On this page you’ll find some of the questions we were asked most frequently in the past couple of weeks. If you can’t find the answer you are looking for, feel free to ask your question through the form at the bottom of the page.
0. General Advice
Many investors within our network sent us notes as soon as the emergency started to let us know that they were still open for business. However, we’re hearing that many other are currently refraining from considering new investments as they focus on making sure that their current portfolio companies are okay.
In the greater scheme of things, it is likely that in the near future term sheets will be less generous than they have been in the past, as the markets enter a recession and risk is amplified by a generally uncertain environment.
1. HMRC Time To Pay & VAT Deferral
If you cannot pay HMRC, it’s important that you get in touch with them through the dedicated Coronavirus Helpline at 0800 015 9559.
At the moment HMRC can agree to defer the payments for PAYE and NICs with no penalties for late payments. An interest charge of 2.75% per annum will still accumulate on late payments.
If you make your VAT payments to HMRC via Direct Debit, cannot pay for this quarter and want to benefit from the deferral, then you should cancel your Direct Debit.
If you’re having problems paying PAYE and NICs, you should get in touch with HMRC through their Coronavirus Helpline and negotiate repayment terms with them directly.
At the moment HMRC can agree to defer the payments for PAYE and NICs with no penalties for late payments. An interest charge of 2.75% will still accumulate on late payments.
Rather than deferring, you can agree late payment terms with HMRC through their Coronavirus Helpline at 0800 015 9559.
2. Bounce Back Loans
In order to be eligible for the Scheme, applicants must self-declare that their business:
- Has been impacted by the COVID-19 pandemic;
- Is engaged in trading or commercial activity in the UK and was established by 1 March 2020;
- Is not using the Coronavirus Business Interruption Loan Scheme (CBILS) or similar COVID-related loan schemes, unless these are under £50,000 and can be converted into a BBLS facility;
- Is not in bankruptcy or liquidation or undergoing debt restructuring at the time it submits it applies;
- Earns more than 50% of its income from its trading activity;
- Does not operate within the restricted sectors, which include credit institutions, insurance companies, public-sector organisations and state-funded primary and secondary schools;
- Was not a business in difficulty at 31 December 2019.
A business is considered in difficulty if met any one of the following criteria on 31 December 2019:
- Companies that have entered into collective insolvency proceedings;
- Companies that have received rescue aid and have not yet reimbursed the loan or terminated the guarantee, or have received restructuring aid and are still subject to a restructuring plan;
- SMEs that are older than 3 years and have accumulated losses greater than half of their share capital in their last annual accounts;
- A company which is not an SME where, for each of the last two accounting years:
- Book debt to equity ratio has been greater than 7.5; and
- EBITDA interest coverage ratio has been below 1.0
If the applicant self-declares that they were a business in difficulty as of 31 December 2019:
- They cannot use Bounce Back Loans for export-related activities;
- They must comply with State Aid regulations under de minimis State Aid rules
- State Aid rules establish that a company stays within the threshold of de minimis State Aid, set at €200,000 in state-aid funding over the course of three consecutive years.
- This equates to about £175,000 and it means, for business in difficulty, that funding under the Bounce Back Loans might interfere with other forms of de minimis aid such as SEIS investment.
Businesses can apply for between £2,000 up to 25% of their turnover. The maximum loan available under the Scheme is £50,000. The government will cover the interest repayments for the first 12 months.
The government-backed guarantee on the loan is a guarantee to lenders. Businesses remain 100% liable to repay the full loan amount, as well as interest, after the first year.
The government has set the interest rate for this facility at 2.5% per annum. Lenders are not permitted to charge any fees.
he government will cover interest payable to the lender for the first 12 months. The borrower will then need to make full repayments (the loan and any interest) up to the end of the six-year term, as per their arrangement with the lender.
Early repayment is permitted at any stage, without early repayment fees.
For businesses in difficulty, Bounce Back Loans are considered as State Aid and are therefore subject to rules and limitations.
In its amended Temporary Framework, the European Commission allows direct aid to companies, provided that the total nominal value of such measures remains below the overall cap of EUR 800,000 per company.
Therefore, businesses are required to self-declare that, since 19 March 2019, they have not received more than £711,200 in State Aid under the State Aid Temporary Framework
The threshold is set at £106,680 in the case of fisheries and aquaculture businesses, and at £88,900 for agriculture businesses.
For businesses in difficulty, State Aid rules establish that a company stays within the threshold of de minimis State Aid, set at €200,000 in state-aid funding over the course of three consecutive years.
This equates to about £175,000 and it means, for business in difficulty, that funding under the Bounce Back Loans might interfere with other forms of de minimis aid such as SEIS investment.
If you are all three of the following:
- A business in difficulty as of 31 December 2019;
- Raised or plan on raising SEIS investment;
- Planning to apply for a Bounce Back Loan.
Ask your bank for clarification around additional de minimis State Aid rules.
A business is not able to take out a Bounce Back Loan Scheme facility if they have been approved for a CBILS facility, and vice versa.
However, a business that has a CBILS facility can apply for a Bounce Back Loan Scheme facility if the Bounce Back Loan Scheme facility will refinance the CBILS facility in full. All accredited lenders who have approved CBILS loans so far will allow customers to refinance their loan into the Bounce Back Loan Scheme where appropriate, however, borrower protections under these schemes differ, and businesses should discuss these with their lender.
