Following an increase in the spread of Coronavirus across the UK, on 24 March 2020 the government instigated a lockdown. People are now only able to leave their homes for food, health reasons, exercise and work where the work is essential and absolutely cannot be done from home. For further guidance on these restrictions please see here.
This has caused an unprecedented disruption to daily life and the ability of businesses to function as usual. Many businesses, particularly those in the retail, hospitality and leisure industries have been forced to close by the government leading to concerns about mass unemployment. For those businesses which are still open the lockdown has required a shift in the way they operate with a significant number of the workforce now working from home. To help combat the disruption and uncertainty, the government has introduced a number of temporary measures designed to provide support to businesses as well as their employees.
For details of the measures in place to support businesses please read below.
Coronavirus Job Retention Scheme
On 20 March 2020 the government announced the Coronavirus Job Retention Scheme, a scheme to enable UK employers that use PAYE to pay at least part of their employee’s wages who have already or would otherwise have been made redundant because of COVID-19. Under the scheme, HMRC will reimburse employers 80% of those wages up to a maximum of £2,500 per month per employee. It will cover the cost of wages backdated to March 1st for a period of 3 months for those employees who were on the payroll as of 28 February 2020; this period may be extended. Employers can then choose whether to pay the remaining 20% of wages but they are not required to do so.
To access the scheme, businesses will need to designate affected employees as ‘furloughed workers,’ which is essentially where employees have been asked to stop working but are kept on the payroll rather than being laid off. Whilst employees are furloughed they must not undertake any work for their employer.
As changing an employee’s status is subject to existing employment law, it will need to be agreed with each employee. It is anticipated that most employees will agree to such a change as the alternative would be for them to be made redundant. Businesses will then need to submit information to HMRC about furloughed employees through a new online portal, details of which will be provided by HMRC in due course.
HMRC have stated that they are expect the first grants to be paid within weeks. However, since the grants under this scheme are not immediately forthcoming, if your business is having short term cash flow problems a Coronavirus Business Interruption Loan may be the solution.
Coronavirus Business Interruption Loan Scheme (CBILS)
CBILS is designed to support smaller businesses (SMEs) who don’t meet a lender’s normal lending requirements for a fully commercial loan or other facility, but who are considered viable in the longer-term.
The scheme is available through the British Business Bank’s 40+ accredited lenders which are listed here. The guidance recommends that businesses contact their current lender first and only approach other lenders if they cannot access the finance they need. CBILS supports a wide range of business finance facilities, including term loans, overdrafts, asset finance and invoice finance although not every lender can provide every type of finance listed.
To be eligible to apply for this scheme, businesses must meet the following requirements:
- be UK based with an annual turnover of no more than £45 million;
- the application must be for business purposes;
- the facility will be used to support primarily trading in the UK;
- they wish to borrow up to a maximum of £5m for a term of up to six years for term loans and asset finance or for a term of 3 years for overdrafts and invoice finance facilities.
- their business must generate more than 50% of its turnover from trading activity
SMEs must also have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable your business to trade out of any short-to-medium term difficulty
Deferment of VAT and Income Tax payments
VAT payments will automatically be deferred for all UK businesses from 20 March 2020 until 30 June 2020. Businesses will have until the end of the 2020/2021 tax year to pay any liabilities that have accumulated during the deferral period.
For the self-employed, payments due on the 31 July 2020 under the Income Tax Self-Assessment will be automatically deferred until the 31 January 2021 but you can choose to still make payment by 31 July 2020 if you wish to do so.
Self-employment Income Support Scheme
In addition to the above support for the self-employed, the government has recently announced the Self-employment Income Support Scheme (SEISS) for self-employed individuals (including members of partnerships) who have lost income due to coronavirus. Those individuals will be able to claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 per month for the next 3 months.
The requirements for this scheme are that individuals must:
- have traded in the 2019/2020 tax year;
- be trading when they apply, or would be except for COVID-19;
- intend to continue to trade in the 2020/2021 tax year;
- have lost trading/partnership trading profits due to COVID-19; and
- have submitted their Income Tax Self Assessment tax return for the 2018/2019 tax year. This is essential as HMRC will use these returns to identify who is eligible for the scheme. Individuals who have not yet filed their tax return for the 2018/2019 tax year should do so by 23 April 2020.
One of the following conditions must also apply:
- trading profits/partnership trading profits in 2018/19 must be less than £50,000 and these profits must constitute more than half of an individual’s total taxable income
- average trading profits in 2016/17, 2017-/8, and 2018/19 must be less than £50,000 and these profits must constitute more than half of an individual’s average taxable income in the same period.
The scheme is not open yet, however, HMRC will contact those who are eligible in due course to invite them to apply.
The government has announced that Commercial Tenants across England, Wales and Northern Ireland who cannot pay their rent up until 30 June 2020 because of the Coronavirus cannot be evicted. During this period, landlords will be prevented from exercising a right of re-entry for non-payment of rent which will include any sum payable under a commercial lease such as any service charge.
Whilst they cannot be evicted, tenants will still be liable for the rent once this period is over as this is not a rent holiday, merely a moratorium.
If an employee is off sick due to coronavirus they will be entitled to receive contractual sick pay and/or statutory sick pay (SSP). A person who is self-isolating to prevent the spread of coronavirus and who is unable to work from home will also be eligible for statutory sick pay. Currently SSP only applies from the fourth day in a row that an employee is off sick, however, the emergency COVID-19 bill which is currently making its way through Parliament will enable employees to get SSP from the first day of self-isolation. This will apply retrospectively from 13 March 2020.
This emergency legislation will also allow UK based businesses with fewer than 250 employees, as of 28 February 2020, to reclaim Statutory Sick Pay (SSP) paid for up to 2 week’s sickness absence per employee due to COVID-19.
Employers will need to keep records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. It is possible for those with symptoms of coronavirus whose employers require evidence to get an isolation note from NHS 111 online and for those who live with someone that has symptoms to get a note from the NHS website.
Details of how this scheme will operate will be revealed once the emergency legislation has passed.
Retail, hospitality and leisure businesses
The government is planning to introduce a business rates holiday for retail, hospitality and leisure businesses in England for the 2020/2021 tax year. This holiday will automatically be applied to those businesses’ next council tax bill in April 2020. However, local authorities may have to reissue bills automatically to exclude the business rate charge, which they should do shortly.
The Retail and Hospitality Grant Scheme has been set up to provide businesses in England in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property depending on their rateable value.
- Businesses will receive a grant of £10,000 if their property has a rateable value of up to £15,000.
- Businesses will receive a grant of £25,000 if their property has a rateable value of between £15,000 and less than £51,000.
No action is required for this scheme as the relevant Local Authority will write to each eligible business.
For both the business rates holiday and the Retail and Hospitality Grant Scheme, the properties that will benefit will be occupied hereditaments that are wholly or mainly being used:
- as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
- for assembly and leisure
- as hotels, guest & boarding premises and self-catering accommodation.
This is an overview of the measures the government has announced as of 27 March 2020. More guidance on the existing schemes as well as details of any new schemes will undoubtedly be forthcoming over the following weeks and months.
This article is for general commentary only and does not constitute legal advice. If you would like to discuss any of the issues discussed in this article, please contact Tom Marshall – firstname.lastname@example.org, or another member of our team.
Cheyney Goulding LLP, solicitors in Guildford, Surrey