5 ways the UK government is helping SMEs with covid-19

Covid-19 has had a profound impact on businesses. Everyone from dentists to decorators have been adversely affected. In order to help businesses during these difficult times, the government has issued several support schemes.

At Pomelo Pay we believe it’s important that small businesses are aware of the help available. We have compiled the four different ways the UK government has pledged to help small businesses, and how to apply if eligible. All information has been taken directly from the gov.uk website.

The Coronavirus Job Retention Scheme

This first government scheme is designed for businesses who hire employees. It’s open to all UK employers for at least three months, starting from the 1st of March of this year 2020.

Is my business eligible?

‍This scheme is open to all UK employers with a UK bank account who have been using the PAYE payroll scheme since the 28th of February 2020. It’s open to any UK organisation with employees, including charities, recruitment agencies and public authorities.

Employees include full-time employees, part-time employees and employees on agency contracts, as well as employees on zero-hour contracts. The scheme also includes employees who were let go after the 28th of February, and then rehired by their employer.

How does it work?

‍Employers are able to claim 80% of an employees’ wages up to £2,500 per month, as well as their employer National Insurance contributions and pension contributions.

In order to claim the scheme, your employee must be put on furlough. This means that your employee must not be working on behalf of the organisation for at least three weeks, whether it’s providing services or generating revenue.

While on furlough, the wages will be subject to income tax and deductions. If you want to keep parts of your business running, you can opt to have some of your employees on furlough and others on a regular salary.

To apply, you’ll need a furlough agreement in writing with your employee as well as all necessary information, such as ePAYE reference number and claim period. You’ll be able to claim once the portal is up and running at the end of April. For more information, visit the gov.uk website.

Support for businesses who are paying sick pay to employees

If one of your employees falls ill, the government has issued support when you provide sick pay. This support will allow businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to Coronavirus.

Is my business eligible?‍

This scheme is available to employers with fewer than 250 employees (as per the 28th of February 2020).

How does it work?‍

The refund will cover up to two weeks of SSP per employee. Make sure you maintain records of all staff absences as well as SSP payments. Let your employees know that they don’t need a GP fit note, since an isolation note from NHS 111 online is enough.

In order to claim the refund, keep all records and be ready to apply once the regulations on the SSP extension come into force. The government will be setting up a repayment mechanism for employers in the meantime.

Coronavirus Business Interruption Loan Scheme

This government support scheme has been put into place in order to support SMEs with loans, overdrafts, invoice financing and asset financing, for up to £5 million and six years.

This scheme encourages lenders to issue loans by guaranteeing 80% of each loan (backed by the government). It comes with Business Interruption Payment support, another scheme to help businesses cover the first twelve months of interest payments as well as lender fees. This means small businesses won’t have to pay any upfront costs and the initial repayments will be lower.

Is my business eligible?‍

Your business must be based in the UK, and you must have a turnover of less than £45 million per year. Your business must also meet the British Business Bank eligibility criteria (such as proof that your business has been impacted by covid-19).

How does it work?‍

The scheme is already open for applications and all big banks are offering loans. In order to apply, talk to one of the forty accredited finance providers and follow the steps on their website. You’ll need to provide documents such as management accounts and cash flow forecasts, as well as details of the kind of loan you’ll need.

Help may come in the form of a loan, a payment holiday, an overdraft or invoice finance – without interest and fee free. If you’re borrowing less than £250,000, you won’t need to provide any personal guarantees as security. However, if you’re borrowing more, check with your financial institution to see what other security you may need to provide.

Protection from eviction for commercial tenants

Government support also comes in the form of protection against eviction. If you’re worried you won’t be able to pay the lease or rent on your commercial property, this scheme will make sure you’re not evicted.

Is my business eligible?‍

If you are currently paying your lease or rent for commercial property in the UK, then yes.

How does it work?‍

The scheme means that no business will be forced out of their premises if they miss a payment until the 30th of June of 2020. So far, no action is required, since the Coronavirus Bill is still awaiting royal assent.

Make sure to communicate with your lease provider or landlord so they are aware of the situation. It’s important to note that this is not a rental holiday and that as a commercial tenant you will still be liable for rent.

Self-employment Income Support Scheme

This long-awaited support scheme from the government is designed to help the self-employed who have been adversely affected by the crisis. If you’ve set up a limited company and appointed yourself as director, you’ll need to go through the Job Retention Scheme and furlough yourself (although as director you are still able to carry out administrative tasks).

Is my business eligible?

‍The scheme is available to those who have submitted a self-assessment tax return for the year 2018-19, intend to trade in the year 2020-21 and have lost trading profits due to coronavirus. Trading profits must not be more than £50,000.

How does it work?

‍The HMRC will reach out to those eligible by mid May 2020 and will process payments of 80% of your trading profits (average of the last three years) up to a maximum of £2,500 per month. It’ll be available for three months and will be subject to income tax and NI contributions. The payments will go through from June 2020 – in the meantime, you’re advised to apply for Universal Credit for extra help.

The lockdown means these are incredibly difficult times for small businesses. The good news is that businesses are still able to keep running thanks to the various support schemes set in place by the government. We recommend maintaining all records of absences, late payments and wages, in order to claim support in the coming months.

Make sure to keep up to date with the gov.uk website in case more information is published that could affect your business. At Pomelo Pay we extend our sympathies to every company and individual affected, and are working hard on our side to help small businesses manage payments during lockdown.