UK response to COVID-19 and supportive measures for business

By Nick Farmer, HLB UK

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The current situation surrounding Coronavirus in the UK is incredibly fast moving and new measures are being introduced daily. The Scientific Advisory Group for Emergencies (SAGE), drawing on a huge range of experts and evidence, has been providing the UK government with advice based on the most up to date scientific findings. This is shaping when, how and why the government has made the interventions it has so far. These include all households being asked to stay at home and avoid non-essential travel, except for key workers that are required to travel for their job. Social distancing measures have been introduced to reduce social interaction between people, and shielding has been introduced for extremely vulnerable people where they are being asked to stay at home at all times and avoid face to face contact for the next 12 weeks. Schools are now closed (except some to look after the children of key workers), and there have been the closures of all pubs, bars and restaurants, as well as other venues such as theatres, cinemas, gyms and leisure centres. For now, parks remain open in order to enable people to go out for exercise and help with their mental wellbeing.

In support of the business community, the UK government has set out a package of measures including:

  • a Coronavirus Job Retention Scheme
  • deferring VAT and Income Tax payments
  • a Statutory Sick Pay relief package for SMEs
  • 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 rateable value between £15,000 and £51,000
  • the Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
  • a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
  • the HMRC Time To Pay Scheme

Here below we discuss supportive measures available to UK businesses.

 

Loans and subsidies

Business interruption loan scheme

Up to £5m emergency funding from the banks with the Government providing an 80% guarantee to the bank. The process will be exactly the same as for the Enterprise Finance Guarantee (EFG) Scheme and business should approach their relationship banker with their, most up to date P&L and Balance Sheets and updated forecasts in the first instance.

Information correct as of 18th March 2020

  • Companies with less than £41m turnover
  • Sector eligibility as for the EFG with only a few exceptions
  • Amount: £1,000 to £5,000,000 (as increased yesterday)
  • Term: 3 Months – 10 Years
  • Interest free for first 6 months
  • No fees.

A package of information may be required as part of the application which could include the latest annual accounts, current management accounts and forecasts. These are to be made available through the high street banks.

Bank of England lending facility

Large businesses impacted by the Coronavirus outbreak will be able to access a new lending facility, which will be run and funded by the Bank of England.

The Covid Corporate Financing Facility will provide short term bridging finance to businesses by purchasing a type of debt called commercial paper. The BoE has stated that the aim is to support liquidity and ensure businesses can pay rent, staff, suppliers and purchase stock, however we are awaiting details of eligibility criteria The scheme is expected to be running by the start of next week.

Information correct as of 18th March 2020

  • Open to non-financial firms that make a material contribution to UK economy
  • Investment grade credit rating or similar (i.e. similar financial health, even if they haven’t got a credit rating) before the crisis
  • Amount: Uncertain
  • Term: Up to 12 months

Small business grant funding

Additional funding will be made available via local authorities in England to support small businesses that already pay little or no Business Rates because of Small Business Rate Relief (SBBR) or Rural Rate Relief.

Once up and running, no application will be necessary as councils will contact businesses (based on their business rates records), however no funds will be available until early April.

Information correct as of 18th March 2020

  • One-off grant of £10,000 to businesses currently eligible for SBRR or Rural Rate Relief, to help meet their ongoing business costs.
  • Larger grants of £25,000 for retail, hospitality or leisure businesses operating from smaller premises, with a rateable value over £15,000 and below £51,000.
  • Guidance for local authorities on the scheme will be provided shortly. Your local authority should then be able to help with any questions on eligibility.

 

Tax deadlines

Time to pay arrangements

Businesses owners or individuals in financial distress, and with outstanding tax liabilities, may be able to agree a Time To Pay arrangement with HMRC. These are agreed on a case-by-case basis, subject to taxpayers’ individual circumstances and ability to pay, and would allow business to defer HMRC liabilities for a limited period.

In expectation of increased demand, HMRC has set up a dedicated COVID-19 helpline, will also waive late payment penalties and interest where a business has problems meeting its filing obligations or paying its taxes due to COVID-19.

