The Chancellor has announced a raft of measures to support business large and small through the coronavirus outbreak. Undoubtedly the government will monitor the impact of its support package closely and we anticipate that more changes will filter through as it starts to take effect.
The Coronavirus Business Interruption Loan Scheme (CBILS)
CBILS is a scheme originally designed to provide unsecured loans of between £25,000 and £5 million to small businesses (SMEs) that are losing revenue because the coronavirus-related lockdown is disrupting their cashflow. Over 40 lenders are involved in the scheme making loans available for UK-based businesses with an annual turnover of up to £45m (of which over 50% must derive from trading activity). SMEs are able to approach more one than lender for a loan. The eligibility test being applied is: “were it not for the current pandemic, the business would be considered viable by the lender and which the lender believes the provision of finance will enable the business to trade out of short- and medium-term difficulties. “
In a recent development (3 April) the scheme will also make government-backed loans of up to £25m available to businesses with a turnover between £45m and £500m.
The scheme, which will work in a similar way to the Enterprise Finance Guarantee scheme of recent years, is now up and running as follows:
- The bank / lender will make the loan to the business;
- The government guarantee will underwrite a proportion of that lending (thought to be 80%);
- The government is making the guarantee to the lender rather than the business borrowing the money;
- The bank / lender will make the decision whether or not to grant the loan;
- The borrower is liable to repay 100% of the loan supported by the guarantee;
- There is no arrangement fee;
- Terms are available for six years for loans and asset finance, and three years for overdrafts and finance facilities;
- The first twelve months’ interest on any loans made under the scheme will be payable by the government and not the borrower;
- Some business are excluded from the scheme under state aid rules.
Since the scheme was announced, businesses have reported difficulties accessing loans via the scheme. The initial criteria required the lenders to first try to offer a loan on normal commercial terms, including the well-publicised requirement for personal guarantees and/or high interest rates. These were understandably refused by borrowers but a refusal of these terms did not then mean the business could qualify for a CBILS payment.
As a result of the limited availability under the initial rules, the government has now confirmed that applications will not be limited to companies refused commercial loans, or those without any security. Guarantee requirements have also changed and company owners will not be asked to guarantee the loan of up to £250,000 with their personal assets. For larger loans, if personal guarantees are needed these will never be for more than 20% of the sum borrowed. Guarantees required will never be secured on a principal private residence.
These new terms will be replied retrospectively and therefore those who have previously applied and been turned down, may now be able to proceed.
No doubt the government will continue to keep this under review. You can find details of CIBLS on the British Business Bank’s website which is being regularly updated as more detail emerges.
Additional support for business
Beyond the loan scheme, details of other new and / or extended measures have been announced. To date, the Chancellor has set out a package of measures to support public services, people and businesses including:
- 12-month business rates’ holiday for all retail, hospitality and leisure businesses in England. The rebate will be automatically applied to the next council tax bill;
- Grant funding is available for businesses in the for retail, hospitality and leisure sector: up to £25,000 for those with property with a rateable value between £15,000 and £51,000; and £10,000 for those with property with a rateable value of under £15,000. Again, this is being managed directly by local authorities
- Nursery businesses will not have to pay business rates for the 2020/2021 tax year;
- VAT: the government has confirmed that VAT payments can be deferred from 20 March to 30 June 2020. Businesses have until 5 April 2021 to pay tax accrued during this three-month period. The Government will continue to pay VAT refunds and reclaims as usual;
- Income tax for the self-employed can be deferred until 31 January 2021 with no penalties or interest for late payment.
- Commercial tenants are protected from eviction if they fail to pay their rents due to coronavirus-related cashflow problems. See our guide ‘Commercial tenants protected from eviction’ for more detail.
Support for businesses that pay little or no business rates
The government will provide additional funding for local authorities in the form of a one-off grant of £10,000 to support small businesses eligible for small business rate relief (SBRR), or rural rate relief, to help meet their ongoing business costs. Eligible businesses will be contacted by their local authority; they do not need to apply.
HMRC’s ‘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 are concerned about being able to pay your tax because of the impact of the coronavirus pandemic, call HMRC’s dedicated helpline on 0800 0159 559.
Support for the self-employed
Following criticism that the government was failing to support the self-employed, the Chancellor announced a major package of support on 26 March. Anyone earning up to £50,000 can apply for a taxable grant of up to 80% of their average monthly profits (calculated by reference to their last three years of earnings) up to £2,500, bringing the self-employed in line with furloughed employees. The grant should be available for three months from June depending on how quickly HMRC can get the scheme up and running.
The banks tell us they remain open for business and your usual bank should be your first port of call to discuss any concerns you have about managing your finances. However, our banking team is in daily touch with lenders and is on hand to review what you may have signed up to in the past and help you through any next steps. Please feel free to contact