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Business Grants and Tax Relief in 2020- 2021 | Pandemic Aid

Major businesses around the world have suffered during the COVID19 Pandemic. Some have closed down while others had to start working on cost-cutting by either reducing staff or decreasing their operational hours. As demand decreased in many sectors, industries have also tried to adapt accordingly. To relieve the situation for businesses and common people, governments and major corporate companies have introduced various business grants and relief programs.

In this article, We will cover some of the business grants and relief programs that are introduced to support individuals and businesses, including state-owned, corporate, and local programs and schemes.

UNITED KINGDOM, UK

In the UK, there are several programs designed to cushion businesses, either small or medium size ventures, against adverse economic impacts of the Covid-19 Pandemic. Generally, there are four broad classes of the grants and tax reliefs;

UK Government Sponsored Resources

a) Coronavirus Business Interruption Loan Scheme

This temporary scheme was launched on 23rd March 2020. The objective of the scheme is to enable small and medium-sized businesses to access interim support in the form of cash from approved lenders.

Any smaller businesses in the UK that have lost revenue due to the pandemic can qualify for up to five million pounds. This sum is to cushion the cash flow interruption and enable these businesses to remain functional without much strain.

The government does this by guaranteeing loans that the small and medium-sized businesses acquire from the authorized lenders. The guarantee covers 80% of any loan under this category. The government aims to increase lending confidence and does not tax or charge the involved parties for the guarantee.

The main eligibility for this scheme is that the business must be located in the UK and must have an annual turnover not exceeding £345 million. The entire list of eligibility rules can be viewed on the British Business Bank website.

b) Income Tax and VAT Deferrals

The UK government announced income tax and VAT deferrals for businesses effective from 20th March to 30th June 2020. This deferment will be automatic for business during the period expected to be the worst economically. For self-employed individuals, the self-assessment income tax, which should have been due by 31st, July has been deferred until 31st January 2020. During the deferral period, the government shall not charge any fines and/or penalties due to late repayment.

Also relating to this scheme, the HMRC’s Time to Pay Scheme shall also be extended. This will be good for many small and mid-size businesses as it will allow them more time to cover any missed tax payments. To qualify for this, you must be a current taxpayer to the UK government and must have pending tax liabilities. The HMRC’s helpline is always open for any inquiries relating to the payment extension plan.

c) Small Businesses with Employees Affected by COVID-19

The Coronavirus Job Retention Scheme is designed for those businesses that face the possibility of having to lay down some of the employees as a result of the pandemic. Under the scheme, the government allows access to business grants and reliefs so that the affected businesses are able to continue paying a part of the employees’ pay, amid the global pandemic.

To access the funds, the business that seeks the funds needs first to designate the affected employees as furloughed workers, and advise the employees on the change. This is a leave that the business allows its workers during the pandemic, for which the HMRC shall provide 80% of the wage costs to the business. The maximum that a single business can claim this reimbursement is £2,500 per month for furloughed workers.

The government has also allowed small businesses to claim a Statutory Sick Pay (SSP). The SSP is under the condition that the business or the employer is paying employees sick pay directly resulting from Covid-19 sickness.

Additionally, those firms that had not more than 250 employees as of 28th Feb 2020 are qualified for the SSP. The employees benefitting from this will not need to provide a GP order to substantiate their claims, but they may need an isolation note from NHS 111.

d) Self-Employed Individuals Unable to Work Due to Coronavirus

If you are a member of a partnership in the UK or are self-employed and have lost income due to Covid-19, the government allows you some business grants. Through the Self-Employment Income Support Scheme, the government allows you to claim up to 80% worth of your trading profits. The maximum you can claim is £2,500 a month. It is essential to note that since this is a form of income, it is subjected to income tax and the National Insurance contributions. It is, however, non-repayable.

When claiming this grant, the trading profit is determined from the self-assessment tax returns three years prior. To qualify for the grant, the individual must;

·  Have a trading profit not exceeding £50,000, and the profit must be more than half of his/her total income.
·  Have submitted the Self-Assessment tax return for 2018/2019
·  Have been in trade in the tax year 219/2020
·  Be an active trader as at the date of applying for the grant
·  Intend to continue trading through the tax year 2020/2021
·  Have lost the trading income only due to Covid-19 pandemic
·  Convince the HMRC that the business has been negatively affected by the coronavirus

This support scheme premiered on 13th May 2020. This means that the first grant payment will be made in June. For employees who do not qualify for SSP, and whose work has been affected by the pandemic, the government provides a business grant through the Universal Credit and Employment and Support Allowance.

The Universal Credit can cover such things as childcare and housing, for people with savings not exceeding £16,000. The Universal Credit and Employment and Support Allowance, on the other hand, covers the living costs for self-employed people who are unable to work.

Retail and Service Industry Impacted by the Coronavirus

Businesses in the retail and service (leisure and hospitality) industry are set to benefit from cash grants through the Retail and Hospitality Grant Scheme that the government has already announced. The cash grants will be up to £25,000 per single business. The businesses have also been accorded a tax holiday for business rates for the 2020/2021 tax period.

