Business West provides answers to a range of widely asked questions to assist businesses, employers and employees in coping with the financial impacts of the coronavirus outbreak.
What is the bounce back loan scheme?
Answer
This new scheme, which will open for applications from 4 May 2020, has been designed to unlock cash flow problems for the smallest businesses and get liquidity funds out to those in need quickly.
Full details about eligibility are still to be announced but the loans of between £2,000 and £50,000 will be available, 100% backed by the Government and with no fees or interest to be paid for 12 months and repayments will not be due for the first 12 months from the loan being taken out. Loans can be for up to 6 years in term length.
To be eligible the business needs to be based in the UK, have been negatively impacted by covid-19 and been viable before the pandemic (defined as not being an ‘Undertaking in Difficulty’ on 31 December 2019).
Some organisations are excluded from the scheme, such as public bodies including schools and banking and insurance companies.
If your organisation has applied for and received a Coronavirus Business Interruption Loan Scheme (‘CBILS’) loan these can be transferred into the Bounce Back Loan Scheme once it opens (4 May) until 4 November 2020.
The government guidance page is: https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan.
Business West welcomes this new loan scheme to support the vital smaller enterprises in our region and nationwide and hopes that it supplies much needed loan finance to businesses to ensure the impact of the pandemic is minimised and our region can drive economic recovery once the pandemic is over.
What should we do if we can't pay our tax bill on time due to coronavirus?
Answer
Call the HMRC coronavirus helpline on 0800 015 559 if you cannot pay your tax bill on time because of coronavirus. The line is open Monday to Friday, 8.00 am to 8.00 pm; Saturday 8.00 am to 4.00 pm, excluding bank holidays.
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. For those who are unable to pay due to coronavirus, HMRC will discuss your specific circumstances to explore:
- Agreeing an instalment arrangement.
- Suspending debt collection proceedings.
- Cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately.
I am a foreign business with HQ in the UK. Do I benefit from Time To Pay?
Answer
Yes, this offer is available to all businesses and self-employed individuals that pay tax to HMRC including VAT and PAYE.
Call the HMRC Coronavirus Helpline on 0800 015 559 if you cannot pay your tax bill on time because of coronavirus. The line is open Monday to Friday, 8.00 am to 8.00 pm; Saturday 8.00 am to 4.00 pm, excluding bank holidays.
Am I covered by insurance? What would it be called?
Answer
Businesses who are concerned about the impacts of Covid-19 should check the scope of their cover, and check with their insurance adviser or broker. Standard business insurance policies are designed and priced to cover standard risks and we, therefore, expect a relatively small minority of businesses to be covered and only those who have taken out specific products. The Government has announced that businesses with business interruption insurance should be able to claim from their insurer or broker.
What grant funding is available for businesses without physical premises?
Answer
The two grant schemes have been designed to support businesses based on the rateable values of their business premises and if a business does not have premises on which business rates is charge, for example they rent office space or are a wholly online business, they will not currently qualify for support. We recognise that this is a gap in support and are raising this as an issue to be considered further. We will update this advice once further information becomes available.
Do I still need to pay my business rates bill?
Answer
The government has announced a business rates holiday for the 12 months from April 2020 for all retail, hospitality and leisure businesses in England, regardless of their rateable value. Businesses who have already received their bill for this period and who are in the qualifying sectors should not pay the original bill and await a cancellation notice that will be issued in the near future.
Nurseries in England do not have to pay business rates for the 2020-21 tax year. Properties that will benefit from the relief will be those occupied by providers on Ofsted’s Early Years Register and are wholly or mainly used for the provision of the Early Years Foundation Stage. There is no action to take as Local Authorities will apply this business rates holiday to your bill. This is separate to the grant available for businesses in these sectors who qualify based on the rateable value of their premises (covered above).
Existing customers aren’t paying their bills, what can I do?
Answer
If you are a small business (under 50 staff) who has not been paid by a business larger than you, you can contact the Office of the Small Business Commissioner who can offer advice and offer help with late payment issues.
They also have information advice and guidance on their website on dealing with unpaid invoices which is available and relevant to all sizes of business or you can call the Office of the Small Business Commissioner on 0121 695 7770. Office hours are Monday to Friday between 9am and 5pm.
If you are a business that does not meet the conditions for the SBC to intervene in your case, you can pursue the debt recovery through the courts. The SBC website tells you how to do this.
Orders have dried up, no customers coming in… what do I do?
