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Privacy statement - Terms and conditions

government financial support for business in response to COVID-19

26 May 2020

Please note: the information contained in this legal update is correct as of the original date of publication

Headlines

The Chancellor has set out a package of measures to support public services, people and businesses through the period of disruption caused by COVID-19.

Measures include the following:

  • The Coronavirus Business Interruption Loan Scheme offering loans of up to £5,000,000 for SMEs through the British Business Bank
  • The Coronavirus Large Business Interruption Loan Scheme offering loans of up to £200,000,000 for businesses with annual turnover of more than £45m
  • The Covid Corporate Financing Facility - A lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
  • A £1.25 bn support package for high-growth firms impacted by coronavirus and those with a focus on research and development
  • Coronavirus Bounce Back Loans for small and medium-sized businesses affected by coronavirus of up to £50,000
  • A 12-month business rates holiday for retail, hospitality, and leisure businesses in England
  • A job retention scheme
  • Deferral of VAT and income tax
  • Statutory sick pay relief for SMEs
  • Small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
  • Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
  • The HMRC Time to Pay Scheme
  • Protection from eviction for commercial tenants.
     

Measures

Set out below are key details of the various support measures being put in place:

What is it?

  • The product will be provided through the British Business Bank through participating providers, a full list can be found at the link here, but this includes most high street lenders. 
  • A wide range of business finance products will be available (varying by provider) including term facilities, overdrafts, invoice finance facilities and asset finance facilities.
  • The maximum value of a facility provided under the scheme will be £5 million pounds.
  • The government will provide lenders with a guarantee of 80% of each loan.  No charge will be made for giving the guarantee.
  • The loans will be interest-free for the first 12 months. The business remains liable for repayments of the capital.
  • Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
  • The scheme may be used for unsecured lending for facilities of up to £250,000. For facilities above £250,000, the lender "must establish a lack or absence of security prior to businesses using CBILS".
  • Under the scheme, personal guarantees of any form will not be taken for facilities below £250,000. For facilities above £250,000, 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; and
    • a principal private residence cannot be taken as security to support a personal guarantee or as security for a CBILS-backed facility.
  • Some lenders have indicated they will not charge arrangement fees or early repayment charges to SMEs borrowing under the scheme.

Eligibility

  • To be eligible for a facility under CBILS, an SME must:
    • be UK-based in its business activity, with annual turnover of no more than £45m
    • generate more than 50% of its turnover from trading activity
    • show that it has a sound borrowing proposal and show in it that were it not for the COVID-19 pandemic, the business would be considered viable for the lender
    • self-certify that it has been adversely impacted by COVID-19
    • not have been classed as a “business in difficulty” on 31 December 2019 if applying to borrow £30,000 or more. Further details on this definition can be found here.
  • Fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment.
  • The following entities are not eligible: banks, building societies, insurers and reinsurers (but not insurance brokers); the public sector including state funded primary and secondary schools; employer, professional, religious or political membership organisation or trade unions.
  • Decision-making on whether you are eligible for CBILS is fully delegated to the 40+ accredited CBILS lenders who range from high-street banks, to challenger banks, asset-based lenders and smaller specialist local lenders.

How can you apply?

  • The scheme is open for applications.
  • Businesses should approach their own provider in the first instance, ideally via their website, as telephone lines will be extremely busy. 
  • On 3 April, the Chancellor announced that CBILS is to be extended to all viable small businesses, not just those unable to secure regular commercial financing. If you have ample security, you can benefit from CBILS loans.The British Business Bank has provided a helpful step-by-step guide to applications here.

What is it?

