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COVID-19 BLOG

NEW SMALL BUSINESS MICRO-LOAN SCHEME ANNOUNCED

28/4/2020

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A NEW GOVERNMENT BACKED BOUNCE BACK LOAN SCHEME FOR SMALL BUSINESSES UP TO £50,000
On 27 April 2020 the Chancellor announced a new Bounce Back loan scheme for small businesses hit by the impact on the pandemic, allowing businesses to apply for loans up to £50,000, with government guaranteeing 100% of the advance.
Despite the announcement by the Chancellor he is ‘unconvinced’ by universal government guarantee.

Rishi Sunak reiterated that he “remained unconvinced” of the case for rolling out a 100% government guarantee across all the state’s coronavirus loan schemes. 
“We shouldn't ask taxpayers to bear all the risk of lending almost unlimited sums to businesses who may have very little prospect of paying those loans back – and not necessarily because of coronavirus, said the Chancellor. “Instead, the new Bounce Back Loans carefully target the extraordinary level of state support at those who need it most.”

So what is the New Loan Scheme?
In summary;
  • businesses will be able to borrow between £2,000 and £50,000 and access the cash within days
  • loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form
The new scheme, will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months. No repayments will be due during the first 12 months.

Note: the guarantee is to the lender and not the business, the business will still be responsible for repaying the loan, and debt will still not be suitable for some smaller businesses


The loans will be easy to apply for through a short, standardised online application (just a two page form with no forward-looking business viability tests or eligibility criteria), making this a Fast Track process. The loan should reach businesses within days- providing immediate support to those that need it as easily as possible.
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FURTHER PROTECTION FOR THE HIGH STREET

25/4/2020

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NEW MEASURES TO PROTECT UK HIGH STREET FROM AGGRESSIVE RENT COLLECTION AND CLOSURE
On the 23 April the Business Secretary announced high street shops and other companies under strain will be protected from aggressive rent collection and asked to pay what they can during the coronavirus pandemic.
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The majority of landlords and tenants are working well together to reach agreements on debt obligations, but some landlords have been putting tenants under undue pressure by using aggressive debt recovery tactics. I personally have also heard of cases of companies struggling with potential rent increases despite the current outbreak.

  • Government to introduce temporary new measures to safeguard the UK high street against aggressive debt recovery actions during the coronavirus pandemic;
  • The government will temporarily ban the use of Statutory demands (made between 1 March 2020 and 30 June 2020) Statutory demands issued to commercial tenants will be temporarily voided, where a company cannot pay its bills due to coronavirus;
  • Winding up petitions issued the government will temporarily ban the use of statutory demands (made between 1 March 2020 and 30 June 2020) to commercial tenants will also be temporarily voided, where a company cannot pay its bills due to coronavirus
  • Government is also laying secondary legislation making changes to be made to the use of Commercial Rent Arrears Recovery (CRARs), building on measures already introduced in the Coronavirus Act to provide tenants with more breathing space to pay rent by preventing landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.
  • As a result landlords and investors asked to work collaboratively with high street businesses unable to pay their bills during COVID-19 pandemic. Tenants are however, being asked to pay what they can afford to pay, and for Landlords and tenants to work together.

This new legislation will be in force until 30 June, and can be extended in line with the moratorium on commercial lease forfeiture.

These measures come on top of a substantial package of business support measures, including a moratorium on evictions for commercial tenants for at least a 3-month period, which includes a suspension of forfeiture rights, which prevents all commercial tenants from being removed from their properties until 30 June.

