23 Mar COVID-19: Financial Support for Businesses
As part of an ‘unprecedented’ business bailout package worth £350 billion, Chancellor of the Exchequer Rishi Sunak has announced that additional support will be introduced to pay up to 80% of the wages for employees who are not currently working but are being kept on the payroll of their employer to prevent more redundancies and lay-offs.
The scheme will provide income coverage for employees up to a maximum of 80%, with the payments being capped at £2,500 which reflects a small step above the median income for the country.
In addition to the support budget being allocated, the Government has also announced it will defer the next quarter of VAT payments, which it says will be around £30 billion being injected back into the economy and assist companies to better equip themselves to stay afloat amid the COVID-19 crisis.
Those who are currently out of work and relying on state benefits will also receive a boost, with the universal and tax credits value being increased by £1,000 per year to try and provide an extra level of safety for the estimated 700,000 people across the UK who have already lost their job.
The intricate detail of how companies can claim the employee income relief has yet to be released, however, the Government has stated that the payments will be based on gross pay and are to be backdated to the start of March. The scheme is being run and operated by HMRC and will be available and running ‘within the next few weeks’ – for a minimum period of three months (subject to possible extension if necessary).
For those who have already lost their jobs through this current health situation – the Government is urging businesses to bring those individuals back into the workforce and grant them a leave of absence instead, meaning they would be eligible for the wage support scheme.
Other key support measures in place for businesses as part of the overall £350 billion package includes:
- Interest-free cash grants to small businesses
- Self-assessment income tax payments for July 2020 being deferred for 6 months
As with all at the moment, the measures being introduced are new and untested, so how the small business grants or extra income support can be claimed still remains to be seen but the early indication is that the payments will begin at the end of next month. Extra business support packages available will include;
- £10,000 for all businesses in receipt of small business rate relief or rural rate relief
- Grant funding of £25,000 for retail, hospitality and leisure businesses with property rateable value between £15,000 and £51,000
- Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
- A new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
In order to access the income support scheme, businesses will have to designate affected employees as ‘furloughed workers’ and notify the relevant employees of this change. They will also be required to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. (HMRC will release further detail on in the coming weeks)
With the measures taken to reduce the spread of the virus, including the closure of retail and hospitality businesses such as restaurants, bars, cafes and cinemas, the income support package will be especially relevant to those individuals that are now unable to work as a direct result of the Government’s advice.
The one thing that the new financial support package does not include, for the time being, is a direct cash injection into the support of the self-employed (outside of the self-assessment relief). You can find more information on the Government’s dedicated Business Support Page
This is, of course, an everchanging situation and with each day comes new information. We will, as always, continue to update you as and when required in line with the UK Government advice and information release, but should you have any questions or concerns, please don’t hesitate to get in touch and we’ll do our best to assist where possible.