Measures Announced by HMRC to Assist Businesses and Individuals with COVID-19 Disruptions

During these turbulent times we believe that it is always best to seek advice and assistance as soon as possible and not delay until matters becomes critical. Below we have summarised the latest position (as at 1 July) on a number of measures to assist businesses in financial difficulties due to the disruption resulting from COVID-19.

Further details can be found on the GOV.UK website. Should you wish to discuss matters further, please contact your engagement/relationship partner or email us mail@sgllp.co.uk

Statutory Sick Pay – TUPE

The Government has clarified the guidance to confirm that claims can be made for employees who have transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), provided that the new employer had:

  • a PAYE scheme that was created and started on or before 28 February 2020; and
  • fewer than 250 employees (including TUPE transferred employees) across all PAYE payroll schemes on 28 February 2020

Additionally, an employer without a PAYE scheme on 28 February 2020 can claim provided that the previous employer had fewer than 250 employees across all their PAYE schemes on that date.

Claims can only be made for SSP paid by the employer making the claim, not for amounts paid by any other employer.

Coronavirus Statutory Sick Pay Rebate Scheme

The rules have been amended so that claims can now be made for employees who are self-isolating because they’ve been notified by the NHS or public health bodies that they’ve come into contact with someone with coronavirus.

The Government has announced that the online application system is to open on 26 May to allow employers to recover the costs of paying coronavirus-related SSP for eligible periods of sickness.

In order to claim, an employer must:

  • Have had a PAYE payroll scheme that was created and started before 28 February 2020.
  • Be small or medium sized, with fewer than 250 employees (including all connected companies).

The repayment will cover up to two weeks of SSP, and is payable if an employee is unable to work because they:

  • Have coronavirus; or
  • Are self-isolating and unable to work from home; or
  • Are shielding because they have been advised that they are at high risk of severe illness from coronavirus.

This applies to sickness starting on or after:

  • 13 March 2020 – if your employee had coronavirus or the symptoms or is self-isolating because someone they live with has symptoms.
  • 16 April 2020 – if your employee was shielding because of coronavirus.

In order to claim, an employer will require their Government Gateway user ID. Further details of the Scheme, including links to obtaining the Government Gateway user ID, can be found here.

If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website.

Support for Businesses that pay Business Rates
A business rates holiday is to be introduced for retail, hospitality and leisure businesses in England for the 2020 to 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.
This includes properties wholly or mainly being used shops, restaurants, cafes, drinking establishments, cinemas, estate agents, lettings agencies, bingo halls and live music venues; for assembly and leisure; and as hotels, guest & boarding premises and self-catering accommodation.

The relief should be automatic and will apply to your next council tax bill in April 2020. However, local authorities may have to reissue your bill to exclude the business rate charge.

You can estimate the business rate charge you will no longer have to pay this year using the business rates calculator. Further guidance for local authorities is available in the expanded retail discount guidance.

Cash Grants for Retail, Hospitality and Leisure Businesses

Further guidance on the scheme has been issued which includes noting that the grants received will be subject to tax. The guidance can be found here.

Cash grants will be provided to retail, hospitality and leisure businesses operating from smaller premises, of £10,000 (for businesses with a rateable value of under £15,000) and £25,000 (for businesses with a rateable value between £15,000 and £51,000).

Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority. Find your local authority. Rateable values can be checked here.

Support for Nursery Businesses that pay Business Rates
A business rates holiday will apply for nurseries in England for the 2020 to 2021 tax year. To be eligible, occupiers must be providers on Ofsted’s Early Years Register or the premises wholly or mainly used for the provision of the Early Years Foundation Stage. This is automatic and will apply to your next council tax bill in April 2020. Further guidance for local authorities is available in the nursery discount guidance.

 

Support for Businesses that pay little or no Business Rates

The government 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 (SBBR). This will provide a one-off grant of £10,000 to businesses currently eligible for SBRR or rural rate relief, to help meet their ongoing business costs. If your business is eligible for SBRR or rural rate relief, you should be contacted by your local authority and do not need to apply.

Coronavirus Business Interruption Loan Scheme

The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing 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 in value.

To be eligible, businesses will still require a sound borrowing proposal and business plan which Simmons Gainsford can assist with.

Businesses can access the first 12 months of that finance interest free, as government will cover the first 12 months of interest payments.

To be eligible, the business must be UK based, with turnover of no more than £45 million per annum and meet the British Business Bank eligibility criteria. These criteria and the list of accredited lenders is available on the British Business Bank website. All the major banks are expected to offer the Scheme once it has launched. The  scheme is being extended so that it will be available to all businesses affected by Covid-19 without the need to first show they are unable to secure normal commercial financing.

