Essential Financial Help for Small Businesses Amid COVID-19

Government Help for businesses during coronavirus outbreak

The UK Government has announced an array of support schemes to help businesses struggling to operate during the coronavirus outbreak.

Here, Christina Nawrocki, Managing Partner at Wellers, one of the UK’s leading accountancy firms, discusses the range financial assistance available to businesses affected by COVID-19.

We are living in an unprecedented time.

Never before has the Government offered a war chest so large to help SME businesses. As the UK implements a lockdown unlike anything we have seen before, the promise of financial help is a welcome relief for many.

That being said, there are a number of ways that this assistance is being made available, so it is critical that business owners fully understand what is on offer in order to take the right course of action.

Loan guarantees

The government will provide loan guarantees up to “an initial” £330 billion for all sizes of businesses.

The Coronavirus Business Interruption Loan Scheme will see no interest due for the first twelve months and lender-levied fees will be covered. The scheme will be delivered through commercial lenders, backed by the British Business Bank.

Eligible SMEs must be UK-based with turnover of not more than £45 million and meet other British Business Bank eligibility criteria.

Support for the self employed

The package unveiled by the Chancellor, Self-employment Income Support Scheme, works whereby grants of 80% of historical income up to £2,500 a month will be issued to those in the self-assessment system with self-employment income below £50,000.

To qualify for this grant over 50% of your income has to be from self employment. The grant is calculated based on the average of your income declared in your last 3 tax returns. If you haven’t filed 3 years worth of tax returns the grant will be calculated based on what you have submitted in that timeframe.

The newly self employed are unlikely to have submitted a tax return, meaning this support won’t be available to them. Other groups of self enployed people also fail to qualify for the Self Employment Income Support Scheme. leading to calls for the scheme to be amended.

It’s unlikely the scheme will be in place before June.

Deferral of VAT payments

The Government has already shown its support to UK businesses by deferring all VAT payments for three months. This came into effect on 20th March and will run until 30th June. What’s more, there is nothing that business owners need to do in order to benefit from this, they just don’t make their VAT payments during this period.

Instead, enterprises have until the end of the 2020/21 tax year (next April) to fulfil any outstanding payments. Any VAT refunds will then be settled by the Government, as they usually would be.

Business rates holiday

All organisations that operate within the retail, leisure, and hospitality sectors can benefit from a business rate vacation, so long as the ratable value is less than £51,000. Unlike the VAT deferral, this scheme is applicable for 12 months, so that it can provide further support in the months after the UK returns to ‘business as usual’, helping those businesses experiencing a knock-on effect from coronavirus.

In addition, pubs will receive an increased discount of £1,000 to £5,000 if their ratable value is less than £100,000. However, it is worth noting that this only applies to those in England.

Support for those that do not pay business rates

During his first Budget, Chancellor, Rishi Sunak set up a Small Business Grant Scheme to support small businesses that pay little, or zero, in business rates. He later increased the level of funding due to the impact of COVID-19. This means those that gain from small business rate relief (SBBR), rural rate relief (RRR), or tapered relief can benefit.

This funding will come from local authorities, rather than central government, in the form of a one-off payment of £10,000 to help firms meet on-going commitments.

Like with the other schemes available, enterprises do not need to apply for this relief. However, it is only available to those in England and they must already benefit from business rate relief and occupy a property.

The retail and hospitality grant scheme

Interest free cash grants of up to £25,000 have been made available to businesses operating in the retail, leisure, and hospitality sectors, called the Retail and Hospitality Grant Scheme.

To claim the full £25,000, businesses must have a ratable value between £15,000 and £51,000. For those that have a ratable value below £15,000, a cash grant of £10,000 is being offered.

IR35 delay

Changes to IR35 off-payroll working regulations were due to come into effect this April to change the way that private companies work with contractors and freelancers, so they can no longer avoid higher tax bills.

In the wake of COVID-19, these planned changes have been deferred by a year. So, for any businesses that rely on working with contractors and freelancers, there will be a delay in the tax repercussions.

80 percent contribution towards employees pay

Payroll is likely to be the biggest outgoing for most businesses, no matter the sector in which it operates.

In these turbulent times, the thought of being able to pay staff whilst the business is not functioning can be daunting, especially for small companies. To help with this, the Government is footing the bill for up to 80 percent of workers’ wages, up to £2,500 a month per employee, to keep people employed even if they aren’t able to work.

Known as The Coronavirus Job Retention Scheme, all employers are eligible, and payments will be backdated to 1st March, but HM Revenue & Customs needs to be contacted in order to make a claim.

Whatever your unique situation, there is support out there to mitigate the impact that COVID-19 is having on the economy. If you are unsure about the future of your business or need additional support to make financial decisions, make sure you speak to your accountant.

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