Policy Update: Changes to CBILS

Welcome to our latest Policy Update. In these updates, The Entrepreneurs Network focuses on recent policy development and sets out (nearly) everything an entrepreneur needs to know about the topic. If you’re joining us for the first time, you can read our past updates here. 

The Government’s £330bn Coronavirus Business Interruption Loan Scheme (CBILS) has come under criticism over the past week. SMEs have complained that they’re unable to access the loans. In fact, under 1,000 firms have accessed the loans so far, despite 130,000 inquiries. Only businesses that could not receive a loan on commercial terms could apply for the guarantee. As a result, some businesses were quoted interest rates of 30%. While others who had qualified for the guarantee were asked to provide personal guarantees (even after the government had requested that banks don’t ask for them). In light of these criticisms, Chancellor Rishi Sunak MP has announced a significant overhaul of the scheme.

Extending the scheme

To prevent banks from pressuring businesses to sign commercial loans on unfavourable terms, the government is extending the loan guarantees to all viable SMEs and not just businesses who couldn’t access a loan on commercial terms.

Personal Guarantees

The Chancellor has banned banks from asking for personal guarantees on loans of £250,000 or less. For businesses borrowing more than £250,000 through CBILS, personal guarantees will be capped at 20% of the outstanding loans balance.

Large Businesses

To help the “missing middle” of businesses too big to benefit from CBILS but too small to access the Bank of England’s financing facilities, the government has announced a new Coronavirus Large Business Interruption Loan Scheme (CLBILS). It will provide a government guarantee of 80% to enable banks to make loans of up to £25 million to firms with an annual turnover of between £45 million and £500 million. Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest, and more information will be announced later this month.

What’s missing?

The scheme still doesn’t provide support for all businesses. As I wrote in an article for Sifted this week: “By insisting that only businesses that were profitable before the crisis hit can access the loans through the Coronavirus Business Interruption Loans Scheme (CBILS), most startups and scaleups are locked out. Venture-backed startups typically run large losses early on, as they invest in growth.”

We’re going to make sure startups and scale-ups aren’t forgotten by the government. Let us know if you want to get involved. We’ve also made a survey so you can share your views on how the Government measures to limit the impact of COVID-19 are operating on the ground for SMEs, startups and scale-ups

Policy Update: Immigration and Covid-19

Migrants and their employers are likely to be concerned with the impact of coronavirus-related travel restrictions on their ability to leave the UK when their visa expires, and in turn their immigration record.

The Government has announced a series of measures to address this problem

Tier 4 (Student) Visa holders

The Home Office announced on 25th March 2020 that individuals who are on a Tier 4 (Student) visa and their visas are expiring between 24 January 2020 and 31 May 2020 can request to extend their Tier 4 (Student) visas until 31 May 2020 if they can't leave the UK because of travel restrictions or self-isolation due to Coronavirus.

If this is impacting you, you must contact the Coronavirus Immigration Help Centre on 08006781767 or by email to inform them that you can't leave the UK due to the travel ban so UKVI can update their records. You will also need to provide UKVI with the below information:

• your full name (include any middle names)

• date of birth (dd/mm/yyyy)

• nationality

• your previous visa reference number

• why you can’t go back to your home country, for example if the border has closed

Tier 2 (General) Sponsors

Employers who are Tier 2 Licence Sponsors  and have sponsored migrant workers on a Tier 2 (General) visa should note the Home Office says that it will not take compliance action against sponsored workers who are unable to attend work because of the coronavirus pandemic, or against employers who authorise absences of more than 4 weeks for this reason. All other changes must still be reported.

If you have any further coronavirus-related visa queries, this list of frequently asked questions may help. Alternatively, you can email me.

Policy Update: Support for the Self-Employed

Welcome to our latest Policy Update. In these updates, The Entrepreneurs Network focuses on recent policy development and sets out (nearly) everything an entrepreneur needs to know about the topic. If you’re joining us for the first time, you can read our past updates here. 

