Coronavirus Business Interruption Loan Scheme
Relaxation to the rules for qualification for the CBILs were announced today.
There have been widespread reports that the CBILS has not been providing the level of financial support that the Government had promised. There is a potential £330bn of 80% Government guaranteed loans being made available to companies with turnovers below £45m (now increased to £500m), and apparently over 135,000 businesses have applied, while less than 2,000 advances have been approved for a total of £145m. The Government has been persuaded that the reason for the lack of response from the banks has been due in part to the requirement that was originally included in the rules that banks should only advance money to businesses that would not have passed their normal lending criteria without the Government guarantee (i.e. because they could already provide sufficient security). Therefore they have removed this rule so that banks can consider applications from a wider range of businesses.
The removal of the requirement for personal guarantees for loans under £250k has been included in the highlighted relaxations, but this is not a new development, having been brought in earlier this week.
These are welcome relaxations, but it by no means opens the doors for a “free for all”. The banks will still need evidence that the underlying business is viable and only needs the funds because of a requirement to cover a cash flow deficit caused by Coronavirus related problems. They will be aware of previous profitability and will want to see considered forecasts demonstrating this requirement so we would recommend taking care to prepare your application to make the bank’s positive decision easier to make. And as always, it must be stressed that these are loans, and whilst there will be no up-front lending fees, and no interest or capital to pay for 12 months, the money will have to be repaid at some point, and it must be assumed that normal commercial rates of interest and repayment will then apply.
Job Retention Scheme (JRS)
The guidance on the JRS has been updated on 4 April, with a few clarifications included. The main ones are as follows.
- There is a substantial section included covering “Eligible individuals who are not employees”. This includes “office holders (including company directors)” but offers little comfort to director/shareholders. Its purpose seems to be to formalise the much-touted (but until now not formally announced) ability of directors to be furloughed (but still for their salary only, not dividends) for as long as they only do what is necessary to fulfil their statutory duties. This is described as “no more than would reasonably be judged necessary for that purpose”, and specifically not anything to “generate commercial revenue or provide services to or on behalf of their company”. I would hope that this would include activities to help keep the company going like maintaining the company’s financial health and trying to keep customers on board, even if they are not placing orders. This is clearly going to be a subjective test and one would hope that it will be interpreted generously by HMRC, should they come to check the claim. The guidance sets out the documentary evidence that will be required to support these claims, which mostly involves directors documenting their own decisions and writing to themselves to confirm them. It is starting to look as if the prospect for dividends to be included in the JRS is fading fast. Perhaps support may be forthcoming from amendment to the Self-employed Income Support Scheme, or possibly a new scheme……..one can only hope. The guidance also confirms that the furloughing rules set out above will apply to personal service companies and workers employed by an umbrella company, although in the latter case it will be up to the umbrella company and worker to agree that the worker should be furloughed. There is more guidance on how the National Minimum Wage (NMW) needs to be taken into account under the JRS. This makes it clear that employees can be paid less than the NMW if 80% of their wage falls below that limit. However if they are being asked to continue with their training (this is particularly applicable to apprentices), that element of their time must be paid at the legally-proscribed level or above.
- Where an employee has made a salary sacrifice (this is often used to accommodate an employer pension contribution), the amount to be taken into account is the reduced pay, after the sacrifice. However, the guidance states that it will be possible to change the arrangement and give up the sacrifice so that the eligible pay is uplifted to the full amount. It is also confirmed that taxable benefits in kind (such as company cars and medical insurance or gym membership) will not be taken into account in calculating the 80%.
- There is a lifeline for those who were in between jobs after 28 February and therefore do not qualify for furloughing by either their new or old employer. The guidance states that it will be acceptable for them to be re-employed by their old employer and furloughed by them. This will of course depend on the former employer’s agreement to do so.
- Employees who are on fixed term contracts can be furloughed, and if their contracts end during the furlough period it will be possible to extend them and continue the furlough.
Small Business Grant Fund (SBGF) and Retail, Hospitality and Leisure Grant Fund (RHLG)
We are hearing that these grants of either £10,000 or £25,000 are starting to be paid to eligible businesses by their local authorities. The way in which this is being managed is different depending on which area your business is in. Brighton and Hove Council update their FAQs regularly, and they have said that they will not be posting details or forms to businesses as they are likely to be closed. The website address is:
The website says that where the B&HCC needs further information to enable it to pay the grant, businesses will be able to provide this through a portal which the council is in the process of setting up, so you need to keep an eye on the website.
There is insufficient space here to cover all of the local authorities in the area so we would suggest that businesses who think they are eligible for grants should visit their council’s website to find out how it is dealing with the scheme and whether any action needs to be taken. If you have not visited your business premises recently, and have not heard anything about a potential grant, we would suggest that you should go in to check the post!
Coast to Capital Grants
These grants, which we highlighted in our last bulletin, have been paused as at April 2nd.
Statutory Sick Pay (SSP) Refunds
We have previously mentioned the refunds that are available for SSP payments made to sick or self-isolating employees for the first two weeks of their absence, a scheme announced by Mr Sunak in the Budget. This benefit is quite small compared to that available under the Job Retention Scheme (JRS), but nevertheless could be a valuable source of funds. Unfortunately, like the JRS, the system for making claims is not yet available – HMRC are working on it, but have not given any indication of timescale. Hopefully this will be available before the end of April (the latest estimate for the JRS). In the meantime, details of the scheme, including who qualifies and what information needs to be gathered and retained, is on the HMRC website at:
Missing “Safety Nets”
There has been a lot of momentum gathering around the problems being faced by those people who have not been provided with the “safety nets” afforded by the Job Retention Scheme (JRS) and the Self-employed Income Support Scheme (SEISS). The headline groups involved are director/shareholders who receive most of their pay through dividends, the newly self-employed and persons who were in between jobs after 28 February – and there are others. Commentary at the moment tends to stress the difficulty of rushing out rules which provide the necessary cover whilst securing as much protection as possible from fraudulent behaviour (and I am sure that most of you will have come across non-anecdotal evidence of this already going on). However, it is to be hoped that the Government will take notice of the “forgotten ones” and in the pursuit of fairness, provide the same level of support to them that the majority of the population is receiving.
(Date: 4 April 2020)
Author; Peter Hedgethorne, Director