In this unprecedented time, many businesses are facing the reality of significant challenges to business continuity and cash flow in light of the ever-increasing spread of COVID 19 across the UK and worldwide. As businesses are faced with the unique challenge of preserving business and continuing to trade whilst looking after customers and staff, they are constantly considering ways in which they can manage their costs in the short to medium term.
Doing nothing and waiting until the company is in financial difficulty is not the recommended approach to take in this rapidly-evolving situation, primarily because implementing any processes can take considerable time, effort and communication with employees.
Fortunately for some businesses, the Government have announced a number of measures which they have or intend to put in place in order to help struggling businesses protect their workforce and this bulletin summarises those key measures which should help UK businesses in the short to medium term. Further information can be accessed on the Government’s website. We will release a separate note following the Government’s announcement this evening in respect of the measures available to self employed. Additionally, please see our article “COVID 19- Contingency Planning for Employers” where our employment team have tackled some of the key decisions that employers need to consider, as well as the latest legislation put in place affecting employers.
Government Assistance to Employers
1. Coronavirus Job Retention Scheme
Initially, employers have been encouraged to consider whether there is work that some or all of its employees could carry out remotely, even if such tasks are not usually within an employee’s job description, and that has now been imposed by the Government for at least the next three weeks to mid-April.
Where a business is not able to continue to trade with employees working remotely, regardless of its size or sector, a new Coronavirus Job Retention Scheme will enable employers to claim a grant from HMRC to cover 80% of employees’ salaries , provided that the employees are kept on the payroll, leave is on a temporary basis and such employee income is subject to PAYE and NIC. This is capped at £2,500 per calendar month for each employee. This scheme will be open for at least three months and will be extended if necessary.
2. Business Rates and Mortgages
The Government has also recently announced that businesses in the hospitality, retail and leisure industry in England will be able to rely on a 12 month business rates holiday in addition to individuals being able to rely on a 3-month mortgage holiday, which in such uncertain times should assist in reducing overheads for both employers and employees. Businesses which received the discount in the 2019/2020 tax year will be rebilled by their local authority at a later date. This discount will automatically be applied to an employer’s next council tax bill (if applicable).
3. Commercial Rent Holiday
Alongside protecting individual tenants, commercial tenants who miss rent payments as a result of COVID19 between now and 30 June 2019 will be exempt from eviction by their landlord. Any rent arrears will be due following this period (if not extended by the Government) and therefore businesses should start discussions with their landlord sooner rather than later to ensure that these payments can be adequately built into future cash flows.
4. Coronavirus Business Interruption Loan Scheme
This scheme offers loans of up to £5 million to SMEs (companies with a turnover of £45 million or less) through the British Business Bank for working capital purposes for a term of up to 6 years. The Government has also agreed to pay the first 12 months of interest and levied fees and act as guarantor for 80% on each loan to give lenders confidence in continuing to provide finances to SMEs. The lenders must apply a normal business test which in essence means they have to satisfy themselves that they would ordinarily lend to that business BUT FOR the current impact of the virus. For example, a business which is not likely to be viable in the longer term because its business trajectory pre-COVID19 was towards insolvency may not meet the business test and consequently not be eligible to receive a loan.
5. HMRC TIME to Pay Scheme
A Time to Pay Scheme will be implemented on a case by case basis and will be tailored to individual circumstances and liabilities to support business’s tax liabilities. It is available to all businesses (as well as self-employed in financial distress and with outstanding tax liabilities).
6. Bank of England Lending Facility
A new lending facility from the Bank of England to help support liquidity amongst larger companies is available to help such companies bridge COVID 19 disruption to their cashflow through loans.
7. VAT Payments
The Government further announced that VAT payments will be deferred in respect of the next quarter and applied automatically to businesses. Liabilities accumulated during the deferral period will not be due until the end of the financial year.
8. Grant Funding
Additional funding through the Retail and Hospitality Grant Scheme provides businesses in the retail and leisure industry with a cash grant of up to £25,000 per property (depending on the rateable value of the property). Additionally, businesses eligible for Small Business Rate Relief (SBRR) OR Rural Rate Relief may be able to meet ongoing costs by utilising a one-off grant of £10,000 made available by the Government.
Businesses should check their insurance policies as with Government advice to close various businesses, e.g., gyms, theatres, restaurants and bars, these businesses may be able to make a claim if they have appropriate business interruption cover for pandemics in place.
10. Company House Filings
The annual filing obligation for UK companies to file their statutory accounts online as been extended, giving businesses and additional three months to file their accounts without incurring any penalty.
We understand that the Courts and Employment Tribunal will not close but instead, there will be an expansion of video and audio linked capabilities enabling proceedings to take place by telephone or other electronic means.
12. Coronavirus Bill 2019-2020
The British Government published details of a new bill called the Coronavirus Bill 2019-2021 to assist employers during the coronavirus pandemic, which included facilitating emergency statutory volunteer leave and amending the current statutory sick pay arrangements to cover self-isolation and additionally make payments due from the first day an individual is incapacitated. This is discussed fully by our employment colleagues in a separate bulletin “COVID-19 – Contingency Planning for Employers”.
In such unprecedented times, where possible, businesses need to be innovative, looking not only at ways to minimise costs and overheads whilst protecting its workforce, but also innovative ways of utilising skilled workforces in order to trade and/or develop the business in such uncertain times. Possible avenues for businesses to explore include diversifying its supply chain in the short term in order to boost any income channels available to such companies, for example, UK car manufacturers are currently answering requests from the Government to manufacture ventilators, masks and other medical supplies. Alternatively, businesses could focus on research and develop opportunities at this time, utilising this quiet time to build out its online profile and/or finalise/explore new product opportunities.
In addition to the above announcements, we have been advised that more announcements in respect of the Governments plans, in addition to further details in respect of the implementation of the above, are due to be announced in the weeks to come. In particular, this evening the Government will release specific measures it intends to make available to self-employed.