NAVIGATING CORONAVIRUS IN THE UK: KEY UPDATES FOR INDIAN BUSINESSES - Webinar 5 May 2020 14:30 - 16:00 (IST) / 10:00 - 11:30 (BST) - Moore ...
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NAVIGATING CORONAVIRUS IN THE UK: KEY UPDATES FOR INDIAN BUSINESSES Webinar 5 May 2020 14:30 – 16:00 (IST) / 10:00 – 11:30 (BST)
YOUR SPEAKERS
Tim Stovold Elena Tsirlina David Winnie Paul Winterflood
Tax and India Group Partner, Solicitor, Solicitor, Director, Corporate Finance,
Moore Kingston Smith CDS Mayfair CDS Mayfair Moore Kingston Smith
Hosted by
Kishore Achary
Assistant Vice President Business Development,
2
Moore Kingston Smith
AGENDA
• Furloughing
• Immigration issues
• Time-to-pay, grants
• CBILS, CLBILS, bounce back loan, future fund
• Q&A
HELPING YOU THRIVE IN A CHANGING WORLD 3
PEOPLE
HELPING YOU THRIVE IN A CHANGING WORLD 4
CORONAVIRUS JOB RETENTION SCHEME
The Scheme
• To help employers whose operations have been severely
affected by coronavirus (COVID-19) to retain their employees
and protect the UK economy
• The scheme is due to be in place from 1 March 2020 to 30 June -
may be extended if necessary
• Extensions to the scheme likely to be announced 45 days
before the expiry date
• 800,000+ employers have applied for grants for 6,300,000+
employees with £8bn+ claimed (as of 4 May 2020)
HELPING YOU THRIVE IN A CHANGING WORLD 5
CORONAVIRUS JOB RETENTION SCHEME
The Scheme
• To qualify for the scheme, the employer must have:
• Created a PAYE scheme on or before 19 March 2020
• Have a UK Bank Account
• Enrolled for PAYE online (or you have an agent who can
access this)
• Note – very small claims (fewer than 15 employees can be
made by telephone if PAYE online is not available)
HELPING YOU THRIVE IN A CHANGING WORLD 6
CORONAVIRUS JOB RETENTION SCHEME
The Scheme
• Employees are eligible to be included in a Grant claim if:
• They were included in a payroll submission before 19 March
2020 (Note – this excludes most joiners in March)
• They have been notified in writing that they have been
“furloughed” – example letter at
http://www.acas.org.uk/sites/default/files/2020-04/Letter-
confirming-an-agreement-to-temporary-furlough.doc
HELPING YOU THRIVE IN A CHANGING WORLD 7
CORONAVIRUS JOB RETENTION SCHEME
The Scheme
• While on furlough, they:
• Provide no services to their employer whatsoever
• Generate no income for their employer directly or indirectly
• Can carry out voluntary work or training
If a client project has been cancelled and your secondees cannot
return to India due to flights being unavailable, this is good grounds to
furlough these employees
Expect these conditions to be checked in future PAYE Compliance visits
from HM Revenue & Customs
• Minimum period of furlough to entitle employer to grant is 21
consecutive days per employee – claims for less than this period will
be rejected
HELPING YOU THRIVE IN A CHANGING WORLD 8
CORONAVIRUS JOB RETENTION SCHEME
The Scheme
• Employers can claim a grant equal to the lower of:
• 80% of the monthly REFERENCE SALARY; or
• £2,500/month
Any amount received must be paid to the employee in full through
the payroll along with any amounts you choose to top up
• PLUS – the associated employer’s NI (if being paid – watch out
for 52 week NI exemption for secondees from India)
• PLUS – the associated employer’s pension contribution (if being
paid – secondees will not normally have a pension contribution
on the basis that they are not normally employed in the UK)
HELPING YOU THRIVE IN A CHANGING WORLD 9
CORONAVIRUS JOB RETENTION SCHEME
The Scheme
• The REFERENCE SALARY is:
• For Fixed Rate employees – the EARNINGS paid through the
Feb 2020 payroll
• For Non-Fixed Rate employees – the greater of:
• the average monthly EARNINGS paid to the employee for the
tax year 2019-20 (or, if less, the period of employment before
the period of furlough began); and
• the actual EARNINGS paid to the employee in the
corresponding calendar period in the previous year (i.e. when
