Price Bailey’s support to businesses in their fight against the impact of the coronavirus pandemic

Never did we think, back in early March 2020, that the effects of COVID-19 would be as widespread and long-lasting as they have been; there is not a business nor individual that has not been affected.

Price Bailey continue to work hard, keeping up to date with both the Government and Local Authority initiatives and supporting clients with a huge amount of experience and knowledge within the firm.  

This summary is updated regularly and can be used as a reference document as we trade through this together.

Last updated: 04 March 2021

 

Government and Local Authority initiatives 

Coronavirus Job Retention Scheme (CJRS)

 

Update 09/02/2021

HMRC has just confirmed there was an error on the CJRS calculator on the GOV.UK website which has now been fixed. This error only affects a specific number of claims that contained employees who were not on a fixed salary. If an employer used an employee’s pay for January 2019 as reference pay, instead of January 2020 and the employee’s pay was different in January 2019 to January 2020, then the claims would have been miscalculated by HMRC.

If you think you may have been affected by this, you will need to recalculate and resubmit your CJRS claim by the deadline on Monday 15 February.

Price Bailey calculates its CJRS claims for the vast majority of our clients using our own calculator; so there is no need for clients to resubmit a claim unless they supplied their own claim information to us having used the HMRC calculator on the GOV.UK website and having employees in their claim that meet the criteria above.

If you still have concerns regarding your January claim, please feel free to speak to your Price Bailey contact.

 

 

Offered from the 01 March 2020, the CJRS has been a lifesaver for many businesses during the pandemic. It has taken various forms throughout its time. For further information on how the scheme was initially launched as well as the terms and eligibility, you can read our Coronavirus Job Retention Scheme (CJRS) article.

The scheme has been tailored to support businesses depending on the trading environment at the time. During the summer of 2020 the scheme started to be phased out with its terms less favourable to employers, making them more inclined to return staff to work if possible.

As the pandemic took further hold and the UK saw further lockdowns, the scheme was revised which made it more favourable again to employers and employees, allowing more jobs to be saved.

The full 80% of employee wage scheme was made available again from the 01 November 2020. Our article Coronavirus Job Retention Scheme (CJRS) furlough extended until March has further detail.

Then in the budget March 2021, a further extension to the scheme was announced of 6 months from the 31 March. The first 3 months of the extension maintains the terms we have known throughout the winter with 80% of an employee’s wages fully funded by the grant.

From 01 July the Governments grant percentage will reduce monthly, and the employer’s contribution will increase to maintain the 80% of pay to the employee.

 

 

May

 

June

 

July

 

August

 

September

 

 

Government contribution: wages for hours not worked

 

 

80% up to £2,500

 

80% up to £2,500

 

70% up to £2,187.50

 

60% up to £1,875

 

60% up to £1,875

 

Employer contribution: employer National Insurance contributions and pension contributions

 

 

Yes

 

Yes

 

Yes

 

Yes

 

Yes

 

Employer contribution wages for hours not worked

 

 

No

 

No

 

10% up to £312.50

 

20% up to £625

 

20% up to £625

 

For hours not worked employee receives

 

 

80% up to £2,500 per month

 

80% up to £2,500 per month

 

80% up to £2,500 per month

 

80% up to £2,500 per month

 

80% up to £2,500 per month

 

 

Employees and employers do not have to have used the scheme previously to claim but after the 01 July employees must continue to receive 80% of their pay to be eligible.

Claims need to be submitted by the middle of the following month for the previous months furloughed hours.

For periods ending on or before 30 April 2021, you can claim for employees who were employed on 30 October 2020, as long as you have made a PAYE RTI submission to HMRC between the 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.

For periods starting on or after 1 May 2021, you can claim for employees who were employed on 2 March 2021, as long as you have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee.

We are aware that HMRC are completing ‘compliance checks’ on a selection of businesses that have used the scheme to make sure that it has been used in line with its conditions and the correct amount has been claimed. You can read more in our article What to expect when HMRC compliance check your use of the furlough scheme.

