Author: Ketan Umretiya

The new Recovery Loan Scheme was launched on 6 April 2021. The new scheme allows businesses of any size to access loans and other kinds of finance between £25,000 and £10 million. The scheme will remain open until 31 December 2021 (subject to review).

The scheme is intended to provide further support to businesses to help them recover and grow following the disruption of the pandemic and the end of the transition period. The new scheme can be used as an additional loan on top of previous support received from other schemes such as the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme

Under the scheme, the government will provide lenders with a guarantee of 80% on eligible loans provided to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.

The following finance options are available:

• Term loans and overdrafts are available between £25,001 and £10 million per business.
• Invoice finance and asset finance are available between £1,000 and £10 million per business.

Finance terms are for up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years. No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security. 26 lenders have already been accredited for the scheme and more are expected shortly.

HM Treasury has published a further Treasury Direction made under the Coronavirus Act 2020, ss. 71 and 76, which modifies and extends the effect of the Self-Employment Income Support Scheme (SEISS). The new Direction mainly deals with the expansion of the SEISS from 1 February 2021 to 30 April 2021, officially referred to as the SEISS Grant Extension 4 (SEISS 4). The online portal for making a claim will open in late April and HMRC is notifying taxpayers of the earliest date they can apply on a staggered basis. The final date for making a claim for the SEISS 4 will be 1 June 2021. 

The self-employed will receive 80% of average trading profits for February, March and April 2021. This will mean a maximum grant for the three months of £7,500 made available to those who meet the eligibility requirements. The SEISS 4 grant is available to the newly self-employed who filed a 2019-20 tax return by midnight, 2 March 2021. 

To be eligible for an SEISS 4 payment, self-employed individuals, including members of partnerships, must meet the following criteria:

(a) carry on a trade the business of which has been adversely affected by reason of circumstances arising as a result of coronavirus or coronavirus disease,
(b) have delivered a tax return for a relevant tax year on or before 2 March 2021,
(c) have carried on a trade in the tax years 2019-20 and 2020-21,
(d) intend to continue to carry on a trade in the tax year 2021-22,
(e) if that person is a non-UK resident or has made a claim under section 809B of ITA 2007 (claim for remittance basis to apply), certify that the person’s trading profits are equal to or more than the person’s relevant income for any relevant tax year or years,
(f) be an individual, and
(g) meet the stated profits condition.

A fifth and final grant covering the period from 1 May – 30 September 2021 will see those whose turnover has fallen by 30% or more continuing to receive the full 80% grant whilst those whose turnover has fallen by less than 30% will receive a 30% grant.

Self-employed individuals (including partnerships) who have overclaimed the Self Employed Income Support Scheme (SEISS) must pay back the overpayment to HMRC. The rules for repaying HMRC state that you must tell HMRC if you were not eligible to have claimed the grant. 

For example:

• for the first or second grant, your business was not adversely affected
• for the third or fourth grant, your business had not been impacted by reduced activity, capacity or demand or inability to trade in the relevant periods
• you did not intend to continue to trade
• you’ve incorporated your business since 5 April 2018

You must also tell HMRC if you:

• received more than we said you were entitled to
• amended your tax return on or after 3 March 2021 in a way which means you’re entitled to a lower grant than you received

If you have overclaimed you must tell HRMC within 90 days of receiving the grant or face additional penalties. If the amount in question is £100 or less then there is no requirement to notify HMRC or pay back any grant received. 

All qualifying self-employed businesses can continue to claim SEISS grants until 30 September 2021, if they continue to be adversely affected by the coronavirus pandemic. A fourth grant covers the period from 1 February 2021 to 30 April 2021 and a fifth and final grant will cover the period from May onwards.

The fourth grant will provide support covering 80% of average trading profits, up to a maximum of £7,500 for those who meet the eligibility requirements. The fifth and final grant will see those whose turnover has fallen by 30% or more continuing to receive the full 80% grant whilst those whose turnover has fallen by less than 30% will receive a 30% grant.