Should you need assistance with negotiations or help and support considering the longer term options please do not hesitate to contact our Licensed Insolvency Practitioner for a FREE consultation on Tel: 07972928153 and email: lucinda@lminsolvency.co.uk
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CHOICE OF INSOLVENCY OPTION & EMPLOYEES

25/4/2020

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THE TYPE OF INSOLVENCY CAN HAVE A SIGNIFICANT IMPACT ON EMPLOYEES, ESPECIALLY WHILST STAFF CAN BE FURLOUGHED
Employees and the future prospect of a business being able to continue trading after insolvency (i.e. through a sale of business) are key considerations in any insolvency, but that decision is even more important in these unprecedented times.
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In simple terms, in a liquidation employment of employees tends to terminate upon appointment of the Liquidator, and the business usually comes to an end (i.e. no prospect of a sale of the business as a going concern). Whereas an Administration process provides protection under a moratorium for the business to continue trading, this includes retaining some or all employees with the hope many jobs will be saved by being TUPER transfer to a new company.

Under the current circumstances, with staff being furloughed, and the start date being crucial for any claim, the type of insolvency becomes more important. If a company is in administration, the administrator will be able to apply for support under the Cover Job Retention Scheme (like any other employer that qualifies) but only where there is a reasonable likelihood of the Administrator bringing the employee back to work after furlough. 

In the first case to look at the Scheme the High Court in Carluccio’s Limited (in administration) [2020] held that administrators who apply for a grant under the Scheme are able to apply funds to the payment of wages in super-priority to all other costs and expenses of the administration.

These means Administrators are able to utilise this scheme to cover costs of trading period (or lock down period whilst sold) if there is a prospect of saving jobs

If you are considering insolvency, please speak to a licensed insolvency practitioner to understand all the key decisions and the implications particularly at this time. We offer a free consultation and are happy to talk through the options available to directors call 07972928153 or email lucinda@lminsolvency.co.uk


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COVID-19 LARGE BUSINESS INTERRUPTION LOAN SCHEME (CLBILS)

7/4/2020

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THE HEADLINES

​THE ANNOUNCEMENT
On 3 April 2020 the chancellor announced an extension of the Covid-19 Business Interruption Loan Scheme ("CBILS") to support larger companies that fall in the gap between the CBILs scheme supporting those with annual turnover unto £45 million per annum and those support through the Covid Corporate Financing Facility) CCFF, which are of investment grade.

As such the Scheme is aimed at supporting large sized Enterprises with a turnover between £45 million and £500 million per annum to access loans, overdrafts, invoice finance and asset finance of up to £25 million

​In contrast to CBILS interest will be payable at commercial rates. ​
Picture
WHAT THE SCHEME OFFERS
  • Loans, overdrafts, asset finance and other working capital facilities
  • Finance of up to £25 million
  • Terms TBC
  • Not interest free like CBILS - Interest will be charged at commercial rates
  • No personal guarantees required on facilities below £250,000
  • On lending above £250,000 personal guarantees are at the lenders discretion (principle private residences are excluded as a source of security).

ELIGIBILITY

KEY FACTS
Each lender will have there own criteria, but to eligible to apply your business must meet the following;
  • ​Be UK based business 
  • with a turnover of between £45 million and £500 millionper annum; and
  • ,Meets the British Business Bank eligibility criteria that businesses: must
    • operate in an eligible industrial sector, a few exceptions apply, which are;
      • Banks and building socities
      • insurers and reinsurers (not brokers0
      • Public-sector orgainsations
      • Employer, professional, religious or political membership organisations
      • Trade unions
    • other may have reduced thresholds (and should seek advice on eligibility);
      • Agricultural and fishing
      • freight transport by road
    • have sound borrowing proposal but unable to meet a lender's normal lending requirements for a fully commercial loan
    • Must have a viable proposal to trade out of difficulty in due course.

WHEN

Launched April 2020

​GOVERNMENT BACKED

Government will be providing lenders with a partial guarantee of 80% on each loan to give lenders the confidence to provide finance to SMEs. The guarantee is not for the business, as such the business (and its directors) remain responsible for repaying the finance.

Under CBILS The scheme has been updated so that personal guarantees cannot be requested for lending below £250,000 (await confirmation the same applies for CLBILS).

For facilities above £250,000 lenders may request personal guarantees, whereby the directors are personally liable for repaying the loan if the business is unable to do so. 