VAT deferment

Following the Chancellor’s announcement on 20th March 2020, no business will pay VAT from now till June 2020, and they’ll have until the end of the financial year to repay those bills. The Chancellor believes this will injection £30bn into the economy and should help companies struggling with a cash flow crisis. All UK businesses are eligible.

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. 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.

Income Tax

For Income Tax Self-Assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021. If you are self-employed you are eligible. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.

 

Support for staff and HR professionals

Coronavirus job retention scheme

Under the Coronavirus Job Retention 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 this crisis. All UK businesses are eligible. You will need to:

  • designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

Statutory sick pay

Small and medium-sized businesses are able to claim support with the extra costs of paying Statutory Sick Pay (SSP) for sickness absence due to COVID-19. Legislation will be brought forward to allow businesses to reclaim eligible SSP costs, probably in the Covid-19 Emergency bill, however this is not yet clear. Existing systems are not designed to facilitate such employer refunds for SSP, however the government will work with employers over the coming months to set up a repayment mechanism for employers as soon as possible.

Information correct as of 18th March 2020

  • Employers with fewer than 250 employees (as of 28 February 2020)
  • Reclaim up to 2 weeks SSP for any employee who has claimed SSP (according to the new eligibility rules) as a result of COVID-19
  • Employers should record staff absences, but GP fit notes not required
  • The scheme will commence from the 13 March 2020.

Support for your people

For employees who are not paid – or have pay reduced – for a period of time, they may be entitled to state benefits such as Universal Credit, Job Seekers Allowance or Employment and Support Allowance. They should start an application on-line for Universal Credit. Staff who are mortgage holders may also be able to agree a payment holiday with their lenders. Staff who become affected by the virus or who are required to self-isolate will be entitled to statutory sick pay, and the government have waived the normal three day waiting period to allow employees to receive payment from day one (or isolation). Whereas SSP is normally paid at the employer’s cost, the government has announced that it will meet the cost of providing statutory sick pay for up to 14 days for workers in companies with up to 250 employees.

 

Supply and infrastructure

Mortgage lenders

Borrowers that are experiencing issues with their finances as a result of Covid-19 should speak to their lender as soon as possible, with details of your current financial position. Lenders have agreed that they will support customers, including through payment holidays, or reduced payments, of up to 3 months. This option should be considered carefully, particularly if your circumstances are unlikely to change, as the interest that you would have paid during this period will be rolled up and added to the balance due. Nor is it clear whether the term of the mortgage would be extended, which could result in borrowers having to make higher repayments over the remaining term of the mortgage. Other options may be to see if you could transfer to a better mortgage deal for you.

Business rates reliefs

It was announced last week that the discount will be increased to 100% for one year and extended to all retail, hospitality and leisure businesses in England, including any property used wholly or mainly as a:

  1. shops, restaurants, cafes, drinking establishments, cinemas and live music venues,
  2. for assembly and leisure; or
  3. as hotels, guest & boarding premises and self-catering accommodation.

As this is a measure for 2020/21 only, the Government is not changing the law relating to business rates reliefs. Instead it will be for individual local authorities to adopt a local scheme and determine in each individual case when to grant relief under their discretionary relief powers. To help them with this, the Government has provided detailed eligibility criteria.

Information correct as of 18th March 2020

  • Businesses that received the retail discount in the 2019/20 tax year will be rebilled by their local authority as soon as possible.
  • Some local authorities will apply the discount automatically to all eligible businesses, others may requires businesses to apply to receive the discount.

Insurance

Businesses should check with their insurance provider if they are covered. The Insurance industry has confirmed that the Government advice to avoid pubs, clubs and theatres etc. is sufficient for businesses to claim on their insurance where they have appropriate business interruption cover for pandemics in place. However, many businesses are unlikely to be covered as most business interruption insurance policies are dependent on damage to property, which will exclude pandemics.

Policies should be checked carefully as some businesses may have purchased a specific add-on relating to notifiable diseases (which includes Covid-19), but some of these will still specify damage to the building. Other businesses may have purchased supply chain or denial of access cover which may meet their needs in this case.

 

As the COVID-19 epidemic continues to escalate, it is likely that the UK government will announce more supportive measures to help the business community. To discuss any of the topics raised in this article or to find out more about doing business in the UK in light of coronavirus, we’d welcome the opportunity to talk with you.

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