Job Support Scheme (JSS)

On the 24 September 2020, in a further attempt to reduce the impact of COVID-19 on the economy, businesses and jobs, the Chancellor announced details of the Job Support Scheme (JSS). It should be noted that the official guidelines for the JSS have been withdrawn by HMRC, pending revision. 

The scheme was initially due to take over from the CJRS at the end of October, but due to the rising number of COVID-19 cases across the UK, the Government announced lockdown V2 and CJRS V2 to support alongside it, which has effectively postponed the rollout until after 30 April 2021, with no new date being announced yet.

The Coronavirus Job Retention Scheme (CJRS), was due to come to an end on the 31 October with the JSS taking over supporting those businesses still operating with reduced demand. It was designed to drive the 10% of the working population still on furlough in mid-September 2020 back to work in some capacity, and protect jobs that might otherwise be at risk from falling demand.

The scheme is aimed at small and medium-sized businesses with larger businesses subject to a financial assessment test to demonstrate they require government funding. The expectation is that large employers will not be making capital distributions to their shareholders whilst accessing the scheme.

To be eligible, the employee needed to be working at least 33% of their usual hours. This requirement is to formalise the fact that this scheme is to support viable jobs. The 33% was due to be reviewed after the initial three months and was presumably going to be increased. The Government scheme shares some of the cost of the 66% balance of hours not worked. The scheme will pay for a third of hours not worked, with the employer covering another third and the employee taking a reduction in wage to cover the other third.

You can use our JSS calculator to understand the cost to you as a business and the impact on your gross pay as an employee in advance here on our Job Support Scheme calculator.

Kickstart scheme

COVID-19 continues to impact the labour market with unemployment increasing by more than 700k in the first 12 months of the pandemic. Between March 2020 and May 2021 70% of job losses were among under 25s. With continued employer uncertainty, we have seen record numbers of redundancies, with . With long Lockdown restrictions expected, one of the hardest-hit brackets beingis the 16-24-year-olds. Some of the severely affected our hardest-hit sectors, leisure and hospitality, are heavy recruiters of this age bracket; and with thousands leaving full-time education, with limited employment prospects, the Government have stepped in and hope to generate them opportunities.

By the end of January 2021, the Kickstart scheme had created over 120,000 jobs – harnessing the talents of a new generation of young workers.

The Kickstart scheme is available to employers of all size and provides funding for 25hrs per week, per employee for 6 months. The funding covers the vast majority of the employment costs:

The job placement must be new and filled by young people (aged 16-24-years-old), who are currently on universal credit; and at risk of long-term unemployment.

To qualify for the scheme placements must:

  • Be new jobs,
  • Must not be in replacement of existing vacancies or self-employed contractors,
  • Be for a minimum of 25 hours per week for six months,
  • Must be paid at least National Minimum Wage.

When the scheme was first launched employers had to make at least 30 placements available between when the scheme opened, in November 2020, and December 2021. This would have ruled out many smaller employers, so on the 25 January 2021 the Government removed this requirement.  

Wishing to create the biggest impact with the scheme when the 30 minimum rule was in place businesses were allowed to pool their requirements with other companies through Kickstart gateways. These were organisations such as local authorities, charities or trade bodies that could take applications from multiple employers and make one application for over 30.

Even with the need to recruit 30 removed from 3 February 2021, it may still be worthwhile using your local gateway for support due to their experience of applying for the scheme. Click here to find your local registered Kickstart gateway.

For further information, you can read our article: Could the Kickstart Scheme support your 2021 strategy and help you recruit talent?

Business cash flow support

Local Restrictions Support Grant (LRSG)

Businesses closed due to national lockdown

The Local Restrictions Support Grant LRSG supports businesses that have been required to close due to the national restrictions.

Administered by your local authority, you may be eligible if your business:

  • is based in England
  • occupies a property on which it pays business rates (and is the ratepayer)
  • has been required to close because of the national restrictions
  • has been unable to provide its usual in-person customer service from its premises

This could include non-essential retail, leisure, personal care, sports facilities and hospitality businesses. It could also include businesses that operate primarily as an in-person venue, but which have been forced to close those services and provide a takeaway-only service instead.

LRSG counts towards your total de minimis state aid limit of €200K over a 3 year period. If you have reached this threshold, you may still be eligible under the COVID-19 temporary framework.