3. Coronavirus Business Interruption Loan Scheme
Initially, guidance suggested that the Loans would count as de minimis state aid, and so would interfere with SEIS. However, the restriction was quickly amended the latest is that EIS and SEIS qualifying company will be eligible to apply for the loans. Companies taking out a loan under the Scheme will also be able to qualify for SEIS and EIS.
If your application is rejected by a lender you can still apply to other accredited lenders through the Scheme.
From what we gathered, many banks still don’t have all the systems and processes in place to handle the huge volume of CBILS applications. It will take them a few more days to be 100% operative. Once the banks are ready, processing times will vary according to priority and amount borrowed.
OUR ADVICE: if you have more than 3 months salary and essential costs, in cash, then do not apply right now. You won’t be high on the list and there are other ways to access short term finance more quickly.
Lenders are required to provide unsecured facilities under £250,000 under the Scheme. Over that threshold the Scheme will still require personal guarantees for the 20% of the borrowed amount that is not backed by the Government.
Guidance from the British Business Bank actually invites early-stage companies within their first 2 years of trading to apply to the regular Start-Up Loans programme instead, or to the Bounce Back Loans Scheme.
4. Coronavirus Job Retention Scheme
All UK-based businesses with a PAYE payroll as of 19 March 2020 are eligible, including charities, not-for-profit organisations and single director companies. The same rules will apply to every type of business.
All employees on payroll on 19 March 2020 are eligible.
This includes those who were on payroll as of 28 of February and were made redundant prior to 19 March 2020 as a result of the COVID-19 outbreak, as long as they are then re-hired. In order to qualify for the grant, employees must be furloughed and stop working for the employer.
Yes, however the scheme does not cover dividends.
Sole-directors of a Personal Services Company who pay themselves a salary and dividends will only be able to claim 80% of their salary.
Furloughing usually means “granting a leave of absence” to employees.
In the context of the Job Retention Schemes it refers to the process of notifying employees that they are exempted from their work duties. Only furloughed workers will be eligible for the Scheme.
As the scheme targets businesses whose employees had to stop working because of the outbreak, it is a condition of the scheme that the employees does not work at all during the time they are furloughed. This has a minimum of 3 weeks.
The Scheme requires a minimum furlough time of 3 weeks.
After the agreed-upon furlough period expires, the employer can take the worker back to work, make them redundant or extend the furlough period.
As long as they stay furloughed for a minimum of 3 weeks, employees can then go back to work and be furloughed again subsequently.
This is to allow furloughed workers to cover, for example, for sick colleagues.
The grant will cover whichever is lower between the following two, for up to a four-month period from 1 March 2020 to 30 June 2020:
- 80% of each furloughed employees’ wages,
- £2,500 per month.
- Plus, the grant will cover employer’s NIC and the minimum automatic enrolment employer pension contributions.
For full-time and part-time employees, the full salary before tax must be used for the calculation.
You can use HMRC’s online calculator tool to obtain the exact amount to claim for based on the usual remuneration of your employees.
For workers with variable earning or on a hourly rate, employers must use whichever is higher between:
- their average monthly earnings for the 2019/20 tax year; and
- their earnings from the same monthly period in 2019.
You can use HMRC’s online calculator tool to obtain the exact amount to claim for based on the usual remuneration of your employees.
Claims must be made to HMRC’s Job Retention Scheme portal.
Below is a video walkthrough of the portal:
You can make one claim every 3 weeks, although a claim can include multiple employees.
In order to make a claim through the portal, you will need to prepare the following information:
- your ePAYE reference number;
- the number of employees being furloughed;
- the claim period (start and end date);
- amount claimed (per the minimum length of furloughing of 3 weeks), keep in mind that you’ll have to calculate this yourself;
- your bank account number and sort code;
- your contact name;
- your phone number;
You can see where to input the correct information in the video below:
Once HMRC has reviewed and approved your claim, they will pay the grant directly to your bank account via BACS within 6 working days.
Employer contributions must continue at a minimum of 3% of staff salaries – if your clients are furloughing staff at reduced pay, contributions should be adjusted accordingly.
Grants under the Government’s Job Retention Scheme will cover employer contributions – based on the 80% of salary, so they have support to maintain required contribution levels.
Although HMRC has been silent on this so far, the prevailing opinion among legal commentators seems to be that HMRC is expected to apply the same concession to the EMI working time requirement for furloughed workers as it applies when reserve forces are called up.
Yes, employees can attend training sessions during furlough but, they should be paid at least the national minimum hourly wage to do so.
As such, if you are topping up the 80% with the 20%, then that’s already covered. However, if you are doing a pay reduction and just accepting the 80% government contribution, then you would have to top that up with the minimum hourly wage for the training they attended.
5. Business Rates & Grants
Businesses based in England in the retail, hospitality and/or leisure sector with a rateable value under £15,000 are eligible.
Businesses based in England in the retail, hospitality and/or leisure sector with a rateable value under £51,000 but over £15,000 are eligible.
If your business is based in England and is in the retail, hospitality and/or leisure sector, you should be eligible.
As per official guidance, this includes properties that are mainly or wholly 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.
Businesses eligible for grants will be contacted by their local council in due course.
6. Statutory Sick Pay Refund
All UK businesses with up to 250 employees as of 28 February 2020 are eligible.
This refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19. This includes self-isolation whether or not the employee is showing any symptoms.
As per the Chancellor’s speech, the first payments will be made by the end of April.
However, systems and processes are being designed from scratch, so we don’t know yet any details of how long it’s going to take to process payments.
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.
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