​Security (usually by way of a debenture or floating charge) this could be security of business assets or personal assets but the directors primary residential property is excluded.
Picture
IMPORTANT - CAUTIONARY NOTE: The business and directors are responsible for repaying the loan. The borrower always remains 100% liable for the debt.
​Directors may need to provide a personal guarantee or security (of company or personal assets, but not Primary Residential Property). 

​If the business cannot repay the loan, the directors may be personally liable. The lenders have a duty to pursue all options to recover the funds before calling on the government backing.

lenders

A list of accredited lenders will be published on the British Business Bank Website.

Click here for a full list of lenders, that can be searched /filtered by type of lending and region >
​
Like any loan application, lenders will require wealth of information, which will vary depending on the type of finance and the terms of the finance offered, but is likely to include;
  • Last 2 or 3 years accounts
  • Management accounts
  • Personal bank statements
  • Statements of income and expenditure
  • Statements of Assets and Liabilities
  • Lending requirement, and more

HOW TO APPLY

  1. Each lender will  have their own terms  and lending limits. Approach one or more participating lenders to discuss borrowing terms. These can be your existing lender, or another new lender. 
  2. Approach lenders via their own websites, but ensure they are accredited lenders for CLBILS
  3. The lender has the authority to decide whether to offer you finance
  4. If the lender turns you down, you can approach alternative lenders under the scheme.

​REPAYMENT AND FEES

Under this scheme Interest and capital repayments will commence immediately. There is no interest free period or repayment holiday.
Picture
IMPORTANT - CAUTIONARY NOTE: You will however have capital and interest repayments that will start as soon as you have taken the finance, with loan repayments starting as early as 30 days from commencement of the loan.
​
Therefore, remember you will need to factor capital plus interest repayments into your cash flow forecasting from the start of the loan repayments. Making sure you can service the loan in an uncertain time will mean you need to consider a number of scenarios for future trade depending on how long the pandemic may last.

FURTHER GUIDANCE

See government link https://www.gov.uk/government/news/chancellor-expands-loan-scheme-for-large-businesses?utm_source=e1eae5d2-6726-4b01-a7b4-29c502d3659a&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

DISCLAIMERS - DUE TO THE RAPIDLY CHANGING CIRCUMSTANCES WITH COVID-19, WE ARE UTILISING INFORMATION FROM GOVERNMENT SOURCES, THESE ARE TRUSTED SITES, BUT WE CANNOT BE HELD RESPONSIBLE FOR ANY INCORRECT INFORMATION OBTAINED FROM THEM OR INFORMATION ON LINKS TO THOSE SITES. THE INFORMATION PROVIDED HERE IS GENERIC IN NATURE, AND NOT SPECIFIC TO YOUR CIRCUMSTANCES, YOU SHOULD SEEK PROFESSIONAL ADVICE BEFORE ACTING ON ANY OF THE INFORMATION CONTAINED ON THIS WEBSITE AND IN PARTICULAR IN OUR COVID-19 HUB. ​

PLEASE CONTACT US... WE ARE HERE TO HELP
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COVID-19 BUSINESS INTERRUPTION LOAN SCHEME (CBILS)

1/4/2020

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THE HEADLINES

​THE ANNOUNCEMENT
At the Budget 2020, the Chancellor announced that a 'Coronavirus Business Interruption Loan Scheme' (CBILS) will temporarily replace the Enterprise Finance Guarantee (EFG), and was launched 23 March 2020.

The Scheme is aimed at supporting Small and Medium sized Enterprises (SMEs ) to access loans, overdrafts, invoice finance and asset finance of up to £5 million (There is a separate scheme for large companies with a facility up to £25 million).

Picture
​These loans will be interest free for 12 months and for up to 6 years.

WHAT THE SCHEME OFFERS
  • Loans, overdrafts, asset finance and other working capital facilities
  • Finance of £1,000 to £5 million
  • Loans and asset finance over a term of 3 months to 6 years (3 years for working capital facilities)
  • Interest free for 12 months and no fees for 12 months ( some lenders also offering capital holidays for 6 - 12 months)
  • No personal guarantees required on facilities below £250,000
  • On lending above £250,000 personal guarantees are at the lenders discretion (principle private residences are excluded as a source of security).


