(Updates on Small Business Grants, Reduction in the Regional Rate and changes in eligibility for the Coronavirus Business Interruption Loan Scheme)
The Society appreciates that in these uncertain times, there will be significant financial and other pressures on our members as businesses serving the community. It is a worrying and uncertain time for business owners, staff and the wider community. Solicitors firms not only serve the public through representing their clients, you also inject support for other businesses within your local community. This must be recognised in any support packages coming from Government.
The UK Government and the Northern Ireland Executive have announced a range of measures to mitigate against these unprecedented circumstances and it is likely there will be more developments in a very fast-moving situation. It is important that this funding support is accessible quickly through workable channels, in order to support the shock to the economy and solicitors’ practices as key pillars of that economy. Implementation is the next stage and some further information is provided on this.
This Information Notice signposts some of the initiatives which have been announced to support businesses through this period, including support in paying salaries, rates relief, tax deferral, loans and other key measures aimed at supporting businesses through cash flow shocks. The Society will continue to provide guidance to members throughout the current situation and to impress upon our Executive the importance of financial relief for firms as small and medium-sized businesses.
Business Support Measures Announced by the Treasury and the Northern Ireland Executive
Coronavirus Job Retention Scheme
Under the Coronavirus Job Retention Scheme, the UK Government has indicated that all employers will be able to access funding from HMRC to pay 80% of the monthly wage costs of employees for businesses whose operations have been severely affected by COVID-19, up to a limit of £2,500 per employee, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on the 80% figure. The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 28 February 2020. Payments under this scheme will be made via BACS. Employers may top up the salary to 100% if they choose to do so.
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts. The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
This scheme has been backdated to take effect for wage packets from 1 March and will be in place for an initial period of three months. The Government has acknowledged that this period may be extended, depending on the future trajectory of the crisis, so this should be factored into business planning.
The broad outline of the scheme is as follows:
Ø Employers need to designate affected employees as “furloughed workers” and employees should be informed. A change in employee status remains subject to the principles of employment law and the contractual position of the employer (including any scope for negotiation). During the period in which they are furloughed, the Government advises employees must not to carry out any work for an employer to ensure they qualify for the scheme. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to the usual income tax and other deductions.
Ø An online portal will be created within HMRC through which the affected employees’ details should be submitted (further details on the practical workings of this are awaited from HMRC). There is work underway to put in place appropriate electronic systems to facilitate the payments to employers.
In terms of timescales at this stage. Government are advising that they are seeking to start monies being paid by the end of April. This is an important consideration in terms of immediate cash flow in the interim. The availability of business interruption loans may be a form of bridge financing to consider if there is an immediate need (see below).
Further detailed information can be found here:
Deferral of VAT
The UK Government has now said that businesses have the option to defer business payments for VAT for the period 20 March 2020 through to 30 June 2020. This is an automatic offer and you do not need to inform HMRC you are deferring your payment. Any liabilities accumulating during the deferral period will be afforded until the end of the 2020/2021 tax year to make payment. You will still need to submit your VAT returns to HMRC on time and VAT refunds and reclaims will continue to operate as normal. The Government advice is If you normally pay by Direct Debit and wish to defer you should contact your bank to cancel your Direct Debit as soon as you can, or you can cancel online if you’re registered for online banking.
More information on this can be found here:
Income Tax for the Self-Employed
For those who are self-employed, income tax assessments due on 31 July 2020 may now be deferred until 31 January 2021. The Government has now indicated this is optional, will be applied to the self-employed automatically and does not involve an application process. No penalties or interest for late payment will be charged during the deferral period.
For more information, see here:
HMRC ‘Time to Pay’ Service
Employers in financial difficulties and with outstanding tax liabilities may enquire if they are eligible to receive support with their tax payments. These applications are assessed on a case by case basis to reflect individual circumstances. It may be worth making contact to enquire about eligibility, including information about payment by instalment and relief from penalties. There is a dedicated COVID-19 helpline which has been established to provide advice and support on these issues.
HMRC’s coronavirus helpline can be reached on 0800 024 1222. The Government also lists a contact number at 0800 0159 559.