Grant size will be based on rateable value:

  • Property with a rateable value of £15,000 or less, you may be eligible for a cash grant of £1,334 for each 28-day qualifying restrictions period.
  • Property with a rateable value over £15,000 and less than £51,000, you may be eligible for a cash grant of £2,000 for each 28-day qualifying restrictions period.
  • Property with a rateable value of £51,000 or above, you may be eligible for a cash grant of £3,000 for each 28-day qualifying restrictions period.

You can apply via your local council’s website – Find the website for your local council.

Businesses closed due to local lockdown

 

A grant up to £3,000 per month is available subject to the business applying having been shut due to restrictions for a minimum period of two weeks (previously three).

Administered by your local authority, you may be eligible if your business:

  • is based in England
  • occupies a property on which it pays business rates (and is the ratepayer)
  • is in an area of local restrictions and has been required to close because of local restrictions that resulted in a first full day of closure on or after 9 September
  • has been required to close for at least 14 days because of the restrictions
  • has been unable to provide its usual in-person customer service from its premise

For example, this could include non-essential retail and personal services that operate primarily as an in-person venue, but which have been forced to close those services and provide a takeaway-only service instead.

Eligible businesses can get one grant for each non-domestic property within the restriction area.

The precise set of businesses eligible for the scheme may vary between each local council area under local restrictions in recognition of the specific conditions in each area.

LRSG counts towards your total de minimis state aid limit of €200K over a 3 year period. If you have reached this threshold, you may still be eligible under the COVID-19 temporary framework.

Grant size will be based on rateable value:

  • Properties with a rateable value of £15,000 or under will receive grants of £667 per two weeks of the closure (£1,334 per month).
  • Properties with a rateable value of over £15,000 and less than £51,000 will receive grants of £1,000 per two weeks of the closure (£2,000 per month).
  • Properties with a rateable value of £51,000 or over will receive grants of £1500 per two weeks of the closure (£3,000 per month).

The grant will be extended to cover each additional 14-day period of closure. If your business is closed for 28-days, or 2 payment cycles, it will receive £1,334, £2,000 or £3,000, depending on the rateable value of the property.

You can apply via your local council’s website – Find the website for your local council.

Businesses legally open within local lockdown but affected

The Local Restrictions Support Grant (LRSG (Open)) supports businesses that have been severely impacted due to temporary local restrictions.

Businesses that have not had to close but which have been severely impacted due to local restrictions (Local COVID alert levels: High or Very High) may be eligible.

Eligible businesses may be entitled to a cash grant from their local council for each 28 day period under local restrictions.

Local councils have the discretion to provide grant funding for businesses under this scheme. They will use their discretion in identifying the right businesses to receive this funding, based on their application process.

Your business may be eligible if it:

  • is based in England
  • is in an area subject to ‘High’ or ‘Very High’ local restrictions since 1 August 2020 and has been severely impacted because of the local restrictions
  • was established before the introduction of Local COVID alert level: High restrictions
  • has not had to close but has been impacted by local restrictions

LRSG counts towards your total de minimis state aid limit of €200K over a 3 year period. If you have reached this threshold, you may still be eligible under the COVID-19 temporary framework.

The grant will be based on the rateable value of your property on the date of the start of the local restrictions. The local councils will be expected to provide funding under the following tiers unless there is a local need to deviate.

  • Property with a rateable value of £15,000 or less, you may be eligible for a cash grant of up to £934 for each 28 day period.
  • Property with a rateable value over £15,000 and less than £51,000, you may be eligible for a cash grant of up to £1,400 for each 28 day period.
  • Property with a rateable value of £51,000 or above, you may be eligible for a cash grant of up to £2,100 for each 28 day period.

Businesses that are not required to close but are impacted may continue to receive funding under LRSG (Open) if restrictions are increased to Local COVID alert level: Very High. 

If a national lockdown in announced funding under this scheme will cease.

You can apply via your local council’s website – Find the website for your local council.

