COVID-19: advice for businesses and individuals

The current COVID-19 crisis is causing significant concern from both a public health and financial perspective. In these testing times, much of the business community is facing unprecedented pressures and difficulties.

HM Government and The Bank of England have announced several initiatives to support individuals, SMEs and larger corporations through this difficult period. On this page you will find a summary of all the key details.



Summary of key policy announcements

The Coronavirus Business Interruption Loan Scheme (CBILS) can assist businesses with loans of up to £5m. The scheme may also be used for unsecured lending of up to £250,000.

Here are the key details:

  • Launched by HM Government for SME’s (turnover up to £45m) and to be delivered by the British Business Bank (BBB)
  • The Chancellor has confirmed that self-employed individuals and partnerships may also apply, with minimum loan amounts of £25,000
  • Product type: 
    • Overdraft
    • Invoice finance – max 3 years
    • Asset finance – max 6 years
    • Term loan – max 6 years
  • Facility amounts: Up to £5m (limited to 25% of annual turnover or 2 x annual wage bill, whichever is greater)
  • Term: 3 months up to 6 years (for term loans and asset finance)
  • Pricing: Interest free for first 12 months.  Some lenders are also providing repayment holidays of up to 12 months
  • Other: 
    • HM Government will provide a guarantee to lender for 80% of facility value
    • The Chancellor has confirmed that no personal guarantees will be required for loans below £250k
    • For facilities above £250,000 personal guarantees may still be required, but must exclude Principal Private Residences. Moreover, any recoveries will be capped at a maximum of 20% of the outstanding balance on the facility after the proceeds of business assets have been applied
    • Insufficient security is no longer a condition to access the scheme
    • No guarantee or arrangement fees
  • Eligibility:
    • UK based
    • Turnover of no more than £45m per year
    • Operate within an “eligible” industrial sector (excluded sectors include banking, insurance, pubic-sector organisations and trade unions)
    • Have a “sound” borrowing proposal were it not for the current pandemic
    • Not received de minimis state aid beyond €200,000 over the current and previous two fiscal years
    • Please note that companies already in receipt of R&D tax credits may be restricted from claiming loan scheme support due to the Notified State Aid criteria. Please contact us if you have any concerns on this matter.

Borrowers should approach one of the accredited BBB lenders with a “viable” proposal. This must show that were it not for the COVID-19 pandemic the business would be considered viable by the lender, and the provision of the specified finance would enable it to trade out of any short to medium term difficulty.

The Corporate Finance team at Ashcroft has great experience in helping SMEs raise different types of finance and have strong relationships with many of the pre-approved lenders. To find out more, please contact Tom Gallop, Partner, Corporate Finance.

A new Coronavirus Large Business Interruption Loan Scheme (CLBILS) has been announced to tackle the so-called ‘squeezed middle’ businesses not covered by the original CBILS measures. This provides a government guarantee of 80% to banks making loans of up to £25m to businesses with an annual turnover of between £45m and £500m.

Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest but the government will not cover interest or fees in the same way as the small business scheme. Further details of the scheme are expected in the coming weeks and this page will be updated accordingly.

The Chancellor announced that the HM Government will cover up to 80% of the wage cost of employees designated as “furloughed” because of the COVID-19 pandemic, provided they are kept on the employer’s payroll. All UK businesses are eligible.

  • Ceiling of £2,500 per month, with employers able to top up salaries above this level if they choose to
  • Employers’ NICs and minimum automatic enrolment employer pension costs will be reimbursed in full on top of this (i.e. not included in the £2,500 ceiling)
  • Dividends are excluded
  • The scheme will be backdated for those who have been unable to work since 1st March 2020
  • Employers are able to reemploy and furlough recently departed staff who are now in employment limbo as a direct result of COVID-19
  • Scheme is currently expected to last for 3 months, but will likely be extended
  • First grants expected to be made within weeks, with HMRC expected to set up an online portal for processing and submitting of information before the end of April

In the absence of any specific guidance to the contrary we believe directors would also be eligible for the scheme as long as they are properly furloughed and do not for example undertake any revenue generating function during their period of furlough. We await further guidance from HMRC on this point.