  • Aimed at businesses too large in terms of turnover to benefit from CBILS loans but without an investment grade and so are not eligible for CCFF loans (see below).
  • The British Business Bank is operating CLBILS via its accredited lenders. A full list can be found here.
  • The scheme provides a government guarantee of 80% to enable banks to make loans of up to £200 million to borrowers, who will be able to borrow up to 25% of  their turnover. This will be in the form of the following:
    • term loan
    • revolving credit facility (including overdrafts)
    • invoice finance
    • Asset finance
  • Under the scheme, lenders will not take personal guarantees of any form for facilities below £250,000. For facilities above £250,000, personal guarantees may still be required, but claims cannot exceed 20% of losses after all other recoveries have been applied.
  • Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest.
  • Companies borrowing more than £50 million through CLBILS will be subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan, including a ban on dividend payments and cash bonuses, except where they were previously agreed. These restrictions will also apply to CCFF loans. Further details are below.

Eligibility

  • Your business must:
    • be UK-based in its business activity
    • have an annual turnover of more than £45 million.
    • have a borrowing proposal which the lender would consider viable, were it not for the current pandemic, and for which the lender believes the provision of finance will enable the business to trade out of any short-term to medium-term difficulty. 
    • self-certify that it had been adversely impacted by COVID-19 
    • not have received a facility under the CCFF
  • Companies borrowing more than £50 million will be subject to a number of restrictions, with further information to be published on Tuesday 26 May. The restrictions in place will include:
    • Dividends: Borrowers cannot make any dividend payments other than those that have already been declared 
    • Share buyback: Borrowers agree not to make any share buybacks
    • Executive pay: Borrowers cannot pay any cash bonuses, or award any pay rises to senior management (including the board) except where they were a) declared before the CLBILS loan was taken out, b) is in keeping with similar payments made in the preceding 12 months, and c) does not have a material negative impact on the borrower’s ability to repay the loan.
  • The following businesses are not eligible to apply:
    • banks, insurers and reinsurers (but not insurance brokers) 
    • public sector bodies
    • further-education establishments, if they are grant-funded
    • state-funded primary and secondary schools 

How can you apply?

  • The maximum loan size available under the scheme has been increased from £50 million to £200 million. The expanded loans will be available from 26 May.
  • The first step is to approach a lender, ideally via the lender’s website as phone lines will be busy. A full list of accredited lenders is available via the link in the first column.
  • The lender has the authority to decide whether to offer you finance but should you be turned down you can still approach other lenders within the scheme.
  • Lenders will likely ask you for the following:
    • details of the loan, including the amount, purpose and the period over which you will make repayments
    • supporting documents, likely to include management accounts, cash flow forecast, business plan, historic accounts and details of assets. This will vary lender to lender.

What is it?

  • The BoE has announced a new lending facility for larger businesses who do not qualify for CBILS (businesses with annual turnover in excess of £45 million). The scheme will be run by the BoE on behalf of the Treasury.
  • The idea is to provide short-term working capital for companies which are fundamentally strong, but have been affected by a short-term funding squeeze, enabling them to continue financing their short-term liabilities.
  • It is intended CCFF will be a temporary measure and the closing date will be dependent on the economic outlook.
  • Businesses will need to liaise with their bank to create commercial paper which will then be used in the application process to the BoE (further details in right hand column).

Eligibility

  • Eligible businesses will be those that make a “material contribution” to the UK economy.
  • In practice, firms that meet this requirement would normally be UK incorporated companies, including those with foreign-incorporated parents with a genuine business in the UK; companies with significant employment in the UK; firms with their headquarters in the UK.
  • Firm must be able to demonstrate they were in “sound financial health” prior to the shock.
  • The clearest way to demonstrate sound financial health is to have, or acquire, a credit rating. For such firms, investment grade means a short-term rating of A3/P3/F3 or above, a long-term rating above BBB-/Baa3/BBB- by at least one of the major credit agencies (S&P, Moody’s or Fitch).
  • If you do not have an existing credit rating from the major credit agencies, one potential route to evidencing credit status is for your firm or your bank to get in touch with one of the major credit agencies to seek an assessment of credit quality that can be shared with the BoE and the Treasury. Forms of acceptable credit ratings can be found here.
  • The restrictions that apply to CLBILS loans in respect of share buyback, dividends and executive pay will also apply to CCFF participants that wish to borrow money that will be repaid beyond 19 May 2021.

