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Last Updated: 3rd April 2020

The Chancellor has said the government will do “whatever it takes” to help businesses cope with the financial impact of the coronavirus. A number of measures designed to support businesses through the Coronavirus pandemic have since been announced; firstly at the Budget and more recently on the 17th and 20th March. These included a Business Interruption Loan Scheme, cash grants, covering staff wages and delaying tax payments such as business rates, VAT and income tax. 

Here we break down what has been announced for SMEs and how to ensure you obtain the financial support your business is entitled to:

  • What we know so far about the business support measures?
  • What does it mean for businesses?
  • Further measures announced on 17th and 20th March 2020.
  • How and when will businesses be able to access the financial support they are entitled to

Update: 17th March 2020: the government introduced much stronger measures in order to limit the spread of COVID-19. In order to ease cashflow pressures on small and medium businesses, further support packages were announced which build on those originally announced at the budget:

  • Business Interruption Loan scheme would be interest free for 6 months.
  • Cash grants to businesses who claim Small Business Rate Relief and businesses in the retail, hospitality and leisure sectors.
  • Payments of business rates for 2020-21 deferred for one year for all businesses in the retail, hospitality and leisure sector.

Update: 20th March 2020: the government introduced further measures to support SMEs; this time aimed at protecting jobs as well as again easing cash flow pressures:

  • Paying staff wages: firms will be able to apply for a grant under the Coronavirus Job Retention scheme to cover 80% of the wages (up to £2,500 per month) of staff who are unable to work due to the coronavirus shutdowns.
  • VAT Holiday: firms will not pay VAT from now to June and have until the end of the financial year to repay these bills
  • Self assessment holiday: income tax payments due in July 2020 are deferred to January 2021.
  • 12 month interest free loans: the government will cover interest payments for the first 12 months of all loans provided through the Business Interruption Loan scheme originally announced in The Budget. This is an increase from the 6 month interest free period announced on 17th March 2020.

The Business Interruption Loan Scheme


What was originally announced in the Budget?

A Business Interruption Loan scheme for all businesses with a turnover up to £45 million. Businesses can apply for a loan of up to £1.2m with the government covering up to 80% of any losses.

What does this mean?

With the government covering the majority of losses, lenders such as banks and others will be able to accept more loan applications from SMEs. 

Loan applications deemed too risky for lenders to approve without government support, can now be accepted; allowing SMEs to gain access to liquidity and the cash flow they need to keep business operations running smoothly.

What changed in the Chancellor’s latest announcement?

The Business Interruption Loan scheme will now provide loans of up to £5m rather than £1.2m. Additionally, the government will ensure loans are interest free for the first twelve months.

How can businesses apply and access support?

The government announced the scheme will be operating from next week; 23rd March 2020.

Whilst it was originally announced the scheme would be delivered by the British Business Bank, loans will actually be granted via lending partners. These include most high street banks as well as niche lenders. Indeed, the Chancellor announced that businesses will be able to “walk into their local branches” by early next week and request a business interruption loan.

Click here for a full list of lending partners.

Specialised lending options tailored to specific cash flow challenges SMEs face should also be available such as asset finance and invoice finance. 

Cash Grants

What was originally announced in the Budget?

A £3,000 cash grant to 700,000 of the economy’s smallest businesses. 

The grant will apply to businesses who are currently eligible for Small Business Rate Relief (or Rural Rate Relief). 

What does this mean?

Small Business Rate Relief helps businesses who typically only use a single, low valued property. The grants are therefore intended to provide a much needed cash injection to the economy’s smallest businesses who could be most vulnerable financially to the impact of COVID-19.

What changed in the Chancellor’s latest announcement?

Cash grants have been increased from £3,000 to £10,000.

Additionally, the government announced that £25,000 cash grants would be available to businesses in the retail, hospitality and leisure sectors with a rateable value of less than £51,000; therefore providing further support to small businesses who will be directly impacted by Coronovirus restriction measures.

How can businesses apply and access support?

The government has not announced how businesses will be able to claim these grants or a timeline for when they will be made available. 

Given the urgent need small businesses have to access cash to meet ongoing obligations, announcements are expected by the end of the week; 20th March 2020.


Business Rates


What was originally announced in the Budget?

The government announced that businesses in the retail, hospitality and leisure sectors with a rateable value of less than £51,000 will not pay Business Rates for one year.

What does this mean?

Retail, hospitality and leisure businesses will inevitably be some of the worst hit by the coronavirus pandemic. Many of these businesses may have to close but expenses such as rent, staff wages and taxes like VAT, National Insurance and Business Rates will all still need to be paid; creating huge cash flow pressures. 

Abolishing Business Rates therefore reduces the cash flow strain many businesses in such sectors will feel over the coming months.

What changed in the Chancellor’s latest announcement?

The Business Rates holiday will now apply to all businesses in the retail, hospitality and leisure sector irrespective of their rateable value.

How can businesses apply and access support?

Applicable businesses have been instructed to contact their local authority.

Some bills outlining business rates have already been sent to businesses for the coming year. These will need to be corrected and reissued. Councils will try to automatically identify businesses who are eligible and ressiue bills as soon as possible. 

As part of the Budget announcement, the government stated they would provide guidance to local authorities by 20th March 2020. It is therefore recommended that businesses look out for further updates then or try contacting their local authority next week once this guidance has been provided.


Statutory Sick Pay


What was originally announced in the Budget?