ELIGIBILITY

KEY FACTS
Each lender will have there own criteria, but to eligible to apply your business must meet the following;
  • ​Be UK based business 
  • with a turnover less than £45 million per annum; and
  • ,Meets the British Business Bank eligibility criteria that businesses: must
    • operate in an eligible industrial sector, a few exceptions apply, which are;
      • Banks and building socities
      • insurers and reinsurers (not brokers0
      • Public-sector orgainsations
      • Employer, professional, religious or political membership organisations
      • Trade unions
    • other may have reduced thresholds (and should seek advice on eligibility);
      • Agricultural and fishing
      • freight transport by road
    • Must generate more than 50% of turnover from trading activity
    • have sound borrowing proposal but unable to meet a lender's normal lending requirements for a fully commercial loan
    • Previously received de minimise state aid does not impact eligibility for CBILS
    • Must have a viable proposal to trade out of difficulty in due course.

Click here for a copy of the British Business Bank Quick Eligibility Checklist for SMEs>

WHEN

Launched 23 March 2020 and will be available for 6 months

GOVERNMENT BACKED

Government will be providing lenders with a partial guarantee of 80% on each loan to give lenders the confidence to provide finance to SMEs. The guarantee is not for the business, as such the business (and its directors) remain responsible for repaying the finance.

The scheme has been updated so that personal guarantees cannot be requested for lending below £250,000

For facilities above £250,000 lenders may request personal guarantees, whereby the directors are personally liable for repaying the loan if the business is unable to do so. 

​Security (usually by way of a debenture or floating charge) this could be security of business assets or personal assets but the directors primary residential property is excluded.
​
Picture
IMPORTANT - CAUTIONARY NOTE: The business and directors are responsible for repaying the loan. The borrower always remains 100% liable for the debt.
​Directors may need to provide a personal guarantee or security (of company or personal assets, but not Primary Residential Property). 

​If the business cannot repay the loan, the directors may be personally liable. The lenders have a duty to pursue all options to recover the funds before calling on the government backing.


SCHEME UPDATED - The scheme was updated so that personal guarantees are not required for lending under £250,000. Also the scheme is open to businesses who would have previously met the requirements for a commercial loan, but were not eligible for CBILS, and where insufficient security was previously a reason for rejection - we recommend businesses previously rejected on these grounds, re-apply

LENDERS

With over 40 accredited lenders these vary from well known high street banks and specialist asset based lenders to lesser known organisations that offer funding support. Lenders include Barclays, RBS, Metro Bank, Hitachi Capital Business finance and many more. 
​
Click here for a full list of lenders, that can be searched /filtered by type of lending and region >
​
Like any loan application, lenders will require wealth of information, which will vary depending on the type of finance and the terms of the finance offered, but is likely to include;
  • Last 2 or 3 years accounts
  • Management accounts
  • Personal bank statements
  • Statements of income and expenditure
  • Statements of Assets and Liabilities
  • Lending requirement, and more

​HOW TO APPLY

  1. Each lender will  have their own terms  and lending limits. Approach one or more participating lenders to discuss borrowing terms. These can be your existing lender, or another new lender. 
  2. Approach lenders via their own websites, but ensure they are accredited lenders for CBILS
  3. The lender has the authority to decide whether to offer you finance, if it can do so on normal commercial terms without utilising the scheme they will
  4. If the lender turns you down, you can approach alternative lenders under the scheme.

​REPAYMENT AND FEES

On a plus side, Government are covering interest for the first 12 months making the initial repayments lower for lenders,. In addition, any lender-levied fees will also be paid in the first 1 2 months, so smaller businesses will benefit from no upfront costs
Picture
IMPORTANT - CAUTIONARY NOTE: You will however have capital repayments that will start as soon as you have taken the finance, with loan repayments starting as early as 30 days from commencement of the loan.
​
Therefore, remember you will need to factor capital repayments into your cash flow forecasting from the start of the loan repayments and capital plus interest after 12 months. Making sure you can service the loan in an uncertain time will mean you need to consider a number of scenarios for future trade depending on how long the pandemic may last.