How can you apply?

  • In order to access CCFF, you will need to liaise with your bank. The commercial paper will have the following characteristics:
    • maturity of one week to twelve months
    • where available, a credit rating of A-3 / P-3 / F-3 from at least one of Standard & Poor’s, Moody’s and Fitch as at 1 March 2020

Commercial paper is an unsecured, short-term debt instrument issued by a company

  • A full list of participating providers can be found here.
  • Once you have spoken to your finance provider, if you are unsure whether you are eligible, contact the BoE at CCFFeligibleissuers@bankofengland.co.uk
  • If, after speaking with your bank, you believe you are eligible then you will need to complete the following documents (all on the BoE website):
    • Issuer Eligibility Form (XLS)
    • Issuer Undertaking and Confidentiality Agreement
    • If your commercial paper will be issued by an entity other than the primary entity in your group, then you may also need a guarantee
    • Associated legal opinion from the primary entity in your group.

What is it?

  • This will be a £1.25 billion package made up of the following:
    • A £500m investment “Future Fund” for high-growth firms impacted by coronavirus, made up of funding from government and the private sector
    • SMEs focusing on research and development will also benefit from £750 million of grants and loans

Future Fund:

  • The scheme will be delivered in partnership with the British Business Bank and launching in May, the fund will provide UK-based companies with between £125,000 and £5 million from the government, with private investors at least matching the government commitment.
  • Loans will automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if they are not repaid.
  • The government is committing an initial £250 million in funding towards the Future Fund, which will initially be open until the end of September. A further £250 million will be matched from funding from private investors.
  • Funding must not be used to a) repay any borrowings; b) pay any dividends; c) pay any bonuses; d) pay any advisory fees.
  • The loans will have a minimum of 8% per annum (non-compounding) interest charge applies. This interest will be higher if the company and the investor(s) agree between themselves. Unlike a typical bank loan, the interest is not payable on a monthly basis and instead will accrue until the loan converts. At this point, the interest will either be repaid or convert in equity.
    The loan will mature after 36 months and cannot be repaid early by the company other than with the agreement of all the investors.

UK Grant and Loan Scheme:

  • The £750 million of targeted support for the most R&D intensive small and medium size firms will be available through Innovate UK’s grants and loan scheme.

Eligibility

  • In respect of the Future Fund, your business is eligible if:
    • it is UK-incorporated, if the business is part of a corporate group, only the parent company is eligible
    • it has raised at least £250,000 in equity investment from third-party investors in the last 5 years
    • none of its shares are traded on a regulated market, multilateral trading facility or other listing venue
    • it was incorporated on or before 31 December 2019
    • either half or more employees are UK-based or half or more revenues are from UK sales.

How can you apply?

  • In order to participate in the scheme, an investor must submit the application in connection with a company. However, as a company you are able to check your eligibility and register your interest in the Future Fund: https://www.uk-futurefund.co.uk/s/eligibility
  • Initially, an investor, or lead group of investors must certify they meet scheme eligibility criteria and provide key investment details. 
  • Secondly, the company confirms the accuracy of the investment application details provided, before submitting the full application. 
  • In the case of approved applications, all parties will execute an agreement (in the template form provided) and satisfy certain conditions set out in the agreement before the funds are released.

What is it?

  • £2,000 to £50,000 loans for small and medium-sized businesses. A loan can be no larger than 25% of a business’ turnover.
  • The government will guarantee 100% of the loan and there won’t be any fees or interest to pay for the first 12 months.
  • Loan terms will be up to 6 years, no repayments will be due during the first 12 months.
  • The interest rate for the facility is set at 2.5% per annum.
  • The length of the loan is six years but early repayment is allowed, without early repayment fees.
  • Lenders are not permitted to take personal guarantees or take recovery action over a borrower’s personal assets.
  • The scheme will be delivered through a network of accredited lenders.

