On Tuesday 17th March, the Chancellor set out a package of measures to support businesses through this period of disruption caused by COVID-19.
These measures included the following:
- A Government guaranteed loan fund of £330 billion available for large and SME businesses
- Statutory sick pay relief package for SMEs
- Business rates relief and a number of grant funding packages
- The HMRC Time To Pay Scheme
- Clarification around insurances
Some of the support measures announced on Tuesday referred to England only.
During the Chancellor’s announcement it was also communicated that the Northern Ireland Executive will be provided with an additional £640M to deal with its response and we’ve now had further clarification around what measures will apply in NI (Wednesday evening).
In our view, the measures announced thus far do not go far enough. In addition, at this time it remains somewhat unclear as to how and when businesses will be able to apply for these support mechanisms. These details are still emerging.
We hope and expect that these measures will be added to over the coming days and we will provide those updates when they become available. In the meantime, please feel free to contact any members of our management team should you wish to discuss.
Below we analyse the various measures and provide some comment.
Support for businesses through the Coronavirus Business Interruption Loan Scheme
A new temporary Coronavirus Business Interruption Loan Scheme will launch next week to support businesses to access bank lending and overdrafts. The government will provide lenders with a guarantee of 80% on each loan to give lenders further confidence in continuing to provide finance to SMEs.
£330 billion will be made available to businesses under what the Chancellor described as ‘attractive terms’.
There are two schemes available, one for large firms operated through the Bank of England and the second via the Business Interruption Loan Scheme.
The maximum loan for small businesses has been increased from £1.2 million to £5 million.
Furthermore, these loans now come with six months interest free.
It appears the Business Interruption Loan scheme will be provided by the British Business Bank (BBB) through participating providers (of which most NI Banks are included). A list of all participating providers is noted at https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/
The current information available on the BBB website states that:
“We are in the process of defining and agreeing he scheme’s details, specifications and eligibility and therefore information is subject to change.”
The Chancellor stated that the two schemes would be in place at the start of next week.
Further details can be found here.
We understand that local NI Banks are working with the Government and the BBB to establish how the above funds can be managed and it is likely to be those Banks that ‘head’ this up and not the BBB. CavanaghKelly will be in regular communication with the mainstream Banks as they roll out this process.
In many cases this will be an application for additional credit. In preparation of making your application, it is likely that you will be requested to provide your Bank with financial projections (say over 6 – 12 months) to show potential impact. You’ll also be required to provide detail around other contingency measures being developed and any cost savings your business is introducing.
Support for businesses who are paying sick pay to employees
The Government has stated they 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 COVID-19.
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 Department of Finance has announced that there will be a 3-month rate free period for ALL businesses in Northern Ireland from April to June 2020. This does not need to be paid back.
The department will also defer the issuing of rates bill from April until June to help businesses with short-term cash flow.
Small business grant scheme (NAV < £15K)
On Wednesday evening, it was also announced that there will a small business grant scheme including an immediate grant of £10,000 for small businesses eligible for the small business rate relief scheme (SBRR) with a net asset value of up to £15,000. This is expected to assist 27,000 businesses.
Please note that as the SBRR scheme does not apply to manufacturing firms it is unclear whether they will qualify for the above.
Grant for the retail, tourism & hospitality sectors (NAV between £15K - £51K)
An immediate grant of £25,000 for companies in the retail, tourism and hospitality sectors, with a rateable value of between £15,000 and £51,000. This will assist some 4,000 businesses.
We await details on how all of the above will be administered.
HMRC Taxation - Time to Pay Scheme
A dedicated helpline has been set up to help businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs. Through this, businesses may be able to agree a bespoke Time to Pay arrangement – call HMRC’s dedicated helpline on 0800 0159 559.
The Government has advised that Businesses that have cover for both pandemics and government-ordered closure should be covered as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc is sufficient to make a claim.
Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers.
Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.
View from CavanaghKelly
Whilst these measures are welcomed, it is unlikely they will be enough to save significant numbers of jobs and businesses at this time, especially if the roll out of the application process takes some time.
Further measures we would like to see considered are as follows:
- Formal deferment of VAT
- Formal deferment of employers NIC
- Subsidies in respect of employees facing redundancy
Should you wish to discuss any of the above, please feel free to contact any member of our management team.
Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.