The government announced that they would cover Statutory Sick Pay (SSP) for up to two weeks if staff are off work due to the coronavirus. This applies to all businesses with fewer than 250 employees. 

Employers will not need to provide a GP’s note to recover SSP and rules would be updated to cover payments from the first day a staff member is absent.

What does this mean?

Businesses are likely to face significant cash flow challenges over the coming months. Cash inflows from sales are likely to significantly fall, yet fixed costs such as staff expenses still need to be paid.

This will reduce cash flow pressures and ensure employers can protect the health and well-being of their staff.

How can businesses apply and access support?

The government has stated they will work on a repayment mechanism for employers “over the coming months” as existing systems are not designed to allow refunds for SSP.

What changed in the Chancellor’s latest announcement?

Further support for employers was announced on 20th March through the Coronavirus Job Retention Scheme. We would expect the government to accelerate their timeline and implement a repayment mechanism much sooner than what was announced in the Budget.


The Coronavirus Job Retention Scheme

Full details and guidance – see here.

What was announced?

If staff are unable to work due to the coronavirus, the government will pay 80% of the wages (up to £2,500 per month) of retained workers.

What does this mean?

Rather than having to lay off staff, this should help SMEs retain some of their workforce. This will be backdated to cover the cost of wages from March 1st; initially covering a three month period. The Chancellor will extend the scheme for longer if necessary.

The latest interpretations would suggest that the employer would not have to make up the remaining 20% of a ‘furloughed’ employee’s wage which isn’t covered by the government grant and it would be at the discretion of the employer whether to pay 80% or full wages to a furloughed worker.

The government guidance mentions covering “all employment costs, up to a cap of £2,500 per month” which would suggest furloughed worker’s employer’s national insurance and pension contributions would also be covered. Further announcements from the government are expected to clarify whether employers can claim a CJRS grant in respect of an employee’s basic pay or their average take-home pay, which could include other pay items such as commission and bonuses as well.

The scheme would ensure that SMEs are not financially worse off if a worker’s employment status is switched to furloughed for the first £2,500 each month. However, HMRC are unlikely to have the scheme up and running until the end of April and it’s unclear when exactly funds will be released. This could therefore create short term cash flow challenges in which case, businesses may be able to get assistance through the Business Interruption Loan scheme.

What process should I follow? 

Employee’s contracts should first be reviewed for any existing clauses that allow the employer to be laid off if there is a downturn in work. If there is no such clause, express consent from the employee to be furloughed will be required. A written agreement between the employer and employee should be drafted which explain the reasons and circumstances for the change in employee status and explain any other relevant provisions such as whether this is a temporary or permanent switch. 

Employers will then need to submit information on furloughed workers via an online portal which they aim to have setup by the end of April 2020. 

How can businesses apply and access support?

HMRC aim to setup an online portal as a matter of urgency as existing systems are not setup to facilitate payments to employers. No exact timeline was provided but it was announced that the first grants should be paid before the end of April 2020.


Tax Payments: VAT, Self Assessment, Corporation Tax


What was announced?

On 20th March, the government announced that the next quarter of VAT payments will be deferred until the end of the financial year.

For directors and others who file self assessment tax returns every January, any income tax payments due on the 31st July 2020, are now due on the 31st January 2021.

HMRC’s “Time to Pay” is an existing service which allows businesses to contact HMRC and request upcoming tax payments are deferred in order to help solve short term cash flow issues.

The government have announced a dedicated helpline to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus: 0800 0159 559

What does this mean?

Businesses will now have have until 3‌1‌‌ March 2021 to pay any VAT bills due between 20th March 2020 and 30th June 2020. Speak to your accountant to understand the amount of cashflow this could free up.

Those who pay income tax via the self assessment system will typically have to pay their second payment on account (50% of the tax due in 2018-19) on 31st July 2020. The payment extension particularly benefits the cash flow of director-only ‘micro’ businesses such as contractors who operate through limited companies and early stage startups.

The dedicated helpline is presumably designed to ease the pressure on HMRC’s existing ‘Time to Pay’ service and to help businesses who are experiencing difficulties with tax payments other than what’s being covered elsewhere.

The HMRC page states that they will be able to discuss installments arrangements as well as suspending existing debt collections. Reports so far suggest that many businesses have already been able to defer payments in this way with HMRC showing a higher degree of flexibility.

For deferring corporation tax payments or other VAT payments for reasons other than the COVID-19 shutdown, it’s advised you continue to contact HMRC’s ‘Time to Pay’ service. 

How can businesses apply and access support?

Both the VAT and Income Tax deferrals will be automatically applied to a business or individual’s tax account. No application is necessary.

The dedicated helpline to support businesses and self-employed people concerned about making upcoming tax payments due to the coronavirus is 0800 0159 559

Click here for more information about how to apply for HMRC’s Time to Pay scheme

What else do I need to know?

The Chancellor was clear that government support would ensure small and medium businesses could cope with the coronoavirus impact and measures would be announced over time. Businesses should start developing their action plans for COVID-19 with as much clarity over what support they are entitled to and exactly when this will made available.

We therefore expect more to be announced by the government soon.


Need support with your COVID-19 Action Plan?

Concerned about the impact the coronavirus is having on your business? 
Need help understanding what Government Support is available?

Book a free Business Health Check with a Chartered Accountant who will help answer your questions and review what solutions and financial support are available to your business: Book Now

Read our free resource on how to access the Coronavirus Government Support announced for businesses so far: Read Now

Access our free COVID-19 Action Plan to understand what areas of your business you need to review: Download Now

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