Additional Restrictions Grant (ARG)

Vital support for those businesses that have not yet been eligible for funding

Local authorities have been given additional funds to support businesses with Additional Restrictions Grants (ARGs). The scheme is predominantly aimed to support those businesses that have not been eligible for grants previously due to not directly paying business rates; although each local authority is given the freedom to determine their eligibility for the grants.

Previous Local Restrictions Support Grants (LSRGs) have been set amounts based on the rateable value of the premises in which you trade. This means if you did not pay rates, you were not eligible, and a number of business slipped through the Governments support net. ARGs though, are much more flexible with eligibility and the amount of the grant being decided by the local authority, which means it can be tailored to support the local economies.

The Government has released funds on the expectation that businesses that are not legally forced to close but, nonetheless, are severely impacted, benefit from the money; which could include businesses:

  •  which supply the retail, hospitality, and leisure sectors
  • in the events sector
  • or those required to close but which do not pay business rates.

With all local authorities having varying criteria, it is difficult to detail how the funds will be administered, but you can find further information about the eligibility in your area here. Local authorities will likely open a window for applications, possibly in multiple phases with different criteria for each so it is important businesses study the local criteria for their area.

The amounts of the loans are expected to be relatively small for the majority but can be up to £10k. Those not eligible are:

    • those that are trading effectively
    • those businesses that are in administration or are insolvent.

VAT

The VAT deferral scheme enabled businesses to defer VAT payments which would have been due for payment between the period 20 March 2020 and 30 June 2020 (i.e. payments in respect of VAT returns due at the end of February, 31 March and 30th April).

The government initially announced that any payments that had been deferred in this period would have to be paid in full by 31 March 2021. However it has since been announced that businesses who did defer payments in that period will be able to opt to pay the debt off in up to 11 instalments over a longer period of time. Instalments can be made up until 31 March 2022 without any late payment interest being charged.

It was necessary to opt into this scheme as it is not automatic and businesses can choose how many instalments to make the payment over. There will be conditions which must be met in order to opt-in, including that you must be up to date with VAT returns and must be able to pay the deferred VAT by Direct Debit.

The application process opened 23 Feb 2021 and are now closed. . If you apply by 19th March you maximise the scheme by paying 11 instalments, by 19th April, 10 instalments and so on until 19th June when the online system closes.

If you do not opt into the scheme and have not agreed alternative arrangements with HMRC, the deferred VAT must be paid in full by 31 March 2021.

For further information or advice please contact Leo Donovan at Price Bailey.

Support for the self-employed 

In the Budget, March 2021, the chancellor announced further phases of self-employed grants. There have been 4 phases of support announced by the Government for the self-employed. Eligibility has been the same throughout the grants. Individuals can apply if 50% of their annual income is derived from self-employed work, and their average annual self-employed trading profit is £50k or less.

The grants are taxable income and also subject to National Insurance contributions.

Individuals will need to prove they have been adversely affected by COVID-19. They do not need to have claimed previous phases to claim the newer phase.

Phase 1 – Grant covering March, April & May, capped at £7,500

The first phase announced 26 March offers individuals a grant of up to 80% of their average monthly trading profits, paid in one lump sum up to £7,500 (£2,500pm).

Phase 2 – Grant covering June, July & August, capped at £6,570

The second phased announced 29 May offered individuals a grant of up to 70% of their average monthly trading profits, paid in one lump sum up to £6,570 (£2,190pm).

To be specifically eligible for phase 3 and 4 individuals must:

  • have been previously eligible for the Self-Employment Income Support Scheme first and second phases (although they do not have to have claimed the previous grants)
  • declare that they intend to continue to trade and either:
    • are currently actively trading but are impacted by reduced demand due to coronavirus
    • were previously trading but are temporarily unable to do so due to coronavirus

Phase 3 – Grant covering November, December & January, capped at £7,500, online applications will go live 30 November 2020.

The third phase announced 5 November offers individuals a grant up to 80% of their 3 months average monthly trading profits, paid in one lump sum up to £7,500 (£2,500pm).

Phase 4 – Grant covering February, March & April, capped at £7,500, online applications will go live in late April 2021.

The fourth phase, detail announced in the Budget, offers individuals a grant of up to 80% of their 3 months average monthly trading profits, paid in one lump sum up to £7,500 (£2,500pm).

