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What COVID-19 business support is available to SMEs?

As the country enters into a national state of emergency due to the coronavirus pandemic, households and non-essential businesses have been ordered into lockdown following the enforcement of a stay-at-home order relayed by Prime Minister, Boris Johnson. As businesses are ordered to temporarily close shop and workers are instructed to work from home where reasonably possible, the economy is experiencing a downward spiral in trade, raising the red light for many smaller enterprises with less in cash reserves.

What COVID-19 business support is available to SMEs?

Larger businesses already on the brink of financial difficulty are tipping into the red, such as Laura Ashley which entered into administration during the onset of COVID-19, writes Keith Tully of Real Business Rescue.

Temporary measures to alleviate cash flow strain

Following intense pressure from professional industry bodies and small-to-medium enterprises (SMEs), Chancellor Rishi Sunak announced an emergency support package to help SMEs and the self-employed workforce stay afloat. Due to the alarming fall in retail footfall, weaker consumer spending, a strained import/export system and the implementation of skeleton workforces, the virus is on course to terminating livelihoods and eliminating customer bases, as already illustrated by the deteriorating state of the economy.

Here is a round-up of the latest COVID-19 business support that is available to SMEs:

Deferred Taxes

To ease the pressure off businesses in preparing their financial documents and setting aside a significant portion of their funds towards their self-assessment payments, the Chancellor has announced a deferral, granting some breathing space for businesses under financial difficulty.  

The 2nd self-assessment payment on accounts originally due in July 2020 has been deferred to January 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)

An emergency business funding scheme has now launched for small businesses in need of an urgent cash injection, replacing the Enterprise Finance Guarantee Scheme. Around £5m worth of these loans will be interest-free for 12 months, giving businesses the best chance of recovery from staggering cash flow and support during this unprecedented period. The government have pledged to back 80 per cent of any lending facility which removes a significant percentage of the risk away from the banks, increasing their appetite to lend.

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

Coronavirus Job Retention Scheme

 All UK employers will be able to continue paying a portion of their employees’ salary, rather than terminating employment contracts during this crisis. This scheme will cover up to 80 per cent of wages for three months or longer which can be backdated to 1 March for small businesses in need of this support. This will be available within the next few weeks.

Business Rates

Businesses in the retail, hospitality and leisure sectors will now be able to benefit from a business rates holiday for the next 12 months. A £25,000 cash grant has also been made available for retail, hospitality and leisure businesses in smaller premises and with a Rateable Value below £51,000.

Small Business Rate Relief

Around 700,000 small businesses eligible for the Small Business Rate Relief will benefit from a £10,000 cash grant.

Mortgage Holidays

A selected number of mortgage lenders have agreed to provide a mortgage holiday of at least 3 months for those struggling as a result of coronavirus. Emergency legislation also rules that commercial tenants cannot be evicted for at least three months.

A limited range of measures have also been implemented for the self-employed, however, industry bodies have criticised the lack of support currently available. The measures include:

Universal Credit

The self-employed can now access Universal Credit 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 come into force in April 2020 has now been postponed to April 2021, giving medium to large businesses the headspace to focus on 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 for a medium-to-large business.

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. During this pandemic, small businesses are urged to take advantage of the temporary measures set out by the government, ensuring that business survival and employee retention is at the forefront and prioritised.

More on dealing with the Coronavirus and the latest small business tax rates and allowances.

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