Government support for SMEs, updated


As ministers announce a three-week extension to lockdown in the UK, we look at the current state of the government’s support measures for SMEs during the Covid-19 pandemic

The government has brought in sweeping measures to support individuals and businesses through the coronavirus pandemic. Some support schemes have been expanded and clarified since they were first announced – here, we take a look at what’s now in place for small businesses.

Coronavirus job retention scheme

The chancellor, Rishi Sunak, unveiled the first phase of the government’s job retention scheme on 20 March. He pledged support for those who would otherwise have been laid off as a result of the pandemic, by paying furloughed staff 80% of their existing salary (up to a monthly cap of £2,500). All businesses in the UK are eligible to apply regardless of their size, and there is no limit to the number of staff that a business can furlough.  

When it was first announced, the scheme only covered staff who were employed on 28 February. After the most recent review of its measures the government has extended that deadline, and now anyone who was on the payroll on 19 March can access the service. This will support an estimated 200,000 more people.

HMRC has promised to make wages for furloughed workers available by the end of April. After calls from business leaders to extend the length of the furlough scheme, the chancellor announced on 17 April that the scheme would be carried through to the end of June. It was originally planned to last until the end of May.

Coronavirus Business Interruption Loan Scheme (CBILS)

Unlike the job retention scheme, CBILS is designed just for small and medium-sized businesses. It provides support for these businesses to access loans, overdrafts, invoice finance and asset finance of up to £5m for up to six years. Its remit was also expanded after reviews – CBILS can now support lending to smaller businesses even where a lender considers them to have sufficient security, which means that more businesses are eligible for support.

A business is viable for the loan scheme if it meets three criteria. It must be based in the UK, have a turnover of up to £45m, and have a borrowing proposal which the lender would consider viable if not for the pandemic. (It’s important to note that the borrower remains fully liable for the debt). Commercial lenders deliver the scheme, backed by the British Business Bank, and the government provides lenders with an 80% guarantee on each loan.

The government will also cover the first 12 months of interest payments, and lender-levied fees through a Business Interruption Payment. The aim is for smaller businesses to avoid having to pay upfront costs, and to have lower initial repayments.

Support for the self-employed

The chancellor added measures to help the self-employed on 26 March, after calls for the original support scheme to be expanded. Self-employed people will now be able to receive up to £2,500 per month for three months in a taxable grant.

Eligibility depends on having submitted a self-assessment tax return for 2018-19, as well as having traded in the year 2019-20 and intending to trade in the next financial year. Individuals must be trading when they apply for the scheme (or show that they would be trading, were it not for coronavirus). They must also have lost trading profits because of the pandemic.

The scheme is open to a self-employed individual if their trading profit was less than £50,000 in 2018-19, or if their average trading profit was less than £50,000 from 2016-17, 2017-18, and 2018-19. HMRC says that it will identify eligible taxpayers (using self-assessment tax returns) and contact them directly.

The government has said that individuals will be able to apply for Universal Credit to bridge the gap between receiving their first grant payment. As of 16 April, Universal Credit claimants can now use their existing Government Gateway account to confirm their identity and speed up the claims process.

Claiming back statutory sick pay (SSP)

Although the government has announced a Coronavirus Statutory Sick Pay Rebate Scheme, the online service to access claims is not yet open. Employers will be able to claim back the current rate of SSP that they paid to current or former employees in the period starting on 13 March.

Repayment covers up to two weeks, starting from the first day of sickness. It applies if an employee either has coronavirus or cannot work because they are self-isolating at home. Employees do not need to provide a doctor’s note.

At the moment, this scheme can be used by employers if they had fewer than 250 employees on 28 February. They also need to have had a PAYE payroll scheme started on or before 28 February. There’s no current end date set for this scheme: HMRC will update employers when that changes.

Deferring VAT payments

The government has brought in temporary changes to VAT payments that would have been due between 20 March and 30 June 2020 in an effort to help businesses manage cash flow.

A VAT-registered business in the UK that had payments due between those dates can now defer payment, and will not be charged for interest or penalties on any amount deferred. (The government also points out that these businesses still have the option to pay VAT as normal, and VAT returns still need to be made on time).

If choosing to defer payment, businesses must pay due VAT on or before 31 March 2021. They don’t need to tell HMRC that the payment will be deferred.

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