Last week, the Chancellor Rishi Sunak announced a major economic intervention to prevent job losses, agreeing to pay 80% of the salary of any worker furloughed because of the coronavirus. However, the measures were not comprehensive. The support on offer for the self-employed was stingy in comparison. To correct the perceived lack of parity between support for employees and the self-employed, he has now announced an additional scheme, the Self-Employed Income Support Scheme.

The scheme will pay self-employed people a taxable grant, worth up to 80% of their average monthly profits over the last three years, for at least the next three months. The Chancellor has stated that 95% of the self-employed will benefit, but not everyone will be able to access the benefit. 

In this policy update, we will run through the new scheme, explaining who qualifies, when they can access it, and what else they can do.

Who qualifies?

To ensure the scheme is deliverable, fair, and to prevent fraud, applicants to the scheme must meet the following conditions. First, the majority of their income must come from self-employment and have lost profits as a result

Second, they need to have been trading in 2019-2020, be currently trading and intend to continue trading in the tax year 2020-2021. They must also have filed a tax return for 2018-2019. If they haven’t already, they will have four weeks to do this. However, this rule means that individuals that have started trading in the past 12 months cannot access the scheme.

Third, they can only qualify if their average annual trading profit from 2016-17, 2017-18 and 2018-19 is less than £50,000 or if their trading profit in 2018-19 was less than £50,000. The scheme excludes those with profits of £50,000 or above, on the grounds that “those with higher average incomes are more likely to have access to savings and other resources”.

Importantly, the scheme does not apply to those incorporated as a limited company. If they pay themselves a salary, then they will be able to access the Job Retention Scheme, but support from this may be limited as it won’t apply to any dividend income.

What do the self-employed need to do?

If they haven’t already, file a tax return for 2018-2019. Otherwise, they should wait. HMRC will use existing information to check your potential eligibility and invite applications once the scheme is operational.

When can self-employed people access the money?

Grants will be paid in a single lump sum instalment covering all 3 months, and will start to be paid at the beginning of June.

What can self-employed people do in the meantime?

They can access Universal Credit. As the minimum income floor was removed, the self-employed can access Universal Credit at a rate of up to £94.25 a week, equivalent to statutory sick pay. Information on how to access the scheme can be found here. This guide may be useful.

Note: The Self Employed Income Support Scheme will be treated as earned income in Universal Credit in the same way as the Coronavirus Job Retention Scheme. This may adjust the amount of Universal Credit you can access going forward.

Can self-employed people still work?

Yes! Unlike the employee scheme, the self-employed can continue to work as they receive support.

What’s left?

The scheme doesn’t cover owner-managers of limited companies and doesn’t cover self-employed who have just started. The former group may pose a serious problem as they may have been advised by accountants to take their income in dividends, which will limit the extent they can benefit from the scheme. 

Policy Update: Treasury Committee Consultation

The Treasury Committee has issued a call for evidence on the Government’s coronavirus financial package.

The Committee is seeking a range of views from stakeholders on whether the Government’s response to the coronavirus is sufficient, and to suggest areas where more support is needed.

The Committee is planning to continue holding evidence sessions on the economic impact of coronavirus. It has asked for this initial tranche of evidence to be submitted by 5pm on Monday 23 March 2020.

We will be responding based on the huge feedback we have received from entrepreneurs in our network. If you would like to feed into our response, please email me with your thoughts. You can also submit evidence to the Treasury Committee via email: treascom@parliament.uk

Coronavirus: What Entrepreneurs Need to Know

The Entrepreneurs Network

The best way to follow what’s going on is to sign to our Policy Updates and my Friday Newsletter. On social media, Twitter is best. We’ve also created a Twitter List of all relevant Government & Business Organisations’ Twitter accounts.

Separately, you might want to connect with us on our Facebook Group, Facebook Page, LinkedIn Group and LinkedIn Page.

The Government

The Business Support website helps you find the right support, advice and information to help with the impact of coronavirus (COVID-19) on your business. This website will continue to be updated as information becomes available. A full range of business support measures have been made available to UK businesses and employees. Find out how to access the support that has been made available, who is eligible, when the schemes open and how to apply here.

Five Steps You Can Take

1. Get help with your finances

For small and medium sized businesses, the new Coronavirus Business Interruption Loan Scheme is now available for applications. For more information and how to apply, visit their website.