Shops and restaurants and other entertainment ventures in England will benefit from these cash grants and tax holidays.

The grant scheme has defined businesses by rateable value so that the businesses valued at £15,000 and less are eligible for up to £10,000 worth of cash grant. Businesses with a rated value of between £15,000 and £51,000 are set for the maximum grant in this category – £25,000.

The business tax holiday applies to all qualifying businesses under the April 2020 tax bill. Eligibility for the Retail and Hospitality Grant Scheme shall be determined by the local authorities for each claim made.

Since local business rates are determined by the local government authorities, there are devolved grants with respect to every state in the UK.

UNITED STATES, US

In the US, there are quite a number of business grants and reliefs aimed at helping local entrepreneurs in small and medium-sized enterprises. These aids are from both the federal and state governments and corporate and non-profit sponsored resources.

Federal Government Sponsored Resources

a) Paycheck Protection Program Flexibility Act of 2020

The Paycheck Protection Program Flexibility Act (PPPFA) was signed to modify some provisions of the Paycheck Protection Program(PPP) from the CARES Act. The provisions include: –

·  Forgiveness of loans offered to small businesses
·  Extension of the period an employer may rehire or lay off employees
·  Deferment period for paycheck protection loans that makes it possible for a recipient to defer payment until they are compensated
·  It is an emergency requirement statutory to the Pay-As-You-Go Act of 2010
·  Elimination that provides a provision protection loan recipient who is in debt to defer payroll tax payments.

Another relief bill was signed to help small businesses, support testing efforts, hospitals in the wake of the pandemic. Below is a breakdown of how the funds will be allocated: –

·  $75 billion for hospitals
·  $60 billion for emergency disaster loans and grants
·  $25 billion for support testing efforts
·  $310 billion for funding the Paycheck Protection Program $60 billion of this is for community banks and small lenders

b) Small Business Administration (SBA)

The government is working directly with state governors to offer loans to small businesses to recover the impact of the pandemic. Businesses can apply for this grant through an SBA lender or any federally insured credit union and the eligible entities for this grant include:

·  Self-employed persons, Sole proprietors and independent contractors
·  Any small business complying with the SBA’s size standards
·  All businesses with NAICS code beginning with 72 and with more than one location and employs less than 500 per location
·  Non-profit organizations, Veteran organizations or tribal business concern of the small business Act with more than 500 employees and meets the SBA industry size standards

c) Coronavirus Aid, Relief and Economic security (CARES) Act

The bill approved $2 trillion to help stabilize the economy and offset the losses experienced during the pandemic. $350billion was allocated to the Paycheck Protection Program (PPP), and through the PPP, sole proprietors could receive up to $10M.

d) Economic Injury Disaster Relief Lending Program(EIDL)

The EIDL offers loans to small businesses that have suffered financially due to the pandemic. All small business owners and agricultural businesses in the US qualify for up to $10,000 loan. The loans are processed in the first come first serve rule.

e) Families First Coronavirus Response Act (H.R.6201)

This bill requires employers to provide paid 2weeks leave to sick individuals with Covid 19 related complications; a paid leave of up to 80 hours if an employee is in dire need to take care of a sick individual or a child. It further offers food assistance, unemployment benefit, and a free coronavirus test.

f) Federal Tax Relief and Deferrals

The US internal revenue service has extended the tax filing deadline from April 15th to July 15th, 2020. All federal tax payments of the previous year that were due on 15th April 2020 and federal estimated income for the taxable year have been deferred. There will be penalties if the taxes will not have been paid by the 16th of July 2020. There has been no extension of due dates of some taxes like the excise tax.

Corporate Sponsored Resources

Corporations are reaching out to help individuals weather the corona storm. You can reach out to the below organizations:

Facebook – Facebook is offering cash grants of up to $100 million and ad credits to businesses due to the pandemic. The program will also enable small businesses to connect with more potential customers.

Amazon – For a business to be eligible for the Amazon relief fund, it has to: –

·  Be located within Amazon headquarters
·  Be open to the general public and those that rely on foot traffic
·  Have less than 50 employees
·  Have Annual revenue of less than $7 million

Grubhub – This online food company is offering a temporary suspension collection of up to $100 million in commission from restaurants affected by covid19.

Google – Google has offered $800million to support small and medium-sized businesses, government institutions, and health organizations. It is also offering $340million in ad credits available to the small business that have an active Google account.

MasterCard – $250 million has been put aside to help small businesses in the US. They are also offering cyber vulnerability and theft protection.

Uber Eats – This Grant Is available to independently owned restaurants. Food delivery fees have been waivered for orders in independent restaurants and businesses suffering from cash flows.

Non-Profit Sponsored Resources

James Beard Foundation – The James Beard Foundation Food and Beverage Industry is offering relief funds to self-owned restaurants during the COVID19 pandemics.

Candid – As a non-profit organization, candid is providing resources to help other non-profit organizations to survive coronavirus.

