Business support for SMEs during COVID-19

The UK’s Prime Minister, Boris Johnson, has ordered households and non-essential businesses across the country into lockdown due to the COVID-19 coronavirus pandemic causing a national state of emergency. The economy is experiencing a steep decline in trade as all non-essential businesses have been ordered to temporarily “shut shop” and, where possible, people are instructed to work from home. The lockdown is undoubtably causing major concern and worry for many small companies that have less in cash reserves.

Some larger businesses who were already suffering financial troubles are now entering into losses. Laura Ashley is an example of this when they fell into administration during the initial onset of COVID-19 in the UK.

Provisional measures to alleviate cash flow pressure

Chancellor of the Exchequer, Rishi Sunak, announced an emergency support package to aid small to medium enterprises (SMEs) and help the self-employed workforce stay afloat. The announcement of this package was the result of severe pressure from professional industry bodies and SMEs. As a result of the unprecedented and alarming reduction in retail footfall, less consumer spending, the implementation of skeleton workforces, a strained import and export system, the COVID-19 virus is set to destroy customer bases and terminate livelihoods. This bleak outlook has already been illustrated by the weakening state of the economy.
Below is an overview of the latest coronavirus business support available to SMEs:

Deferred Taxes

The Chancellor has announced a deferral on taxes to alleviate the pressure on businesses preparing their financial documents and reserving a substantial amount of their finances towards their self-assessment payments. This deferral will hopefully allow some respite for businesses experiencing financial troubles.

The 2nd self-assessment payment on accounts has been deferred to January 2021 (originally due in July 2020). The next quarter of VAT payments have also been deferred to the end of June 2020 which can now be paid at the end of the financial year.

Coronavirus Business Interruption Loan Scheme (CBILs)

For small businesses requiring a critical cash injection, an emergency business funding scheme has now launched. This replaces the Enterprise Finance Guarantee Scheme.

Approximately £5m worth of these loans will be interest-free for 12 months. The relief of interest will give businesses the best possible chance of recovery from varying and staggered cash flow and help support during this unprecedented time. The government have guaranteed to back 80% of any lending facility which removes a considerable percentage of the risk away from the banks, in turn increasing their desire to lend.

CBILs offers a varied range of finance products including short and long term loans, asset finance, overdrafts and invoice finance.

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme will allow all UK employers the ability to continue paying a portion of their employees’ wages during the crisis instead of the less favourable option of terminating contracts. The scheme will cover up to 80% of wages for three months or longer if required. This support can be backdated to 1st March for small businesses.

Business Rates

The retail, leisure and hospitality sectors will now be able to benefit from a “business rates holiday” therefore will not be required to pay business rates for the following 12 months. Additionally, a £25,000 cash grant is available for retail, hospitality and leisure businesses in smaller premises and with a Rateable Value below £51,000.

Small Business Rate Relief

The Small Business Rate Relief is a £10,000 cash grant which will benefit around 700,000 eligible small businesses.

Mortgage Holidays

A number of mortgage lenders have agreed to offer a mortgage holiday of at least 3 months for mortgage payers who are struggling due to COVID-19. Commercial tenants cannot be evicted for at least three months due to emergency legislation.

Some measures have also been put into effect for the self-employed, however, industry bodies have criticised the lack of support currently available. The measures currently include:

Universal Credit

The self-employed can now access Universal Credit which is equivalent to Statutory Sick Pay (SSP), currently standing at £94.25 per week.

IR35 reform postponed

The IR35 private sector reform which was due to be implemented in April 2020 has now been postponed to April 2021. This postponement will give medium to large businesses the space and time to focus on business contingency plans as a result of the virus. The reform will mean that the responsibility for determining employment status will be with the end client if the contractor is working on a private-sector contract.

The Chancellor is expected to announce a wider range of business support measures for the self-employed and extend the support for small businesses if the crisis escalates over the coming weeks. Throughout this pandemic, small businesses are strongly advised to take advantage of the temporary measures set out by the government. These measures will ensure that employee retention and business survival is prioritised and at the forefront.

Business Continuity Hub

Stewart Accounting has launched a new Business Continuity Hub which will be continually updated with the latest advice and resources around COVID-19. You can access the hub here: