UK Relief Package Supports the Economy, Large Corporates and Small Businesses Reeling From COVID-19
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The UK government has introduced a number of schemes to support the economy, business, and workers through the COVID-19 pandemic. This Advisory contains a high-level summary of the current relief proposals along with links to the relevant government or other organisation's website. Please contact Stuart Axford, Henry Clinton-Davis, Sean Scanlon, Colin Tan, Ewan Townsend or Jeremy Willcocks with any enquiries.
For more detail specifically in relation to employment matters, please see our client Advisory.
1. The COVID-19 Corporate Financing Facility (CCFF)
With effect from 23 March, the UK government will purchase newly issued commercial paper from eligible companies. The CCFF is unlimited in size, and available to larger companies. It is therefore the facility most likely to be of interest to large corporates who are in need of support.
Eligibility for the facility will be based on firms' credit ratings prior to the Covid-19 pandemic. Regard will also be given to whether or not the business in question:
- makes a material contribution to economic activity in the UK;
- has significant employment in the UK or its headquarters are in the UK;
- generates significant revenues, serves a large number of customers, or has a number of operating sites in the UK; and
- is UK incorporated (including companies with foreign-incorporated parents and with a genuine business in the UK).
2. Term Funding Scheme
The Term Funding Scheme with additional incentives for SMEs (TFSME) has been introduced to offer four-year funding of at least 10% of the participants' stock of real economy lending at interest rates at, or very close to, the Bank of England Base Rate. For these purposes, the "stock of real economy lending" is based on the participant's flow of funding towards goods and services in the real economy. Additional funding will be available for banks that increase lending, especially to small and medium-sized enterprises (SMEs), which are defined for these purposes as private non-financial companies with a turnover of under £25m and unincorporated businesses.
The Scheme is intended to:
- help businesses and households benefit from the Bank of England's Monetary Policy Committee's actions;
- provide participants with a cost-effective source of funding to support additional lending to the real economy;
- incentivise banks to provide credit to businesses and households to bridge a period of economic disruption; and
- provide additional incentives for banks to support lending to SMEs.
Eligible lenders are banks and building societies that are participants in the Bank of England's Sterling Monetary Framework (SMF) and that are signed up to access the Discount Window Facility (DWF). SMF participants that are not already signed up to the DWF can apply for access simultaneously with applying to use the TFSME. Institutions that are not currently SMF participants can also apply to join, subject to the Bank of England's usual eligibility criteria.
Applications can be made by completing this Application Form. Drawdowns under the TFSME can be made after 27 April 2020 up until 30 April 2021.
3. Coronavirus Business Interruption Loan Scheme (CBILS)
CBILS is intended to support small- and medium-sized businesses (those with a turnover of under £45m) by making available to them loans and overdrafts through the British Business Bank.
- Provides loans of up to £5 million. The UK government will cover the first 12 months of interest payments for businesses;
- The UK government will also guarantee the repayment of 80% of each loan to induce lenders to continue to provide finance to SMEs;
- No charge for the guarantee for either lender or borrower.
In order to qualify for CBILS, the applicant/loan must satisfy the following criteria:
- Loan must be for business purposes;
- Loan must be used to support primarily trading in the UK;
- Applicant must be a UK-based SME with annual turnover of up to £45m;
- Business must generate more than 50% of its turnover from trading; and
- Applicant must have a borrowing proposal which would be considered viable by the lender.
4. Support for Small Businesses
The UK government has committed to provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBRR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.
A business is eligible if:
- it is based in England;
- it occupies property; and
- it is receiving small business rate relief or rural rate relief as of 11 March 2020.
5. VAT Deferral
All UK businesses will be entitled to defer their VAT payments for three months without interest or penalties. There are no eligibility criteria—it is available to every UK business automatically without notice to HM Revenue and Customs (HMRC) .
6. HMRC Time to Pay Scheme
All businesses and self-employed individuals in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC's Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
A business or self-employed person is eligible if they:
- pay tax to the UK government; and
- have outstanding tax liabilities.
7. Business Rates: Expanded Retail Discount
Businesses in the retail, hospitality and leisure sectors will pay no business rates in England for the 2020/2021 tax year. There is no rateable value threshold on this relief and it is available to all businesses irrespective of size.
8. Coronavirus Job Retention Scheme
The Coronavirus Job Retention scheme allows all UK-based businesses to designate employees as "furloughed" following which the UK government will reimburse up to 80% of the furloughed workers wage costs up to £2,500 per month.
Once the scheme is implemented, employers will be able to claim a grant from HMRC to cover most of the wages of their workforce who remain on payroll but who are temporarily not working during the coronavirus outbreak. The scheme will run until at least 31 May 2020 and payments can be backdated to 1 March 2020 provided that employees met the eligibility criteria at the time. Any employer in the country is eligible for the scheme, provided that it had an HMRC Pay As You Earn scheme in operation on 28 February 2020.
An employer can claim the grant only in respect of furloughed employees. The employer must notify the employees in writing that they are furloughed, and must keep a copy of that communication. HMRC has established a new online portal for the purposes of this notification.
9. Statutory Sick Pay
The UK government has introduced legislation to allow small- and medium-sized businesses and employers to reclaim expenditures for Statutory Sick Pay (SSP) for up to two weeks' sickness for any employee whose absence is due to COVID-19. Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note.
To be eligible, an employer must have had fewer than 250 employees as of 28 February 2020.
10. Self-Employed Income Support Scheme
The Self-Employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) whose income has been negatively impacted by COVID-19. The scheme will provide a grant to self-employed individuals or partnerships of 80% of their profits up to a cap of £2,500 per month.
HMRC will use the average profits from tax returns in 2016-17, 2017-18 and 2018-19 to calculate the size of the grant. The scheme will be open to those for whom the majority of their income comes from self-employment and who have profits of less than £50,000. The scheme will be open for an initial three months; individuals can make their first claim by the beginning of June 2020.
In order to be eligible, an applicant must:
- be self-employed or a member of a partnership;
- have lost trading profits due to COVID-19;
- file a tax return for 2018-19 as self-employed (those who have not yet filed for 2018-19 will have an additional 4 weeks from the date of the announcement to do so); and
- have traded in 2019-20; be currently trading at the point of application (or would be except for COVID 19); and intend to continue to trade in the tax year 2020 to 2021.
11. Income tax deferral
Those individuals due to make a payment on account of income tax in July 2020 may defer the payment to January 2021 without interest or penalties.
12. Mortgage Holidays
The UK's Chancellor of the Exchequer has announced an agreement with mortgage lenders that they will offer a three month mortgage holiday for borrowers in financial difficulty due to coronavirus. Payment holidays will be available to all customers who are up to date on their mortgage payments.
Payment holidays will also be available to all Buy-to-Let landlords whose tenants have lost income because of the impact of COVID-19. Landlords are expected to pass on this relief to their tenants. Mortgage borrowers will still owe the money where a payment holiday has been granted and interest will still accrue.
13. Companies House
Companies House has announced that it will allow companies affected by COVID-19 to apply for an automatic and immediate 3-month extension for submitting their accounts. Applicants will need to provide information for their inability to file timely.
Most commercial insurance policies are unlikely to cover pandemics or unspecified notifiable diseases, such as COVID-19. However, those businesses that have an insurance policy covering government-ordered closure and pandemics or government-ordered closure and unspecified notifiable disease should be able to make a claim (subject to the terms and conditions of their policy).
The UK government does, however, advise that insurance policies differ significantly, and businesses are encouraged to check the terms and conditions of their specific policies and contact their providers.
© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.