NYC COVID19 response and impact Fund-This program is offering aid of up to $3million to help non-profit service providers in NYC. For eligibility, it has to meet these conditions: –

·  Have an annual revenue of $750,000 and above
·  Be based in NYC
·  Have non-governmental revenue of $20 million
·  Must be a non-profit organization
·  Have a record of delivering effective services for residents of NYC

United Way – This program is offering non-profit organizations to help those struggling financially in the community.

CANADA

The Canadian governments, federal and provincial has pledged financial support to help businesses to thrive in this pandemic by offering nationwide grants and relief like: –

·  Providing businesses with credit and financial support to businesses
·  Regional relief and Recovery fund
·  Flexibility for corporate taxes
·  Direct wage support for employees
·  Support in accessing and navigating funding options

Government-Sponsored Resources

a) Business Credit Availability Program (BCAP)

This program is offering support of more than $10 billion to businesses suffering a downturn in cash flows, and the funds are distributed through the Business Development Bank of Canada(BDC) and Export Development Canada(EDC). To access the grant, businesses should contact their financial institutions, which will then refer to the EDC and the BDC.

b) Working Capital loans

These loans are offered through the BDC of up to $2 million for the businesses that qualify and with reduced rates on the new loans.

c) Co-lending programs for small businesses

Loans of up to $2.65 million are being offered with BDC offering 80% of it and the other paid by the financial institution you are working with.

d) Canada Emergency Business Account (CEBA)

Small businesses have been greatly affected, and to stabilize them, the government is offering loans of up to $40,000 with no interest payable until 31st December 2022. Early payers will receive a 25%loan forgiveness. For your business to qualify for this loan, it has:

  • Have a business operating account
  • Business owner to have paid $20,000 and above in the previous year.

e) Canada Emergency Commercial Rent Assistance (CECRA)

Loans to property owners have been forgiven so that they can reduce the tenant’s rent by 75% for April, May, and June 2020. The government will also offer 50%of the value of small business rent each month, with tenants paying 25%rent.

f) Innovation Assistance Program

This grant is offered through the industrial research assistance program (IRAP) for a subsidized wage of up to 3months.

g) The Regional Relief and Recovery Fund (RRRF)

This program offers relief to small micro-enterprises to help with operating costs affected by covid 19. The fund is valued at $962 million and offered by the regional agencies. To qualify for this relief, the business must: –

  • Have less than 500 employees
  • Are operating in Canada
  • Have the revenue funding for 2019

Direct Wage Support to Employees

A taxable relief benefit is to be granted to workers who lose their income as a result of covid 19. For eligibility, the business should have a Payroll of $2000 and non-deferred expenses of between $40,000 and $1.5 million.

Emergency Response Benefit (CERB)

CERB offers benefits to individuals affected by the virus and or in quarantine or taking care of a child and cannot be at work. Within 10 days of your application and $2000 monthly for a maximum of 6 weeks. For eligibility, one needs to: –

·  Be a Canadian resident of at least 15 years
·  Had an income of $5,000 in the previous year
·  Expecting no income for 14 days in the initial 4-week period
·  Have stopped working because of covid19, having not quit voluntarily

Employment insurance and sickness benefit

This benefit is for the individuals who are in quarantine and have applied for EI. They are required to provide a medical certificate.

Canada child benefit
Families are receiving $300 per child.

Support for seniors
Seniors eligible for old age security are receiving $300 and an additional $200 for those that qualify Guaranteed Income Supplement (GIS)

People with disabilities
This benefit is available to individuals who are holders of the disability tax credit (DTC) certificate. Below is a breakdown of how that receives the benefits.

  • $100 for those with a valid DTC certificate and are eligible for Guaranteed Income Supplement(GIS)
  • $300 for those with valid DTC certificate and are eligible for Old Age Security(OAS) pension
  • $600 for those with a valid DTC certificate

Students

Canada Emergency Student Benefit

The Canada emergency student benefit is providing financial support for post-secondary students and high school graduates that have no job and are unable to get one due to Coronavirus. Students who qualify should not have benefited from the CERB or the EI. It is offering benefits of $1250 for 4 weeks or $2000 for a week for those living with a disability. For one to be eligible, he or she has to:

  • Be a Canadian resident, registered Indian, permanent resident or protected person
  • Not have applied or received CERB and EI benefits
  • Be studying in Canada
  • Student loan suspension-charges on interest won’t be charged until 30th September 2020
  • Service grants -Benefits of $5000 on students who do national service and are to be paid in accordance with working hours.

International Students – Abolishment of the rule that requires international students to work for a maximum of 20 hours per week to those working in healthcare and food supply. Plus an additional $450 to people surviving on income assistance.

Conclusion

There are many other programs and schemes that are introduced for providing business grants and relief globally. These initiatives will help businesses and individuals to return to work earlier and recover their losses sooner. The global economy is bound to change post-COVID19 and these grants and relief will surely help affected businesses.

Sources:
https://www.tmf-group.com
https://www.independent.co.uk
https://www.sba.gov
https://learn.marsdd.com
https://ilsr.org
https://www.shopify.com/blog/small-business-government-relief-programs
https://www.gov.uk
https://www.axa.co.uk