For further information please contact Iain Dowling, Director, Private Clients.

The CCFF is aimed at supporting the liquidity of larger corporates “who make a material contribution to the UK economy” by allowing them to raise short-term (up to 12 months) financing through issuing commercial paper which will be purchased by The Bank of England.

Please contact Tom Gallop for further details if you believe this scheme may apply to you.

The Chancellor has announced new funding measures to enable SME’s to borrow between £2,000 to £50,000.

There will be no repayments, fees or interest in the first 12 months, and the Government will guarantee 100% of the loan. It is expected that lenders will have to agree to a “low” rate of interest for the remaining period of the loan.

The scheme will launch on May 4, with the application process likely to consist of a simple 2 page form. Loans will be made available within two days of application.

Eligibility:

  • UK based
  • Negatively impacted by COVID-19
  • Was not an “undertaking in difficulty” on 31 December 2019. We await further clarification on this point but a key difference here from CBILS is that there is no mention of “viable proposal” or future trading expectations
  • Cannot apply if in the following sectors:
    • Banks, insurers, re-insurers
    • Public sector bodies
    • State funded schools
  • Cannot apply if already claiming under CBILS but may transfer a CBILS loan to the bounce back scheme if loan amount is less than or equal to £50k

The Corporate Finance team at Ashcroft has great experience in helping SMEs raise different types of finance. To find out more, please contact Tom Gallop, Partner, Corporate Finance.

The Chancellor has announced a new “Future Fund” to support the UK’s innovative businesses that are currently affected by COVID-19.

Many of these businesses have thus far been unable to access other government business support programmes, such as CBILS, because they are either pre-revenue or pre-profit, and typically rely on equity investment.

The scheme will deliver an initial commitment of £250m of new government funding and will initially be open until the end of September 2020.

  • Eligibility:
    • UK based unlisted companies
    • Raised at least £250k from private 3rd party investors in the last five years
    • If part of a group, only the ultimate parent company is eligible
    • Loans provided on a matched basis alongside other private 3rd party investors. (Government loan will not exceed 50% of the bridge funding being provided)
  • Size: Convertible loans between £125k and £5m. Note: There is no cap on the amount that the matched investor(s) may loan
  • Term: Maturity after a maximum of 36 months
  • Pricing: Interest rates will be at least 8% per annum, with interest to be paid on maturity

The loan will convert to equity if not repaid before the next qualifying funding round, a sale or an IPO, at a minimum 20% discount rate.

The Future Fund will be developed by the British Business Bank with the intention of launching for applications in May.

The Corporate Finance team at Ashcroft has great experience in helping SMEs raise different types of finance. To find out more, please contact Tom Gallop, Partner, Corporate Finance.

The SEISS is designed to support self-employed individuals (including members of partnerships) whose finances have been adversely impacted by COVID-19.

The scheme will provide taxable grants to the value of 80% of trading profits, up to a cap of £2,500 per month.

HMRC will use the average profits from the last three years tax returns (18/19 return must be filed) to calculate the size of the grant.

We have detailed the key elements of the scheme below:

  • Eligibility (must meet all the below criteria):
    • Be self-employed or a member of partnership. (Please note, if you pay yourself a salary and dividends through your own company you won’t be covered by the scheme but may be covered for the salary element by the Coronavirus Job Retention Scheme if you are operating under PAYE.)
    • Lost trading profits as a result of COVID-19
    • Filed your 18/19 tax return – those who haven’t have until April 23rd to do so
    • Are currently trading (or would be except for COVID-19) and intend to continue doing so
    • Have average trading profits of less than £50,000
    • More than 50% of your total income comes from self-employment
  • Grant payments expected to commence at the beginning of June, with payments backdated to March
  • HMRC will contact eligible individuals directly to invite applications
  • You are able to continue working and take advantage of this scheme (unlike The Job Retention Scheme)

Given the expected time lag on SEISS grants, we would encourage those affected to take advantage of the improved Universal Credit and business continuity loans (See CBILS above) if necessary. Furthermore, please consider other measures that may alleviate cashflow pressure such as VAT and self-assessment income tax payment deferrals, as detailed below.