You can also speak to your bank or lender to discuss options.

The Bank of England’s new lending facility for larger firms is also open for applications. Find out more on their website.

2. See what you're entitled to

The government is also making cash grants and additional funding available to certain sectors and smaller businesses.

Find out more about the schemes available, whether you’re eligible and how to apply on their website.

3. Support your staff

Through the Coronavirus Job Retention Scheme, the Government will pay salaries (at 80% of current pay up to £2,500 a month) for workers who are no longer working and would otherwise be made redundant.

For businesses with fewer than 250 employees, the cost of providing 2 weeks of COVID-19 related statutory sick pay per employee will be refunded by the Government in full. Find out more on their website.

4. Check guidance on tax

If you are concerned about paying your tax you can talk to HMRC about managing payments.

We have already postponed upcoming VAT payments through to June, cancelled business rates for many sectors and delayed July’s self-assessment tax payments until January 2021. To find out more visit their website.

5. Follow the latest advice

The Gov website will be updated regularly as more information becomes available.

The Prime Minister’s daily press conference, live streamed on the @10DowningStreet Twitter feed, will also provide the latest updates on health advice, support for businesses and employees, as well as a range of other issues.

Policy Update: Extra support for business on covid-19

Welcome to our latest Policy Update. In these updates, The Entrepreneurs Network focuses on recent policy development and sets out (nearly) everything an entrepreneur needs to know about the topic. If you’re joining us for the first time, you can read our past updates here. 

In response to coronavirus, the Chancellor Rishi Sunak has announced additional measures to support business through the unprecedented disruption. The measures expand on those announced last week in the Budget. The Chancellor stated: “We will do whatever it takes to protect our people and businesses from the effects of this global economic emergency brought on by the Coronavirus pandemic.” 

Unlimited loans and guarantees to support firms through this period

The key measure announced was £330 billion (equivalent to 15% of GDP) worth of loan guarantees to ensure that “any business who needs access to cash to pay their rent, the salaries, suppliers, or purchase stock, will be able to access a government-backed loan, on attractive terms.”

They are also increasing the amount businesses can borrow through the Coronavirus Business Interruption Loan Scheme from £1.2 million to £5 million. Furthermore, businesses can access the first 6 months of that finance interest free, with the government paying.

 £20 billion of business rates support and grant funding

At the budget the Chancellor announced that businesses in the retail, leisure and hospitality sectors with annual rateable values under £51,000 would receive a one year 100% business rates holiday. The Chancellor has now gone further and extended it to all businesses in the above sectors. On top of that, retail, hospitality and leisure businesses, with a rateable value over £15,000 and below £51,000 would receive a £25,000 grant.

Some 700,000 businesses don’t pay business rates at all because their premises are too small. At the budget, it was announced that they would receive a £3,000 grant. This has been increased to £10,000. 

Regulatory changes on the way

The Chancellor has also instructed his cabinet colleagues to meet with business leaders and representatives in the most affected sectors, and identify opportunities to support them through regulatory forbearance.

The Housing Secretary Robert Jenrick has already announced that cafes, restaurants and pubs can now automatically become takeaways and food delivery companies, without applying for planning permission.

We are talking to the government, so if there are regulatory changes that could help your business weather the storm then let me know.

This is a fast-moving situation. We’ll make sure to keep you up to date as further policy moves are announced. To receive these, make sure to sign up here.

Policy Update: The Manifestos

What's are entrepreneurs being offered this election?

Welcome to our latest Policy Update. In these updates, The Entrepreneurs Network focuses on a recent policy development and set out (nearly) everything an entrepreneur needs to know about the topic. If you’re joining us for the first time, you can read our past updates here. We want to make sure this is as relevant as possible for entrepreneurs, so we’re happy to take suggestions for future topics (send them here).

Over the past week, each major party has launched its election manifesto. We’ve read through each and in this month’s policy update we’ll let you know what each party is offering entrepreneurs. 

Some people might be sceptical of manifestos and believe they’re not worth the paper they’re printed on. While it’s true that major announcements are not always mentioned in manifestos, e.g. when Osborne brought in the National Living Wage, and sometimes pledges are broken, e.g. tuition fees, the academic evidence suggests manifestos are good guides to government policy. (Though it depends on whether we have a minority or majority government).

