “low-cost, easily accessible commercial paper”, or corporate bonds. These are provided through a loan facility with the Bank of England.
Some businesses may find that they are too big for the SME loan program, but not eligible for the large business program either because they do not have a credit rating from a rating agency that allows them issue publicly traded debt securities. The government will be under pressure to adjust the rules to help those stuck in the middle.
Statutory sick pay during the coronavirus pandemic
For companies with less than 250 employees on February 28, the government will reimburse the cost of 14 days of statutory sick pay per employee. The SSP is £94.25 per week.
Employees will not need to provide a doctor’s note if they are off work as they may have coronavirus. If evidence is required by an employer, those with coronavirus symptoms can get an isolation note from NHS 111 online and those living with someone who has symptoms can get a note on the NHS website. This system will be operational once the relevant legislation has been adopted.
Value Added Tax (VAT) payments for all businesses can be deferred for three months from March 20, 2020 to June 30, 2020. If you are self-employed, income tax payments due in July 2020 under the self-assessment system will be postponed to January 2021.
This is an automatic offer with no application required. Companies will not need to pay VAT during this period. Taxpayers will have until the end of the 2020 to 2021 tax year to pay debts accrued during the deferral period. Refunds and VAT claims will be paid by the government as usual.
Retail, hospitality, leisure and nurseries in England will not have to pay business rates for a year from April 2020. This includes all shops, restaurants, cafes, pubs, bars, cinemas and concert halls, hotels and bed and breakfasts (among other businesses).
Retail, hospitality and leisure businesses will also be able to apply for a cash grant of up to £25,000 per property. Businesses in these sectors with property with a rateable value of £15,000 and less will receive a grant of £10,000. Those whose property has a rateable value between £15,000 and £51,000 will receive a grant of £25,000.
Businesses across all sectors that benefit from small business tariff relief or rural tariff relief will receive a £10,000 grant.
How to find more information?
A dedicated help line has been set up to help companies and self-employed people in financial difficulty and with unpaid taxes to be supported in their tax file. Through this, companies may be able to agree a tailor-made ‘Time to Pay’ agreement.
If you’re worried you won’t be able to pay your tax due to Covid-19, call the HMRC helpline on 0800 0159 559.