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The UK’s new Chancellor, Rishi Sunak, made coronavirus planning the chief focus of his first Budget which was presented to Parliament on 11 March. In a coordinated response with the Bank of England, the Budget included a £12billion emergency fiscal stimulus while interest rates were dropped from 0.75% to 0.25%.
In response to the escalating crisis, on 17 March, the Chancellor then went much further, announcing an unprecedented package of measures to support business through what Boris Johnson has described as the ‘worst public health crisis for a generation’. Taken together, these emergency steps amount to at least £330bn in state loan guarantees and £20bn in fresh tax reliefs and grants.
Whilst public safety is the government’s top priority, the knock-on effects of the pandemic, including absences from work, supply chain interruptions and a reduction in consumer spending will have a significant impact on UK businesses. As such, below is a summary of the financial support measures that have been announced aimed at guiding businesses through the uncertain times ahead:
Changes to statutory sick pay (‘SSP’)
Emergency regulations have been introduced from 13 March which extend SSP, currently paid at a rate of £94.25 per week and rising to £95.85 on 6 April, to anybody eligible under the pre-existing criteria who is self-isolating in accordance with government guidance.
In addition, the government has simultaneously pledged to refund SSP costs to businesses with fewer than 250 employees, as of their February payroll. This measure, which is set to cost the government £2billion, is limited to two weeks’ pay where staff are absent through either self-isolation measures or positive COVID-19 diagnosis.
Business Rates retail discount
Prior to the 2020 Budget, the government had announced that the business rates retail discount would be increased to 50% for 2020-21. However, in the wake of coronavirus, Sunak’s Budget doubled this relief to 100% for businesses with a rateable value of under £51,000 whilst also extending it to the leisure and hospitality sectors. These temporary measures meant that tens of thousands of small businesses would not pay any business rates over the coming year, saving each entitled firm up to £25,000. At his 17 March press conference, the Chancellor acknowledged that businesses in the hospitality, retail and leisure sectors are amongst those likely to be hit hardest by the pandemic, particularly those who are not sufficiently insured against closure. Accordingly, the business rates holiday for 2020-21 has now been extended to every business within these vulnerable industries, irrespective of rateable value.
In addition to the above, the Budget set aside £2.2billion for local authorities to provide a non-refundable grant of £3,000 to the 700,000 small business which already benefit from Small Business Rate Relief or Rural Rate Relief. As of 17 March, these grants have now been increased to £10,000 per business.
In addition, those businesses within the retail, hospitality and leisure sectors with a rateable value of under £51,000 can now benefit from a £25,000 cash grant, in addition to the business rates holiday.
Time to Pay
HMRC has established a dedicated helpline for businesses suffering cash-flow problems stemming from the pandemic, whereby they may be able to agree a bespoke arrangement to defer payment of PAYE, VAT or Corporation Tax for a limited period. In addition, HMRC will also waive late payment penalties where businesses suffer further administrative difficulties owing to COVID-19. HMRC have deployed a further 2,000 call handlers to provide this scheme, which is similar to those previously used in response to issues such as flooding and the 2008 financial crisis.
Coronavirus Business Interruption Loan Scheme
Highlighting the need to support businesses of all sizes, the government has made available an initial £330billion of loans, equating to 15% of the country’s GDP. These government backed loans are to be made available for any business to meet its immediate needs, whether that be to pay rent, salaries, suppliers, or any other expense.
This support will be delivered through two different routes, with the Bank of England buying commercial bonds from the largest firms in Britain, while for SMEs loans will be delivered by the British Business Bank, with loans of up to £5m being made available with no interest due for the first six months.
In what are unprecedented times, the government’s plans and promises to do ‘whatever it takes’ to win the economic battle against coronavirus are clearly welcome and will be vital to many businesses struggling to ride the storm. For further advice, please contact a member of our corporate team