calculating the REFERENCE SALARY in May 2020, look at
May 2019)
HELPING YOU THRIVE IN A CHANGING WORLD 10CORONAVIRUS JOB RETENTION SCHEME
The Scheme
The EARNINGS you should use when calculating 80% of your
employees’ wages is regular payments you are obliged to make,
including:
• regular wages you pay to employees
• non-discretionary overtime
• non-discretionary bonuses
• non-discretionary commission payments
HELPING YOU THRIVE IN A CHANGING WORLD 11CORONAVIRUS JOB RETENTION SCHEME
The Scheme
You cannot include the following when calculating EARNINGS:
• discretionary bonuses
• discretionary commission payments
• Benefits in Kind (such as a company car) and salary sacrifice
schemes (including pension contributions) that reduce an
employees’ taxable pay
• Tax free Scale Rate payments towards living expenses
HELPING YOU THRIVE IN A CHANGING WORLD 12CORONAVIRUS JOB RETENTION SCHEME
The Scheme
Employment Law aspects:
• If there is no lay-off clause or short-time working clause in the
contract, then employers either need:
(i) the employee(s) to consent to changes to their contract; or
(ii) to commence consultation
• Gaining employee agreement is simply a question of presenting
the facts and then a written agreement.
HELPING YOU THRIVE IN A CHANGING WORLD 13CORONAVIRUS JOB RETENTION SCHEME
The Scheme
• If employer is required to consult, the consultation process
depends on the number of employees affected:
A reasonable period of time (normally 2 weeks but could
Less than 20 affected employees
be less in current COVID-19 circumstances)
20 to 99 affected employees 30 days
100+ affected employees 45 days
• The consultation is exactly the same as any other consultation
where you want to change terms or make redundancies. Listen to
employee suggestions etc…
• Take advice on the process!
HELPING YOU THRIVE IN A CHANGING WORLD 14CORONAVIRUS JOB RETENTION SCHEME
The Scheme
• Individuals remain your employees while on furlough – do not
issue a P45 when furlough commences!
• They continue to have employment rights and benefit from the
Working Time Directive
• They continue to accrue holiday entitlement while on furlough
• Any holiday they take while on furlough must be paid at their full
holiday pay rate and not at any reduced furlough salary rate
• This includes Friday 8th May (VE Day Bank Holiday)
HELPING YOU THRIVE IN A CHANGING WORLD 15CORONAVIRUS JOB RETENTION SCHEME
Making a claim
• You (or your agent) will need to access PAYE Online Services
(except where small claims are made via telephone)
• Select a period that you want to make the claim for (which can be
up to 14 days after the date you are making the claim)
• Furloughed employees’ name and National Insurance number
• Calculate the tax, NI and pension amounts you are claiming
HELPING YOU THRIVE IN A CHANGING WORLD 16CORONAVIRUS JOB RETENTION SCHEME
Making a claim
• You will need your:
• PAYE Reference number and Accounts Office number
• Companies House Company Number
• Corporation Tax Unique Tax Reference
• Your bank Sort Code, Account Number and address
• A contact name and telephone number
• Claims paid within 6 working days (sometimes faster)
HELPING YOU THRIVE IN A CHANGING WORLD 17IMMIGRATION The current issues facing Tier 2 Sponsors
Introduction The UK immigration system has been particularly hard hit by the widespread disruption caused by COVID-19. In response to this pandemic, we have seen lockdown and travel bans imposed on a global scale. The impact of these measures on migrants’ ability to enter, leave and remain lawfully in the UK is significant and growing. The impact on businesses is unprecedented and the consequences are, as yet, unknown. The Home Office’s COVID-19 policy response has been slow and incomplete across the board and is particularly lacking for Tier 2 Sponsors and employees. Ambiguously worded and incohesive guidance has caused greater confusion and uncertainty at a time when clarity and reassurance is required.