The fourth grant will take into account 2019 to 2020 tax returns and will be open to those who became self-employed in tax year 2019 to 2020. The rest of the eligibility criteria remains unchanged.

Phase 5 – Grant covering May to September. The amount of the fifth grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021.

The fifth grant will be worth:

  • 80% of 3 months’ average trading profits, capped at £7,500, for those with a turnover reduction of 30% or more
  • 30% of 3 months’ average trading profits, capped at £2,850, for those with a turnover reduction of less than 30%

Online applications will go live late July. HMRC will contact you mid-July to give you a date you can make your claim from, if you are eligible from your tax returns. Claims must be made on or before 30 September 2021.

For further information relating to the above grants or any other personal tax issues, please contact Michael Morter.

Funding solutions during COVID-19  

The Chancellor, Bank of England, British Business Bank and HMRC created a combination of unprecedented support options for UK businesses throughout the pandemic.

Businesses raised £ 175bn in the initial 6 months of the pandemic environment, and mainstream banks suggest they completed their 5 year planned lending objectives within the first 3 months. Lenders will be keen to make sure that you had a viable business before the pandemic and that you have a strong repayment vehicle. Loans are required to be repaid, and therefore government initiatives such as the CJRS and grants with no repayment should be utilised to their full potential before applying for debt.

There are several options available when it comes to funding your business during COVID-19:

Coronavirus Business Interruption Loan Scheme (CBILS)

Open until the 31 March 2021 in its current form, CBILS offers loans and other lending products of up to £5m, where the Government secures 80% of the facility to provide comfort to lenders.

Loans can be taken over a maximum of 6 years with fees and interest being paid for by the Government for the first 12 months. Most lenders are allowing 12-month capital payment holidays from the start of the loan, so there is no repayment due till month 13. Overdrafts and invoice finance facilities are available for terms of up to 3 years.

Businesses applying for a CBILS loan will need to prove that they had a viable business that could repay the borrowing prior to COVID-19. The monies borrowed will be expected to support the business through COVID-19 difficulties.

For further information and eligibility criteria, read our detailed article Coronavirus Business Interruption Loan Scheme (CBILS) or contact Simon Blake, who leads our Strategic Corporate Finance team.

Recovery Loan Scheme

During the Budget the chancellor announced a new form of lending superseding the CBILS and BBLS. Available from 6 April businesses of any size will be able to apply for:

  • Term loans and overdrafts of between £25,001 and £10 million per business.
  • Invoice finance and asset finance of between £1,000 and £10 million per business.

Term loans and asset finance can be repaid over up to 6 years, and overdrafts and invoice finance product can be taken over 3 years.

Like CBILS, this scheme offers the lender a Government guarantee of 80% of the facility; making more applications acceptable to lenders. Also like CBILS no personal guarantees will be required for facilities under £250k and a borrower’s main residents cannot be charged as security.

The funds borrowed can be used for any legitimate business use, including investment and growth. Borrowers are eligible as long as they are trading in the UK and can show:

  • They are a viable business or would be viable were it not for the pandemic
  • They have been impacted by the coronavirus pandemic
  • And are not in collective insolvency proceedings

If previous loan schemes have been utilised this scheme is still available. Lenders will have to be accredited to provide the Government-backed facilities and a list of accredited lenders is due prior to the 6 April.

Bounce Back Loan Scheme (BBLS)

Open until the 31 March 2021 the BBLS was designed to administer cash to smaller businesses quickly. Businesses can borrow from £2,000 and up to 25% of their turnover with a maximum loan of £50,000.

If you already have a Bounce Back Loan but borrowed less than you were entitled to, you can top up your existing loan to your maximum amount.

This scheme provides a government guarantee against 100% of the loan. The loans are director lead, meaning the directors of the company confirm their eligibility and request the amount they wished to borrow. The funds have been made available within days of application by many of the lenders. Interest rates are a standard 2.5% after the initial 12 months interest and capital free period.

