Date updated:

With over 358,000 cases of coronavirus being confirmed to date, the COVID-19 pandemic has left businesses around the world counting costs.

Addressing the issue for UK businesses, Chancellor Rishi Sunak has set out a package of temporary measures to support businesses during this period of disruption.

The Future Fund is now open for applications and will remain so until the end of September 2020

The Fund provides convertible loans from £125,000 to £5,000,000 to UK-based companies provided that the company has at least equal match funding from private investors. The scheme is being administered by the British Business Bank and further details and applications can be made via their website.

Applications are to be made by investors rather than the company concerned and all loans monies to be collated by the company’s facilitating solicitors.

To be eligible a company must:

  • have more than half of its employees based in the UK or have more than half of its revenues from UK sales
  • have been incorporated on or before 31 December 2019
  • attract at least the equivalent match funding from third-party private investors and institutions although there is no maximum that could be raised form private investors. At least £125,000 matched funding must be lined up before making the application
  • have previously raised at least £250,000 in equity investment from third-party investors (not including founders, employees, workers or consultants) in the last 5 years.

Private investors may include non-executive and investment directors (though tax issues may have to be considered on conversion) and must fall within certain categories, for example:

  • investment professionals
  • high net worth companies or associations or trusts
  • certified sophisticated investor or self-certified sophisticated investor
  • high net worth individual
  • an association of HNWIs
  • Note that EIS and SEIS relief is not available for the matched funding from private investors.

In summary the terms of the convertible loan are:

  • interest at 8% pa non-compounding but could be higher with agreement; to accrue until conversion
  • maturity date is 3 years
  • convertible on new funding round; exit; or maturity date
  • predefined loan agreement: non-negotiable
  • restrictions on use of proceeds including no repayment of borrowings, dividends, bonuses and advisory fees.

The loan documentation is in predefined form and not negotiable but existing shareholder and investment agreements and the articles of association should be reviewed, together with any option agreements, to ensure that all necessary consents and resolutions are obtained.

Bounce Back Loans scheme for small businesses

On 27 April, the Chancellor announced a 100% government-backed loan scheme for small businesses. Eligible businesses will be able to borrow between £2,000 and £50,000 and access the funds within days, with loans interest free for the first 12 months. The scheme launched for applications on Monday 4 May through a short, standardised online application. Firms will be able to access these loans through a network of accredited lenders. The government is working with lenders to ensure loans delivered through this scheme are advanced as quickly as possible and agree a low standardised level of interest for the remaining period of the loan. More information on the scheme is available here.

Temporary Measures to Support UK Businesses During COVID-19

To ease the burden of the COVID-19 pandemic, UK businesses will have access to:

  1. the Coronavirus Job Retention Scheme;
  2. VAT and Income Tax payments deferment;
  3. a Statutory Sick Pay relief package for small and medium-sized enterprises (“SMEs”);
  4. a 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England;
  5. grant funding for all business in receipt of small business rate relief or rural rate relief;
  6. grant funding for retail, hospitality and leisure businesses;
  7. the Coronavirus Business Interruption Loan Scheme for SMEs;
  8. a lending facility from the Bank of England to help support larger firms;
  9. the HMRC Time To Pay Scheme; and
  10. a ban on evictions for commercial tenants who miss rent payments.
The Coronavirus Job Retention Scheme

The government has announced details of the coronavirus (Covid-19) Job Retention Scheme and this will be of interest to employers.

The temporary scheme is available for at least three months starting from 1 March 2020, but it is unlikely that payments under the scheme will be made for some weeks.

Eligible UK employers will be able to access government support to continue paying their employees who would otherwise have been laid off because of the coronavirus crisis – designated employees will be “furloughed workers”. HMRC may fund up to 80% of the furloughed worker’s wages, the employer may agree to pay the other 20%.

Employees on zero hours contracts are covered under the scheme.

It is also important to remember that normal employment rules still apply so there is still an obligation to consult, and collectively consult. The scheme’s details are complex and Stone King is happy to advise employers. Full details of the scheme can be found at: Claim for wage costs through the Coronavirus Job Retention Scheme

Deferring VAT and Income Tax Payments

Valued Added Tax (VAT) payments will be deferred for 3 months in order to support UK businesses. The deferral will apply from 20 March 2020 until 30 June 2020.

