What contractors may have missed in Sunak’s Winter Economy Plan

One of the less well-publicised measures introduced in response to Covid-19 has been the government’s Coronavirus Future Fund, writes Gareth Wilcox, partner at Opus Restructuring and Insolvency. This scheme is designed to issue loans between £125,000 to £5 million to ‘innovative’ companies which are facing financing difficulties due to the coronavirus outbreak.

Coronavirus Future Fund (cont.)

The loans under this scheme are conditional on equal match funding being obtained from private investors, but are designed to support businesses that are unable to access other schemes. This is ordinarily since they are either pre-revenue or pre-profit at the current time.

The following eligibility criteria apply:

  • The business must be UK-based, incorporated on or before December 31st 2019;
  • must have raised at least £250,000 in equity investment from third-party investors in the last five years
  • have none of its shares traded on a regulated market, or other listing venue; and either
  • have half (or more) employees being UK based; or
  • half or more revenues generated by UK sales.

The scheme was initially only open for applications until the end of September 2020 but under the Winter Economy Plan, it has now been extended until November 30th 2020, in line with CBILS and BBILS.

This scheme may be of use to contractors or consultants whose engagers are struggling to obtain conventional equity funding for projects in the current climate. The time window is still short, however, and it should be noted that funds under the scheme cannot be used for:

  • Repaying any borrowings from a shareholder or a shareholder related party
  • Paying any dividends or other distributions
  • Making any bonus or other discretionary payment to any employee, consultant or director of the company other than as previously contracted or as paid during the ordinary course of business
  • Paying any advisory or placement fees or bonuses to any corporate finance entity or investment bank (or similar service provider on monies advanced from the Future Fund.)

Kickstart Scheme

Another coronavirus-inspired government initiative which seems less on the radar than it ought to be is the Kickstart scheme, which starts in November 2021. It is designed to offer 6-month placements for individuals aged 16-24 who are claiming Universal Credit and at risk of long term unemployment.

Under the scheme, employers offering new roles to such individuals will receive funding for 100% of the relevant National Minimum Wage for 25 hours a week, plus associated employer National Insurance contributions and employer minimum auto-enrolment pension contributions.  There is also £1,500 per job placement available for setup costs, support and training. The objective, therefore, is that all costs associated with the employment will be covered.

The roles must be ‘new’ and cannot replace existing roles, or cause existing employees or contractors to lose their employment.  Roles must be offered on a basis of a minimum 25 hour per week, six-month contract, paying at least minimum wage (for the age group) and must not require extensive training prior to the placement. 

Additionally, each employer applicant must demonstrate how they will help participants improve their skills, experience and in effect, future employability.

Any employer creating more than 30 placements can apply directly whilst other applicants must find a local employer contact, usually within the local authority.

While clearly survival is on the forefront of many businesses at this time, this scheme could be a useful tool in the arsenal of HR consultants struggling to gain support for additional staffing.  This at a time when many fear for the prospects of young people such as those that the scheme is designed to support. Or the considerable number of young people who may have recently started self-employment but are therefore not eligible for the Self-Employed Income Support Scheme.

Self-employed Income Support Scheme (SEISS)

For sole traders and not limited companies, the SEISS is designed to cover 20% of average monthly trading profits for self-employed individuals (capped at £1,875) in its next third phase. But it’s also been extended to April 2021 (for which the profit coverage level is yet to be announced). While not relevant to PSCs, it is somewhat reassuring that despite fears that the scheme would conclude alongside the CJRS, the government used its Winter Economy Plan to extend it, in a show of support for independent, freelance workers. The twenty per cent coverage for many self-employed traders does not go far enough to meeting the shortfalls they have suffered from Covid-19, yet at least some government support will continue to be offered.

Reduced VAT for Tourism and Hospitality

Finally, the 5% rate on supplies of food and non-alcoholic drinks from restaurants, pubs, bars and cafés has also been extended to March 31st 2021. While this does not appear to be of immediate relevance for contractors, it is worth noting that a lower proportion of the total spent on sustenance and similar costs is now recoverable. Therefore, care should be taken when submitting returns to ensure that there are no amounts overclaimed.

Friday 2nd Oct 2020
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Written by Gareth Wilcox

Gareth Wilcox is a Partner and Licensed Insolvency Practitioner with Opus Business Services Group.  As well as heading up Opus’ Birmingham office, he oversees the solvent restructuring team and has significant experience in this area

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