On the 24 September as part of the Governments Winter Economy Plan, the Chancellor announced that before your loan is due for repayment your lender will approach you to discuss:

  • Extending the term of your loan to 10 years (from 6 years),
  • Moving to interest-only repayments for a period of 6 months (which can be used up to 3 times),
  • Pausing your repayments for a period of 6 months if you have already made at least 6 repayments (you can use this option once).

All of these were offered with the promise that if taken out, your credit score will not be impacted. This will come as a welcome relief to many who face repaying the cash they required in the depths of lockdown. 

Companies can transfer loans of up to £50,000 issued under CBILS to the Bounce Back Loan Scheme.

For further information on this initiative, read our detailed article or contact William Wilson.

Coronavirus Large Business Interruption Loan Scheme (CLBILS)

On Friday 3 April 2020, the chancellor detailed a new scheme, much like CBILS, but for larger businesses that did not meet the requirement of CBILS nor COVID-19 Corporate Financing Facility.

Currently open until 31 March 2021 CLBILS offers funding solutions up to £200m, where the Government secures 80% of the lend. This, as the name suggests, is for larger businesses with an annual turnover above £45m. This scheme can only be accessed if an applicant has been unable to secure regular commercial finance, so it is advisable to contact your lender in the first instance to see what packages are available and suitable.

Lenders will still be expected to conduct their usual credit risk checks. This scheme allows lenders to specifically support businesses that were viable before the COVID-19 outbreak but now face significant cash flow difficulties that would otherwise make their business unviable in the short term. COVID-19 must have impacted firms, and businesses must evidence that the loan will help them trade out of short-medium term difficulty.

The scheme supports a wide range of financing options including short term loans, overdrafts, invoice finance and asset finance. Businesses will remain responsible for repaying any facility they may takeout.

To be eligible, a business must:

  • be UK-based in its business activity
  • have an annual turnover above £45m
  • be unable to secure regular commercial financing
  • have a borrowing proposal which the lender:
    a. would consider viable, were it not for the COVID-19 pandemic
    b. believes will enable you to trade out of any short-term to medium-term difficulty

Businesses from any sector can apply, except for banks and building societies; insurers and reinsurers (but not insurance brokers); public-sector organisations, including state-funded primary and secondary schools.

If borrowing over £50m then business owners must agree to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan.

We are experienced in raising different types of funds for many different situations and demonstrating viability is something we often get asked to support with.

To find out more, please contact Simon Blake, who leads our Strategic Corporate Finance team.

 Coronavirus Corporate Financing Facility (CCFF)

Available for at least 12 months from 20 March 2020, and for as long as those businesses who make a material contribution to the UK economy require support in easing cash flow issues.

The CCFF will provide funding to businesses by purchasing commercial paper of up to one-year maturity, issued by firms making a material contribution to the UK economy.

 

This is the vast majority of the £330bn scheme that was highlighted by the Bank of England and the Chancellor. However, The Bank of England has already warned that many retailers will not qualify due to their credit ratings. As of 1 March 2020, Companies must be able to demonstrate that they were investment grade. Financial companies (which we interpret as institutions rather than services businesses) are not eligible to apply. Commercial Paper issued by leveraged investment or private equity funded vehicles or from companies within groups that are predominantly banks, investment banks or building societies are not eligible if securities are being issued by a finance subsidiary its parent company should guarantee them.

Commercial paper is an unsecured, short-term debt instrument issued by a company.

CCFF will purchase sterling-denominated commercial paper, with the following characteristics:

  1. Maturity of one week to twelve months
  2. Where available, a credit rating of A-3 / P-3 / F-3 / R3 from at least one of Standard & Poor’s, Moody’s and Fitch as at 1 March 2020.
  3. Issued directly into Euroclear and/or Clearstream

Non-standard features such as extendibility or subordination will not be acceptable.

If firms have different ratings from different agencies, and one of those is below investment grade, then the commercial paper will not be eligible. We believe that the minimum facility size is £1m.

Businesses do not need to have previously issued commercial paper to participate. However, it seems likely at this stage that Commercial Paper will need to be listed (i.e. tradeable), and that any dealing counterparties must be appropriately authorised for FSMA 2000. This could create delays, complexity and enhanced compliance requirements for businesses that have not had to manage these type of securities before and therefore be a practical barrier to access.

