COVID-19 BRIEFING FOR SME’S ISSUED AT 2300 hrs on 4th NOVEMBER 2020

OVERVIEW

On Saturday 31st October the Prime Minister announced that the Government would be seeking Parliamentary approval for the introduction of a four-week ‘lockdown’ in England, starting at 12.01 am on Thursday 5th November 2020 and ending at 11.59 pm on Wednesday 2nd December. Parliament has now approved this, together with further financial support measures that are detailed in this Bulletin.

don t panic text on tissue paper
Photo by Markus Spiske on Pexels.com

INTRODUCTION

The changes are being introduced in response to the worsening Covid-19 situation and are designed to reduce the spread of the virus, the number of people becoming infected, the rate of hospital admissions and the number of people dying from Covid-19.

The headline measures are:

  • Pubs, restaurants, hospitality venues and non-essential retail outlets must close
  • No mixing of households inside homes permitted
  • People are told to stay home except for ‘essential’ outside visits to places such as food shops and pharmacies
  • Schools, universities, colleges, courts and construction sites will remain open
  • No international travel will be permitted, except for work
  • Elite sport will be allowed to continue but community sports will not
  • The ‘Furlough Scheme’ to be extended throughout November
  • Workplaces will be told to stay open where people can’t work from home, including in construction and manufacturing
  • Support bubbles will remain for people who live alone (but they can only meet others in their bubble outside) as can households made up of single parents and children
  • Children will be able to move between homes if their parents are separated
  • Those deemed vulnerable or aged over 70 will be told to be especially careful in following the rules and minimise contact with others – but shielding measures won’t be reintroduced
  • There won’t be a limit on the time allowed for exercise outdoors and recreation and it’s OK to sit on a park bench or eat and drink outside

For full details of what we can and cannot do please follow this link: Visit the Government website for full national restrictions.

DETAILED FINANCIAL SUPPORT MEASURES

The Coronavirus Job Retention Scheme (CJRS) or ‘Furlough Scheme’

Employers small or large, charitable or not-for-profit are eligible for the extended CJRS, which will now continue throughout November.

Businesses will have the flexibility to bring furloughed employees back to work on a part time basis or furlough them full-time, and will only be asked to cover National Insurance and employer pension contributions which, for the average claim, accounts for just 5% of total employment costs.

Employees will receive 80% of their current salary for hours not worked, up to a maximum of £2,500. There is no minimum number of hours each employee has to work to qualify; those employees that are not working at all will still qualify. Under the extended scheme, the cost for employers of retaining workers will be reduced compared with the scheme that ended on 31st October. Employers will not have to contribute any money to staff salaries but they may choose to add up to 20% if they wish.

The Job Support Scheme (JSS), which was scheduled to come in on Sunday 1st November, has been postponed until the new furlough scheme ends.

Employers that have previously claimed under the CJRS, as well as those now wishing to claim for the first time, will have to follow the eligibility criteria:

Employers

  • All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the CJRS.
  • The Government expects that publicly funded organisations will not use the scheme, as has already been the case for CJRS, but partially publicly funded organisations may be eligible where their private revenues have been disrupted. All other eligibility requirements apply to these employers.

Employees

  • To be eligible to be claimed for under this extension, employees must be on an employer’s PAYE payroll by 11.59 pm on 30th October 2020. This means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made on or before 30th October 2020.

These current rules will continue to apply:

  • Employees can be on any type of contract. Employers will be able to agree any working arrangements with employees.
  • Employers can claim the grant for the hours their employees are not working, calculated by reference to their usual hours worked in a claim period. Such calculations will broadly follow the same methodology as currently under the CJRS.
  • When claiming the CJRS grant for furloughed hours, employers will need to report and claim for a minimum period of 7 consecutive calendar days.
  • Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period.
  • For worked hours, employees will be paid by their employer subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts.
  • All approved grants must be paid to employees in full.

Business Grants

Businesses with premises that are required to close will receive grants worth up to £3,000 per month under the Local Restrictions Support Grant (LRSG). Here are some examples:

  • For properties with a rateable value of £15k or under, grants to be £1,334 per month, or £667 per two weeks;
  • For properties with a rateable value of between £15k-£51k grants to be £2,000 per month, or £1,000 per two weeks;
  • For properties with a rateable value of £51k or over grants to be £3,000 per month, or £1,500 per two weeks.

The Government will give a further £1.1b to Local Authorities, distributed on the basis of £20 per head of population, for one-off discretionary grants to enable viable local businesses to continue.

You should contact your Local Authority to check your eligibility for both the LRSG and the discretionary grant.

Bounce Back Loans (BBL)

More businesses will be able to benefit from Government loan schemes, which have been extended to the end of January 2021. Firms can now ‘top up’ existing Bounce Back Loans (BBL) should they need additional finance. If you have a current BBL under £50,000 and want to borrow a further sum up to this limit you should contact your original BBL lender as soon as possible.

If you have not currently got a BBL you can apply for one immediately:

  • Businesses can borrow between £2,000 and £50,000 with the cash arriving within days
  • Loans will be 100% Government-backed for lenders and businesses can apply online through a short and simple seven-question, one-page form (see link below)

Thousands of small firms and sole traders – including high street staples like hairdressers, coffee shops and florists – will be eligible for 100% government-backed Bounce Back Loans to help them survive in the difficult trading circumstances caused by the Coronavirus outbreak. The Government has also agreed with lenders that an affordable flat rate of 2.5% interest will be charged on these loans.

Any business that has already taken out a Coronavirus Business Interruption Loan of £50,000 or less can apply to have these switched over to this generous new scheme.

Full details, including an application form, can be accessed here: Bounce Back Loan scheme.

