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Knowing your options: Financial support during COVID-19

The industry has now – rightly – been recognised as critical in ensuring the most vulnerable in our society remain safe. Whilst operators will continue in most senses to be operating ‘business as usual’ there will inevitably be an impact from a number of factors.

The health and care sector faces unique pressures during the COVID-19 pandemic.

Rachael Anstee, Partner at Hazlewoods sets out the key aspects operators should be considering in managing their financial affairs during these exceptional times.

In these uncertain times, it is important to review the position of your business to understand the potential risks, to give some thought to an emergency business plan and to understand what other help is available to you to aid your business continuity.

Here is our assessment of the most important areas providers need to consider.

Track Key Performance Indicators (KPIs)

It is well worth ensuring you monitor KPIs very closely during this period (potentially daily but at least weekly). Think about any indicators that would be particularly important to consider at this time, such as staff attendance statistics, details of staff self-isolating or on sick leave, levels of agency usage and any other aspects that might be important to understand at as early a stage as possible.

Statutory sick pay

The Government has announced that ‘eligible’ employees diagnosed with COVID-19 or ‘eligible’ employees who are unable to work as they are self-isolating in line with Government advice due to displaying COVID-19 symptoms, will be entitled to statutory sick pay (SSP) which will be payable from day one.

Those employees who are not eligible (earnings of less than £118 per week) will be able to make a claim for universal credit or contributory employment and support allowance.

Management of cash flow

Cash management is likely to be crucial during the pandemic and we would strongly advocate preparing and maintaining a detailed forward-looking cash flow in order to ensure continued liquidity during the crisis. We have free tools on our website that might help you to prepare this.

It is probably too early in the crisis to see any noticeable trends or issues arising, such as interruptions in local authority funding payments – although it is conceivable there could be delays as councils have to manage their own issues around staff absence due to self-isolation and sickness.

Aspects which operators may want to explore in order to carefully plan treasury management might include:

  • Deferring rates payments.
  • Agreeing rent and other expenditure deferrals.
  • Deferring capital expenditure.
  • Updating your credit control procedures.
  • Reviewing any contractual obligations and advance orders you may have in place.
  • Talking with key suppliers. These conversations may be easier than you think.

The Government has also announced certain measures that operators could potentially take advantage of in order to assist with shorter term funding and cash flow pressures.

If you have concerns about tax liabilities, a helpline has been set up to specifically address these situations (0800 024 1222) and measures can be put in place to help you.

Funding and loans

Small- or medium-sized businesses may benefit from a new temporary Coronavirus Business Interruption Loan Scheme (CBILS), which launched on Monday 23rd March 2020.

This is aimed at supporting SMEs with turnover up to £45m and businesses can approach a list of 40 accredited lenders with a sound borrowing proposal.

The scheme supports businesses in accessing bank lending and overdrafts. Loans of up to £5m are available, each provided with a guarantee of 80% for which businesses and banks will not be charged. Furthermore, the Government will cover the interest payments for the first 12 months.

It will be important to assess the relative merits of each lender’s scheme as we have heard of instances of personal guarantees also being required in certain cases for the element not covered by the government guarantee. However, the Chancellor has since stated that no personal guarantees should be sought on loans of less than £250,000.

For larger businesses being affected by the short-term funding squeeze, there is the option of the COVID-19 Corporate Financing Facility (CCFF).

Funded through the Bank of England, the scheme is available to all non-financial companies that meet the eligibility criteria.

Coronavirus job retention scheme

Whilst it might be less relevant to social care operators that continue to attempt to operate as usual, all UK businesses that had staff employed within a PAYE payroll scheme on or before 28th February 2020 are eligible for the coronavirus job retention scheme, which will part pay the wages of employees who may have needed to be laid off due to financial pressures.

Businesses will receive a grant for 80% of a furloughed employee’s earnings (capped at £2,500 per month), plus the associated employer’s national insurance contributions (NIC) and minimum automatic enrolment employer pension contributions on that subsidised wage.

Employees on sick pay or who are self-isolating cannot be furloughed but can be furloughed afterwards. Employees who are shielding for 12 weeks in line with Public Health England guidance can be placed on furlough.

It is a temporary scheme, expected to last for at least three months, starting from 1st March 2020. It can be used at any time during this period using a portal that HMRC have indicated will be live from 20th April.
Businesses will need to identify employees as ‘furloughed workers’, and should discuss with their employees, and make any changes to, the employment contract by agreement (seeking legal advice and negotiating with union representatives where necessary).

Payments received by a business under this scheme are made to offset normal deductible revenue expenditure. They will therefore be treated as taxable profits for income tax and corporation tax purposes, in accordance with normal principles.

To the extent that operators find that they are in the position that members of staff are unable to undertake their duties as normal then this might be of benefit. However, the guidelines are not clear as to whether operators receiving public funding will be entitled to furlough staff.

The guidance currently states, ‘Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.’

We hope that this key aspect will be clarified to ensure that care operators receive fair and equal access to this key measure.

If you are in doubt about your company’s entitlement to join this scheme, we suggest that you contact your employment lawyer. However, we hope that the guidance will be clarified for the benefit of the sector in the near future.

VAT deferral

For any operators that may be VAT registered, the next quarterly VAT payments have been deferred by the Chancellor such that no VAT will be due between now and the end of June. Instead, businesses will have until 31st March 2021 to settle this deferred liability.

Any payments deferred during the suspension period will need to be settled before the end of the 2020/21 financial year (31st March 2021).

Keeping up

The support that is being offered to businesses is currently changing almost daily. Many of the measures may not be perfect but importantly they have been rolled out at speed to address a rapidly evolving situation. If you would like to discuss any of the support schemes available or would like any assistance in accessing these measures we would be delighted to offer our support during these unprecedented times.

Useful Resources

HM Government Business Support:

Government guidelines for employees, employers and businesses:

HMRC dedicated coronavirus helpline:

World Health Organisation – country and technical guidance:

Rachael Anstee is Partner at Hazlewoods. Email: Twitter: @Hazlewoods

Have you used any of the financial support that has been made available to businesses during coronavirus? What are your experiences? Let us and others know by commenting below.

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