COVID-19 – an update for businesses

24th April 2020

As Spring arrives, we have now been in lockdown for over four weeks and are all getting used to living with the restrictions and adapting to different ways of working and using technology, both for business and social purposes. We have spoken with many of our clients about the issues that they are facing in managing cash flow and planning for the future, and have spent a lot of time researching the help available from the Government and in particular understanding the specific details of each new measure. We have shared below some of the main developments over the past month.

Coronavirus Job Retention Scheme (CJRS)

When the CJRS was first announced, there were a lot of unanswered questions. The good news is that many of these have now been answered. However, there are still some areas of uncertainty which means that employers are going to have to do their best to calculate the amount to claim and wait to see whether HMRC question their calculations later.

The online portal for making claims went live on 20 April and over 185,000 businesses made claims on the first day with an estimated 1.3 million people being furloughed.

Two welcome announcements were the extension of the furlough scheme for another month to 30 June 2020 and a relaxation in the criteria for eligible employees.

Under the final scheme rules, an employee is eligible if they were employed as at 19 March 2020 and had been included on a PAYE payroll RTI submission by that date. For employees that were on the payroll at 28 February and were made redundant between then and 19 March, they can be re-employed and then furloughed.

If you have questions on the CJRS or would like us to help with your claim, please let us know.

Self-employed Income Support Scheme (SEISS)

After what seemed to many a long wait, the Government announced the SEISS to help self-employed individuals and members of partnerships.

The SEISS has some similarities to the CJRS as it offers support based on 80% of a person’s typical trading profits (averaged over three years to 2018/19), capped at £2,500 per month for three months, although there are also a number of differences.

The scheme is only open to those who started self-employment before 6 April 2019 so those who recently set up their own business will not be eligible. HMRC will review existing information provided in tax returns to check whether an individual is eligible and will invite such individuals to apply online, from mid-May. People should not contact HMRC but should wait to be invited. The online claim portal should be available from early June.

The payment will be made as one lump sum in June to cover the three months of the scheme and will be taxable.

The scheme will apply to self-employed individuals or members of trading partnerships earning less than £50,000 of trading income per annum, whose self-employment income is greater than half their total income. This test can either be met based on the 2018/19 tax return or based on an average of 2016/17, 2017/18 and 2018/19.

To be eligible, an individual must:

  • have submitted a 2018/19 self-assessment tax return;
  • have traded in 2019/20;
  • intend to continue to trade in 2020/21; and
  • have lost trading or partnership trading profits due to COVID-19. Anyone claiming will need to make a declaration that this is the case.

In contrast to the CJRS, those claiming under the SEISS can continue to work.

HMRC has now published further guidance on the SEISS which covers the treatment of losses and a clarification of how income is calculated for the purpose of meeting the relevant criteria.

Limited companies

For those who carry out their business through a limited company, paying themselves a mixture of salary and dividends, the above measures may provide little help.

A director may be furloughed and claim under the CJRS but the amount claimable is likely to be low as it will be restricted by the level of previous salary. Also, if claiming under the CJRS, a director would not be able to continue to work in the business, other than carrying out their statutory duties as a director. This means they cannot carry out any revenue generating activities.

Such company owners may consider themselves to be self-employed but will not be able to benefit from the SEISS. Currently, the Government does not seem to have any plans to help such people although many are lobbying for them to reconsider.

Coronavirus Business Interruption Loan Scheme (CBILS)

After a rocky start, where businesses struggled to access loans through the CBILS, there have been some welcome changes to the scheme. Approvals of applications have increased from 21% to 46% and more than £2.8 billion has now been lent to SMEs by 48 accredited lenders.

It has now been clarified that no personal guarantees will be required for facilities below £250,000, and for facilities above this amount any personal guarantees are capped at 20% of the outstanding balance. Also, interest and fees on the loans will be paid by the Government for the first 12 months.

It is important to get your CBILS application right as a strong application will greatly increase your chances of success. Based on our experience to date of assisting clients with applications, banks are asking for 3 years of accounts and up to date detailed management accounts information. If you might need to apply for a loan, it is worth getting this in order now. Cash flow forecasts may be required, although these seem to be less key, probably because the banks know they will largely be guesswork! As you would expect, there will be lots of scrutiny around the viability of the business.

Banks seem to be trying to help and businesses that have a relationship manager are often able to make good progress. However, smaller clients who are “managed” via a central call centre are having to simply follow the application process with less assistance.

How can we help?

If you need help with any of the above or just want to talk through a problem, please let us know.


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