There will be no personal guarantees required for loans under £250,000. For loans over £250,000, personal guarantees will be limited to 20% of the amount outstanding after the liquidation of business assets.

These rules will apply for loans already made under the scheme and operational changes are to be made to speed up lending approvals.

You should talk to you bank or finance provider (not the British Business Bank) as soon as possible and discuss your business plan with them. This will help your finance provider to act quickly once the Scheme has launched. If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow.

COVID-19 Corporate Financing Facility

The Bank of England will buy short term debt from larger companies to allow them to finance your short-term liabilities. The scheme is now available for applications. More information is available from the Bank of England.

Coronavirus Large Business Interruption Loan Scheme

The maximum loan size has been increased from £50 million to £200 million. Companies borrowing in excess of £50 million will be subject to restrictions including:

  • No dividend payments other than those that have already been declared
  • No share buybacks
  • Cannot pay any cash bonuses, or award any pay rises to senior management (including the board) except where they were

a) declared before the CLBILS loan was taken out,
b) is in keeping with similar payments made in the preceding 12 months, and
c) does not have a material negative impact on the borrower’s ability to repay the loan.

Support for Businesses Paying Tax

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.

If you have missed a tax payment or you might miss your next payment due to COVID-19, you should call HMRC’s dedicated helpline: 0800 024 1222.

Further details can be found here.

Insurance

Businesses that have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc is sufficient to make a claim as long as all other terms and conditions are met.

Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.

Coronavirus Job Retention Scheme – Flexible Furlough

The guidance has been updated for the change to flexible furloughing. Although this commences on 1 July, any employee who commenced furlough before that date MUST compete a minimum of 3 consecutive weeks.

For example, a previously furloughed employee can start a new furlough period on 22 June which would have to continue for at least 3 consecutive weeks ending on or after 12 July. After this the employee can then be flexibly furloughed for any period.

Claims can no longer include 2 calendar months and claims for periods to 30 June must be made by 31 July.

Claims for staff flexibly furloughed should only be made once the exact number of hours to be worked during the claim period is known. If a claim is made in advance and the employee works for more hours than expected, the excess will have to be paid back to HMRC.

For employees who are flexibly furloughed, the employer must calculate the employee’s usual hours. This can be calculated for either the entire claim period or for each pay period, or part of a pay period, that falls within that claim period.

Unless the employee

  • is not contracted to work a fixed number of hours; or
  • is paid depending on the number of hours worked

the fixed hours basis is used.

This requires the employer to

  • Start with the contracted hours at the end of the last pay period ending on or before 19 March 2020. (This should be calculated ignoring annual leave, being off work sick or on family related statutory leave)
  • Divide by the number of calendar days in the repeating working pattern, including non-working days.
  • Multiply by the number of calendar days in the pay period (or partial pay period) included in the claim
  • Round up or down if the result isn’t a whole number.

The guidance includes examples of how to work out usual hours for employees who are contracted for a fixed number of hours.

For employees who do not have fixed hours or are paid based on the hours worked, the variable hours method should be used. The ‘usual hours’ for the employee will be calculated based on the higher of either:

  • the average number of hours worked in the tax year 2019 to 2020
  • the corresponding calendar period in the tax year 2019 to 2020

The calculation should include

  • any hours of leave for which the employee was paid their full contracted rate (such as annual leave)
  • any hours worked as ‘overtime’, but only if the pay for those hours was not discretionary

For employees on a flexible work time arrangement (“flexi-leave”):

  • Exclude hours worked that accrued paid time off rather than being paid
  • Include time off taken which had been accrued by working additional hours at some other time

The usual hours based on the average number of hours worked in the tax year 2019 to 2020 is calculated by:

  • Starting with the number of hours actually worked (or on paid annual leave or flexi-leave) in the tax year 2019 to 2020 before the employee was furloughed, or the end of the tax year if earlier.
  • Dividing by the number of calendar days the employee was employed in the tax year 2019 to 2020, up until the day before the employee was furloughed, or the end of the tax year if earlier. (exclude periods on sick pay or family related statutory leave)
  • Multiplying by the number of calendar days in the pay period (or partial pay period) being claimed for
  • Rounding up or down if the result isn’t a whole number.

The guidance includes examples of how to work out the average number of hours worked in the tax year 2019 to 2020 for an employee who works variable hours.