Answer
GOV.UK provides advice on business continuity management. The link below provides details on developing your own plan. It includes a Business Continuity Management toolkit to help you identify all the issues you need to consider and how to make your own arrangements to manage business interruption.
Link: Resilience in society: infrastructure, communities and businesses
Please also regularly check this trading through coronavirus website to see what Government support measures are available for your business.
What support is available to businesses to pay Statutory Sick Pay costs for my employees who can’t work because of coronavirus?
Answer
If you run a business with fewer than 250 people (as at 28 February 2020), the costs your business incur in paying up to 14 days of Statutory Sick Pay (SSP) will be refunded for employees who have been off work because of coronavirus. The Government will work with employers to set up a repayment mechanism for employers as soon as possible. Employers should maintain records of staff absences and payments of SSP but employees will not need to provide a GP fit note.
This scheme is available to businesses across all sectors.
I won’t be able to afford my mortgage, what should I do?
Answer
The government has announced a mortgage holiday for those affected by the virus. If coronavirus has caused your income to drop and you are struggling to pay your mortgage, try to reach out to your mortgage provider to explain your situation and arrange a payment holiday before you actively miss a payment, as this is less likely to negatively impact on your future credit rating.
We are seeking to understand how these payment holidays will work, whether they will apply to residential or commercial mortgages or both and what happens to the accrued capital and interest payments over the course of your mortgage’s lifetime.
We will update this page once further information is available.
What are the banks doing, supposedly have funding? How do I access it?
Answer
A number of private lenders are making funds available to small businesses impacted by COVID-19, including £2 billion from Lloyds Banking Group and £5 billion from NatWest. Details of support can be found on the lender’s website.
How can I access the £10,000 grants for small businesses?
Answer
Eligibility is based on whether you receive business rates relief. Those who qualify for Small Business Rate Relief (SBBR) or Rural Rate Relief will be able to get the funding. Central government will be working with local authorities to outline the scheme.
Once the scheme is running, your local authority will contact you, meaning that you do not need to apply to the scheme yourself. Grant money will not be available until early April. Guidance will be issued to local authorities by the 1st of April and they will write to businesses shortly thereafter with details of how to claim the grant.
Will my business insurance cover coronavirus?
Answer
Insurance policies are tailored to the needs of the individual business, there is not a one size fits all approach. Although the government has clarified that its actions will be enough for businesses to claim on their insurance, only a very small minority of businesses have insurance cover that include closure due to an infectious disease. Businesses are recommended to look at their policy and talk to their insurer to assess whether they are covered.
Can I claim business interruption insurance?
Answer
Business interruption insurance covers periods when unexpected events result in a loss of income. If the criteria of the policy is fulfilled, insurance companies will compensate businesses to a limited loss of profits or increase in running costs. Circumstances when business interruption insurance can be claimed on will vary between policies, so it is recommended that companies check their policies and talk to their insurers.
How would business failure work for different types of company?
Answer
The two main types of insolvency are liquidation and bankruptcy.
Liquidation occurs when either the value of a company’s liabilities exceeds the value of its assets or where a company cannot meet their liabilities as they become due. The liquidation process for insolvent limited companies and limited liability partnerships releases and sells the company assets in order to pay back the debt. This process is managed by an insolvency practitioner, otherwise referred to a liquidator. Following this process, the company is officially dissolved and ceases to exist. This process can be begun by the directors of the company or creditors who are owed £750 or more.
Solvent companies can be liquidated through members’ voluntary liquidation. We recommend contacting a legal professional for further information. Taking the decision to liquidate a company brings the lifecycle of the business to an end permanently. It is important that all other options are explored before taking this final decision, which could include suspending trading for a temporary period, restructuring the business and/or changing the focus of the trading activities into related markets to retain the goodwill that has been built up with customers and suppliers. Liquidation is appropriate if the financial viability of the company is doubtful over the longer term.
Bankruptcy can only occur to individuals not limited companies. The process can be begun by the individual or by creditors who are owed £5,000 or more and are handled by the Government’s Insolvency Service. This process may involve selling major assets and will impact the credit rating of the individual for six years.
Similar to liquidation for companies, bankruptcy is a final decision once other alternative options have been explored. Debt advisory organisations including Citizens Advice Bureau, Step Change, National Debtline and others can provide support before and during the decision to declare bankruptcy. Our advice is to get in touch with support services before bankruptcy becomes inevitable to see if steps can be taken to get on top of debts.
I won’t be able to pay the rent, what do I do?
