Spring Budget Update #2 - Covid Summary

Further to yesterday’s Budget update focussing on taxation, the following is the second instalment covering the key Covid support elements of the Chancellor’s announcements last week.

Job Retention (Furlough) Scheme

As was widely expected (and indeed reported pre-Budget!), the furlough scheme is to be extended to finish at the end of September 2021.

For employees there will be no change to the amount they are entitled to receive for the entire period (being 80% of relevant earnings).

For employers however, similar to the policy back in mid-2020, the amounts the government will contribute towards that 80% will decrease over the final months as follows:

• Between now and the end of June 2021 the government contribution rate will remain fixed at the current rate of 80%
• From the start of July 2021 this will decrease to 70% (requiring a business contribution of 10%)
• From the start of August to the end of September 2021 this will decrease further to 60% (requiring a business contribution of 20%)

For furlough claims from 1 May 2021 onwards the employee must have been on the payroll on or before 2 March 2021 and there must have been an RTI submission to HMRC notifying a payment of earnings between 20 March 2020 and 2 March 2021.

Self Employment Income Support Scheme (SEISS)

A further much-anticipated announcement was the extension of the SEISS to include a fifth and final grant in addition to the fourth as already outlined pre-Budget.

SEISS 4

The previously-announced fourth grant scheme (covering Feb – Apr 2021) is set to remain and cover 80% of a 3-month profit average capped at £7,500, but will now incorporate the 19/20 tax year in its calculation.

The application date has not been confirmed but is expected to be in late April and remain open until late May.

SEISS 5

What is intended to be the final iteration of the scheme, the fifth grant will cover the months of May to September 2021.

Despite remaining consistent in using 3-month average profits to cover the five-month period, this final grant will vary from previous versions in that it will include a restriction based on the impact of Coronavirus on turnover.

For those whose turnover has fallen by more than 30% the rate of grant on the 3-month average profit amount will remain at 80%, capped at £7,500.

For those whose turnover has fallen by less than 30% the rate of grant on the 3-month average profit amount will fall to 30%, capped at £2,850.

No details have yet been released as to how the turnover restriction will be calculated or when the application process will begin, but is expected to be in late July.

Eligibility

Eligibility for fourth and fifth SEISS schemes is dependent on the 19/20 self assessment tax return having been filed with HMRC by 2 March 2021.

Restart Grants

Announced as a means to ‘tide businesses over’ until they can recommence trading over the coming months, Restart Grants are (under current plans) the final instalments of the ‘council-led’ grants available for businesses in the non-essential retail, leisure and hospitality industries required to close or scale down as a result of Coronavirus restrictions.

The grant available depends on the type of business and the premises it operates from:

Non-Essential Retail

Non-essential retail businesses (i.e. those currently planned to reopen from 12 April) will be entitled to grants of up to £6,000 per premises.

Leisure and Hospitality

Leisure and hospitality businesses (i.e. those currently planned to reopen from 17 May) will be entitled to grants of up to £18,000 per premises.

The maximum available depends on the rateable value of the premises:

• Those with rateable value up to £15,000 can claim up to £8,000
• Those with rateable value between £15,000 and £51,000 can claim up to £12,000
• Those with rateable value in excess of £51,000 can claim up to £18,000

In both cases the grants will be administrated by local authorities – the government have advised the funds will be allocated to the councils in April so the hope is that the distribution to businesses will happen shortly after.

Please check the website of your respective council for announcements on timings and processes.    

Recovery Loan Scheme

With the cessation of the Bounce Back and CBILS loan schemes remaining on course for 31 March 2021, a new ‘Recovery Loan’ scheme is due to launch on 6 April 2021.

Businesses will be entitled to apply for loans or overdrafts of between £25,000 and £10m (or between £1,000 and £10m for invoice or asset finance facilities) until the end of 2021 under the scheme.

Most of the major banks are signed up to the scheme under which the government guarantees 80% of finance provided for terms of up to six years (for loans and asset finance) or three years (for overdrafts and invoice finance).

Personal guarantees may be required on facilities in excess of £250k, however a borrower’s principal private residence cannot be included in any security given.

All UK trading businesses impacted by Coronavirus will be entitled to apply but must show they are viable or would have been had it not been for the pandemic.

Those who have previously received Bounce Back or CBILS finance are entitled to apply, but this will likely be considered by lenders when assessing borrowing levels and/or viability on application.

Business Rates

The current 100% business rates holiday for eligible businesses (i.e. those in the retail, leisure and hospitality sectors) for the 20/21 year has been extended to the end of June 2021.

For the remainder of the 21/22 year to 31 March 2022 business rates for eligible businesses will be discounted by two thirds (up to a value of £2m).

If you have any questions regarding this or anything else please get in touch, and for regular updates, announcements and news please check our website (www.dsaprospect.co.uk) and make sure you’re following our LinkedIn page: https://www.linkedin.com/company/dsa-prospect-ltd