How the UK government is supporting businesses and individuals during this time of the COVID-19 crisis?
Each sector has been affected by the coronavirus pandemic differently, and considering the variation in the impacts and degree, the UK government took many extensive economic measures since March 2020 to mitigate this disruption.
During the first half of 2020, when the 1st wave of COVID-19 struck the UK, the government assured support to businesses through guaranteed loans and self-employed grants. The UK government also announced around £330 billion government-backed financial support during this time of crisis. Bank of England and HM treasury released many schemes to help the businesses financially, in order to discontinue the havoc caused by the corona virus.
Following provisions of ‘The Coronavirus Act 2020’, the UK government has been providing financial aid to UK businesses through various schemes such as:
- Reduction in bank rate to support UK businesses to improve financial conditions.
- ‘Coronavirus Job Retention Scheme’ launched on 5th November 2020 and is now extended until 31st March 2021. This scheme provides UK employers an opportunity to receive government funding to cover up to 80% of employee’s wages capped to £2,500 per month. It covers economic trauma caused by the lockdown in the UK. All the charities, businesses, agencies, and employees affected by COVID-19 having ‘PAYE’ payroll and UK bank account are eligible to apply through this scheme. The organization does not need to be necessarily incorporated in the UK and there is no restriction on the job-type of the employee. Any employee whether hired on a contract, full-time, or part-time basis is eligible to apply.
HMRC announced the publication of the list of employee names and company numbers claiming through the CJRC scheme after December 2020, with certain exceptions.
- Coronavirus Package for Innovative Businesses was introduced to reduce the impact of crises on innovative businesses. The Chancellor announced the amount of £1.25 billion COVID support package for the businesses contributing to research and development. It included ‘Future Fund’ and ‘R&D and loan fund for SME’.
- Future Fund provides a fund from £125,000 to £5 million from British Business Bank to the UK based high-growth businesses. To be eligible for the scheme, business must be registered and incorporated in the UK and must have raised at least £250,000 in the last five years. The loan provided will be for 39 months maximum with an interest rate of around 8% minimum.
- R&D and loan fund for SME provides loans and around £750 grants for small businesses working on research and development, via UK’s grants and loan scheme. Support of around £175,000 will be offered to around 1,200 firms in the UK.
- Winter Economic Plan launched on 24 September 2020 by the Chancellor. It inculcates further measures of UK business support. Schemes part of ‘Winter Economic Plan’ are:
- ‘Job Support Scheme’ (JSS) included two salary schemes i.e JSS Open and JSS Close for the businesses that are facing loss due to lockdown. JSS Open is for viable jobs where the business is open and employees are working for at least 20% of working hours. Via JSS open 61.67% of non-workable hours can be claimed. The cap on the amount is placed on £1547.70 per month. Employees will be paid for the workable hours in the usual manner. JSS Closed is for the businesses which are facing complete closure due to COVID restrictions. The business which cannot operate due to COVID will be paid 2/3rd of the employee’s pay. Cap is placed on £2,100 per month.
- VAT Support Scheme allows you to pay your deferred VAT in installments without interest. For this scheme, you need to have deferred VAT to pay, and you must opt-in for it by the end of March 2021.
- Business loan Schemes repayment changes were announced by the Chancellor. It includes changes in:
- Bounce Back Loans: It provides businesses with an easy and flexible repayment system, extending the maximum repayment period from 6-10 years.
- Coronavirus Business Interruption Loans: The government guarantee 6-10 years of extended loans.
- Enhanced Time to Pay for Self-Assessment Taxpayers: Due to COVID-19 HMRC announced that taxpayers can opt for deferring the second self-assessment payment. HMRC will not impose interest and penalties on the deferred payment, paid before the extended deadline of January 31, 2020.
- Self Employed Income Support Scheme (SEISS): This scheme was designed for self-employed individuals who are affected by the crises. Through this scheme, eligible self-employed individuals will be given 80% of their average monthly income. The government increased the limit of the amount in each round. To claim via SEISS, claimants are required to provide information regarding the effect of COVID on their business.
According to the announcement for the third round i.e November 1, 2020, to January 31, 2021, the grant of up to £30,000 of self-assessment liabilities can be claimed. The last date to apply is January 29, 2021. The Cap of the fourth round is yet to be announced. All the details regarding eligibility and claim through SEISS will be provided by HMRC.
In December 2020, the government announced more provisions regarding its support for UK businesses:
- Extension of ‘Coronavirus Job Retention Scheme’ to 30th April 2021
- Extension of government-backed loan schemes to 31st March 2021. It includes:
- Bounce Back Loan Scheme(BBLS)
- Coronavirus Business Interruption Loan Scheme (CBILS)
It was launched on 11 March 2020 to provide temporary loans from the British Business Bank to support the UK based SME’s. The maximum loan provided will be £5 million and the borrower will be 100% liable for the debt. Over 100 lenders provide loans based on eligibility determined by the application. The extension of the scheme was announced by the Chancellor on 17th December 2020. It has been expanded with certain changes in its eligibility criteria and features.
- Coronavirus Large Business Interruption Loan Scheme (CLBILS)
This scheme provides a loan to medium or large UK businesses with a turnover of more than £45 million per year and now are facing disruption due to global pandemic. After the announcement made by HM treasury maximum amount is increased from £50 million to £200 million.
The finances through CBILS or CLBILS will be provided in the form of term loans. Invoice finance, asset finance, and an overdraft. In both cases, the borrower will remain 100% liable for the debt. It is advised to submit a request for CBILS and CLBILS before 31 January 2021.
- COVID Corporate Financing Facility (CCFF)
This allows large firms to contribute to the UK economy by buying commercial paper for up to one year, it will help the firms to mitigate the disruption caused in cash flows due to COVID. Previously issued commercial papers are not required to participate in CCFF. It aims to relieve the pressure of cash flow on the firms.
- The extension of the mortgage payment holiday scheme was also announced. According to this scheme, mortgage lenders would offer 3 months mortgage payment holiday to provide financial aid to those who are under the impact of COVID crises.
- An increase in Self Employed Income Support Scheme (SEISS) was also announced.
All these steps and schemes helped businesses in improving their cash flow and reduced pressure on them. The UK government has been supporting since the 1st wave of COVID and now when another lockdown has been announced in 2021, the UK government is still actively playing its positive role to help the business and employees.
The detailed document covering eligibility criteria, requirements, and all concerns is released by the government, and is available on the UK government website.