The Latest UK Government Measures in Relation to Companies Impacted by Coronavirus

With the coronavirus continuing to spread across the world, the UK Government is introducing further support and relief to companies in an attempt to limit its impact.

Information as of Wednesday 20 May 2020 at 12pm UK

In addition to our article from Friday 20th March outlining new measures introduced by the UK Government to ease the burden to businesses caused by coronavirus (COVID-19), various announcements are highlighted below. Rather than provide an exhaustive list of the changes, we have chosen to focus on those we feel may have the most impact on our clients.

If you are confused about whether Government financial support is available to your business, you can use this online platform to complete a short questionnaire which will highlight the relevant support which could be available to your specific company.

Top-up to Local Business Grant Funds Scheme

A discretionary additional fund has been introduced by the UK Government aimed at small businesses with ongoing fixed property-related costs. The allocation of funding will be at the discretion of local authorities with further guidance yet to be announced.

The maximum grant payment available will be £25k and the scheme is designed to prioritise small businesses in shared spaces, market traders, and other small properties. In order to qualify, companies must have fewer than 50 employees and must be able to demonstrate a significant drop in income due to coronavirus related measures.

The Future Fund

As outlined in our article here, the Government is offering a £1.25b support package for innovative companies in the UK, which includes a £500m investment fund for high-growth companies impacted by COVID-19, comprised of funding from government and the private sector. The Government is initially pledging £250m to the new fund delivered by the British Business Bank. To qualify, a company must be able to secure an equal or greater amount of match funding from private investors and must be a UK registered private company which has previously raised at least £250k in private investment in the past five years. The Future Fund is set to launch in May and will be kept “under review” suggesting funding could be increased in the future. Applications will initially be open until the end of September 2020. To apply, please visit: https://www.gov.uk/guidance/future-fund.

A £750m grants and loans package is also available to Small and Medium sized Enterprises (SMEs) focused on research and development.

Duty on Imports

Duty Deferment account holders who are unable to make deferred customs duties and import VAT payments due on 15 April 2020 can contact HM Revenue & Customs (HMRC) and potentially enter into an extended period without having their guarantee called upon or their deferment account suspended. The outstanding payment will not affect existing duty deferment limits. Where HMRC agree to an extended payment period, interest will not be charged on the outstanding payments provided payment is made in full by the agreed date.

Registered Importers who pay cash/an equivalent can also request an extension to the payment deadline.

In both cases, importers will be asked to explain and possibly demonstrate how they are facing 'severe financial difficulties' as a result of COVID-19.

Potential Insolvency

The government has announced that it will temporarily suspend the wrongful trading rules, backdated to 1 March 2020.

Pre-COVID-19, the wrongful trading rules broadly said:

  • If the company becomes insolvent, the director must immediately take advice from a qualified insolvency practitioner.
  • As a director you should not allow the company to continue to trade whilst you are knowingly insolvent - you potentially become liable for your company's debts, including amounts due to HMRC.

The new measures, announced on 28 March 2020, will allow for a relaxation of these wrongful trading rules. This is expected to reassure directors that the difficult decisions they have to make about the future viability of their business will not have to be unduly influenced by the existing exceptional circumstances which are entirely beyond their control. Provisions will be included to enable the changes to be extended if necessary.

Accounts Filing Extension Update

As previously explored in our update from 20 March, Companies House is now granting those who apply an extension to file company accounts. While companies will still have to apply for the three month extension to be granted, those citing issues related to COVID-19 will be automatically and immediately granted an extension. Applications can be made through a fast tracked online system which should take just 15 minutes to complete. At face value, this may seem like a good opportunity for your business; however we would encourage you to seek specific advice about your individual circumstances before taking any action. 

Value Added Tax (VAT)

The UK government will support businesses by deferring Valued Added Tax (VAT) payments for three months. The deferral will apply to payments due from 20 March 2020 until 30 June 2020, although taxpayers should be aware that they must file the VAT return on time and in accordance with recent Making Tax Digital changes too. All UK businesses are eligible but Non-Established Taxable Persons (NETPs) are not able to defer VAT payments, meaning non-resident VAT payers must stick with the usual payment deadlines.