Eligibility

  • You can apply for a loan if your business:
    • is engaged in trading or commercial activity in the UK and was established by 1 March 2020
    • is not using the CBILS, CLBILS, CCFF schemes
    • is not in bankruptcy or liquidation at the time it submits its application for finance
    • derives 50% of its income from its trading activity (this requirement does not apply to charities or further-education colleges)
    • has been negatively affected by coronavirus 
    • was not a “business in difficulty” on 31 December 2019 (see link above for details)
  • The following businesses are not eligible to apply: 
    • banks, insurers and reinsurers (but not insurance brokers)
    • public-sector bodies
    • further-education establishments, if they are grant-funded 
    • state-funded primary and secondary schools
  • You cannot apply if you’re already received a loan under CBILS but may transfer it to the Bounce Back Loan Scheme through arrangement with your lender until 4 November 2020.

How can you apply?

  • The Bounce Back Loan scheme has launched.
  • The first step is to find a lender, who can be found here.
  • Secondly, you should approach a lender yourself, ideally via its website.
  • Thirdly, you fill out a short application form online to self-certify that your business is eligible for a loan under BBLS. The Lender will then make a decision but even if they turn you down, you can still approach other lenders within the scheme.

What is it?

  • A business rates holiday for retail, hospitality and leisure businesses for the 2020 to 2021 tax year.
  • Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.
  • The relief is to be applied by local authorities on a discretionary basis under section 47 Local Government Finance act 1988, although it will be fully funded by central government.
  • Full guidance for local authorities has been provided here.
  • Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used as:
    • shops, restaurants, cafes, drinking establishments, cinemas and live music venues,
    • for assembly and leisure; or
    • as hotels, guest and boarding premises and self-catering accommodation.

Eligibility

  • The guidance states that shops mean “hereditaments that are being used for the sale of goods to visiting members of the public: shops (such as: florists, bakers, butchers, grocers, greengrocers, jewellers, stationers, off licences, chemists, newsagents, hardware stores, supermarkets etc)”.
  • The list is not intended to be exhaustive – but is intended as a guide for local authorities. Authorities should determine for themselves whether particular properties that are not listed are broadly similar in nature to those above and, if so, to consider them eligible for the relief. Conversely, properties that are not broadly similar in nature to those listed above should not be eligible for relief.
  • The guidance also provides a list of uses that are specifically not eligible for relief. These are: financial services, other services (e.g. estate agents, letting agents, employment agencies); medical services (e.g. vets, dentists); professional services (e.g. solicitors, accountants, insurance agents, financial advisers, tutors); post office sorting offices; casinos and gambling clubs). The examples given do not focus on the sale of goods to visiting members of the public.

How can you apply?

  • There is no application required.
  • Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority.
  • You can estimate the business rate charge you will no longer have to pay this year using the business rates calculator here.

What is it?

  • A business rates holiday for nurseries in England for the 2020 to 2021 tax year.

Eligibility

  • The business must be based in England
  • Properties that will benefit from the relief will be hereditaments:
    • occupied by providers on Ofsted’s Early Years Register
    • wholly or mainly used for the provision of the Early Years Foundation Stage

How can you apply?

  • There is no action. This will apply to the next council tax bill. However, local authorities have said they may need to reissue bills to exclude the business rate charge.

What is it?

  • UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during the crisis.
  • You can furlough employees and apply for a grant that covers 80% of their usual wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay.
  • It is intended to be a temporary scheme in place, but has recently been extended in its current form until the end of July. From August, employers currently using the scheme will have more flexibility to bring their furloughed employees back to work part time whilst still receiving support from the scheme.
  • This will run for three months from August through to the end of October. The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month. More specific details and information around its implementation will be made available by the end of May.