We will examine the main issues currently facing UK businesses
who hold sponsor licences and who employ migrants on a Tier 2
visa.
Overview of We will discuss the Home Office’s COVID-19 policy response
and how these polices apply to sponsors in practice.
Topics
We will also discuss the wider human resource implications
flowing from the relevant issues and Home Office’s policy
response. Many businesses have already suffered or are preparing to suffer a downturn in
demand and revenue for an unidentifiable amount of time. Amid predictions of a
global recession, and in the UK, “an economic contraction that is faster and deeper
than anything we have seen in the past century…”, businesses are also having to
plan and prepare for an uncertain future.
Many businesses are having to quickly adapt their entire way of working in
response to this unprecedented situation. Most businesses have either had to
cease trading (for example, those operating in the hospitality industry), or
significantly adapt their ways of working (for example, by asking staff to work
What are the from home) in order to safeguard the health of their workforce and comply with
the lockdown restrictions.
issues facing UK As salaries typically represent a large proportion of businesses’ running costs,
many employers are seeking to reduce their overheads by permanently or
sponsors? temporarily cutting their workforce and/or by changing their employees’ terms
of employment, including the numbers of hours worked and/or their rates of pay.
The recruitment and retention of Tier 2 employees has thus been duly affected.
Sponsors are grappling with significant difficulties in adapting their sponsored
workforce to the demands of the current situation and in doing so, understanding
what impact implementing any changes will have on their sponsored migrants’
visas, on their ability maintain compliance with their sponsor duties and on
wider human resource issues generally.
Slow and incomplete policy responses from the Home Office have served to
exacerbate the uncertainty faced by sponsors and sponsored migrant alike. The Coronavirus Job Retention Scheme (CJRS)
The CJRS is a temporary UK government scheme open to UK
employers/Tier 2 sponsors. It is designed to support employers/sponsors
whose operations have been severely affected by coronavirus (COVID-
19) and protect employees’ jobs. Under CJRS, employers can ‘furlough’
their employees (put them on temporary paid leave) for a minimum of 3
weeks and for a maximum of 4 months starting from 1 March 2020. In
doing so, employers can claim from the UK government 80% of the
furloughed employees' usual monthly wage costs, up to a maximum of
£2,500 a month. Employers are still required to pay the associated
Employer National Insurance contributions and the minimum automatic
What help is enrolment employer pension contributions on that wage.
available? Furloughed employees are not permitted to work for their employer
whilst on the CJRS.
Eligibility
Any employer with a UK payroll and a UK bank account will be able to
apply to the CJRS, but the employee in question must have been
employed on 19 March 2020 and be on the employer’s PAYE payroll on or
before 19 March 2020. This means an employer must have made an RTI
submission in respect of the employee to HMRC on or before 19 March
2020.YES – but, clarity on this point was slow to be provided and there remains
many questions as to how the operation of the CJRS reconciles with the
Tier 2 sponsor framework:
A week after the UK government announced the introduction of the
CJRS, the Home Office, on 27 March 2020, released its first raft of COVID-
19 guidance for Tier 2 sponsors. This guidance was silent on whether
Tier 2 sponsors could utilise the CJRS for their sponsored employees.
On 3 April 2020, the Home Office released further, very limited
guidance for Tier 2 sponsors who cannot pay the salaries of their
Are Tier 2 sponsored employees because they’ve temporarily reduced or
ceased trading. The guidance states, “You can temporarily reduce the
employees pay of your sponsored employees to 80% of their salary or £2,500 per
month, whichever is the lower.” It does not explicitly state that sponsors
eligible for the can utilise the CJRS.
