Small business grant scheme (Covid-19)

UPDATED 22 July 2021

There are new grant schemes available across the UK to support small businesses during the Coronavirus outbreak. Under the schemes, eligible businesses will receive a grant of £10,000.

How the scheme works

Under the scheme, you can claim a grant of £10,000. This grant doesn't need to be repaid and you can claim the grant and continue to do business.

If your business is in England, Scotland or Wales, you should apply to your local authority for the grant.

If you're based in Northern Ireland and you pay your business rates by Direct Debit, you'll receive the grant automatically. If you don't pay by Direct Debit you can apply online.

Note: For VAT registered businesses, income is vatable if it's within the normal scope of a business or linked to a supply. Coronavirus related grants are one-off events unrelated to any supply of goods or services. Whilst it's unlikely that any grant income will attract a VAT liability, you should seek specific advice from your accountant to understand if any grant received should be treated as vatable or non-vatable income. You can find further details on what income is vatable in the HMRC manual. Grant income is likely to be considered income for income or corporation tax purposes

Who can apply

The grants are aimed at small businesses who are registered to pay business rates. Criteria are slightly different across England, Northern Ireland, Scotland and Wales.

Process a grant once received

Once you receive the grant, you'll need to record it your accounts. We recommend that you create a special ledger account where the grant money is recorded. This helps you trace the amount of the grant received, making it easy to locate and report on, if required.

There are two ways you can process the grant

  1. Record that you've applied for the grant before you receive the funds. This shows that you expect to receive the funds from the government, so that your balance sheet reflects this in advance of receiving the money. Then record the receipt of the money once it arrives.
  2. Just record the receipt of the money once it arrives.

Record that you've applied for the grant and received the money

Some businesses want to record that they've applied for the grant before they receive the funds.

This shows that you expect to receive the funds from the government, so that your balance sheet reflects this in advance of receiving the money.

To record the grant in this way, you'll need to create a ledger account for when you actually receive the money and a second ledger account to record that you've claimed the grant.

To record the grant

  1. Create two new ledger accounts. These will help you trace and report on the expected funds and the amount of the grant when you receive it, as it these amounts appears as a separate items on your management reports.

    1. Small Business Grant Accrued Income - use this to record the expected funds. This is reported as an Asset on your balance sheet. When you receive the money, the balance of this ledger account is reduced to zero.
    2. Small Business Grant Income - use this to record the amount of the grant. This is reported as Income on your profit and loss.
  2. Enter a journal to record that you've applied for the grant. This adds the funds to your balance sheet and your profit and loss

  3. Enter a bank receipt to record that you've received the loan. This adds the funds to you bank account and reduces the accrued income to zero.

Example

For this article we'll use the following example

  • Your company applies for a grant of £10,000 on 10th April.
  • You enter a journal to show that you've requested the funds on your balance sheet.
  • You receive the money on 20th April.
  • You enter a bank receipt to show that the money has been received.

Create new ledger account

  1. From Settings, select Financial Settings, then Chart of Accounts.
  2. Select New Ledger Account and complete the following information:

    Included in Chart

    Leave this selected.

    It makes sure the balance of this account is included on your reports

    Ledger Name* Enter a name of your choice, such as Small Business Grant Accrued Income
    Display Name* This is the name that appears on the reports. Enter a name that makes sense to you, such as Small Business Grant Accrued Income.
    Nominal Code*

    For example 1160.

    You can use any number here but it's good practice to keep the numbers in each category consistent, so use a number that's close to you other Asset accounts. For the default chart of accounts use a number between 1000 and 1190.

    Category *

    Current Asset.

    The balance of the account will appear on your Balance Sheet in the Assets section.

    The category determines the report and report section where the balance of this account is reported.

    Category Group This defaults to Asset and you can’t change this.
    VAT Rate Choose No VAT.
    Visibility

    Leave the defaults selected.

Create a ledger account

  1. From Settings, select Financial Settings, then Chart of Accounts.
  2. Select New Ledger Account and complete the following information:

    Included in Chart

    Leave this selected.

    It makes sure the balance of this account is included on your reports

    Ledger Name* Enter a name of your choice, such as Small Business Grant Income
    Display Name* This is the name that appears on the reports. Enter a name that makes sense to you, such as Small Business Grant Income.
    Nominal Code*

    For example 4960.