Answer
The Government has announced that Commercial tenants unable to pay rent because of coronavirus will be protected from eviction. These measures, included in the emergency Coronavirus Bill currently going through Parliament, will mean no business will be forced out of their premises if they miss a payment in the next 3 months. We will update this page when further information is available.
What is force majeure?
Answer
The term is used to refer to unforeseeable circumstances that prevent someone from fulfilling a contract. A party to a contract will only be able to consider force majeure to excuse non-performance if the contract contains a force majeure clause. English common law has no general concept of force majeure, and it cannot be implied into an English law contract.
If a contract does contain a force majeure clause, it is still not certain that a party will be able to rely upon it to protect against claims for non-performance as a result of the coronavirus outbreak. Force majeure clauses are interpreted strictly by the English legal system and a contract simply becoming more expensive to perform will not constitute a force majeure, It is thus necessary to carefully consider the precise terms of any clause. Even if the force majeure clause is correctly drafted the flexibility it affords can vary significantly.
If your contract contains a force majeure clause and you wish to exercise the clause within the contract we recommend contacting a legal professional given this is a technical area of contract law.
How do I access the £25,000 grant for retail, hospitality or leisure businesses?
Answer
Businesses based in England with a rateable value of between £15,001 and £51,000 will receive a grant of £25,000. Properties that will benefit from the relief will be occupied properties that are wholly or mainly being used restaurants, cafes, shops, drinking establishments, cinemas, live music venues or for assembly and leisure or as hotels, guest and boarding premises or self-catering accommodation.
Once the scheme is running, your local authority will contact you, meaning that you do not need to apply to the scheme yourself. We will update this page when further information is available.
What is VAT deferral and does it apply to my business?
Answer
The Government announced that they will defer Value Added Tax (VAT) payments for 3 months from 20 March 2020 until 30 June 2020.
All UK Registered businesses will not need to make the VAT payments normally due with VAT returns during this period. No application is necessary. Taxpayers will be given until the end of the 2020-21 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.
What is the Business Interruption Loan Scheme? Am I eligible? How can I access it?
Answer
The temporary Coronavirus Business Interruption Loan Scheme is now open. It will support small and medium-sized businesses with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to six years. The Government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
Updated scheme features: 2 April 2020:- Access to CBILS has been increased: those smaller businesses who would have previously met the requirements for a commercial facility but would not have been originally eligible for CBILS can now apply.
- No personal guarantees for facilities under £250k: Personal guarantees of any form cannot be taken under the scheme for any facilities below £250k.
- Personal guarantees for facilities above £250k: Personal guarantees may still be required, at a lender’s discretion, but recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.
These changes should be retrospectively applied by lenders for any CBILS facilities offered since its launch on 23 March 2020.
The government will provide lenders with a guarantee of 80% on each loan (subject to pre-lender cap on claims) to give lenders confidence in continuing to provide finance to SMEs. The scheme will be delivered through commercial lenders. There are 40 accredited lenders able to offer the scheme, including all the major banks.
You are eligible if your business is UK based, with turnover of no more than £45 million per year.
To apply, you should talk to your bank or one of the 40 accredited finance providers offering the scheme (and not the British Business Bank) as soon as possible to discuss your business plan with them. You can find out the latest on the best ways to contact them via their websites. The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website.How do I plan for my cash flow?
Answer
We would recommend that businesses make a financial plan including a 13 week cash flow forecast and consideration of sources of liquidity. In making this plan consider the following questions: what assets can be sold? Are there areas of trapped cash, can any costs be removed in the short term? You can use the Time To Pay service to get relief from HMRC but you will need to show that there is a reasonable prospect that they will be able to pay the money back in the future.
Try to consider what the impact will be for your organisation and then identify the critical services that will help keep your business afloat i.e. what should be prioritised. Update your business plans, budgets and forecasts including consideration of the potential worst-case scenario. Keep updated on the guidance from this website and keep all of your stakeholders updated through regular communication, this includes lenders, customers and suppliers.
Do you have any advice for the self-employed?
Answer
If you do not currently receive Universal Credit you can apply to do so even if you are working. The payment covers those on a low income including a self-employed person whose income has decreased as a result of this disruption. You can apply for an advance on your first scheduled universal credit payment if needed. Universal Credit is administered through Jobcentre Plus, which is expected to switch to online/phone for consultations soon.