It was positive to see that the bank will operate in both the primary and secondary markets, subject to the other side being appropriate.

We see this as an opportunity for businesses to not only inject capital to stabilise but also to improve corporate governance and the ability to access wider forms of capital in the mid-term. As concerning as these times are, there is an opportunity here for certain types of businesses.

To find out more, please contact Chand Chudasama from the Strategic Corporate Finance team.

 The Future Fund (TFF)

Withdrawn on 31 Jan 2021, TFF took some time to gain momentum, possibly due to understanding and the fact that loans are only classed as approved once the Convertible Loan Agreement document is issued.

TFF provides government loans of between £125k and £5m to high growth innovative companies using a Convertible Loan Note (CLN). The loan will need to be at least matched by funding from private investors, and the company must have raised at least £250k in private third party investment in the past five years.

The CLN turns into the most senior class of shares when:

  1. In the future, the business raises further capital that is equal to the whole bridge funding round
    b. On sale or IPO
    c. After 36 months, the loan will likely turn into shares, or, be repaid with a premium.

The business is eligible if:

  • it is UK-incorporated – if part of a corporate group, only the parent company is eligible
  • none of its shares are traded on a regulated market, multilateral trading facility or another listing venue
  • it was incorporated on or before 31 December 2019
  • at least one of the following is true:
    • half or more employees are UK-based
    • half or more revenues are from UK sales

Loans will have an 8% interest rate and looking at the application V approved figures it would seem that criteria are tight.

For information on this initiative read our blog on The Future Fund: 10 terms and what to do next or contact Chand Chudasama from the Strategic Corporate Finance team.

Debt Advisory Service

Many are still trading in difficult environments, and with a cautious approach being taken by lenders, being prepared prior to approaching them could be fortuitous. You can listen to our podcasts How to prepare your business and approach your lender for a loan during COVID-19 or read our accompanying blog that provides top tips and things to consider as well as a live example.

Whilst these schemes provided relief to many, in our daily conversations with clients, we observed gaps in the market. Firstly, those with structurally high levels of existing debt. Secondly, pre-profit businesses who may struggle to access CBILS and for whom the normal ‘start-up’ loan support is not sufficient, and where the shareholder base are not able to deploy further equity funding. Thirdly, the sheer levels of debt on-boarded by businesses during 2020 will cause its own issues. Many are going to be expected to repay the debt over relatively short amortisation periods, and still may not be trading at full capacity.

Due to our extensive experience across our strategic corporate finance team, we are well prepared to support business owners through these three difficult circumstances, as well as any other company struggling to raise funding. You can read about the services we have on offer to support you raise, or restructure debt in this difficult climate by reading our Debt advisory services webpage. You can also read how our team supported a client to raise funds in just such an environment in our case study.

Due to the number of headwinds rearing their head in 2021, we expect cash flow to be a concern for many. With us in the deepest recession ever recorded, we hope that the BoE’s predictions of a ‘bounce back’ are correct and the that ill structured debt and rising interest rates do not restrict the UK’s businesses to prosper.

One positive of COVID-19 on the lending market is the innovation that has presented itself; aside from there being many other ways to fund a business other than debt, there are now many lenders providing alternative finance. Please let us know if you feel you may be hindered by debt as you attempt to maximise on future opportunities.

Employment Law during COVID-19

Legal aspect of the Coronavirus Job Retention Scheme (CJRS)

To furlough employees, you need an agreement – The Treasury Direction says that to claim under the furlough scheme, the employer and employee must have agreed in writing that the employee will cease all work (para 6.7). Notification alone is not sufficient. This document also needs to be kept for five years. Further, as stated above, any salary reduction is a breach of contract without express agreement from the employee.

Furlough agreements are required to include the time period for which the employee will be out of work. This time period will likely be the period that the Job Retention Scheme remains in place, subject to a minimum of 3 weeks. If an employee comes back to work after the set period and you do not require them to work still, you can ‘re-furlough’ them for a further period of time.

