COVID-19 financial support: Your questions answered

What we know so far about the Coronavirus Job Retention Scheme, tax relief and loan facilities announced by Rishi Sunak.

by Joanna Santinon
Last Updated: 25 Mar 2020

With the coronavirus crisis fall-out developing on a day-to-day basis, many entrepreneurs and businesses are urgently trying to navigate chancellor Rishi Sunak’s emergency measures, some of which were set out only last week on 20 March. 

The announcements so far should help protect employees otherwise facing unemployment, provide cash flow to support businesses that find themselves in uncertain times, and address concerns that the level of welfare was not fit for the challenges created by COVID-19.

What is the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme offers employers grants covering 80 per cent of the wages (capped for each employee at £2,500 per month) of employees who are “furloughed” (no longer working because of the outbreak but are still employed). The regime can be backdated to 1 March.

The idea is that furloughing staff rather than making redundancies gives businesses the ability to welcome back their workforce quickly once the crisis has passed, which should aid the recovery both of their businesses and the economy. This is particularly helpful for sectors such as restaurants and leisure which may otherwise have been forced to lay off staff or place employees on zero-hour contracts. 

When does it become available?

The launch date is as yet unclear. HMRC is working urgently to set up a system for reimbursement, as existing systems are not set up to facilitate payments to employers. 

However, early indications are that banks are struggling and March payroll could be challenging for a number of businesses – it’s likely there will be a time-lag.

Do we need to top up furloughed workers’ salaries to 100 per cent?

As the Chancellor noted in his speech, “employers can top up salaries further if they choose to”. This implies that the employer would not need to pay more than the amount granted for the furloughed employee, thereby potentially reducing the employer’s labour bill to zero for furloughed employees.

What does it mean for our tax bill?

The Chancellor was silent on the tax and National Insurance consequences of the grant, particularly for the employer, and it is assumed that these rules will continue to apply, such that employer’s NIC may be recovered so long as the total cost does not exceed £2,500 per month.

Can furloughed workers continue to do limited work for the company?

Employees will need to be furloughed for all their working hours and will not be able to work for that employer during the period that they are furloughed. 

What cash flow support is available?

The Chancellor has also taken steps to give businesses more cash, and also let them keep their cash for longer. The Coronavirus Business Interruption Loan Scheme has been developed and its interest-free period extended from the initial proposal of six months to 12 months. Loans from £1,000 up to £5 million will be available whereby the government will cover the interest costs over the 12-month period, guaranteeing against 80 per cent of the facility. 

What are the terms?

The borrower will be 100 per cent liable for all of the debt. In theory, businesses can apply for a loan from 23 March, but details are still limited on what individual providers will require. 

How this looks in practice may take time to see. Some businesses which would never have previously considered such a loan may now be forced to do so, while many smaller businesses will be hesitant to take a loan during what could be a prolonged situation, when they can see no current means to repay. 

Additionally, from conversations with our entrepreneurs, there are concerns around producing the accurate business projections needed for a loan application when they can’t be sure what their business will look like in one week’s or three months’ time.

What tax relief is there and when does it become available?

One of the more crucial measures, due to the immediate impact and relief it will provide compared to some of the other steps introduced by the Chancellor, is the move to defer the next three months of VAT payments. This will mean no business owner will pay VAT until at least July and will hopefully give them some breathing room as they manage other costs.

Am I eligible for a business rates holiday or a grant?

The government announced a 12-month business rate holiday for those in the hospitality, retail and leisure sectors, applying from April 2020. This relief will apply to all those businesses in that sector that have been forced to close. 

It includes live music venues, gyms, caravan parks, early years childcare providers and self-catering accommodation, but does not extend to casinos, medical services or business services. The full eligibility list is available here.

Non-repayable grants of £25,000 are also available for hospitality, retail and leisure firms with property of a combined rateable value between £15,000 and £51,000. Grants of £10,000 will be available for companies in any sectors that receive small business rate relief.

Joanna Santinon is EY Partner and Entrepreneur Of The Year Leader, UK

Image credit: Julian Simmonds/Pool/AFP via Getty Images

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