We’ve waited till the dust has settled on all three manifestos for two reasons. First, often the full details don’t come out till days after a policy has been announced. Second, we’ve been busy working on our own manifesto. (It’s been backed by 250+ entrepreneurs and you can read it here).

The aim of this update isn’t to tell you how to vote, indeed we’re not covering many of the most important issues the country faces from climate change to the NHS. But we want to give you an idea of what’s likely to happen post-election and how it might affect your business and/or future entrepreneurial efforts.

We’re going to focus on the key areas that affect entrepreneurs from Brexit and immigration to tax and regulation. We’ll look at the parties we think have a chance of being part of the next government: Conservatives, Labour, Liberal Democrats and the SNP. Looking at the polls and betting markets, the three most likely election outcomes are Conservative Majority, Conservative Minority, and Labour minority.
 

The Manifestos

On Brexit

If elected, the Conservatives promise to ‘get Brexit done’. This will mean passing the Withdrawal Agreement negotiated by Boris Johnson. They will then have until 31 December 2020 to agree a free trade agreement. They have ruled out taking the option of extending the negotiating period by 2 years. This creates the possibility of a cliff edge and a no deal Brexit.

Labour, on the other hand, have a policy of renegotiating the Withdrawal Agreement within 3 months and holding a confirmatory referendum (Labour’s deal vs Remain) within 6 months, where the Prime Minister would remain neutral. Labour seeks a deal that would:

• Have a permanent and comprehensive UK-wide customs union.

• Closely align with the Single Market.

• Follow current and future EU law on workers’ rights, consumer rights and environmental protections.

Under Labour, EU citizens would be granted an automatic ‘right to remain’ and wouldn’t have to use the EU Settlement Scheme. They are unclear on whether free movement will be maintained, but elsewhere have suggested that “there will be a great deal of movement”.

Liberal Democrats also favour a second referendum, but would revoke Article 50 if they managed to get a majority (an outcome bookmakers put at 800/1). The SNP also support a second vote on Brexit.

On Immigration

Labour haven’t confirmed whether or not they’ll keep free movement if Britain votes leave in a second referendum. On non-EU immigration, Labour will end the minimum income requirements for spousal visas. Their manifesto has little to say about changes to the rules around skilled non-EU migration, focusing instead on the hostile environment.

The Liberal Democrats would replace Tier 2 work visas with a more flexible merit-based system, create a new two-year visa for students to work after graduation and introduce a ‘Training up Britain’ programme to make the most of migrants’ skills. They would also give asylum seekers the right to work after living in the UK for 3 months (a reform that’s been backed by leading business figures. We even backed it in a letter to the FT.)

The SNP call for a devolved migration system for Scotland. They want to cut the cost for employers of recruiting from overseas, and to simplify the visa and citizenship process. In particular, they would scrap the immigration skills charge and oppose the £30k minimum income threshold. Both the SNP and the Liberal Democrats support Free Movement.

The Conservatives propose to end Free Movement and replace it with an Australian-style points based system. It’s not entirely clear what the system will look like, as Jonathan Portes argues. Unlike Australia’s system, they suggest “most people coming into the country will need a clear job offer”. They pledge to “treat EU and non-EU citizens equally.” They also state: “There will be fewer lower-skilled migrants and overall numbers will come down.” They plan to raise the NHS surcharge for the NHS.

On Taxes

The Conservatives will increase the Employment Allowance from £3,000 to £4,000. They also pledge to strengthen the Small Business Commissioner. Companies investing in new buildings and structures will benefit from an increase in the Structures and Buildings Allowance from 2% to 3%. They have promised to continue SEIS and EIS, but Entrepreneurs’ Relief will be reviewed and reformed, though the details are vague. They have cancelled the planned cut in Corporation Tax from 19% to 17%.

