As the spread of the coronavirus COVID-19 continues across the globe, the UK government has responded by introducing various temporary measures to provide financial assistance to businesses in the UK, small, medium and large, in times of increasing economic uncertainty. The Chancellor's financial assistance measures are summarised below.
Support for businesses generally
The UK government's financial support initiatives that will apply to businesses generally will be as follows:
any Valued Added Tax (VAT) payments to HMRC due for payment during the period 20 March 2020 to 30 June 2020 will automatically be deferred, with any VAT liabilities incurred during this period not due for payment until the end of the 2020 to 2021 tax year;
employers will be able to apply to HMRC to facilitate partial payment of salaries of employees who would otherwise have been laid off during the COVID-19 crisis, with 80% of the salary of affected workers being paid under this job retention scheme up to a monthly cap of £2,500 per employee. Note that the government has noted that in order to be eligible, affected employees must have their status designated and notified as furloughed workers, which is subject to existing employment law and may be subject to negotiation, depending on the terms of the relevant employment contract.
Support for small and medium sized businesses (SMEs)
The Chancellor's announcement of financial support for UK businesses for SMEs will be as follows:
ability to claim back statutory sick pay paid to employees due to sickness absence due to COVID-19 – these claims cover up to 2 weeks statutory sick pay per eligible employee who is sick due to COVID-19, and can be made by employers with up to 250 employees (as at 28 February 2020) on the day following the commencement of regulations regarding the extension of statutory sick pay for COVID-19;
for retail, hospitality and leisure sector businesses in England that occupy properties that are wholly or mainly used (i) as shops, restaurants, cafes, drinking establishments, cinemas and live music venues, (ii) for assembly and leisure or (iii) as hotels, guest and boarding premises or self-catering accommodation:
- business rates holiday for the 2020 to 2021 tax year that will be applied automatically by local authorities through council tax bills in April 2020;
- a cash grant of £10,000 to businesses operating from premises with a rateable value up to £15,000, to be administered automatically by local authorities;
- a cash grant of £25,000 to businesses operating from premises with a rateable value between £15,000 and £51,000, to be administered automatically by local authorities;
for properties used by nursery businesses in England either occupied by providers on Ofsted's Early Years Register or wholly or mainly used for the provision of the Early Years Foundation Stage, a business rates holiday for the 2020 to 2021 tax year that will be applied automatically by local authorities through council tax bills in April 2020;
SMEs that are already eligible for small business rate relief or rural rate relief will receive a one-off grant of £10,000 automatically through local authorities;
self-employed UK taxpayers will be able to defer income tax payments that would have been due for payment on 31 July 2020 through Income Tax Self-Assessment to 31 January 2021, with no penalties or interest for late payment charged during this deferral period; and
a Coronavirus Business Interruption Loan Scheme (via the British Business Bank) will be established to assist SMEs (with turnover no more than £45 million per year) obtain loans, overdrafts, invoice financing and asset financing of up to £5 million and up to 6 years, whereby the government will provide lenders with guarantees of 80% of an SME's loan – no charge will be made for such guarantees, but will be subject to per-lender caps on claims and the government will cover the first 12 months of interest payments and any lender fees under such loans.
The Chancellor's announcement also referred businesses and self-employed people to HMRC's Time to Pay service if they are in financial distress and have outstanding tax liabilities. HMRC's arrangements in such circumstances are arranged on a case-by-case basis depending on the circumstances and liabilities in question.
Support for larger businesses
Government support for larger UK businesses will come in the form of a lending facility from the Bank of England. This facility is intended to facilitate working capital for larger businesses that are fundamentally strong but are affected by the availability of short-term funding for short term liabilities. This new Bank of England facility will operate by way of the purchase of short-term debt and is intended to ease the supply of credit to all firms in the UK.
King & Wood Mallesons' Banking & Finance team are available to discuss your queries on all areas of finance and financial markets law, please contact Khai Nguyen or Vanessa Docherty in our London office.