Thanks to COVID-19, many contractors have found themselves out of work and, as a result, out of pocket. It has also appeared that the wellbeing of contractors and their limited companies have not been at the forefront of the government’s mind. In the words of our Head of Tax Andy Vessey, “it would appear that contractors operating through their own PSC’s have been left out in the cold”. However, recent changes to the Coronavirus Business Interruption Loan Scheme (CBILS) have made help a little more accessible to PSCs struggling through the lockdown.
What’s included in the scheme?
The Coronavirus Business Interruption Scheme (CBILS) was introduced to provide support to SMEs (small and medium-sized enterprises) that are losing revenue due to the COVID-19 pandemic. Put simply, this scheme enables businesses to claim bank loans, overdrafts and invoice/asset finance. The scheme is built around the premise that the government provides banks with a guarantee of 80%. The government will also cover the first year of interest payments and any additional lender levied fees. This leaves businesses with no upfront costs and lower initial repayments.
The first version of this scheme, announced in the 2020 budget, was only open to those who had already been rejected for a loan on commercial terms. A commercial loan, in essence, would keep your company afloat but would amount to quite a debt. Why should you take onboard such debt for something that is not your fault?
What changes have been made to CBILS?
On the 3rd of April, Chancellor Rishi Sunak announced the changes that were to be made to the Coronavirus Business Interruption loan scheme. The news that the scheme was to be extended to benefit more small businesses was more than welcome.
So, exactly what changes have been made?
- Businesses are no longer expected to prove they have felt the effects of COVID-19, they can now self-certify.
- Banks are no longer able to ask for personal guarantees from facilities under £250k
- Banks can still request personal guarantees for facilities above £250k, however, recovery of such is capped at 20% of the outstanding balance of the CBILS facility[.
- There are automated processes in place to help with loans under the value of £30k.
- Some lenders have even motioned that they won’t be charging any early repayment charges or arrangement fees.
One of the most notable changes overall is that the scheme will from now on be supporting lending to smaller businesses. There was even an admission that lenders would still be supported to lend to those businesses who were previously denied due to them being financially secure or being eligible for the commercial loan.
In addition to this, by not having to put down a personal assurance on a loan under £250k the entire scheme is readily available and means - in theory - that you don’t have to lose your house if you can’t afford to pay it all back after lockdown.
More still needs to be done for PSCs during coronavirus lockdown
While this process has become more streamlined and accessible for those who had previously been forgotten, there's still a considerable gap when it comes to financial aid for limited companies. Contractors have been excluded from the Self-Employment Income Support Scheme (SIESS), so between the CIBLS and Coronavirus Job Retention Scheme (CJRS) - which we explain in full here - PSCs are having to shoehorn currently available help to fit their circumstances. Neither option is far from a perfect fit.
In addition to a range of business insurances including professional indemnity and public liability, Larsen Howie offers a range of IR35 contract and working practices reviews. We also offer representation from Andy Vessey, Head of Tax here at Larsen Howie, should it go to tribunal, as well as training and consultation for businesses that wish to continue working with their invaluable contractor workforce.
For any further information or advice, please call us on 01163 800 400 or drop us an email. Alternatively, take a look around our Knowledge Hub for more IR35 advice, industry news, and contractor guides.