WHAT WE KNOW SO FAR - We are aware some lenders are offering capital repayments of 6-12 months, so you may wish to shop around for the best terms for you (all are on individual basis, like any loan)

​

​COMPARISON TO ENTERPRISE FINANCE GUARANTEE SCHEME (EFG)

As mentioned the scheme is a temporary replacement of the existing EFG Scheme, or recent blog looks at the differences and added benefits of the CBILS.
Blog - 27/03/2020 - Whats better about the Coronavirus Business Interruption Loan Scheme >

​FREQUENTLY ASKED QUESTIONS

WILL I NEED TO GIVE SECURITY?
For facilities under £250,000 security will not be required. For lending over £250,000 security requests are at the discretion of the lender. 
​

For lending over £250,000 generally security will be sort by the lender, this may be against company assets or in the form of a Personal Guarantee.
Lenders cannot seek security over Primary Residential Property (PPR) of a director as security under this scheme
You may wish to  consider independent professional advice in respect of the facility terms and security.

WILL I HAVE TO PROVIDE A PERSONAL GUARANTEE (PG)?
Again requests for Personal Guarantees are at the discretion of the lender for facilities above £250,000. However the scheme has been updated so that no security will be required for lending under £250,000
Lenders cannot seek security over Primary Residential Property (PPR) of a director as security under this scheme
You may wish to  consider independent professional advice in respect of the facility terms and security.

WHAT HAPPENS IF I ALREADY HAVE AN EFG FACILITY?
Any query regarding your existing EFG Scheme should be directed to your current provider and not the British Business Bank.
Refinancing an existing  EFG Facility to a CBILS Facility will be at the discretion of your current provider, and you should contact them directly.
The EFH Scene is now temporarily suspended, with new lending being offered under CBILS

CAN START-UPS APPLY?
Potentially, but for businesses in the first two years of trading, Start up Loans under the British Business Bank Start Up Loans Programme may be more suitable, which offer loans of between £500 to £25,000 at 6% interest per annum.

CAN SOLE TRADERS / FREELANCERS APPLY?
Yes, the scheme is open to enterprises trading in the UK, but there are some conditions. The eligibility detailed above on this page applies and the business activity must be operated through a separate business bank account.

IS THERE A SET UP FEE?
There will be no set up fee for the business, these will be covered by the scheme.

​FURTHER GUIDANCE

​See government link https://www.gov.uk/guidance/apply-for-the-coronavirus-business-interruption-loan-scheme

DISCLAIMER - DUE TO THE RAPIDLY CHANGING CIRCUMSTANCES WITH COVID-19, WE ARE UTILISING INFORMATION FROM GOVERNMENT SOURCES, THESE ARE TRUSTED SITES, BUT WE CANNOT BE HELD RESPONSIBLE FOR ANY INCORRECT INFORMATION OBTAINED FROM THEM OR INFORMATION ON LINKS TO THOSE SITES. THE INFORMATION PROVIDED HERE IS GENERIC IN NATURE, AND NOT SPECIFIC TO YOUR CIRCUMSTANCES, YOU SHOULD SEEK PROFESSIONAL ADVICE BEFORE ACTING ON ANY OF THE INFORMATION CONTAINED ON THIS WEBSITE AND IN PARTICULAR IN OUR COVID-19 HUB. ​

PLEASE CONTACT US... WE ARE HERE TO HELP
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COVID JOB RETENTION SCHEME

1/4/2020

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THE HEADLINES

​THE ANNOUNCEMENT
 At the Budget 2020, the Chancellor announced an unprecedented package of measures to seeing companies receive grants to pay their workers 80% of their salaries up to a limit of £2,500 per month.