For more information, see the following:
Self-Employed Income Support Scheme (SEISS)
On 26 March, the Government announced a scheme which allows self-employed individuals or members of partnerships to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This is calculated as average profits across the tax years 2016-2017, 2017-2018, 2018-2019 (where applicable). To be eligible, your self-employed trading profits must also be less than £50,000 and more than half of your income must come from self-employment.
The Government has said the scheme will be operational no later than the beginning of June. Further information on eligibility and the operation of this scheme can be found here:
Small Business Grant Scheme
The First and deputy First Minister have announced that all small businesses who are entitled to benefit through the Small Business Rates Relief Scheme (those with a Net Annual Value for rates of £15,000 or less), will be provided with an immediate grant of £10,000 to relieve financial pressures. The scheme will be administered by the Department for the Economy and Invest NI, working with Land and Property Services. The Department for the Economy has announced the first tranche of payments under this scheme have been made.
The grants are being paid using the rating list to make direct payments to bank accounts. The Department for the Economy has indicated that businesses will be able to benefit even if their valuation has changed under Reval2020- businesses will be able to choose the figure either before or after revaluation to establish eligibility. An online web portal has been set up to allow businesses to provide these details if they have not already done so. Although the grant scheme is targeted at 27 000 business, LPS only hold bank details for around 7000 of those businesses. Members to whom this scheme would apply should take swift action to ensure they can access this payment as soon as practicable.
The link to the web portal for registration can be found below:
There is also a telephone number for enquiries on the scheme:
Tel: 0300 200 7809.
Members can also monitor announcements from a range of sources regularly to learn more about the practicalities of accessing this grant funding:
Immediate Rates Relief
The Northern Ireland Executive has announced that it will be bringing forward a package of proposals to provide financial relief for businesses. Finance Minister Conor Murphy MLA has said there will be a three month ‘rates holiday’ in which businesses will pay zero rates for April, May and June 2020. The effect of this is a 25% reduction in the annual rates bill for small businesses. Rates bills due to be issued in April will be now be deferred until June and members should be aware of the option to make payment through monthly instalments from June 2020 to March 2021 to aid cash flow.
Reduction in the Regional Rate
The Finance Minister announced in the Budget on 31 March 20202 a further reduction of 12.5% in the regional business rate. With the Reval2020 taken into account, this is roughly an 18% reduction in the rate. During plenary in the Assembly, the Minister indicated that further business support interventions in this area may be necessary if the pandemic is prolonged. Members should monitor the Department of Finance for any further announcements.
Small Business Rate Relief Scheme
In addition, members should be aware that the Small Business Rate Relief scheme remains in operation for 2020/2021. This applies a tapered range of discounts automatically to your rates bill if the Net Annual Value of your property is £15,000 or less. Land and Property Services have a helpful guide for applicants here, which includes a contact number, which may be useful if members believe they have not received the appropriate relief. LPS has recently reviewed the rates which will apply from April 2020.
Hardship Rate Relief
Hardship rate relief is in place to help businesses recover from a temporary crisis caused by exceptional circumstances. However, the guidance on this suggests that it may not be granted where other compensation is available (in this case the business grants may make this inaccessible). This relates to those risks and impacts which produce a serious loss of business and could not have been foreseen. Guidance notes on this can be found here:
Coronavirus Business Interruption Loan Scheme (‘CBILS’)- UK Government
The UK Government has launched the new temporary CBILS through the British Business Bank, in order to support businesses accessing bank lending and overdrafts during the crisis. The purpose of the scheme is to provide lending to viable UK businesses that would be turned down for a loan or other forms of debt finance due to inadequate security. Loan values under CBILS through a maximum upper limit of £5 million per applicant for a period of up to six years. The Government has said they will cover the interest payments on the loans for the first twelve months (previously six). The scheme is now open and the Chancellor has now introduced changes to widen the access to the scheme to those smaller businesses that would have previously met the requirements for a commercial facility, but would not have been eligible for CBILS. This should significantly increase the number of businesses eligible for the scheme. The changes in summary are as follows:
- personal guarantees cannot be taken for any facilities below £250,000
- personal guarantees may be required for facilities above £250,000 but will be capped at 20 per cent of the outstanding balance after business asset recoveries
- insufficient security is no longer a condition to accessing the scheme, making more smaller businesses eligible to receive the business interruption payment
The Government has asked that lenders should retrospectively apply these changes for any CBILS facilities offered since 23 March 2020.
