COVID Business Support: The UK’s Path to Post-Coronavirus Recovery
2020 was a historic year for a number of reasons, one being its primary role in bifurcating the world into two periods, the pre-pandemic and post-pandemic one, both with more differences than similarities. The coronavirus has punctuated two different aspects that define the current global situation, i.e., commuting and physical communication has been restricted, and two, the digital revolution has been radically speeding up. The Coronavirus pandemic led the UK government to enforce a nationwide lockdown, driving businesses to a standstill as per the government guidelines and to announce Covid business support.
The government launched a number of schemes in lieu of support for businesses and to shore up support for livelihoods across the nation. Now that the country is lifting restrictions, the government announced and has now launched several recovery schemes, worth £407 billion, for businesses in a bid to reinvigorate business activity and restore the battered economy. Let’s look at the schemes announced.
Restart Grant Scheme
The Restart Grant Scheme launched as per the government’s covid business support grant is worth £5 billion and has launched through local councils as of April 1, 2021. The scheme will help businesses reopen smoothly with a one-off support grant of £6,000 for non-essential retail businesses and a one-off grant worth £18,000 for businesses in the hospitality (hotels, restaurants), leisure, personal care and accommodation sector.
UK based businesses; paying business rates; trading on April 1, 2021; and belonging to the above-mentioned sectors are eligible to apply for this grant. The businesses that have gone into liquidation struck off from the Companies House register or have exceeded the allowable subsidy limit cannot benefit from the Restart Grant Scheme. The total amount of grants that have been handed over to councils now stands at £25 billion, the Restart Grants Scheme being one of the latest of such schemes. You can apply by visiting the website of your local council or speak to your accountants for guidance.
Additional Restrictions Grant
Additional Restrictions Grant, administered by local councils, is meant to support businesses that have been severely affected by the covid-19 led lockdown. Local councils will ascertain if a particular business is eligible or not and the amount of grant to be awarded; the businesses that are not on the business rates system might also be deemed eligible.
Small Businesses affected by covid-19 that have not received wider government support under the various grants available and belong to the worst affected sectors might stand eligible for this grant. Businesses that are in administration, insolvent and have been struck off from the Companies House register, and have exceeded the permitted subsidy allowance will not be able to get any benefits under Additional Restrictions, Grant.
Recovery Loan Scheme
The Recovery Loan Scheme facilitates businesses to transition from the devastating effects of the pandemic to normality. The scheme offers up to £10 million worth of loans per business with 80% of the loan amount guaranteed by the UK government. The provision of loans is made possible through multiple lenders listed on the British Business Bank’s website, and the scheme is open for applicants till 31 December 2021.
As per the Recovery Loan Scheme, the applicant can get:
- Term loans or overdrafts ranging from £25,001 to £10,000,000 per business
- Invoice or asset finance ranging from 1,000 to £10,000,000 per business
Personal guarantees are not necessary if the loan amount is below £250,000 and the applicant’s principal private residence cannot be taken as a guarantee. The loan term is up to 3 years for overdrafts and invoice finance facilities and up to 6 years for loans and overdraft facilities.
For an applicant, the eligibility criteria are that the business should be based in the UK, the applicant has to establish that the business would be viable had it not been for the pandemic; the business has been severely affected by the pandemic and is not in collective insolvency proceedings (eligibility criteria is different for the firms that come under the Northern Ireland Protocol).
If your business has already received assistance from any other coronavirus loan schemes (the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme, and Coronavirus Large Business Interruption Loan Scheme), you can still apply for assistance under the Recovery Loan Scheme. However, the amount you’ll get may be affected by the amount of assistance you’ve already received under the aforementioned schemes.
