Getting a leg up

The impact of the Covid-19 pandemic has pushed governments to take unprecedented action to support domestic companies through periods of economic shutdown. While there have been some commonalities, each jurisdiction has taken its own approach and companies operating in them should be aware of the major changes.

Insider Engage has summarised all the corporate support programmes available in the UK, EU, US, Singapore and Dubai, to help CFOs navigate their options and understand how companies can access the support to which they are entitled.

In March, the chancellor introduced a range of funding measures and tax relief options to support companies of all sizes. The Coronavirus Job Retention Scheme, which allows for employees to be placed on furlough with 80% of their wages paid by the state, is (currently) set to run until October.

For UK-incorporated, unlisted businesses, the British Business Bank is providing support of up to £5mn, but only if the amount is matched by private investors. Applicants need to have raised at least £250,000 from third-party investors over the past five years.

Other loan programmes available to UK companies include:

Bounce Back Loan Scheme – small companies can access loans of between £2,000 and up to 25% of turnover, capped at £50,000. Loans are fully state guaranteed, with the government paying interest and fees for the first 12 months.

Coronavirus Business Interruption Loan Scheme – small companies can claim support including loans of up to £5mn. Up to 80% is guaranteed by the government, which also pays fees and interest for the first 12 months.

The larger company support packages – the Covid-19 Corporate Financing Facility and the Coronavirus Large Business Interruption Loan Scheme – provide loans of up to £200mn with partial government guarantees, but FCA- or PRA-regulated firms are not eligible.

Additionally, companies with fewer than 250 staff can claim two weeks’ worth of statutory sick pay for employees off work with Covid-19.

For employees forced to work from home due to office closures, companies can also reimburse for new internet connections, work computers and office equipment all without paying tax. Employers can also provide non-taxable loans of up to £10,000 to staff dealing with hardship as a result of the pandemic.

On 23 April, EU leaders agreed a EUR540bn ($638bn) package for employees, companies and member states. This was made up of three tranches, including a EUR200bn pan-European guarantee fund for loans to companies, accessible via the European Investment Bank.

Much of the rest of the EU’s response has been targeted at releasing funds to its member states, for local governments to use as they deem necessary.

Brussels has also temporarily relaxed state aid rules to permit governments to prop up vital industries through deferral of tax payments, wage subsidies, state funding for medical research facilities, and other measures.

Additionally, on 19 May, the EU’s long-term budget was agreed, with a theme of “green recovery” running through it. Within this, EUR100bn was set aside for loans to countries to help businesses retain employees through local schemes. Guarantees are provided by member states rather than the EU.

American lawmakers were quick to act when states went into lockdown, passing the Coronavirus Aid, Relief and Economic Security (Cares) Act.

The country’s small business loan programme, dubbed the Paycheck Protection Program, ran from 3 April to 8 August and supplied $521bn in forgivable loans.

The act also introduced an Employee Retention Tax Credit to provide a $5,000 refundable tax credit to companies affected by the pandemic.

The Main Street Lending Program was launched by the Federal Reserve on 9 April, offering access to a loan pool of $675bn for companies with up to 15,000 workers or up to $5bn in 2019 revenue.

In addition, companies can access the Economic Injury Disaster Loan program. The US Chamber of Commerce is campaigning for this fund to be replenished and the current $150,000 loan cap to be raised to $2mn.

It is also is pushing for more employer protections to stop lawsuits against companies that had made “good-faith efforts to follow applicable public health guidelines”.

Singapore’s government introduced two support packages in February and March.

Companies are eligible for a tax-exempt cash grant to cover the first S$4,600 of gross monthly salary per employee for October to December 2019 and February to August 2020. However, details vary by industry and are more generous towards retail, travel and tourism.

The government has also passed increases to the Wage Credit Scheme, which provides partial state funding for people earning up to S$4,000 a month. For 2019 and 2020 the limit will be raised to S$5,000. The government’s share of funding will also increase for the two years covered, and payouts were brought forward to June.

There are strict eligibility criteria for Singapore’s programmes which include bridging loans, trade financing support and working capital loans for small businesses. Companies must be physically based in Singapore and have at least 30% of equity owned by Singapore citizens or permanent residents.

Corporate tax payments due in April, May and June have been deferred until July, August and September respectively, while non-residential properties are eligible for a property tax rebate of between 30% and 100% for the 2020 calendar year, depending on their use.

Foreign worker levies have been waived for April and May, and companies paying this levy could be entitled to a rebate.

However, CFOs need to be aware that specific criteria for different parts of the support measures could have consequences for contractual obligations or parts of company operations.

The government of the United Arab Emirates has been less interventionist in its approach. Its low-tax economy means there are few opportunities to defer or waive taxes.

The Targeted Economic Support Scheme, introduced on 15 March, provides temporary relief from principal and interest payments for private sector companies.

It includes a AED50bn ($14bn) fund for collateralised loans to banks to encourage them to lend more to corporate customers. A similar amount has been released through the relaxation of capital buffers for banks.

Examples of available relief measures include the granting of permission to renew commercial licences without mandatory renewal of lease contracts, and a three-month, 10% reduction on water and electricity bills for residential and commercial property.

The federal UAE government is also incentivising banks to moderate enforcement actions against smaller company borrowers, while due to its number of non-resident staff, labour laws have also been amended around redundancies, enabling employees to more easily get back into the job market.