The grant would be for those that can no longer work due to restrictions as a result of the outbreak, but would be retained as employees by their employer. i.e. "Furloughed Workers"

Picture
This scheme has probably seen the most changes and clarification being issued since its launch, together with a very similar scheme for Self employed and freelancers being launched (this scheme does not cover Self employed)

THE SUPPORT
Employers can claim 80% of furloughed workers (employees on leave of absence) usual monthly wage costs, up to £2,500 per month, (£576.92 per week) per employee, plus the associated Employer National Insurance contributions and minimum automatic enrolment pension contributions on that wage
​

ELIGIBILITY

KEY FACTS
  • All UK businesses are eligible, including;
    • businesses
    • single director companies and owner manged companies
    • charities
    • recruitment agencies (agency workers paid through PAYE)
    • public authorities
    • Except those that receive public funding for staff costs
  • Furloughed employees must have been on the PAYE payroll on or before 19 March 2020 (originally 28 February 2020) and notified to HMRC on a RTI submission on or before 19 March 2020; and 
  • Employees on any type of contract are covered:
    • Full-time employees
    • Part-time employees
    • Employees on agency contracts
    • Employees on flexible or zero-hour contract
  • The scheme also covers employees who have been made redundant since 19 March 2020 (originally 28 February 2020), if they are rehired by their employer (as a result of the scheme being announced)
  • You must have a UK bank account

The following are not eligible under this scheme;
  • Employees hired after 19 March 2020 (originally 28 February 2020)
  • Self employed and freelancers - see separate scheme
  • Anyone whilst on Statutory Sick Pay
Picture
IMPORTANT - CAUTIONARY NOTE: We recommend you seek professional legal advice in respect of employment contracts and the ability to furlough employees - a change to their employment contract may be required, depending of  the terms

WHEN

​The scheme will cover the cost of wages backdated to 1 March 2020, and was initially open for 3 months. This has now been extended to 30 June 2020

​The scheme can be used at anytime during this period, and opened for claims on 20 April 2020

CRITERIA

  • Employees must not work for their employer during a period of furlough
  • Employees must be furloughed for a minimum period of 3 weeks
  • Furlough (as well as the amount to be paid whilst furloughed) must be agreed with employees, it cannot be unilaterally imposed. The agreement needs to recorded in writing and a record kept.
  • At a minimum, employers must pay a furloughed employee the level of the Government contribution to be eligible for the grant i.e. the 80%. It is up to the employer whether they pay the employee the reminder up to their normal wage (and subject to employment contracts and any furlough agreement). 
Picture
IMPORTANT - CAUTIONARY NOTE: We recommend you seek professional legal advice with regards the selection to employees to furlough

HOW TO APPLY

​To access the scheme you need to:
  • Designate affected employees as 'furloughed workers'
  • Notify employees of the change in status to 'furloughed' - Changing the status of employees remains subject to existing employment law and depending on the employment contract, may be subject to negotiation. 
  • submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal which launched Monday 20 April 2020
  • See the guidance below for step by step guides to claiming
  • It is expected that the average claim will take 4 - 6 days to process

We recommend you seek professional advice in respect of furloughing workers and the terms of contracts of employment, and read the detailed guidance provided by HMRC and the Government below.

DETAILED GUIDANCE AND UPDATES​

GUIDANCE FOR EMPLOYERS
Ahead of the portal opening, HMRC launched its calculator tool to help firms identify the level of grant they are entitled too through the scheme
​Here is a link to the the calculator tool >

Check if you can claim for your employees wages through CJRS - Latest guidance for employers (updated 17 April 2020)>
There is also new guidance (published 17 April 2020) on how to calculate the 80% of wages for furloughed employees to claim through CJRS, see the guidance here >
Together with a Step by Step guide to making a claim, together with examples of claims can be found here >

GUIDANCE FOR EMPLOYEES
Check if your employer can use CJRS - Latest guidance for employees (updated 17 April 2020)>

​FRAUDULENT USE OF THE SCHEME & WHISTLE BLOWING

HMRC has confirmed that:
  • a hotline will be made available for staff to blow the whistle on employers asking employees to work while they are on furlough;
  • it will be able to take criminal action against employers if they knowingly try to defraud HMRC;
  • in order to further avoid fraud, there will be a 4 to 6  day processing period for claims to allow HMRC to conduct background checks to flag high-risk claims

​REPAYMENT AND FEES

This is a grant scheme so there is no repayment.