Mortgage Holidays

Mortgage payment holidays will no longer end on 31st October. Borrowers who have been impacted by Coronavirus and have not yet had a mortgage payment holiday will be entitled to a six month holiday, whilst those that have already started a mortgage payment holiday will be able to top up to six months without this being recorded on their credit file.

This will mean that:

  • Those who have not yet had a payment deferral will be eligible for 2 payment deferrals of up to 6 months in total
  •  Those who currently have an initial payment deferral will be eligible for another payment deferral of up to 3 months
  • Those who have resumed repayments after an initial payment deferral will be eligible for another payment deferral of up to 3 months

The Financial Conduct Authority (FCA) says that it’s important that borrowers who can afford to make repayments continue to do so. They are urging consumers not to contact their lender until the enhanced measures are in place. Lenders ‘will soon provide further information’, the FCA says. We understand that this information will be available during week commencing 9th November and that lenders will contact borrowers directly to advise them.

Under the FCA’s proposals, borrowers will have until 31st January 2021 to request a payment deferral. A payment deferral under these proposals would not be reported as missed payments on a borrower’s credit file. This does not mean that consumers’ ability to access credit will be unaffected in future, as lenders may take into account a range of information when making lending decisions. The FCA is also proposing that no one will have their home repossessed without their agreement until after 31st January 2021.

Some borrowers would not be eligible for a payment deferral because they:

  • have already had 2 payment deferrals (of up to 6 months in total) and individually tailored support will be more appropriate to their circumstances
  • have already agreed alternative support with their lender – but check to see if any current agreement has an end date and, if so, ask your lender for an extension.

Individually tailored support may be reported on a borrower’s credit file; lenders should inform borrowers where this will be the case but, again, check with your lender to confirm that this will indeed be the case if you have not heard from them by 13th November.

Support for People with Other Forms of Borrowing

The FCA proposes to extend payment deferrals and other support to personal loans, credit cards, motor finance, rent-to-own, buy-now-pay-later and pawn-broking customers who are experiencing payment difficulties because of Coronavirus.

These proposals will mean that:

  • those who have not yet had a payment deferral will be eligible for 2 payment deferrals of up to 6 months in total
  • those who currently have an initial payment deferral will be eligible for a further payment deferral of up to 3 months

High-cost short-term credit (HCSTC) consumers, such as those with payday loans, who have not yet had a payment deferral would be eligible for a payment deferral of 1 month. The FCA says that it’s important that borrowers who can afford to make repayments continue to do so. As with guidance to mortgage borrowers, the FCA is urging consumers not to contact their lender until the enhanced measures are in place. Lenders ‘will soon provide further information’.

Under the FCA’s current proposals borrowers would have until 31st January 2021 to request an initial payment deferral. A payment deferral under FCA proposals would not be reported as missed payments on a borrower’s credit file. This does not mean that consumers’ ability to access credit will be unaffected in future, as lenders may take into account a range of information when making lending decisions.

Consumer credit customers who have already benefitted from 2 payment deferrals (or 1 for HCSTC) and who are still experiencing payment difficulties should speak to their lender who will be able to provide individual tailored support. This also applies to those who have resumed repayments after an initial payment deferral, as they would not be entitled to a further deferral, but should receive individual tailored support if they are experiencing payment difficulties. Individual tailored support may be reported on a borrower’s credit file; lenders should inform borrowers where this will be the case.

Lending firms will also continue to offer individual tailored support to overdraft borrowers, as set out by the FCA in September. This could include:

  • Reducing or waiving interest
  • Agreeing a programme of staged reductions in the overdraft limit
  • Transferring the overdraft debt to an alternative credit product on more favourable terms

Support for Self-Employed People

The Government is increasing its support to the self-employed over the coming months and will ensure that people get paid faster than previously announced.

The key points are:

  • The Government will increase support under the third instalment of the UK-wide Self-Employment Income Support Scheme (SEISS), with people receiving 80% of average trading profits for November
  • Grants will also be paid faster than previously planned – with the claims window opening at the end of November rather than the middle of December
  • The increase means that there will be approximately £4.5 billion of support for the self-employed between November 2020 and January 2021

To reflect the recent changes to the Furlough Scheme (for PAYE employees), the SEISS will be made more generous, with self-employed individuals receiving 80% of their average trading profits for November. To ensure that those who need support get it as soon as possible, payments will also be made more quickly with the claims window being brought forward from 14th December to 30th November.

The changes will ensure that self-employed individuals who temporarily cannot carry out their business or who have suffered reduced demand due to the Coronavirus outbreak are supported over the autumn and winter, with two grants covering the period up to April 2021.

As SEISS grants are calculated over three months, the uplift for November to 80 per cent, along with the 40 per cent level of trading profits for December and January, increases the total level of the third grant to 55 per cent of trading profits. The maximum grant will increase to £5,160. This provides broadly equivalent support to the self-employed as the Government is providing to employees through the Coronavirus Job Retention Scheme (CJRS) in November and then the Job Support Scheme in the two subsequent months.

To be eligible for the Grant Extension self-employed individuals, including members of partnerships, must:

  • have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants)
  • declare that they intend to continue to trade and either:
    • are currently actively trading but are impacted by reduced demand due to Coronavirus
    • were previously trading but are temporarily unable to do so due to Coronavirus

In addition, more businesses will be able to access additional support as deadlines for applications for Government-backed loan schemes and the Future Fund (future-fund) have been further extended until 31st January 2021.

The Government and HMRC will publish further details on how to claim on 30th November.

You will be able to access these details on either the gov.uk or HMRC websites.

We will issue further advice and guidance Bulletins as the Covid-19 situation develops.

Henry Boyle

2300 hrs 4th November

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