This is an automatic offer from HM Revenue & Customs (HMRC) with no application required.

Businesses will not need to make a VAT payment during this period. Taxpayers were given until at least 31 March 2021 to pay any liabilities that had accumulated during the deferral period. Interest is not expected to be charged on the deferral, but the announcements have been silent on that topic.

VAT refunds and reclaims will be paid by the government as normal. 

Coronavirus Business Interruption Loan Scheme (CBILS) 

Created by the British Business Bank, CBILS is designed to support a wide range of business finance facilities with overdrafts, asset finance, term loans and invoice finance; however, not all lenders can provide every type of finance available.

The Chancellor announced on 3 April 2020 that he was extending the CBILS so that all viable small businesses affected by COVID-19 (not just those unable to secure regular commercial financing) would be eligible. 

The Government is also preventing lenders from requesting personal guarantees for loans under £250k and aims to speed up lending approvals. The Government will continue to cover the first 12 months of interest and fees.

To determine whether your company may be eligible, all of the following criteria must be satisfied:

  1. Your application must be for businesses purposes
  2. You must be a UK based SME with annual turnover not exceeding £45m – this is a group threshold not per individual company (see CLBILS below if you have higher turnover)
  3. Your business must generate more than 50% of its turnover from trading; companies operating on a cost plus basis which are financed by a parent company will be ineligible
  4. Your CBILS-backed facility will be used primarily to support trading in the UK
  5. Your borrowing request does not exceed £5m

Finance terms are up to six years for asset finance and term loans and up to three years for overdrafts and invoice finance facilities.

How to access finance

In the first instance, you should approach your own finance provider; however, you should also consider approaching other lenders if you are unable to access the finance you need.

It is also worth noting that decision making is fully delegated to the accredited lenders and the CBILS guarantee is to the lender. As with any commercial transaction, the borrower is always 100% liable for repayment.

A key aspect of the CBILS is its interaction with the Enterprise Investment Scheme (EIS) tax relief rules. The British Business Bank is a development bank wholly owned by HM Government and, accordingly, the CBILS would likely fall within the rules on state aid. To the extent that CBILS is classified as state aid, this could have an impact on companies which have received risk finance investment (i.e. the Seed Enterprise Investment Scheme, Enterprise Investment Scheme, Social Investment Tax Relief, and Venture Capital Trusts relief).

Loss making companies are not eligible under CLBILS and it cannot to be used where an applicant was an “undertaking in difficulty” as at 31 December 2019. An undertaking in difficulty is defined to include businesses that have accumulated losses greater than half of their subscribed share capital as at 31 December 2019. In practice this means certain fast growth businesses may not be eligible for the CBIL Scheme (unless the business is less than three years old).

Coronavirus Bounce Back Loan

Set to launch on 4 May, the coronavirus Bounce Back Loan is designed to help SMEs apply for loans of £2k-£50k for terms up to six years.

The UK Government has stated it will guarantee 100% of the loan, there will be no fees or interest to pay for the first 12 months and no repayments will be due during that time.

Companies based in the UK, affected by coronavirus but were not in difficulty on 31 December 2019, can take advantage of the loan. 

State funded schools, banks, insurers, reinsurers, public sector bodies and those already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS) cannot apply for the Bounce Back Loan.

If you have already received a loan of up to £50k under CBILS, it may be possible to transfer it into the Bounce Back Loan scheme. For those cases, we would advise you to contact your lender before 4 November 2020.

Coronavirus Large Business Interruption Loan Scheme (CLBILS)

A new Coronavirus Large Business Interruption Loan Scheme (CLBILS) was announced on 3 April 2020 and is designed to provide more companies with Government-backed support.

It will provide a Government guarantee of 80% to enable banks to make loans of up to £25m to larger companies with an annual turnover of between £45m and £500m.

Michael Izza, Chief Executive of ICAEW and Chairman of Chartered Accountants Worldwide shared his thoughts on CLBILS on LinkedIn on 19 May:

“So far, fewer than 100 large businesses have accessed finance through CLBILS so ministers are right to review how it is operating. Increasing the maximum loan size available under the Scheme is a sensible move which should make it attractive to more businesses. Bids for these larger loans will be subject to a significant level of scrutiny so companies should seek advice to ensure their applications have the best chance of being accepted.”