On 3 April 2020, the Immigration Law Practitioners Association (ILPA),
CJRS? clarified matters by circulating an email to its member practitioners
confirming the Home Office had informed them that Tier 2 sponsors
and sponsored migrants are eligible for the CJRS.
The Home Office guidance for Tier 2 sponsors has since been updated
twice, on 14 and 20 April 2020. Neither update has sought to
substantively add to or amend the wording of the above COVID-19
guidance to provide any further clarity for sponsors seeking to
implement this Scheme.TIER 2 MINIMUM SALARY REQUIREMENT
What issues should
Tier 2 Sponsors be
aware of if utilising MAXIMUM SALARY PAID UNDER THE CJRS
the CJRS? Under the CJRS, a furloughed sponsored worker’s salary will be reduced to 80%,
or a maximum of £2,500 gross per month, whichever is lower.
Unless an employer tops-up the furloughed employee’s wages, the maximum
annual salary of a Tier 2 worker will be £30,000.
This is lower than the required minimum salary for many Tier 2 sponsored
workers.What does the Home Office COVID-19 guidance say?
The consequences
of furloughing and
paying less than the What is the fallback position?
minimum salary
If the Tier 2 employee is not furloughed under the CJRS, but is instead asked to work
reduced hours, then their salary can be reduced on a pro-rata basis, in accordance
with the standard rules and guidance for Tier 2 workers. Their salary must not
however fall below the relevant Tier 2 visa category minimum.The Home Office’s COVID-19 guidance provides that when
sponsors are making decisions and seeking to implement changes:
“Any reductions must be part of a company-wide policy to
avoid redundancies and in which all workers are treated the
same. These reductions must be temporary, and the employee’s
pay must return to at least previous levels once these
arrangements have ended.”
What HR issues A sponsor must also obtain the sponsored employee’s written
should Tier 2 consent to convert them into a ‘furlough worker’ and/or to reduce
their pay, as either or both changes would amount to a fundamental
Sponsors be aware change to a term of their employment contract.
of if utilising the Equality and discrimination laws will apply in the usual way and
furloughing an employee does not affect their redundancy rights.
CJRS? Care should therefore be taken to ensure the selection process
does not fall foul of UK employment and discrimination law.
Before deciding to put some or all of your workforce on furlough
leave (regardless of whether you employ Tier 2 employees) it is
advisable to seek initial advice on the selection process. The Home Office COVID-19’s guidance for sponsors does not explain what must be
evidenced to show that a business has temporarily reduced or ceased trading.
Many employers have applied to the CJRS and HMRC have reserved the right to
audit businesses later on.
Whilst we await further guidance, we recommend that sponsors carefully consider
Will a Tier 2 whether there is a genuine, temporary reduction in work and if so, whether the CJRS
is the best solution for their business, bearing in mind furloughed employees are
Sponsor need to not permitted to work (including remotely) whilst on furlough leave.
prove a reduction in The only possible insight on what evidence may constitute a reduction/cessation in
trading comes from the Home Office’s sponsor guidance, which provides examples
trading to apply to of situations which the Home Office consider to be a change to the sponsor’s
circumstances. Such changes include, amongst other things, becoming insolvent,
the CJRS? entering into a Company Voluntary Arrangement or a debt arrangement scheme. In
each of these examples, sponsors must report this change to the Home Office within
20 working days of the change taking place. Further guidance is therefore required
to understand if a broader definition, which includes COVID-19 related issues, can
be applied and utilised by businesses.The existing Home Office’s COVID-19 guidance for sponsors does not specify whether the
Home Office must be notified of this change. We therefore recommend adopting a cautious
approach until guidance has clarified whether it is necessary.
