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We have summarised below the package of measures that the government has so far announced to support public services, people and businesses. The government has made it clear that these measures are by no means final and we will update further as and when additional measures are introduced.
A helpline at HMRC has been set up in order to help those who cannot pay their tax bill due to COVID-19. Businesses suffering from financial distress and facing outstanding tax liabilities may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.
The support arrangements are to be agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. The government has indicated that HMRC will look favourably on claims related to COVID-19.
The government have pledged to support all UK businesses by deferring VAT payments for 3 months. The deferral will apply from 20 March 2020 until 30 June 2020. This measure will be implemented automatically; businesses need not make any application, nor any VAT payment during this period. VAT payments will fall due until the end of the 2020 to 2021 tax year to pay liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal. For those who are self-employed, Income Tax payments are due on 31 July 2020 will be deferred until 31 January 2021. Similarly, there are no applications required in relation to this offer. There will be no penalties or interest implemented for late payment.
All UK employers are eligible to be able to access support to pay part of their employees’ salary for those employees that would otherwise have been laid off during this crisis (such employees will be defined by the scheme as “furloughed workers”).
HMRC will reimburse 80% of furloughed workers wage costs, capped at £2,500.00 per month.
In order to access the scheme, businesses will need to designated affected employees as “furloughed workers” and notify their employees of this change. The government has flagged that changing the status of employees remains subject to existing employment law, and, depending on the employment contract, may be subject to negotiation. Businesses will also report to HMRC about the employees that have been furloughed, and submit information about their earnings through a new online portal. For more information about this scheme, please refer to our Employment team’s legal update.
The government will introduce a business rates retail holiday for all retail, hospitality and leisure businesses in England for the 2020/2021 tax year. Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority “as soon as possible”.Guidance for Local Authorities on the scheme has recently been released.
A £25,000 grant will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000.00 and £51,000.00. Guidance for Local Authorities has been released.
The government has announced that it will provide additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief. This scheme involves a one-off grant of £10,000.00 to businesses currently eligible for small business rate relief or rural rate relief, to help meet their ongoing business costs.
The government has advised that if your business is eligible for small business rate relief or rural rate relief, you will be contacted by your local authority and it is not necessary to take any active steps to apply.
Funding for the scheme will be provided to local authorities by government in early April. The government stated that guidance for local authorities on the scheme will be provided shortly.
The government has recognised many businesses may struggle with their cashflow due to COVID-19 and has recently announced that commercial tenants who cannot pay their rent because of coronavirus will be protected from eviction.
These measures will mean no business will be evicted from their premises if they miss a payment in the next three months. This measure is well-timed for many businesses whose quarterly rental payments are due to landlords on Wednesday.
This measure will come into force when the Coronavirus Bill receives Royal Assent. The measure is intended to continue until 30 June 2020 with an option to extend if necessary. As commercial tenants will be liable for the rent after this period elapses, the Government has stated that it is continuously reviewing the impact on commercial landlords’ cash flow and that it will frequently communicate with them.
The British Business Bank will launch a new temporary Coronavirus Business Interruption Loan Scheme this week (w/c 23 March 2020) to support SMEs to easily access bank lending and overdrafts.
The government will provide lenders with a guarantee of 80% on each loan to encourage, and install confidence in, lenders to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million (an increase from the previous amount of £1.2 million).
Businesses can access the first 12 months of such finance interest free, as government will cover the first 12 months of interest payments. Further details, including details on the lenders providing access to this scheme will be announced shortly, and the scheme will be available this week (w/c 23 March 2020).
The Bank of England has launched a new scheme for larger firms and companies on behalf of HM Treasury. The scheme aims to assist with affected businesses who, in the absence of the disruption caused by COVID-19, would hold a strong position in the market. This scheme will help businesses across a range of sectors to pay wages and suppliers, overcoming potential disruption to their cashflows.
The loans will be funded by the issue of additional central bank reserves. Financing will be made available by the government purchasing sterling denominated commercial paper up to one-year maturity issued by investment grade non-financial firms making a material contribution to the UK economy. Businesses do not need to have previously issued commercial paper in order to participate.
The terms of the financing will be comparable to those offered on the market in the period before the COVID-19 economic shock. The temporary impact on a company’s or firm’s balance sheet will be overlooked as the facility will be available to firms and companies, which can demonstrate that they were financially healthy prior to the impact of COVID-19 on their cashflow.
The scheme will operate for at least 12 months and will continue as long as there is a demand to relieve cash flow pressures on those companies and firms that make a material contribution to the UK economy.
The following measures have been implemented by the Monetary Policy Committee (MPC):
The Bank of England have explained that the reduction in Bank Rate will help to support business and consumer confidence at a difficult time. Additionally, the Bank of England have stated that this measure will boost the cash flows of businesses and households, and to reduce the cost of, and access to, finance.
In order to mitigate the consequences of low interest rates (namely the increased difficulty for banks and building societies to reduce deposit rates, and as a result, their reduced ability to cut lending rates), the TFSME will, over the next 12 months, offer four-year funding of at least 5% of participants’ stock of real economy lending at interest rates at, or very close to, Bank Rate.
Additional funding will be available for banks that increase lending to SMEs.
The TFSME has pledged to:
The length and extent of the economic disruption that COVID-19 will bring is uncertain at this time. While the government’s support mechanisms appear to be a welcome step, it is clear that further measures will need to be put in place to ensure that UK businesses are able to navigate this period of uncertainty.Alongside the necessity for further measures, further clarity on the proposals is also required. TLT will continue to review and report on future government guidance in response to COVID-19 and how it may affect businesses.
Contributor: Amanda Applegate
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.
24 March 2020
by James Webb