(UPDATED 27TH APRIL 2020)
We have received a number of questions and comments from self-employed people regarding what help is available for business owners and the self employed who have been financially hit by the effects of the Covid-19 outbreak.
Lots of people have heard snippets on the news, or have some idea of what the Government is offering but this is mixed up with conflicting or false information from well-meaning individuals trying to be helpful.
Bounce Back Business Loan
What is this?
Announced on the 27th April and available for applications from 9am on Monday 4th May, businesses (including the self employed, micro businesses and start-ups) can apply for up to £50,000 (or 25% of turnover) of 100% Government underwritten loan funding – and most importantly, can access the cash very quickly (within 24 hours of approval)
- Income does not need to be proven (Self-Certified)
- No forward forecasts or evidence of business viability are required
- One simple short application process
- Administered via approved lenders
- No repayments will be due in the first 12 months
- 12 months interest free, and a competitive interest rate thereafter
It should be noted that this is still a loan, and it is repayable – it is currently unclear whether a PG (Personal Guarantee) would be required, however it is likely that is will be required.
More information on the scheme can be found HERE
The £10,000 Grant
What is this?
The Government has promised a grant of £10,000 for the smallest businesses. It was initially £3,000, but once the magnitude of the crisis became apparently the Chancellor came back and increased it. There have been some rumours that how much you get depends on your rates, but we cannot find any evidence of truth in this. All official sources indicate that the grant is a flat rate of £10,000 for everyone eligible.
This grant is NOT repayable.
Who will get it?
Any business in England, who has premises, who receive Small Business Rate Relief. You will not be entitled to this grant if you hot desk, or rent a chair, or work from home. You must have a business premises for which you receive a Business Rates bill (even if the amount payable on that bill is £0)
How and when will we get it?
This will be distributed by your Local Authority (the people who bill you for your rates) and you do not need to do anything. The system is expected to be in place by early April. Any questions should be directed to your Local Authority (but realistically, they are being absolutely swamped with calls about this so you’re unlikely to learn anything new).
The £25,000 Grant
What is this?
This is a grant for businesses in the retail, hospitality or leisure sectors who have premises with a Rateable value of £15,001-51,000 (You can find out your Rateable Value here) These will primarily be shops, hotels, bars, restaurants, cinemas etc. We think it unlikely that salons will be considered as leisure or retail, but no clarification has been provided.
How will I get this?
Similarly to the £10,000 grant, your Local Authority will contact you.
80% of Employees Pay is covered
What is this?
The Chancellor announced that before firms lay-off their staff, they should consider keeping them on and reclaiming 80% of the cost – for up to 3 months (he did also consider extending that 3 month period if necessary)
What are the details?
The scheme will cover 80% of an employees gross pay, up to £2500 per month. The employee will need to be ‘Furloughed’ – this means to take a temporary leave of absence. It is important to note that employee’s who have been ‘Furloughed’ are not allowed to undertake work tasks. They go home and they stop doing any work, until you are in a position to bring them back in.
You are not obliged to top-up the remaining 20% of their wages, but you may do so if you want to and can afford to.
Tax Payments Deferred
Anyone with tax liabilities currently due, may defer the payment. This means that VAT due in April may be paid in June. If you’re self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021 – giving you six month extra to pay.
It must be noted though, these are deferments they are not giveaways. The liability does still need to be paid, you are just being given longer to do so.
How do I take advantage of this?
Although some may tell you that you need to contact HMRC to request this, this is not true. It is an automatic offer with no applications required.
Sick Pay (SSP)
The Government is giving two weeks Statutory Sick Pay for all employees needing to take time off due to Covid-19. Normally, sick pay is not paid immediately, but under these measures you may claim from Day 1 of your employees absence.
You will process this through your payroll.
Working Tax Credits and Universal Credit
Many self-employed people have noted that little support exists for sole traders and freelancers who do not have premises. If this sounds like you, there is some good news.
Existing claimants of UC or Working Tax Credits will receive an automatic £20 per week top up in payments from early April. You may also be able to make a claim for Housing Benefit (if you rent) and Council Tax Benefit.
Home owners may request a 3 month Payment Holiday from their lender, which they are obliged to give. This is not a ‘freebie’, it will be added to the loan to be paid back later, but it will give you some breathing space in the short term.
Coronavirus Business Interruption Loan Scheme
What it is?
The Government has promised £330bn of State-backed business finance (loans), which will be processed and administered via the British Business Bank.
The Government will cover the interest on those payments for the first 12 months.
It is not yet clear if there are any restrictions on accessing this loan, based on business viability, structure, or length of time trading. It is however, more than likely that a personal guarantee will be required (so if you do not repay the loan in full, or your business liquidates, you will remain personally liable for the balance even if you took it out as a limited company).
To be eligible you need to demonstrate that you cannot meet the eligibility criteria for a traditional lender, but can provide long term viability. It is unlikely that small, lifestyle businesses that cannot prove long term commercial viability will be approved for this funding, but it’s always worth checking.
We would urge business owners not to increase their outgoings during this turbulent period unless this is absolutely necessary, and the business can return to full viability with the help of the money.
How do I apply?
Applications will open the week commencing the 23rd March and info will be published on this page HERE