As a general point, sponsors must report certain information or events to the UKVI using the
SMS, within a set time limit. Sponsors have a duty to inform the UKVI via the SMS if there are
any significant changes in the migrant worker’s employment circumstances. This would
include furloughing a sponsored worker and / or paying them a reduced salary.
Sponsors must report the following within 10 working days:
- Non-attendance on the employees first day of work;
Is there a duty on - if you terminate the contract of employment earlier than stated on the employee’s CoS;
sponsors to notify - if you stop sponsoring a migrant for any other reason, such as you become aware that they
have moved into an immigration route that does not need a sponsor;
the Home Office if - If they are absent from work without pay for 4 weeks or more, and this absence is not
covered by an exception. Absences related to the coronavirus pandemic do not need
they furlough Tier 2 to be reported;
employees? - if there are any significant changes in the sponsored migrant’s circumstances, for example:
a change of salary from the level stated on the CoS;
- If they are employed at a different location – working from home during the COVID-19
crisis does not count as a change of location according to the Home Office COVID-19
guidance;
- if a sponsored migrant’s employment is affected by TUPE or similar protection – for
example, if you are involved in a merger or demerger and / or
- if the size of your business changes from small to large or vice versa.Tier 2 workers are usually prevented from taking more than 4 weeks of unpaid leave each
calendar year. The only exceptions to this are where the unpaid absence is for one or more of
the following reasons:
statutory paternity leave;
statutory maternity, paternity or parental leave;
statutory shared parental leave;
statutory adoption leave;
sick leave;
Placing Tier 2 assisting with a national or international humanitarian or environmental crisis overseas,
provided you agreed to the absence for that purpose; or
employees on taking part in strike action as part of a legally organised industrial action.
unpaid leave Where the sponsor is required to stop sponsoring a migrant who has been absent from work
without pay for 4 weeks or more, the sponsor must report this using their SMS account. This
applies whether the migrant is absent from work over a single period or more than one period
during any calendar year (1 January to 31 December). The 4 weeks is worked out according to
the migrant’s normal working pattern.
This position has however changed in response to COVID-19-: according to the current Home
Office COVID-19 guidance , Tier 2 sponsors, do not currently need to withdraw sponsorship
from employees who are absent from work without pay for 4 weeks or more, providing the
absence is related to the coronavirus pandemic. Absences related to coronavirus do not need to
be reported. Nonetheless, it is advisable that employees and sponsors maintain records of the
duration and reasons for any unpaid absence that extends beyond 4 weeks and how this relates
to the coronavirus pandemic.As of 30 March 2020, Home Office guidance was issued confirming RTW checks have been
temporarily adjusted due to COVID-19 to make it easier for employers to carry them out.
The following temporary changes have been made:
checks can now be carried out over video calls;
job applicants and existing workers can send scanned documents or a photo of
documents for checks using email or a mobile app, rather than sending originals;
employers should use the Employer Checking Service if a prospective or existing
employee cannot provide any of the accepted documents;
RTW continue to be necessary and employers must continue to check the prescribed
Right to Work documents listed in the ‘Right to Work checks: an employer’s guide’. It remains an offence to
knowingly employ anyone who does not have the right to work in the UK.
(RTW) checks After the COVID-19 measures end, employers should follow the checking process set out in
during COVID-19 Right to work checks: an employer’s guide. You will be asked to carry out retrospective
checks on existing employees who started working for you during these measures. The
retrospective checks must be carried out within 8 weeks of the COVID-19 measures ending.
Both checks should be kept for your records.
The Home Office guidance states they will not take any enforcement action against you if
you carried out the adjusted checks set out in this guidance, or a check via the UKVI, and
follow this up with the retrospective checks.
