Coronavirus: What financial support is the government offering to individuals and businesses?
Less than a week after the new Chancellor, Rishi Sunak, unveiled a £12bn support package to help the economy cope with the coronavirus pandemic, he unveiled a £330bn package of government-backed loans as well as a further £20bn in the form of grants and tax breaks – all with a view to keeping businesses trading and protecting jobs.
Statutory Sick Pay
The government intends to introduce legislation to enable SMEs and employers to reclaim Statutory Sick Pay paid for sickness absence due to the coronavirus.
Employers with less than 250 people employed as at 28 February 2020 will be entitled to a refund of up to two weeks’ Statutory Sick Pay for each eligible employee who has been off work as a result of the coronavirus. Employers should maintain appropriate records of staff absences and payments of Statutory Sick Pay, but employees will not need to provide a doctor’s note.
While the scheme has not yet come into force, it is expected that the eligibility period for refunds will commence on the day after the regulations come into force. So, employers will only be entitled to claim funds in respect of payments made to persons staying at home during that period.
It is expected that the repayment mechanism will be agreed with employers over the coming months – despite the urgent need for many businesses to resolve cash flow issues. The lack of an immediate refund will of course be problematic for many businesses suffering significant drops in income.
The Government has announced that it will introduce a business rates retail holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year. In addition, businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority for those payments.
To help address immediate cash-flow issues, retail, hospitality and leisure businesses operating from smaller premises, with a rateable value (a measure of property values) between £15,000 and £51,000, will be able to apply for a £25,000 grant.
The government is asking that enquiries on eligibility for, or provision of, the reliefs be addressed to the business’s local authority. It is expected that further guidance for and from local authorities will be issued in the coming days.
Grants for Small Businesses
The government has indicated that it will provide additional funding for local authorities to support small businesses that are entitled to small business rate relief (SBBR) or rural rate relief. This funding will take the form of a £10,000 grant to help meet working capital needs. Businesses eligible for SBRR or rural rate relief are to be contacted by their local authority – so there is no need for business to apply. It is expected that the grant will be made available in April.
Tax Payment Deferrals
Businesses and self-employed people in financial difficulty who owe tax to HMRC may be eligible to receive support through the HMRC Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. For those concerned about the payment of taxes due to the coronavirus, HMRC has set up a dedicated helpline on 0800 0159 559.
£330bn of Financial Support for Small and Large Businesses
The Government is introducing two new schemes to provide government backed loans to small and large businesses.
For small businesses, the Government is introducing a temporary Coronavirus Business Interruption Loan Scheme. The scheme, which is due to launch next week, will be delivered by the British Business Bank to provide small and medium sized businesses with access to bank lending and overdrafts. Under the scheme, the government will provide lenders with a government guarantee covering 80% of the loan amount. Loans under the scheme can be up to £5m and will be interest free for the first 6 months. The scheme is expected to be available in the week commencing 23 March 2020.
For larger businesses, the Bank of England has announced a new lending facility to raise working capital through the purchase of short-term debt. The scheme will only be available to support financially strong companies that have encountered short terms cash flow problems as a result of the pandemic. This scheme is also expected to be available in the week commencing 23 March 2020.
Of course, the problem with these types of loans is that they will need to be paid back – in part at least. So, some companies may take the decision that, if there is no viable prospect of being able to repay the debt, they are better off allowing nature take its course and put the company into administration.
Following negotiations between the government and insurance companies, it is expected that businesses that have cover for both pandemics and government-ordered closure will be covered under their existing insurance policies notwithstanding that the government has only advised people to stay way from pubs and restaurants, rather than forcing them to close. This will come as a major relief to many hospitality businesses that, on a strict interpretation of their policies, were not covered in circumstances where the government merely recommended closure but did not strictly order it.
Notwithstanding the above, insurance policies do vary in their coverage, so it is important to read the terms of your policy carefully.
The Bank of England has today announced another interest rate cut to an all-time low of 0.1%. This should reduce the cost of borrowing for many companies and help with short term cash flow. Although, it does of course have a knock-on impact on banks. So, it will remain to be seen how that sector fares out. Although, one would expect the government to prop up the banking sector as necessary.
Support for Individuals
The government has also taken steps to protect individuals from the economic impact of the pandemic. The reliefs and measures for individuals include the following:
• Individuals who cannot pay their mortgage as a result of the impact of the coronavirus will be given a three-month repayment holiday. While full details have yet to be announced, it is expected that this relief would apply to persons who are out of work and on statutory sick pay due to the virus.
• No specific protections were outlined for affected workers who are renting. However, the Chancellor did make it clear that the government intends to protect jobs and will “go much further to support people’s financial security”. So, some relief for affected renters may be forthcoming.
• In relation to wages, it is expected that some agreement will be reached with unions and that financial support may be given to prevent companies laying people off. Further details are awaited.