A furlough agreement is a temporary variation of the contract of employment, and the employees will revert to their normal terms following furlough. However, some employers are using furlough agreements to introduce and agree on permanent changes such as the right to put the employees on short-time working or to lay them off temporarily.

This is a complex area of law, and legal advice should be obtained before making such changes.
In respect of contractual terms which have not been varied by agreement, the underlying contract of employment continues to apply during the furlough period, as do an employer’s statutory obligations which often override contractual terms, particularly around termination of employment, for example, timings of consultation on a collective redundancy process.

Our Employment Law team can draft furlough agreements at a set cost on a per company, rather than per employee basis.

To read some commonly asked questions to our legal team, please see our article An employment law Q&A for dealing with COVID-19. 

Coronavirus Statutory Sick Pay Scheme (CSSP)

For small and medium-sized businesses with less than 250 employees, two weeks Statutory Sick Pay (SSP) can be reclaimed per eligible employee absent due to COVID-19 (this includes both Coronavirus sickness and isolation absence) on or after 13 March 2020. Employees will not need to present a GP fit note but can be supplied an isolation note from NHS111 online to satisfy their employer.

The Coronavirus SSP Rebate Scheme is now open for employers to make a claim. The process broadly follows the same format as the Coronavirus Job Retention Scheme (CJRS) claims, for those also claiming through CJRS.

The information employers will need to make a claim is:

  1. Claim period
  2. Number of employees
  3. Amount claimed.

In contrast with the CJRS, you are not required to provide the individual employee’s names or NI numbers. For more information and updates on the application process, please read our article  Coronavirus Job Retention Scheme (CJRS) and Coronavirus Statutory Sick Pay Rebate Scheme (CSSP) published 28 May 2020.

Claims can only be made for periods that have already passed.

Cash collection during COVID-19

With nearly half of all businesses seeing reduced turnover compared to the previous year due to COVID-19, there will undoubtedly be cash flow pressures for some.

In a normal trading environment, 96% of SMEs will have experienced a bad debt, and 70% will have at least one commercial dispute every three years.

The normal process of recovering owed funds can be lengthy, costly and without guarantee of success; because of this, an average of £40bn is written off by SMEs every year. Cash is always important, but now more than ever, business owners need to be recovering and retaining the cash that is rightly theirs.

Escalate dispute resolution and debt recovery, launched in 2017 after 7 years of planning and investment, is a game-changer in its field. It offers a fixed fee recovery with no fees until the funds are recovered and no fees if the case is not won.

Due to its set up, everyone is incentivised to recover funds quickly, whereas, with the normal process open-ended fee structures and hourly rates, that is not always the case. Recoveries of £1k and above are completed, and the case is assessed and agreed to be taken on often with 24hrs. This assessment is carried out for free, so SME owners know if they have a viable case from very early on in the discussion.

Further information, including case studies, can be found on our Escalate webpage. For some top tips in managing, debtors read our article: Responding to Coronavirus: Unlocking cash from your balance sheet. For further information, please contact Matt Howard or email [email protected].

If the worst is to happen and funds are not recovered due to insolvency steps taken by your client then maximising on bad debt relief is a key consideration. For further information, read our article VAT and bad debt reliefs.

Price Bailey’s response to COVID-19

There is no doubt that many of you are concerned about how this pandemic will affect your business day-to-day and the impact on any upcoming strategic decisions. Please remember that we are here to support you with any immediate planning or personnel questions you might have, however small. Your Price Bailey contact will be happy to talk through your concerns and work with you to find the right solution for your business, so do give us a call. 

As a result of the Government’s decision to move the country into a national emergency lockdown to mitigate the impacts of the virus, and the associated advice and restrictions on social contact, we have decided to close all Price Bailey locations from the morning of 24 March 2020.

Our Board, partners and teams were well prepared for this scenario.

You can be assured that we have a robust business continuity plan in place, which will enable us to minimise the impact on our service to you. Since the beginning of the outbreak, we have been making preparations for our people to work from home, and mobile telephone numbers have been added to the website for most contacts. No matter who you speak to, or what day of the week it is, you can be confident you’ll always get the same experience.

For more information, read our response to COVID-19.

Please take care of yourself and those you hold dear.

 

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

 

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