If, at the point of carrying out the retrospective checks, you find your employee does not
have permission to be in the UK you must end their employment. If the checks you have
undertaken during the adjusted period were conducted in the prescribed manner, you do
not need to undertake a retrospective check.If you would like to discuss any of the issues raised, please
contact our Immigration Team:
Elena Tsirlina | Solicitor, Team Leader
CDS Mayfair: elenatsirlina@cdsmayfair.com | +44 7891 857588
Immigration
David Winnie | Solicitor
With thanks to davidwinnie@cdsmayfair.com | +44 7771 654830
Moore Kingston Smith
Chloe Spaven | Solicitor
chloespaven@cdsmayfair.com | +44 7462 116621HELP FOR BUSINESS
HELPING YOU THRIVE IN A CHANGING WORLD 32CORONAVIRUS – TAX PAYMENTS
CORONAVIRUS TIME-TO-PAY HOTLINE – 0800 024 1222
• Launched on 11 March 2020
• 2,000 call handlers waiting for your call – but still expect delays
• Agreements can be made to defer payment of any business tax
liabilities:
• Corporation Tax
• VAT (but automatic deferral also available…)
• PAYE
• Hotline number is Tips of negotiation Time-to-pay at:
• https://www.icaew.com/insights/tax-news/2020/mar-
2020/covid19-support-on-negotiating-time-to-pay
HELPING YOU THRIVE IN A CHANGING WORLD 33CORONAVIRUS – TAX PAYMENTS
AUTOMATIC DEFERRAL OF VAT PAYMENTS
• If you have a VAT payment due between 20 March 2020 and 30
June 2020, you have the option to defer the payment until 31
March 2021
• HMRC will not charge interest or penalties on any amount
deferred
• You will still need to submit your VAT returns to HMRC on time
• If you pay by direct debit, you must cancel this to benefit from
deferment
HELPING YOU THRIVE IN A CHANGING WORLD 34CORONAVIRUS – TAX PAYMENTS
DEFERRAL OF JULY 2020 SELF-ASSESSMENT PAYMENT ON ACCOUNT
• If you’re due to pay a self-assessment payment on account by 31
July 2020 then you can choose to defer payment until January
2021
• You do not need to be self-employed to be eligible for the
deferment (e.g. this applies to buy-to-let landlords as well)
• This is an automatic deferral with no applications required
• No penalties or interest for late payment will be charged if you
defer payment until 31 January 2021
HELPING YOU THRIVE IN A CHANGING WORLD 35BUSINESS RATES AND
GRANTS
HELPING YOU THRIVE IN A CHANGING WORLD 36BUSINESS RATES AND GRANTS
Are you eligible for Small Relief continues to be
Business Rates Relief? (i.e. available + £10,000 grant
Check your rateable value at: Yes
rateable value < £15,000) payable to your business by
https://www.tax.service.gov.uk/business-rates-find/search local authority
No
No help provided by
Do you operate in the leisure,
No government with business
hospitality or retail sector?
rates or grants
Yes
100% Relief from Business
Rates for 2020/21
Grant of £25,000 payable to Is the rateable value of
your business by local Yes your premises < No No grant available
authority £51,000?
HELPING YOU THRIVE IN A CHANGING WORLD 37BUSINESS RATES AND GRANTS
More grants coming? Announcement on 2 May 2020
• Additional fund aimed at small businesses with ongoing fixed property-
related costs.
• Local authorities asked to prioritise businesses in shared spaces and
others not currently receiving grants
• The allocation of funding will be at the discretion of local authorities
• Businesses must be small, under 50 employees and be able to
demonstrate that they have seen a significant drop of income due to
Coronavirus restriction measures.
