Coronavirus: Local Restrictions Support Grant update

Following government announcements that grant funding for businesses impacted by Coronavirus restrictions would increase, more details on the latest changes to the Local Restrictions Support Grant scheme have now been released.

A key point to stress is that these are national scheme guidelines and Local Authorities can use their own discretion when setting the eligibility criteria for their area. Business owners will, therefore, need to apply to their Local Authority to see if they qualify, for how long and for what amount.

What’s changed?

The government first announced the Local Restrictions Support Grant (LRSG) in September.

Since then, as announced on 9 October, the government is making the LRSG scheme more generous so that businesses in England can receive up to £3,000 per month and are eligible for the payment sooner - after only two weeks’ of closure rather than three. The government has also extended the scheme to include nationally imposed local lockdowns and certain nationally enforced closures.

Furthermore, on 22 October, the Chancellor announced he would be extending LRSG support to businesses in Tier 2 areas which can remain open, but are severely impacted by restrictions over socialising.

Put together, these changes could benefit hundreds of thousands of businesses, including restaurants, pubs and nightclubs.
We have highlighted some of the key phrases and definitions that are particularly pertinent to these grants below.

Is your business eligible?

When the LRSG was launched, it was announced that it would support businesses that were open as usual, providing services in person to customers from their business premises, but which were then required to close for at least 3 weeks due to local lockdown restrictions imposed by the government.

Although the scheme is aimed at businesses which pay business rates on their premises, Local Authorities may also, at their own discretion, provide funding for businesses which don’t pay business rates.

Under the September announcement your business may have been eligible if it:

  • Occupies property on which it pays business rates.
  • Is in a local lockdown area and has been required to close, because of the formal publication of local restrictions guidance, resulting in a first full day of closure on or after 9 September (this funding is not available retrospectively).
  • Has been required to close for at least 3 weeks because of the lockdown.
  • Has been unable to provide its usual in-person customer service from its premises.

For example, this could include non-essential retail, personal services or cafes/restaurants that operate primarily as an in-person venue, but which have been forced to close those services and provide a takeaway-only service instead.

Eligible businesses will receive one grant for each property liable for business rates within the lockdown zone.

Note that businesses that are required to close, but do not pay business rates, may be eligible for funding at the discretion of the Local Authority, as may businesses which are severely impacted, but aren’t required to close.

How much could your business get?

Under the 9 October announcement:

  • Businesses which are legally required to close due to a nationally imposed local lockdown will now receive up to £3,000 per month, rather than up to £1,500 per three weeks, and they are eligible for payment after only two weeks of closure, rather than three.
  • Properties with a rateable value of £15,000 or under will receive grants of £667 per two weeks of closure (£1,334 per month).
  • Properties with a rateable value of over £15,000 and less than £51,000, will receive grants of £1,000 per two weeks of closure (£2,000 per month).
  • Properties with a rateable value of £51,000 or more, will receive grants of £1500 per two weeks of closure (£3,000 per month).
  • The government is also extending the scheme to include businesses which have been forced to close on a national, rather than a local, basis.

Grant support for businesses in Tier 2 areas

Additional LRSG support is now available for businesses in Tier 2 areas. These are businesses that aren’t forced to close, but which are severely impacted by restrictions over socialising.

The Local Authority will determine the final grant amount allocated to each business, but the additional funding being provided assumes that these businesses will receive grants equivalent to 70% of the grants for which businesses legally forced to close are eligible for.

This would be equivalent to:

  • For properties with a rateable value of £15k or under, grants of £934 per month.
  • For properties with a rateable value above £15k and below £51k, grants of £1,400 per month.
  • For properties with a rateable value of £51k or above, grants of £2,100 per month.

These grants can applied for retrospectively from the date that the Tier 2 restrictions, or the equivalent local restrictions (if prior to the 3 Tier alert system), were first implemented.

This scheme will initially run until April, with a review point in January.

For further information, please see the Business Grants Factsheet PDF on the government website: https://www.gov.uk/government/news/plan-for-jobs-chancellor-increases-financial-support-for-businesses-and-workers.

Discretionary funding

You may receive a grant at the discretion of your Local Authority if:

  • Your business is required to close, but you do not pay business rates.
  • If your business is not required to close, but has been severely affected; for example, as a result of customer businesses being closed.

Your Local Authority will publish details of discretionary funding on their website.

Key points

It is worth noting that:

  • Grants are to be based on the rateable value of the property on the first full day of local lockdown restrictions.
  • Businesses can choose to spend the grants as they wish, with many expected to use them to cover high fixed costs, such as property.
  • Grants are taxable as income and this should always be included in your accounts.

Exclusions

Note the following were exclusions under the initial September announcements, but may not all still apply since the October changes and you will need to clarify the position with your Local Authority:

  • Businesses which can continue operating during the lockdown, because they do not depend on providing direct in-person services from their premises.
  • Businesses that have chosen to close, but have not been required to close, as part of a local lockdown.
  • Businesses that are still subject to national closures, such as nightclubs. This no longer seems to be an exclusion under the October announcements and relaxations.
  • Businesses that have reached the state aid limit.

If your business gets state aid already

The Local Restrictions Support Grant counts towards state aid.

Payments count towards the total de minimis State aid you’re allowed to get over a 3-year period - €200,000. If you have reached this threshold, you may still be eligible for funding under the COVID-19 Temporary Framework. The limit for the framework is €800,000.

Your Local Authority will ask you to complete a declaration confirming that:

  • you will not exceed the relevant State aid threshold;
  • you were not an ‘undertaking in difficulty’ on 31 December 2019. This applies only to the COVID-19 Temporary Framework.

The ‘undertaking in difficulty’ test does not apply to small and micro undertakings (fewer than 50 employees and less than €10 million annual turnover and/or annual balance sheet), unless they were already in insolvency proceedings, have received rescue aid that has not been repaid, or are subject to a restructuring plan under State aid rules.

Further guidance and how to apply

More details on the different LRSG extensions can be found on the government website here: https://www.gov.uk/government/news/plan-for-jobs-chancellor-increases-financial-support-for-businesses-and-workers.

Please visit your Local Authority’s website for eligibility criteria and to find out how to apply.

For further information or advice on any of the issues raised, or for help with services like bookkeeping, cash flow management or payroll during the Coronavirus pandemic, please call us on 01225 325580, email info@richardsonswift.co.uk, or contact your usual client director.

Please note that this is only a summary of the main issues and should not be construed as advice. Every effort has been made to ensure factual accuracy at the time of publication (28 October 2020), however, the government response to the Coronavirus situation is changing 24-7, so it should not be relied upon completely.