Labour’s manifesto promises £82bn in tax increases levied on high earners and businesses. This includes raising corporation tax to 26%, with a small profits rate of 21%; taxing dividends as normal income; reviewing corporate tax reliefs (raising £4bn); abolishing Entrepreneurs’ Relief; a new 45p rate of Income Tax for incomes over £80,000 with incomes over £125,000 paying 50p; and raising Capital Gains Tax to the same level as Income Tax, while also creating a rate of return allowance to exempt the risk free rate of saving.

The Liberal Democrats will return Corporation Tax to 20% and abolish the separate capital gains allowance. They will also raise the basic rate of Income Tax by 1p.

The SNP would review the tax rules around intermediaries – known as the IR35 tax rule – and look at problems with implementation of the Loan Charge. They would reduce VAT on energy efficiency improvements, and support a freeze in further insurance premium tax hikes. The SNP would also double the employment allowance from £3,000 to £6,000.

On R&D

The Conservatives propose raising the R&D Tax Credit rate from 12% to 13% and reviewing the scope of the policy – potentially allowing companies to claim the credit for purchasing datasets or cloud computing. They will also double public funding of R&D.

The Liberal Democrats plan to allow companies to claim R&D tax credits against the cost of purchasing datasets and cloud computing without a review. Labour’s plans are a little vaguer. While they want to increase R&D as a proportion of GDP to 3%, by “increasing direct support for R&D and reforming the innovation ecosystem to better ‘crowd in’ private investment”, according to their Funding Real Change costings document they will phase out R&D tax credits for large corporations and the Patent Box over this Parliament (while keeping the R&D tax relief SME scheme).

On Skills

Labour will allow employers to spend Apprenticeship levy funds on a wider range of accredited training. The Liberal Democrats are proposing a Skills Wallet, giving every adult £10,000 to spend on training and education throughout their life with £4,000 added at age 25, £3,000 at age 40 and £3,000 at age 55.

The Conservatives will look at improving the Apprenticeship Levy and are proposing a £3bn National Skills Fund. The fund will provide matching funding for individuals and SMEs purchasing high-quality education and training.

On High Streets and Business Rates

Labour and the Conservatives are both committed to review the system of business rates. While the Liberal Democrats have pledged to replace business rates with a levy on commercial landowners, potentially cutting admin for businesses and increasing the incentive to invest in property improvements. The Conservatives’ review will look at reducing the overall burden of rates and they’ve already committed to cutting rates for smaller retailers. Labour will exempt new capital investment from rateable values. The Liberal Democrats will also scrap the Conservatives’ reform which allows developers to convert offices and shops into residential properties without planning permission.

On Labour Market Regulation

Labour will ban zero-hours contracts and create a new Ministry of Employment Rights. They will also roll out sectoral pay bargaining. The Liberal Democrats will require a 20% higher minimum wage to be paid to workers on zero-hours contracts and propose extending paid parental leave to the self-employed. The Conservatives will launch a review on how best to help the self-employed.

On Entrepreneurship

The Liberal Democrats will create a new start-up allowance to help entrepreneurs with living costs when starting out. They will require all government agencies and businesses employing 250+ people to sign up to the prompt payment code and make it legally enforceable. They will also expand the activities of the British Business Bank to increase equity investment in SMEs.

Labour will create a network of Post Office banks. A business development agency will be based in the Post bank “providing free support and advice on how to launch, manage and grow a business.” They will also tackle late payments by banning late payers from public procurement contracts.

The Conservatives will expand the Start-Up Loan scheme and through their Red Tape Challenge will work to ensure regulation is sensible and proportionate, with the needs of SMEs prioritised.

If you want to find out more about the manifestos, you can read the full manifestos below:

• Conservative

• Labour

• Liberal Democrats

• Scottish National Party

• Brexit

• Green Party

We’ll make sure to keep you up to date on any other policy changes we spot in upcoming newsletters. To receive these, make sure to sign up here.

Policy Update: Tier 2 Visas, Post-Study Work Visa and Freedom of Movement

At last, some good news on immigration!?

Welcome to our latest Policy Update. In these updates, The Entrepreneurs Network focuses on a recent policy development and set out (nearly) everything an entrepreneur needs to know about the topic. If you’re joining us for the first time, you can read our past updates here. We want to make sure this is as relevant as possible for entrepreneurs, so we’re happy to take suggestions for future topics (send them here).