• Maximum level of grant under this scheme will be £25,000 per
business
HELPING YOU THRIVE IN A CHANGING WORLD 38Self-employed
HELPING YOU THRIVE IN A CHANGING WORLD 39HELP FOR THE SELF-EMPLOYED
SELF-EMPLOYED INCOME SUPPORT SCHEME
• This scheme will allow self-employed individuals to claim a grant
worth 80% of their trading profits up to a maximum of £2,500 per
month for the period from 1 March to 31 May 2020
• This scheme does not apply to:
• Individuals operating through Personal Service Companies; or
• Landlords
HELPING YOU THRIVE IN A CHANGING WORLD 40HELP FOR THE SELF-EMPLOYED
SELF-EMPLOYED INCOME SUPPORT SCHEME – CONDITIONS (1)
The individual must have:
• submitted their tax return for the tax year 2018-19 which included
self-employed income (or if submitting late, have submitted by 23
April)
• continued to trade in the tax year 2019-20
• continued to trade when the application is made, or would be
except for COVID-19
HELPING YOU THRIVE IN A CHANGING WORLD 41HELP FOR THE SELF-EMPLOYED
SELF-EMPLOYED INCOME SUPPORT SCHEME – CONDITIONS (2)
• lost trading/partnership trading profits due to COVID-19
• trading profits of less than £50,000 and have more than half of
their income come from self-employment for either:
• The tax year 2018-19; or
• On average for the tax years 2016-17, 2017-18, and 2018-19
HELPING YOU THRIVE IN A CHANGING WORLD 42HELP FOR THE SELF-EMPLOYED
SELF-EMPLOYED INCOME SUPPORT SCHEME
• No need to individual to stop working
• HMRC will be inviting self-employed individuals to claim these
payments now
• Any payments due will be paid as a lump sum by bank transfer
within 6 working days of making the claim
• The grant will be taxable income for the self-employed individual
HELPING YOU THRIVE IN A CHANGING WORLD 43LOANS FROM BANKS FOR SMEs
CBILS, CLBILS and Bounce Back
Loans
HELPING YOU THRIVE IN A CHANGING WORLD 44LOANS FROM BANKS FOR SMES
Scheme available depends on Company size
• Bounce Back Loan Scheme (max loan £50k, no company size
restrictions)
• Coronavirus Business Interruption Loan Scheme “CBILS” (up to
£45m turnover, max loan size £5m)
• Coronavirus Large Business Interruption Loan Scheme “CLBILS”
(£45m up to £500m turnover, loans up to £50m)
• Covid Corporate Financing Facility – (£500m+ turnover)
HELPING YOU THRIVE IN A CHANGING WORLD 45Bounce back loans
HELPING YOU THRIVE IN A CHANGING WORLD 46LOANS FROM BANKS FOR SMES
BOUNCE BACK LOANS
• Announced on 27 April and available since yesterday, the UK’s Bounce Back Loan scheme is
intended to provide support for the smallest businesses
• Administered through network of accredited banks
• Businesses can borrow between £2k and £50k, but the loan must not exceed 25% of turnover, via
simple online application form and receive cash within a few days of applying.
• Up to 6 year term
• Interest rate of 2.5% p.a.
• First year’s interest and fees paid by government, and no capital repayments in first year, no early
repayment fee
• Loan is 100% guaranteed by UK government (compared with 80% under CBILS)
HELPING YOU THRIVE IN A CHANGING WORLD 47LOANS FROM BANKS FOR SMES
BOUNCE BACK LOANS
• Simple application form
• Eligibility criteria:
• Impacted by Coronavirus
• Were not a business in difficulty as at 31 December 2019
• is engaged in trading or commercial activity in the UK and was established by 1
March 2020
• Not using the other CBILS, CLBILS etc. loan schemes
• Derives 50% of income from trading activity
HELPING YOU THRIVE IN A CHANGING WORLD 48Coronavirus Business
Interuption Loan Scheme
(“CBILS”)
HELPING YOU THRIVE IN A CHANGING WORLD
49LOANS FROM BANKS FOR SMES
CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS)
• CBILS is intended to provide financial support to SMEs that are seeing
their cashflow disrupted, as a result of the COVID-19 outbreak
• British Business Bank operates CBILS via its accredited lenders (incl.
Barclays, HSBC, Lloyds, Metro, NatWest, etc..) with the
recommendation to use your incumbent bank first.
