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BUSINESS UPDATE: COVID-19

Update No.20 - 4th May 2020
Good afternoon,

Over the weekend there have been a number of amendments and clarifications to existing Schemes, and in addition one or two new initiatives.

Bounce Back Loans
  • This new Scheme is open for applications as of today (4th May 2020).
  • Briefly, the scheme provides for:
  1. Loans of up to 25% of turnover, to a maximum of £50,000.
  2. Whilst the borrower remains 100% liable for the debt, the government guarantees 100% the outstanding balance and interest.
  3. Interest in the first 12 months is paid by the government and thereafter is charged at 2.5%.
  4. Borrowers will not have to make any capital repayments in the first 12 months.
  5. The length of the loan is for 6 years, but early repayment is permitted.
  6. No personal guarantees are permitted, and no recovery action is permitted over a principal private residence, or principal private vehicle.
  7. There are no business projections, business plans, or eligibility criteria required.
  • Further information can be found in our update on 28th April here.
  • Businesses should check the British Business Bank website to find out which lenders provide Bounce Back Loans.
  • To visit the British Business Bank click here.
Coronavirus Business Interruption Loans
  • Following the creation of the Bounce Back Loan scheme, further changes to the CBILS have also been announced.
  • To speed up the provision of finance to small and medium sized businesses, the largest 7 lenders have stated that rather than relying on business providing forecasts and business plans in applications, they will only ask businesses for information and data that might reasonably be provided at speed, and will support this with their own information to assess credit and business viability. For more information click here.
Additional Grants for Small Businesses
  • Details of additional funding for those not covered by existing local authority grants will be revealed this week. At this stage we do not believe that this scheme is applicable for businesses based in Wales.
  • On Saturday, it was announced that the Small Business Grants Fund (SBGF) would receive a 5% top-up aimed at closing the support gap for businesses that don’t qualify for the existing business rates relief.
  • The fund is aimed at small businesses (less than 50 employees) who are incurring on-going fixed property-related costs.
  • The Government has asked local authorities to prioritise:
  1. Businesses in shared spaces
  2. Regular market traders
  3. Small charity properties
  4. Bed and Breakfast properties that pay council tax rather than business rates.
  • Grants will be based upon economic need and at the local authorities discretion.
  • The maximum grant is £25,000, with discretion for much smaller ones, dependent upon the need.
  • Recipients must be able to demonstrate a significant drop in income due to COVID-19, and those eligible for current grant schemes will not be eligible for this new one.
  • Further guidance will be announced later this week. Click here for more information. 
Coronavirus Job Retention Scheme
  • The Scheme has been up and running for 2 weeks now, and although it is not quite as straightforward as we initially imagined, it has been generally well received, and payments are coming through as promised.
  • However, some organisations have been incorrectly refused support due to tax arrears, and HMRC advises that they should re-apply. Employers with tax arrears should not have been rejected, and there should be “no repeat of the situation”.
Self-Employment Income Support Scheme
  • Detailed notes form the Chancellor outlining this Scheme were published recently.
  • These notes include:
  1. The purpose of the scheme, and how to claim.
  2. Who can apply?
  3. The calculation and definition of “profit”
  4. The basis of the calculation of the payment
  5. Further details are available here
Creative Wales Fund
  • Further details relating to the finance available are now published.
  • These include:
  1. The background and purpose of the Fund
  2. The 2 main Schemes are The Emergency TV Development Fund and The Emergency Digital Development Fund
  3. Who can apply?
  4. The types of projects that the fund supports.
  5. The conditions for funding support up to £25,000
  • Whilst the Scheme continually makes reference to “funding”, as opposed to “grant”, there are various references to grants, which makes it safe to assume that this is grant funding.
  • Closing date for applications is 18th May 2020, with decisions on applications by 1st June 2020. For more information contact creativewales@gov.wales 
Protection for Businesses
  • The government is to introduce changes to the insolvency laws. This is to allow businesses that are suffering a cash flow crisis, and become technically insolvent, to continue to trade. Usually, where a business is trading when insolvent the Directors incur a personal liability for any debts accrued in that period. This threat of personal liability is to be removed retrospectively, on a temporary basis, from 1st March 2020. This is potentially a difficult issue to legislate for, and our advice is to seek professional guidance if contemplating such a situation.
  • Commercial tenants in the UK that cannot pay their rent due to COVID-19 are protected from eviction. No business will automatically forfeit their lease if they miss a payment up to 30th June 2020, and this period may be extended. The tenant is still liable for the rent and it will be payable in the future. It is always advisable to discuss the situation with the landlord.
VAT
  • A zero rate of VAT now applies to the sales of Personal Protective Equipment (PPE) for COVID-19, from 1st May 2020 until 31st July 2020. Import duty has also been removed.
Additional information
  • Employees that are working from home because their workplace is closed, or who are self-isolating will incur costs. There are no specific rules for deduction of employees expenses due to the coronavirus, but HMRC have published guidance as to the expenses that may be eligible for deduction due to working from home in this period.
  • There are 2 ways of doing this, provided that the employer requires you to work at home:
  1. Employers can pay a flat rate of £6 per week, as a tax free allowance
  2. Or, employees claim a flat rate £6 per week, and can ask that it is deducted from taxable income, thereby saving £1.20
  • To make the process easy HMRC will not need evidence of any claims up to £6 per week, but anything in excess of this figure will need to provide evidence. For more information click here.
And finally

This is our 20th update since the first was sent on 18th March 2020. We do hope that you are finding them useful. We appreciate that an enormous amount of detail is now contained in all twenty, and that there is often a need to go back through previous editions in order to check or reacquaint the details, especially as the information is updated. 

We will therefore produce an index of all twenty this week, in order to make easier access to previous information.

 
Best wishes
Mitchell Meredith
Copyright © 2020 Mitchell Meredith Ltd, All rights reserved.


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