In this edition, we’re looking at some recent changes to the Tier 2 visa system. Perhaps surprisingly, given the chaos in parliament, the changes are broadly welcome and will make life for startups a bit easier. We’ll also touch on a few policy announcements that aren’t in place yet, but are useful to keep an eye on, such as the restoration of the Post-Study Work Visa and the Conservative government’s plan to end free movement after Brexit.

Shortage Occupation List

From October 6th onwards, the shortage occupation list will be expanded significantly. There are a number of key advantages for employers hiring foreign workers in shortage occupations on Tier 2 visas. These include:

• There is no need to advertise the role for 28 days before recruiting outside the UK.

• No need to meet the minimum income threshold (£30,000).

• Reduced visa fees.

• Priority if the visa cap is reached (it’s less likely to be reached now as NHS Doctors and Nurses don’t count towards the cap).

The announcement is particularly good news for startups in science and tech. Newly added roles include:

• Civil and electrical engineers

• Web design/developers

• Software developers

• Biologists and bio-chemical scientists.

Other occupations added to the shortage occupation list include:

• Architects

• Skilled Chefs

• Graphic Designers

• Maths and Science Teachers

The full list is available here.

llda de Sousa, Partner of Immigration at Kingsley Napley told us: “We welcome the most recent statement of changes as these will help employers fill a much needed gap in their workforce. Even though the UKVI fees for short occupation roles are slightly lower than the standard fees, more can be done in terms of reduction of the fees.”

We are undertaking a series of roundtables with Kingsley Napley on understanding and reforming Britain's visa system to support entrepreneurship in the UK. The next one will be on November 7th. Find out more here.

Other helpful tweaks to the Tier 2 Visa include:

• PhD level roles will be exempt from the monthly Tier 2 visa cap.

• If a worker in a PhD level role has to leave the UK in order to carry out research, then those absences won’t count against an Indefinite Leave to Remain application.

• Tier 2 workers who are absent from work due to sickness, statutory parental leave, assisting in a national or international humanitarian or environmental crisis or engaging in legal strike action may still apply for ILR even if those absences cause their salary to fall below the required threshold.

Post-Study Work Visa

We think the reinstatement of the 2-year post-study work visa is really good news for entrepreneurship in the UK. In fact, it was our top policy request in our recent report Job Creators. In the report, we found that 49% of the UK’s fastest growing companies had at least one immigrant-founder. When we dug deeper into the backgrounds of some founders, a pattern emerged. Most came to the UK to study, before transitioning to either the post-study work route or staying under EU free movement.

For employers and startups in particular, this change will help as it will allow them to hire foreign workers without sponsoring them with the Tier 2 process.

It’s worth noting the Post-Study Work Visa’s reinstatement is not guaranteed. The government has merely announced its intention to bring it back in time for graduates who start their degree level courses from next year onwards. However, given the cross-party support for the idea, it should pass into law even in a relatively gridlocked parliament.

The end of Freedom of Movement

While given the passing of the Benn Act, it’s unlikely that the UK will leave the European Union without a deal on October 31st, there is still an outside chance if parliament rejects an extension or the government finds legal means of being forced to seek an extension. You may remember back in August, Home Secretary Priti Patel claimed that free movement would end immediately in the event of a No Deal Brexit. This understandably has caused concern for companies employing EU citizens.

In part due to risk of legal challenges, the Home Office has now updated its guidance. The department accepted it will not be able to distinguish between EU nationals living in the country before and after Brexit until at least the end of 2020. As a result, employers will not be asked to carry out checks until everyone who is eligible has had a chance to apply for indefinite leave to remain through the EU settlement scheme.

Law Professor Steve Peers was quoted in Politico as saying: “It should avoid any serious crisis of large numbers of EU citizens not being able to enter the country again [after a no-deal Brexit]”...“It seems to be a climbdown because the government had threatened a much stricter scheme, without really explaining it.”

The key difference immediately after an Oct 31st No Deal Brexit would be that EU nationals who commit crimes during their stay in Britain would be subject to tougher treatment and would be at risk of deportation.