    You can use any number here but it's good practice to keep the numbers in each category consistent, so use a number that's close to you other Income accounts. For the default chart of accounts use a number between 4000 and 5000.

    Category *

    Other Income.

    The balance of the account will appear on your Profit and Loss in the Income section.

    The category determines the report and report section where the balance of this account is reported.

    Category Group This defaults to Income and you can’t change this.
    VAT Rate Choose No VAT.
    Visibility Leave the defaults selected.

Enter a journal to record the that you've requested the funds

  1. Go to Adjustments, then Journals.
  2. Select New Journal.

    Reference If required, enter a reference.
    Date* Date you requested the funds.
    Description* e.g. Small business grant claimed

    *Field compulsory.

  3. Enter the details of the ledger accounts and debits and credits, for example:

    Ledger Account Deatils Debit Credit
    1160 - Small Business Grant Accrued Income Small Business grant requested 10000.00  
    4960 - Small Business Grant Received Small Business grant requested   10000.00
  4. Click Save.

Record receipt of the grant

Record that you received the money as an Other Receipt. For the purposes of this section we'll use the following example:

  1. Go to Banking, select New, then New Sale or Receipt.
  2. Select Other Receipt.

    Date Received* Date you received the money.
    Bank Account* The bank account the money was paid into
    Amount Received* Total amount you received, e.g 10000.
    Reference If required, enter a reference.
    Details Enter any additional details as required.

    *Field compulsory.

  3. Enter the information required to record the money received, for example:

    Ledger Account Details VAT rate Total
    1160 - Small Business Grant Accrued Income Small business grant received No VAT 10000.00
  4. Click Save.

You’ve now recorded receipt of the grant. Using our example, your ledger accounts are updated as follows:

  Ledger Account Debit Credit
10 April 1160 - Small Business Accrued Income 10000  
  4960 - Small Business Grant Received   10000
20 April 1200- Bank account 10000  
  1160 - Small Business Accrued Income   10000

Record receipt of the money only

To record the grant in this way there are two steps

  1. Small Business Grant Income Received - Create a new ledger account for the money received. Use this to record the amount of the grant. This is reported as Income on your profit and loss.

    This will help you trace and report on the money received from the grant, as it will appear a separate item on your management reports.

  2. Record that you've received the loan.

Example

For this article we'll use the following example

  • Your company receives a grant of £10,000 on 20 April 2020.
  • The grant is paid into the main bank account for your company.
  • You enter a bank receipt to show that the money has been received.

Create a ledger account

  1. From Settings, select Financial Settings, then Chart of Accounts.
  2. Select New Ledger Account and complete the following information:

    Included in Chart

    Leave this selected.

    It makes sure the balance of this account is included on your reports

    Ledger Name* Enter a name of your choice, such as Small Business Grant Income
    Display Name* This is the name that appears on the reports. Enter a name that makes sense to you, such as Small Business Grant Income.
    Nominal Code*

    For example 4960.

    You can use any number here but it's good practice to keep the numbers in each category consistent, so use a number that's close to you other Income accounts. For the default chart of accounts use a number between 4000 and 5000.

    Category *

    Other Income.

    The balance of the account will appear on your Profit and Loss in the Income section.

    The category determines the report and report section where the balance of this account is reported.

    Category Group This defaults to Income and you can’t change this.
    VAT Rate Choose No VAT.
    Visibility Leave the defaults selected.

Record receipt of the grant

Record that you received the money as an Other Receipt.

For the purposes of this section we'll use the following example:

  • £10,000 was paid into your bank account on 20 April 2020.
  1. Go to Banking, select New, then New Sale or Receipt.
  2. Select Other Receipt.

    Date Received* Date you received the money.
    Bank Account* The bank account the money was paid into
    Amount Received* Total amount you received, e.g 10,000.
    Reference If required, enter a reference.
    Details Enter any additional details as required.

    *Field compulsory.

  3. Enter the information required to record the money received, for example:

    Ledger Account Details VAT rate Total
    4960 - Small Business Grant Received Small business grant received No VAT 10000.00
  4. Click Save.

You’ve now recorded receipt of the loan. This updates your ledger accounts with the following posting.

Ledger Account Debit Credit
1200 - Bank account 10000  
4960 -Small Business Grant Received   10000

What support can I get for my business?

These measures are part of a wider government package that's being offered due to coronavirus. To find out what other funding you might be eligible for, visit these pages.