Covid-19 Where are we now?

Dear Clients

Its Day 42 of lockdown and much has happened in the last 6 weeks.

The latest development…

New Bounceback loans
Announced by the chancellor last week. Guaranteed 100% by government up to £50,000 capped at 25% of turnover. Announcement well received and should be available from 9am today! The finer details are being ironed out; as we write this is what we expect.

There are 3 criteria:-

  1. The company is based in the UK
  2. The business has been negatively affected by Coronavirus
  3. The company was not an “undertaking in difficulty” on 31 December 2019

“Undertaking in Difficulty” definition
Stems from EU state aid regulations, likely to be one used by HMRC for Enterprise Investment Scheme roles (EIS) :
“any company is “in difficulty” when it meets the criteria for insolvency under the Insolvency Act 1986, such as:

  • The company is unable to pay its debts when they fall due;
  • “the balance sheet test” – value of assets< liabilities (including its contingent prospective liabilities).

Companies in negative equity may consider capitalising directors’ loans. We understand that the bounceback loans will be available to partnerships, LLPs and sole traders in addition to limited companies.

Here, in no particular order, are updates on the financial side of the pandemic: –

Rates grants.
Most small grants of £10,000 were paid out within a couple of weeks of claims being made. More audit checking of the larger grants but they are also being distributed.

Self-employed grants.
80% of average monthly profits up to maximum of £2,500 expected to be paid out in June. No contact from HMRC yet.

Coronavirus Business Interruption Loan Scheme (CBILS).
Cumbersome application process and lack of clarity surrounding the government “guarantee”

Welsh Government Economic Resilience Fund.
Grants of up to £10,000 for small businesses who did not receive funding under the rates grants scheme. Grants of up to £100,000 for larger businesses. Due to the heavy demand in the first week this scheme has now been paused.

Development Bank of Wales £100 million loan scheme.
Fully subscribed in week one.

Job Retention Scheme.
Paying out 80% of furloughed employees wages up to a maximum of £2,500 per month plus employers’ national insurance and employers’ pension contributions. The speed at which this lifeline was introduced deserves mention. Originally not expected to arrive until June the first claims were paid out last week. The claims process can be tortuous due to the manual data entry required to the HMRC portal.