The Government has suspended the ‘minimum income floor’ from Universal Credit for the self-employed, so if you are in the system due to low income there is no longer an assumption that you earn the equivalent of the living wage (which from April 2020 is £8.72 an hour, or £305.20 for a 35 hour working week).
If you are self-employed and claiming Employment Support Allowance (ESA), and test positive for coronavirus or are in self-isolation, you will be able to claim from day one of a claim.
The self employed are not entitled to claim statutory sick pay (SSP) under current government rules as there is no employer – employee relationship, although the support for self-employed individuals is a key area that have been raised with the Government for additional support. We will update this page if further details become available.
What is the Self-employment Income Support Scheme and how do I access it?
Answer
The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) whose income has been negatively impacted by COVID-19. The scheme will provide a grant to self-employed individuals or partnerships, worth 80% of their profits up to a cap of £2,500 per month. HMRC will use the average profits from tax returns in 2016-17, 2017-18 and 2018-19 to calculate the size of the grant. The scheme will be open to those where the majority of their income comes from self-employment and who have profits of less than £50,000. The scheme will be open for an initial three months with people able to make their first claim by the beginning of June.
To be eligible for the scheme you must meet all the criteria below:
- Be self-employed or a member of partnership;
- Have lost trading/partnership trading profits due to COVID-19;
- File a tax return for 2018-19 as self-employed or a member of a trading partnership. Those who have not yet filed for 2018-19 will have an additional 4 weeks from this announcement to do so;
- Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID 19) and intend to continue to trade in the tax year 2020 to 2021
- Have trading profits of less than £50,000 and more than half of your total income come from self-employment. This can be with reference to at least one of the following conditions:
-Your trading profits and total income in 2018/19
-Your average trading profits and total income across up to the three years between 2016-17, 2017-18, and 2018-19.Individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational. HMRC will then pay the grant directly to eligible claimants’ bank account. For eligible individuals who have not submitted their returns for 2018-19, they will have 4 weeks’ notice from today to file their returns and therefore become eligible for this scheme.
Grants are expected to start to be paid by the beginning of June 2020.
Why does the self-employment income support scheme not cover small businesses who are incorporated?
Answer
Self-employed individuals who are owner-managers and pay themselves a salary through PAYE will be eligible for support through the Coronavirus Job Retention Scheme. SMEs can also access support through the temporary Coronavirus Business Interruption Loan Scheme. This supports SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years.
This new Self-Employment Income Support Scheme is open to anyone who reports trading profits through Income Tax Self-Assessment. Self-employed individuals who work through a company do not report their trading profits in this way.
Is the Self-employment Income Support Scheme subject to tax?
Answer
Yes – individuals will pay Income Tax and National Insurance on any payments received through this scheme as they are replacement for income in line with normal practice for benefits or grants that replace income. The grant is recognised as income for the purposes of Universal Credit and Tax Credits and may impact the amount claimants are entitled to.
What should self-employed people do while they wait to be paid from the self-employment income support scheme?
Answer
In the interim, self-employed individuals may be eligible for Universal Credit. If you do not currently receive Universal Credit you can apply to do so even if you are working. The payment covers those on a low income including a self-employed person whose income has decreased as a result of this disruption. You can apply for an advance on your first scheduled Universal Credit payment if needed. Universal Credit is administered through Jobcentre Plus.
The Government has suspended the ‘minimum income floor’ from Universal Credit for the self-employed, so if you are in the system due to low income there is no longer an assumption that you earn the equivalent of the living wage (which from April 2020 is £8.72 an hour, or £305.20 for a 35 hour working week).
If you are self-employed and claiming Employment Support Allowance (ESA), and test positive for coronavirus or are in self-isolation, you will be able to claim from day one of a claim.
What happens to self-employed individuals whose 2018/19 profits are very different to what they would have expected to make this year?
Answer
The government will only act on the most recently available data. This is from the 2018/19 tax year. To try to provide the most accurate possible estimate of self-employed income, they can look at average profits over 16/17, 17/18 and 18/19.
Can I get any help to reduce my business’ energy bills?
Answer
Businesses in financial distress should speak to their energy supplier about their energy bill and ways to restructure payments.
Finance Hub
From equity, grant, debt and alternative solutions our Finance Hub provides key information on a wide range of options available, access to approved providers as well as the opportunity to discuss your needs with an adviser throughout Covid-19 and beyond.
- The information we have been given from the government is hard to decipher when you’re in panic mode and the team at Business West have tirelessly replied to every question I’ve asked.Rebecca PriorPrior Made, Bristol
