Coronavirus: Charities could miss out on Treasury's mitigating loan scheme

Those that don't earn more than half their income through trading might not qualify for the Coronavirus Business Interruption Loan Scheme announced in the Budget

Charities could miss out on a new loan scheme announced in the Budget to help mitigate the impact of coronavirus if they do not earn more than half of their income through trading.

Government guidance on the new Covid-19 measures unveiled in yesterday’s Budget says that the temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will “launch in a matter of weeks to support businesses to access bank lending and overdrafts” to help mitigate the likely economic impact of measures to delay the virus’ spread.

The government will provide lenders with a guarantee of 80 per cent on each loan, and the scheme will support loans of up to £1.2m in value.

The Covid-19 outbreak has seen hundreds of people in the UK infected and about 120,000 worldwide, with the World Health Organisation declaring the virus a pandemic.

But there was confusion about whether this would apply to charities, and the Treasury confirmed to Third Sector yesterday that only organisations earning more than 50 per cent of their income from trading would qualify for the scheme.

Full details of the scheme would be published in the coming weeks, a spokesman for the Treasury said, including the full eligibility criteria.

Not all charitable trading activity is counted as “trading” by the Treasury, according to government guidance.

Exempt activities include selling investments, selling assets for a charity’s charitable purpose, letting land and buildings where no services are provided to the user and “the sale or letting of goods donated to a charity for the purpose of sale or letting”.

It is not known whether the delivery of public service contracts is included.

But it has been confirmed that charities with trading subsidiaries will be eligible as long as there is an inter-company guarantee from the trading entity to the charity, which means that if the charity defaults it could get income from its trading arm.

Fundraising charities without trading arms are almost certainly excluded.

Richard Sagar, policy manager at the Charity Finance Group, has called for additional measures to help charities through the Covid-19 pandemic.

Several charity sector bodies criticised yesterday’s Budget for a lack of sector-specific announcements despite a large number of spending commitments and promises on issues such as business rates, Covid-19 and the removal of the Tampon Tax.

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