• The government gives the lender a guarantee for 80% of the value of
the loan to encourage more lending
• The borrower remains fully liable for the debt, but if in default, only 20%
of the outstanding facility can be recovered under any personal
guarantees given.
HELPING YOU THRIVE IN A CHANGING WORLD 50LOANS FROM BANKS FOR SMES
CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS)
Your business must:
• Be UK-based in its business activity and borrowing to support this
activity
• Have a borrowing proposal which the lender:
• would consider viable, were it not for the COVID-19 pandemic
• Being able to show you could trade out of any short-term to medium-
term difficulty was previously a requirement, now banks can’t ask for
this information but recommend it is provided if it supports the
application.
• Generally formal due diligence assignments are not being carried out by
the banks
HELPING YOU THRIVE IN A CHANGING WORLD 51LOANS FROM BANKS FOR SMES
CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS)
• The maximum value of a facility provided under the CBILS is
£5m for businesses with up to £45m turnover
• Term debt and asset finance facilities can be taken over a period
up to six years. Overdraft and invoice finance facilities will be for
up to three years
• Arrangement fees and interest free for 12 months paid for by the
Government
HELPING YOU THRIVE IN A CHANGING WORLD 52LOANS FROM BANKS FOR SMES
CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS)
• Security:
• No lender is allowed to take personal guarantees as security
for lending < £250,000
• Primary residential property cannot be taken as security
under the scheme
• Recovery under personal guarantees is limited to 20% of the
outstanding facility in default
HELPING YOU THRIVE IN A CHANGING WORLD 53Coronavirus Large Business
Interruption Loan Scheme
(“CLBILS”)
HELPING YOU THRIVE IN A CHANGING WORLD
54LOANS FROM BANKS FOR SMES
CORONAVIRUS LARGE BUSINESS INTERRUPTION LOAN SCHEME (CLBILS)
• Operates through the biggest lenders, with the same eligibility criteria
• The maximum value of a facility provided under the CLBILS is:
• £25 million for businesses with up to £250m turnover
• £50 million for businesses with up to £500m turnover
• 80% security guarantee from government as with CBILS
• First year interest and arrangement fees not covered by government, so different from
CBILS in that respect
• Due diligence may be carried out
HELPING YOU THRIVE IN A CHANGING WORLD 55Information Required
HELPING YOU THRIVE IN A CHANGING WORLD
56LOANS FROM BANKS FOR SMES
INFORMATION REQUIRED
Expect to be asked the following as part of the credit application:
• Historic Viability (e.g accounts) - Bounce Back, CBILS, CLBILS
• Current Needs (e.g. 13 week cashflow) - CBILS, CLBILS
• Future Needs (e.g. 12 month + forecast) – CLBILS, CBILS (optional)
HELPING YOU THRIVE IN A CHANGING WORLD 57COMING SOON:
Future fund for start-ups
HELPING YOU THRIVE IN A CHANGING WORLD 58SUPPORT FOR START-UPS AND SCALE-UPS
FUTURE FUND
• Announced on 20 April and due to commence mid-May, the UK’s £250m Future Fund is intended to provide
support for high-growth tech start-ups for whom the CBILS is not appropriate
• Details are sketchy as to how it will operate, but we do know that financial support will be provided:
• In amounts between £125k and £5m
• In the form of convertible loan notes, which will convert into equity at a minimum of a 20% discount at
the end of their term (up to 3 years) or on the borrower’s next equity fundraising round
• Must be matched by third party equity
• Will attract an 8% or higher rate of interest
• The business applying to the Future Fund must be a UK-registered unlisted company and must have raised
at least £250k from third party investors previously
• Future Fund financing can only be used for working capital purposes – it cannot be used to repay debt,
fund dividends or pay advisory fees
HELPING YOU THRIVE IN A CHANGING WORLD 59QUESTIONS
Please leave a comment with any questions you have for the panel in the chat box
or email kachary@mks.co.uk after the sessionYou can also read