This mechanism is a government commitment to lenders of a guarantee of 80% on each loan, with no charge for this guarantee to businesses or banks. It is important to note businesses remain responsible for repaying any loans; the guarantee is made to the lender. The final decision on eligibility rests with the accredited lenders. The dedicated page for information on the criteria and operation of the scheme can be found at:
Minister for the Economy Diane Dodds MLA has expressed the determination of her department to make the scheme business-friendly for NI businesses. Members interested in learning more should monitor Gov.uk, the British Business Bank and contact accredited lenders. A list of accredited lenders for the purposes of CBILS can be found here. This page can be filtered to identify Northern Ireland lenders who should be contacted for more information. There may be other online funding sources also identified by the British Business Bank, more information is found here.
It will be important for members considering making an application for a CBILS loan to consider readying a cash flow impact analysis and detailing how cash flow issues will increase in severity, depending on the period over which the crisis extends. It may be worth modelling this impact in measurable time periods, e.g. three months, six months etc to support your application. This forms part of a wider business plan in terms of how to manage cash flow- other areas of enquiry might include asking lenders for repayment holidays on loans or asset purchases.
Members with an interest in larger business loans and the Corporate Financing Facility can find information here:
For further information and FAQs for Coronavirus Business Interruption Loan Scheme:
Statutory Sick Pay- Rebate for SMEs
The UK Government has included provision within the Coronavirus Act 2020 for HMRC to make regulations to allow qualifying NI SMEs to reclaim statutory sick pay (‘SSP’). The UK Government announced this would cover up to 2 weeks’ SSP per eligible employee who is off work due to COVID-19. Legislation has also been passed which provides for self-isolation due to COVID-19 to come within sick pay arrangements (see below, this expires after eight months- see here.).
The UK Government has announced the scheme will be open to employers with fewer than 250 employees and will come into operation on the day after the necessary regulations on the extension of SSP to self-isolators comes into force. Further clarity is awaited on the precise mechanics of the rebate scheme for NI businesses.
In preparation, it is important to note employers should maintain records of staff absences and payments of SSP and the Government has announced it will work with employers to set up the repayment mechanism, as this is requiring work to be carried out on current systems.
Further information on this can be found here:
Protection from Forfeiture During the Relevant Period
Under the terms of the Coronavirus Act 2020, commercial tenants in Northern Ireland who cannot pay their rent because of COVID-19 will be protected from forfeiture (until 30 June).
The provisions of the Act mean no business will automatically forfeit their lease and be forced out of their premises if they miss a payment up until 30 June.
There is the option for the Department of Finance to extend this period (more than once if required) by way of regulations.
The Government advise this is not a rental holiday. All commercial tenants will remain liable for the rent. Commercial tenants are protected from eviction if they are unable to pay rent.
More information can be found here:
Professional Indemnity Insurance
The Society has contacted the brokers about the impact of COVID-19 on professional indemnity insurance premium payment arrangements and what options might be available to firms in these unprecedented circumstances. We have been advised by our insurance brokers that Premium Credit will engage with clients individually on the possibility of deferring some instalments. Firms seeking to avail of this facility should contact Premium Credit directly (or other relevant body):
Phone Number: 0330 123 9717
Business Interruption Insurance
It is important to contact your provider, however the vast majority of business interruption insurance policies that firms may have taken out will likely not include cover for losses caused by a pandemic. These policies typically insure against damage to property, although there may be clauses in some policies which may cover COVID-19 if it was to become a “notified disease”.
Incorporated Practices- Guidance from Companies House on filing of Accounts and Contact Point
3 Month Extension
As of 25 March 2020, businesses will be able to apply for a 3-month extension on filing their accounts. All companies who apply for an extension as a result of COVID-19 will automatically be granted the extension without needing to provide evidence.
Further information can be found here – https://www.gov.uk/government/news/companies-to-receive-3-month-extension-period-to-file-accounts-during-covid-19
Temporary Closure of Companies House Contact Centre
Companies House has made the decision to temporarily close their Contact Centre until further notice. From 25 March, any queries should be directed to your Customer Care Manager or to email@example.com.
The Society will continue to update members with information regarding business support measures in the course of the current crisis, as more detail on their operation and impact for NI business becomes clear. The Society will continue to monitor the situation and update members as required.
David A. Lavery CB