The Covid-19 pandemic is causing untold economic damage worldwide and is wreaking havoc on virtually every industry sector. Across the globe, governments have devised financial rescue and support packages in an effort mitigate to the economic damage and bolster businesses.
This briefing will outline the support that had been made available by the UK government to businesses to date and explores some of the most widely available reliefs.
Deferment of VAT and discretionary tax reliefs
- Payment of VAT may now be deferred by three months, from 20 March 2020 until 30 June 2020. This may be further extended in due course subject to the government’s evaluation of the Covid-19 situation.
- No applications to HMRC are required to access this relief, it is automatic and available to all UK businesses.
- Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.
In addition to the deferment of VAT, the following measures have also been advertised as discretionary reliefs accessible on a ‘case by case’ analysis to businesses:
- agreeing an instalment arrangement for any outstanding tax liabilities
- ‘time to pay’ service
- suspending debt collection proceedings
- cancelling penalties and interest where businesses experience administrative difficulties in contacting or paying HMRC immediately.
Coronavirus Job Retention Scheme
Under the scheme all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during the Covid-19 pandemic. Employees that are subject to the Scheme will not be able to undertake any work for their employing organisation until their status is changed/restored.
All UK businesses are eligible to access the Scheme. For businesses to avail themselves of the scheme they must:
- designate affected employees as ‘furloughed workers,’ and notify the relevant employees of this change. The ability for employers to change the status of their staff remains subject to ordinary employment law considerations and the content of each employment contract (negotiation may therefore be required)
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (the setup of which is pending)
- HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
For more information from our specialist employment team about the Scheme, click here.
Reimbursement of statutory sick pay (“SSP”)
UK based small-medium sized businesses, (those employing less than 250 staff as of 28 February 2020), will be able to reclaim statutory sick pay paid to employees due to Covid-19 as an expenditure. The refund will cover up to 2 weeks’ SSP per eligible employee. Where employees have been required to self-isolate, they may claim SSP from the first day of their isolation.
For more information about the operation of SSP during the Covid-19 pandemic, click here.
Business Interruption Loans
This relief is designed to assist small-medium sized businesses with cash flow issues.
- The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) and will not charge businesses or banks for this guarantee. The initiative will support loans to SMEs of up to £5 million in value.
- To be eligible for a loan businesses must (1) be UK based and have a turnover of less than £45 million per annum; and (2) must meet the other British Business Bank criteria (primarily, having a solid business plan that would be viable but for the pandemic).
- The loans may be accessed by liaising with your relevant bank or finance provider for a discussion of your business plan with them. It may be possible to use this a pre-text for requesting a repayment holiday from monthly repayments existing under any pre-existing loans with the lender.
Covid-19 Corporate Financing Facility
- The facility will be operated by the Bank of England by short term debt from large companies.
- The facility will offer financing on terms comparable to those in markets in the period before the Covid-19 pandemic and will be open to firms that can demonstrate they were in sound financial health prior to the shock.
- The fund will purchase Commercial Paper issued by companies that make a material contribution to economic activity in the United Kingdom. Factors that will favourably impact on this evaluation are:
- the company is incorporated in the UK
- the company has a significant employment presence in the UK or its headquarters/centre of operations within the UK
- the company generates significant revenues within the UK and/or has a large number of UK based customers or sites.
Further details about the operation of the facility can be found on the Bank of England website.
Other industry specific measures that have been introduced by the government include:
- a Self-employment Income Support Scheme
- a 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England
- small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
- grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rate-able value between £15,000 and £51,000
The measures outlined in this briefing are being rolled out as the first round of general economic reliefs introduced by the UK government in response to the current crisis. The situation remains fluid – the operation of the above measures will of course require much fine tuning and the UK government is likely to widen the available support mechanisms for businesses in response to further emergent, and perhaps industry-specific, economic issues caused by Covid-19.
If you or your organisation face commercial disruption and potential resulting legal issues because of the Covid-19 pandemic, please contact Stephen Blair or William Bainbridge.
This briefing is for guidance purposes only. RadcliffesLeBrasseur accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.