For those who are self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

All UK businesses are eligible and no applications are required as it is an automatic offer.

Taxpayers will be given until the end of the 2020/2021 tax year to pay any liabilities incurred during the deferral period.

Statutory Sick Pay Relief Package for Small and Medium-Sized Enterprises.

The Government will be bringing forward legislation to allow SME businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19.

This refund will cover up to 2 weeks’ SSP per eligible employee who has been off from work owing to COVID-19.

This scheme is available to UK businesses with fewer than 250 employees as of 28 February 2020.

The eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home come into force.

The Government is developing a rebate scheme and will provide further details once the legalisation has passed.

12-month Business Rates Holiday for All Retail, Hospitality, Leisure and Nursery Businesses in England

A business rates holiday for retail, hospitality and leisure businesses in England is also being introduced by the Government covering the 2020/2021 tax year.

UK businesses will be eligible for the business rates holiday if they fall into the retail, hospitality, leisure or nurseries sector and where properties are wholly or mainly being used:

  1. as shops, restaurants, cafes, drinking establishments, cinemas and live music venues;
  2. for assembly and leisure;
  3. as hotels, guest & boarding premises and self-catering accommodation; or
  4. for the provision of the Early Years Foundation Stage.

No applications are required as the relief should be automatically applied to council tax bills in April 2020.

Small Business Grant Funding of £10,000 for All Business in Receipt of Small Business Rate Relief

Additional Small Business Grant Scheme funding will be provided by the Government in order that local authorities can support small businesses that pay little or no business rates because of small business rate relief, rural rate relief and tapered relief.

This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.

UK businesses will be eligible if:

  1. the business is based in England;
  2. it is a small business and already receives small business rate relief and/or rural rate relief; and
  3. it is a business that occupies property.

No applications are required as the relevant local authority will write to businesses that are eligible for this grant.

Grant Funding for Retail, Hospitality and Leisure Businesses

The Government has introduced the Retail and Hospitality Grant Scheme to provide UK businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.

For UK businesses in these sectors with a rateable value of under £15,000, they will receive a grant of £10,000.

For UK businesses in these sectors with a rateable value of between £15,000 and £51,000, they will receive a grant of £25,000.

To be eligible, UK businesses in the retail, hospitality or leisure sector must have property wholly or mainly being used:

  1. as shops, restaurants, cafes, drinking establishments, cinemas and live music venues;
  2. for assembly and leisure; or
  3. as hotels, guest and boarding premises and self-catering accommodation.

No applications are required as the relevant local authority will write to businesses that are eligible for this grant.

Coronavirus Business Interruption Loan Scheme

The British Business Bank, will launch a new Coronavirus Business Interruption Loan Scheme, early this week to support primarily SME businesses to access bank lending and overdrafts.

The Government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value.

UK businesses will be eligible for the scheme if:

  1. turnover does not exceed £45 million per year; and
  2. business meets the other British Business Bank eligibility criteria.

Full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website.

Lending Facility from the Bank of England Supporting Larger Firms

The Bank of England are offering to buy short term debt from larger companies under the new Covid-19 Corporate Financing Facility.

There will also be support to the corporate finance markets overall and ease the supply of credit to all firms.

All non-financial companies that meet the criteria set out on the Bank of England’s website are eligible.

The scheme will be available early this week.

More information is available from the Bank of England.

Time to Pay Service

All UK businesses and self-employed people in with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.

Such arrangements are agreed on a case-by-case basis with HMRC.

To access support UK businesses will need to call HMRC’s dedicated helpline: 0800 0159 559.

Ban on Evictions for Commercial Tenants Who Miss Rent Payments

The Government has announced that commercial tenants who cannot pay their rent as a result of COVID-19 will be protected from eviction. This measure has been included in the emergency Coronavirus Bill, which is currently going through Parliament.

The measure will apply to all commercial tenants and leases in England, Wales and Northern Ireland meaning that no business will be forced out of their premises if they miss a payment in the next 3 months.

Commercial tenants will still be liable for the rent after this period however the Government will be keeping an open dialogue on the matter.

All content in this article is correct as of 24 March 2020 based on HM Government press releases. However, due to the fast changing landscape of COVID-19 and the above measures being subject to the implementation of emergency legislation, we recommend consulting with our Corporate and Commercial team lawyers at Stone King to ascertain how these measures will affect you.