​FREQUENTLY ASKED QUESTIONS

ARE DIVIDENDS COVERED?
The scheme does not cover dividends, only salaries through the PAYE system

WHO MAKES THE CLAIM AND WHO RECEIVES THE MONEY?
The employer makes the claim, and receives the monies as a reimbursement of employees wages

WHAT IF I HAVE MORE THAN ONE JOB ?
While we understand that an employee who is furloughed can do no work at all, our current understanding is that the employee can hold a separate employment with a different and unconnected employer which will be unaffected.

WHAT IS A 'FURLOUGHED EMPLOYEE'?
“Furloughed” is not a term normally used in UK employment law. The Direction now sets out the definition of “furloughed employee” in paragraph 6.1 of the Direction:
“An employee is a furloughed employee if:-
(a)   the employee has been instructed by the employer to cease all work in relation to their employment,
(b)   the period of which the employee has ceased (or will have ceased) all work for the employer is 21 calendar days or more, and
(c)   the instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease.”
A furloughed employee will remain on the employer’s pay-roll if they are furloughed but they should not undertake any work for the employer during this time.

CAN AN EMPLOYEE GO ON AND OFF FURLOUGH?
The minimum length of furlough is three weeks (21 calendar days) but an employee can be furloughed more than once. This means they can go on and off furlough subject to the three week minimum. Accordingly it would be open to employers to rotate employees on to furlough.

IS IT A REQUIREMENT THAT THE EMPLOYER PAYS THE 80% OR £2,500 CLAIMED?
Yes. The Direction states (para 7.1(b)(ii)) that if the employee is being paid less than £2,500 they must be paid “an amount equal to at least 80% of the employee’s reference salary”.
Paragraph 7.12 of the Direction goes on to provide that if between the 1 March and 18 April the employer has paid the employee less than 80% of their regular wages as required under the Direction (for those on less than £2,500) then the employer can pay the difference and it will satisfy the requirement of the Scheme.

CAN AN EMPLOYER CLAIM FROM HMRC BEFORE IT ACTUALLY PAYS THE EMPLOYEE?
The Direction states that the employer can claim for earnings which it “reasonably expects to be paid”. However, it cannot claim for any salary which is “conditional on any matter”. This seems to permit the employer deferring payment to the employee in order to claim the reimbursement but prohibits any arrangement whereby the employee was only entitled to be paid on condition the reimbursement is received from HMRC.

COULD AN EMPLOYER ASK VOLUNTEERS TO GO ON FURLOUGH ?
Yes

​FURTHER GUIDANCE

Guidance for Employers by Federation for Small Business >

DISCLAIMER - DUE TO THE RAPIDLY CHANGING CIRCUMSTANCES WITH COVID-19, WE ARE UTILISING INFORMATION FROM GOVERNMENT SOURCES, THESE ARE TRUSTED SITES, BUT WE CANNOT BE HELD RESPONSIBLE FOR ANY INCORRECT INFORMATION OBTAINED FROM THEM OR INFORMATION ON LINKS TO THOSE SITES. THE INFORMATION PROVIDED HERE IS GENERIC IN NATURE, AND NOT SPECIFIC TO YOUR CIRCUMSTANCES, YOU SHOULD SEEK PROFESSIONAL ADVICE BEFORE ACTING ON ANY OF THE INFORMATION CONTAINED ON THIS WEBSITE AND IN PARTICULAR IN OUR COVID-19 HUB. ​

PLEASE CONTACT US... WE ARE HERE TO HELP
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    Author

    Lucinda Matkin - Licensed Insolvency Practitioner & Chartered Accountant

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