Income Tax

For self-employed taxpayers, the second payment on account of tax due by 31 July 2020 will be deferred until 31 January 2021.

It appears this will not apply to employees who are required to file a Self Assessment Tax Return.

There is no need to make an application for this extension to take effect.

No interest for late payment will be levied during this deferral period. 

Statutory Sick Pay Rebate Scheme

The UK Government has introduced a new Statutory Sick Pay Rebate Scheme (SSPRS) designed to repay employers the current rate of Statutory Sick Pay (SSP) which they pay to employees (and former employees) for periods of sickness from 13 March 2020 or 16 March 2020 if the employee was shielding. The SSPRS will cover up to two weeks of SSP starting from an employee's first day of sickness if they have the coronavirus or if they are self-isolating.

It is important to note a rebate cannot be claimed in relation to employees who were furloughed at the time of illness or absence, and for whom the separate Coronavirus Job Retention Scheme grant was claimed.

Employees are not required to produce a Doctor's fit for work note in order for an employer to make a claim and part time and contract workers can be included; however, employers must have fewer than 250 employees as of 28 February 2020 in order to qualify. Employers must also be within their State Aid limits under the EU Commission temporary framework.

Volunteer Leave

Workers are permitted to take statutory leave to support 'essential health and social care services' through volunteering where their employer has ten or more employees. Workers must provide at least three working days' notice and produce a certificate certifying their involvement as a volunteer, along with the dates that they will be volunteering.

Leave can be taken in blocks of two, three or four weeks and is set to run for 16 weeks, with employers unable to reject claims on any grounds. A volunteering worker's employment contract remains in effect.

It is not yet clear how volunteering employees will be compensated; however it is understood that the Government will compensate workers for loss of earnings as well as providing a travel and subsistence allowance.

Changes to Annual Leave

New regulations came into force on 26 March 2020 designed to allow employees to carry annual leave over to a new holiday year where it is impractical to take leave due to COVID-19. These new regulations amend the prohibition on carrying over four weeks of statutory annual leave under the Working Time Regulations 1998.

Statutory Residence Test (SRT)

For the purposes of day counting for SRT, HMRC considers that the circumstances are 'exceptional' if you:

  • are quarantined or advised by a health professional to self-isolate in the UK as a result of the virus;
  • find yourself in a 'lockdown' situation as a result of the virus;
  • are unable to leave the UK due to the closure of international borders; or
  • are asked by your employer to return to the UK temporarily as a result of the virus.

Tax Relief for Working from Home

In the UK, if your employees are required to work from home, they can claim for expenses such as increased utility bills. This has always been the case but has become more high profile given the current circumstances.

From 6 April 2020 employees can claim a rate of £6 per week (higher claims can be made but the process is more complex). Either:

  • Employers can pay their employees £6 per week additionally tax-free; or
  • Employees can claim tax relief on £6 per week by completing and filling a P87 form. This can be done through an online P87 form through your Government Gateway account or by filling out a postal P87 form. Employees will need their employer's name, PAYE reference (which can be found on payslips and P60s), and job title (as well as National Insurance number for postal forms).

Self-Employment Income Support Scheme (SEISS)

Eligible self-employed people must make a claim before 13 July to receive a taxable grant of 80% of their average monthly trading profits paid out in a single instalment covering three months' worth of profits, capped at £7,500 in total. 

Eligible self-employed individuals will now be able to claim a second and final SEISS grant in August; a taxable grant worth 70% of their average monthly trading profits for three months, paid out in a single instalment and capped at £6,570 in total.

The eligibility criteria for the second grant will be the same as for the first grant. People do not need to have claimed the first grant to claim the second grant. 

More information will be available from 12‌‌ June.

In Conclusion

Our focus is on ensuring our clients can operate as normally as possible and have access to the latest information that is broadly relevant for them. If you have specific concerns, please contact us for more information.

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