  • Eligible employees (self-isolating or caring for people within the same household) covered from day 1 instead of day 4
  • No sick note required, isolation note from NHS111 online will suffice
  • Businesses can reclaim SSP paid to employees for up to 2 weeks sickness due to COVID-19
  • Eligible for SMEs with a workforce of fewer than 250 employees
  • Employers should maintain all necessary records and wait for reclaim mechanism to be announced

The Time to Pay (TTP) service can be used by businesses to negotiate payment terms for tax and related penalties.

  • The Government has suggested that all businesses and self-employed individuals in financial distress and with outstanding tax liabilities may be eligible to receive support with their tax affairs (including PAYE) through HMRC’s time to pay service.
  • A dedicated helpline has been setup by HMRC to address each case individually, with arrangements expected to be tailored to specific circumstances
  • The HMRC helpline number is: 08000 159 559

The Government has recognised that these sectors have been affected perhaps more than any other by the COVID-19 crisis and the corresponding advice given to the public.

As a result, some significant announcements have been made over the last few weeks:

  • Relief in the form of a “rates holiday” for the 2020/21 tax year, irrespective of rateable value for businesses in these sectors
  • Further cash grants of up to £25,000 available for those with a rateable value between £15,000 and £51,000
  • One-off grants of up to £10,000 available for businesses currently qualifying for Small Business Rates Relief (SBBR) or Rural Rate Relief to help meet ongoing business costs

Enquiries should be made direct to your local authority as soon as possible

  • VAT deferral – the Government is deferring VAT payments from 20th March 2020 until 30th June 2020. All UK businesses are eligible, and no further action is required
  • Ability to file accounts late – businesses can apply for a 3 month extension for filing accounts, which will automatically be granted if delay is due to COVID-19
  • Confirmation that Government advice is sufficient for businesses to claim on their insurance if appropriate pandemic cover is in place
  • Commercial tenants who cannot pay their rent until 30th June are protected from eviction
  • IR35 legislation to be delayed until at least April 2021
  • Funding of up to £25,000 available from TechForce19 to technology companies who can find digital ways to support people staying at home, e.g. providing remote social care, boosting the volunteer sector, improving mental health support
  • Standard rate of Universal Credit and Tax Credits to be increased by £20 a week for the 2020/21 tax year, meaning claimants are up to £1,040 better off
  • 3 month mortgage payment holiday available to home owners and landlords who are experiencing difficulties due to COVID-19 (note interest will still accrue on remaining balance)
  • Nearly £1bn of additional support pledged for renters, in the form of Housing Benefit and Universal Credit. From April of this year, Housing Allowance rates will pay for at least 30% of market rents in each area
  • Tenants can apply for a 3 month payment holiday. No one can be evicted from their home or have their home repossessed over the next 3 months
  • Payments due on the 31st July 2020 under income tax self-assessment will be deferred until 31st January 2021. No penalties or interest will arise

How Ashcroft Partnership can help

It is clear that the Government is fully committed to assisting businesses and the wider economy through this crisis. We would recommend keeping a constant eye on the gov.uk website for further details on how these and other measures will be implemented. Further detail is expected in the coming weeks as the situation continues to evolve.

The Ashcroft Partnership is fully committed to working with our clients and the local business community to make sense of the new measures and support packages and to provide ongoing support and advice.

Our Corporate Finance team, for example, is on hand to assist with cash flow modelling and applications for funding, as well as general advice regards working capital management. Likewise, our Tax Team can assist with HMRC applications (e.g. Time to Pay) along with the other measures detailed above.

Please note, we will be providing regular updates as we hear further news from Government, banks and other agencies executing the schemes. Information from our teams advising businesses and individuals through these challenging times will appear elsewhere on this page.

In the meantime, should you require further information or have any questions regarding any of the above, then please do not hesitate to contact us on 01763 209 113 or at COVID-19@ashcroftllp.com