Coronavirus: SSP, Business Rates and the Coronavirus Interruption Loan Scheme

SUPPORT FOR BUSINESSES THROUGH THE CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS)

A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, 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. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value. Businesses can access the first 6 months of that finance interest free, as government will cover the first 6 months of interest payments.

Further details on the scheme can be found on the government webpage which, as you can see, is in the process of being updated. Accredited lenders are set out here.

This type of loan may be helpful for businesses that continue to pay overheads against little or no income stream, where income streams are expected to resume following a period of interruption (e.g. Covid-19). Please reach out if you are unsure of how your business may benefit. If you believe that this scheme could benefit your business, we urge you to contact your banking or finance relationship manager to flag your interest at this relatively early stage.

Personal Guarantees
Insufficient security is no longer a condition to access the scheme. Lenders will not take personal guarantees for facilities below £250,000. For facilities above £250,000 personal guarantees may still be required, at a lender’s discretion, though will excllude the Principal Private Residence (PPR).

Companies claiming R&D Tax Credits
The CBILS is deemed to be a Notified State Aid (an EU-approved government subsidy), as are Research & Development (R&D) tax credits. A company cannot have two Notified State Aids for the same project and therefore companies already in receipt of R&D tax credits may be restricted from claiming loan scheme support as well (and vice versa).

Viability [21/04/2020 UPDATE]
Borrowing proposals must be viable were it not for Covid-19. Viability is tested for loans above £30,000. For small and medium-sized businesses, accumulated losses at 31 December 2019 cannot exceed 50% of subscribed share capital, though these rules do not apply to businesses less than three years old. For larger businesses the EBITDA/interest ratio must be more than 1.0 and the debt/equity ratio less than 7.5.

Evidence Requirements Relaxed [29/04/2020 UPDATE]
To speed up the provision of finance to small and medium-sized businesses under CBILS, the largest seven SME lenders (Barclays Bank UK, Danske Bank, HSBC, Lloyds Bank, NatWest, Santander and Virgin Money) have stated that rather than relying on businesses providing forecasts and business plans in applications, lenders will use their own information. While the exact details of the changes are still to be released, the moves should make the scheme easier to access and make the application process quicker. However, businesses should still assess carefully the implications of taking on debt finance and be comfortable that this is the right solution for them at this time.

SUPPORT FOR BUSINESSES THAT PAY BUSINESS RATES

• The retail discount is 100% for 2020-21 for properties with a rateable value below £51,000. Businesses in this category should pay no rates for the year beginning April 2020. Please review your direct debit arrangements if necessary.
• No measures have yet been announced for businesses with a rateable value above £51,000 though these could soon follow.
• Businesses that received the retrospective retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible. This has already taken effect for some local authorities. We advise our clients to request, in writing, that any credit in your business rates account is paid back to the business by BACS, rather than offset against future liabilities. You should contact your local authority for advice on executing this.
• A £25,000 grant will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000. Details on the mechanism of this measure are yet to be released by the government.
• A £10,000 grant (previously £3,000) is available for businesses that do not pay rates. Details on the mechanism of this measure are yet to be released by the government.

Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority. Guidance for local authorities on the business rates holiday will be published by 20 March.

SUPPORT FOR BUSINESSES WHO ARE PAYING SICK PAY (SSP) TO EMPLOYEES

• The cost of providing 14 days of SSP per employee will be refunded by the government in full. The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible.
• SSP will be payable from day 1 instead of day 4.
• Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note.

Remember that by law, employers must pay Statutory Sick Pay (SSP) to employees and workers when they meet the following eligibility conditions (agency, casual and zero-hours workers can also get SSP):

• they’ve been off sick for at least 4 days in a row, including non-working days (reduced to 1 day for Covid-19)
• they earn on average at least £118 per week, before tax
• they’ve told their employer within any deadline the employer has set or within 7 days

Another option is to tell employees to take their holiday entitlement now whilst your business closes temporarily. Please refer to this guidance from ACAS. We are also available to answer employment-related queries. For our clients who subscribe to our HMRC investigation service, we offer access to legal employment advice.

If you are considering temporarily closing the workplace and reducing staff hours or laying off staff, it’s important to talk with staff as early as possible and throughout the closure. Unless it says in the contract or is agreed otherwise, you will still need to pay employees for this time.

SUPPORT FOR BUSINESSES PAYING TAX

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 due to Covid-19, call HMRC’s helpline on 0800 0159 559.

Our page on Negotiating time to pay with HMRC is a useful first port of call.

INSURANCE

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.

We are here to support you, and we will do all that we can to ensure you receive the guidance you need.

We wish our entire community the very best for your health and wellbeing during this challenging period.