Super Deduction has been launched by the government to counter the falling levels of investment and to stem growth by allowing businesses to save up to 25p for every £1 of investment in assets that will enhance productivity and enable companies to grow. The scheme covers investments in qualifying plant and machinery assets from 1 April 2021 to 31 March 2023. Companies under Super Deduction will be able to get:
- a 130% super deduction capital allowance on qualifying investments
- a 50% first-year allowance for qualifying special rate assets
Businesses through Super Deduction have been given an incentive to move towards investment benefiting from a generous capital allowance offer.
Mortgage Guarantee Scheme
The Mortgage Guarantee Scheme is an effort by the government to make up for the shortfall in the loan-to-value (LTV) mortgage products resulting from the pandemic; this will help the new generation to become homeowners with the government backing the introduction of 91-95% Loan to value mortgage products. The lenders will be allowed to purchase a government guarantee for the top slice of the mortgage, i.e. the government will be liable to compensate a portion of the losses suffered by the lender in recompensation. The guarantee might cover as much as 80% of the purchase value of the guaranteed property. A mortgage will be deemed eligible for government guarantee:
- If it is a residential mortgage (not second homes) and not buy-to-let
- In case the applicant is an individual or individuals instead of a company
- It should be a UK based property with a value of £600,000 or less
- If it is based on 91-95% loan-to-value
- If it gets originated within the dates covered by the scheme
- It is a repayment mortgage and not an interest-only, and
- If it clears the standard requirements in terms of assessment of borrower’s ability to repay, e.g. a loan-to-income or credit score test
The scheme will be open for applicants from April 2021 to December 2023; it is a temporary measure by the government to counter the pandemic initiated scarcity in the LTV products and is directed to ensure that borrowers remain principal beneficiaries.
Help to Grow
The Help to Grow scheme, worth £520 million, is devised to boost business growth in the UK via management training and technology usage advice along with the provision of subsidy on software. The scheme has two areas of focus, i.e. management and digital.
Help to Grow: Management
The Management section will facilitate businesses through a 12-week long management training, subsidized by the government, provided by leading business schools in the UK. The training will cover one-on-one sessions with business mentors on financial management and digital adoption. The program can accommodate 30,000 learners in a period of 3 years, and with a 90% government subsidy in place, a participant will be charged £750.
Businesses based in the UK that have been trading for the past 12 months and have 5 to 249 employees are eligible. The participant has to be in a position of significant influence within the organisation, i.e. a departmental director or a CFO. Charities aren’t allowed to benefit from this scheme.
Help to Grow: Digital
‘Help to Grow: Digital’ will facilitate businesses through online free business advice along with the provision of vouchers for specific software. Only those software that pass certain criteria will be subsidised by the provision of vouchers. Software that will help businesses grow their customer base, increase sales, contribute a major chunk of business’s online sale, and help them manage their accounts and finances digitally will be subsidised through vouchers.
Businesses that have been trading for more than 12 months in the UK and have 5 to 249 employees, and are investing in a discounted software for the first time, are eligible for this scheme.
Video: Covid 19 Government Support & Guidance
The financial support for businesses amidst the coronavirus (Covid 19), launching a number of schemes, has helped businesses to survive amid a period of suppressed economic activity. Now that the lockdown is easing, step by step, businesses are looking forward to a smooth transition to a trading market. The covid business support schemes mentioned above are expected to give businesses a head start, a helping hand to start again in a restarted market where trends have changed in more ways than expected. you can outsource an accountancy firm to help you find the right grant for your business.
Jinesh is a Senior Business Accountant, with a masters in Finance from Westminster University, and specializes in tax and accounting for small to medium businesses with a turnover less than £ 3 Million.
He specialises in helping creative businesses understand and manage their accounting and tax needs and obligations.
As accounting ecosystems evolve, their potential to add value also grows. This has increased the focus on digital solutions to tackle complex business problems. Jinesh helps businesses see the opportunity in this and helps businesses become more efficient and increase performance, using the right solutions.
Some of the key things he focuses on are:
- Helping businesses gain insights from their business data
- Providing complex tax and accounting solutions
- Helping businesses prepare for complex industry developments and changes