Eligibility

  • You must have:
    • created and started a PAYE payroll scheme on or before 19 March 2020
    • enrolled for PAYE online 
    • a UK bank account
  • Where employers receive public funding for staff costs, and that funding is continuing, it is expected that staff will not be furloughed, and they will be paid in the usual fashion. This also applies to non-public sector employers who receive public funding for staff costs.
  • Employees hired after 19 March 2020 cannot be furloughed and claimed for in accordance with the scheme.
  • Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts.

How can you apply?

  • Employers will need to:
    • designate affected employees as “furloughed workers” and notify them of the change. This may be subject to negotiation depending on the employment contract.
    • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal called the PAYE Real Time Information system). Guidance can be found here.
  • HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. You can also claim for NICs and employer pension contributions that are paid on the subsidised furlough pay. Payments have already started flowing to employers.
  • The scheme in its current form runs until the end of July, though note the changes that are being made after that, as detailed in the first column.

What is it?

  • VAT payments will be deferred for 3 months, applying from 20 March 2020 until 30 June 2020.

Eligibility

  • All UK businesses are eligible.

How can you apply

  • There is no application required, businesses will not need to make a VAT payment during this period.
  • Taxpayers will be given to the end of the 2020 to 2021 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.
  • Those who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay.

What is it?

  • The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.
  • For businesses in these sectors with a rateable value of under £15,000, they will receive a grant of £10,000.
  • For businesses in these sectors with a rateable value of between £15,001 and £51,000, they will receive a grant of £25,000.

Eligibility

  • The business must be based in England
  • The business must be in the retail, hospitality and/or leisure sectors
  • Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used: 
  • as shops, restaurants, cafes, drinking establishments, cinemas and live music venues 
  • for assembly and leisure
  • as hotels, guest and boarding premises and self-catering accommodation.
     

How can you apply

  • Businesses do not need to do anything. Local authorities will write to you if you are eligible for the grant.
  • Guidance for local authorities on the scheme is still be provided.
  • Any enquiries should be directed to the relevant local authority.

What is it?

  • The government will provide additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief.
  • This will provide a one off grant of £10,000 to eligible businesses to help meet their ongoing business costs. 

Eligibility

  • Funding for the scheme will be provided to local authorities by government in early April. Guidance for local authorities on the scheme is to follow.
  • A business will be eligible if:
    • it is based in England
    • it is a small business and already receives SBBR and/or RRR
    • it is a business that occupies property. 

How can you apply

  • If a business is eligible for SBRR or rural rate relief, it will be contacted by its local authority – no application is required.
  • The best person to contact would be one of the Economic Development Officers at the local town or city council.

What is it?

  • 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.
  • TTP allows a business to defer tax debts by converting settlement to instalments over a 3-12 month period.

Eligibility

  • These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
  • HMRC have made it clear that they see themselves as a lender of last resort. You must demonstrate all other source of finance have been pursued and exhausted.

How can you apply?

  • Contact HMRC’s dedicated helpline - 0800 0159 559.
  • HMRC are to provide further detailed guidance on the level of information they require and whether TTP will be extended to prospective and not just current tax liabilities.

What is it?

  • This refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19.
  • 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.

Eligibility

  • 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.
  • The 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.

How can you apply?

  • The government is developing a rebate scheme, due to be available from 26 May 2020. To use the online service you will need the Government Gateway user ID you got when you registered for PAYE Online. If you have not registered online yet you will need to do so.
  • Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website.

What is it?

  • Commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction.
  • These measures will mean no businesses will automatically forfeit their lease and be forced out of their premises if they miss a payment up until 30 June.
  • This does not equate to a rental holiday and all commercial tenants remain liable for the rent.

Eligibility

  • All commercial tenants in England, Wales and Northern Ireland are eligible.

How can you apply?

  • This is now in force. No action is needed.

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