The usual hours based on the usual hours for a pay period or partial pay period based on the corresponding calendar period in the tax year 2019 to 2020 is calculated by:

  • Identifying the pay periods in the 2019 to 2020 tax year that correspond to at least one calendar day in the pay period (or partial pay period) being claimed for.
  • If the pay period (or partial pay period) being claimed for starts and ends on the same calendar days as the identified pay period in the tax year 2019 to 2020, then the number of hours actually worked in that pay period is used.
  • If the pay period (or partial pay period) being claimed for does not start and end on the same calendar days as the identified pay periods in the tax year 2019 to 2020, then the proportion of the hours worked in each of the pay periods identified is added together (see below).

The last step noted above requires that the employer, for each pay period identified in 2019 to 2020, to:

  • Start with the number of hours worked in the pay period identified in the tax year 2019 to 2020.
  • Multiply by the number of calendar days in that pay period which correspond to at least one calendar day in the pay period (or partial pay period) being claimed for.
  • Divide by the total number of calendar days in the pay period in the tax year 2019 to 2020.

The amounts calculated for each pay period are then added together and rounded up or down if the result is not a whole number.

The guidance includes: an example of how to work out the usual hours worked in the same period last year for an employee who works variable hours and the pay period (or partial pay period) being claimed for starts and ends on the same calendar days as the identified pay period.

and an example of how to work out the usual hours based on the hours worked in more than one pay period in the tax year 2019 to 2020.

Where employees are paid per task or piece of work done, the same basis as employees who work variable hours should be used, if possible. If the hours worked is not known then this should be estimated using the number of ‘pieces’ produced and the “average rate of work per hour” calculated to comply with National Minimum Wage rules.

The number of hours furloughed is calculated by subtracting the number of hours actually worked in the claim period from the employee’s usual hours. Any time on annual or family related statutory leave while flexibly furloughed counts as furloughed hours and does not count as time actually worked.

The updated guidance can be found at: https://www.gov.uk/government/collections/coronavirus-job-retention-scheme

Coronavirus Job Retention Scheme

Guidance has been issued as to how to correct an error on a claim made under the Scheme. Employers making another claim will be asked whether there is a need to reduce the amount to take account of a previous overclaim.

The claim will then be reduced for the overpayment. A record of this adjustment should be retained for 6 years. Employers not intending to make another claim under the scheme or who have made an underclaim will need to contact HMRC.

See instructions at: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/get-help-with-the-coronavirus-job-retention-scheme

Employers required to make a repayment will be provided with a payment reference and directed to: https://www.gov.uk/guidance/pay-coronavirus-job-retention-scheme-grants-back

The Government has issued a new template to be used for periods commencing on or after 1 July when claiming for 100 or more employees. This can be found here.
The Government has updated the guidance to clarify the changes to the scheme from 1 July.
The main changes from the original guidance on how the scheme will operate from 1 July relate to the treatment of employees returning from parental leave and the maximum number of employees which can be included on a claim.

All claims for periods up to 30 June must be made by 31 July and the earliest date for making claims for July will be 1 July.

With effect from 1 July, employers can bring furloughed employees back to work for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked. Employers will have to pay employees for the hours they work. Wage caps are proportional to the hours an employee is furloughed. For example, an employee is entitled to 60% of the £2,500 cap if they are placed on furlough for 60% of their usual hours.

  • Government support will remain unchanged for July.
  • In August, the Government will continue to pay the salary element but employers will be required to pay the employer’s NI and pension contributions in full.
  • In September, the Government contribution will drop to 70% of the wages (up to £2,187.50) with employers being required to make up the 10% (up to £312.50) as well as paying the full employer’s NI and pension contributions.
  • In October, the Government contribution will decrease to 60% (up to £1,875) with employers being required to make up the 20% (up to £625) as well as paying the full employer’s NI and pension contributions.
  • Employees will continue to receive 80% of their wages (up to £2,500).

In general, it will only be possible to claim for employees who have already completed at least 3 weeks on furlough at 30 June and the number of employees claimed for cannot exceed the maximum number claimed for under any claim ending 30 June. However, an employee returning from maternity, shared parental, adoption, paternity or parental bereavement leave after 10 June may be furloughed provided that:

  • A claim has been made for any other employee in the organisation in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June
  • The employee to be furloughed started maternity, shared parental, adoption, paternity and parental bereavement leave before 10 June and has returned from that leave after 10 June
  • The employee was on the PAYE payroll on or before 19 March 2020 (that is an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020)

The maximum number of employees that can be claimed for is increased by the number of employees furloughed after returning from parental leave.

Further details of how the scheme will change from 1 July can be found here and here.

Deferring VAT and Income Tax

Income Tax payments from the self-employed due in July 2020 under the Self-Assessment system will be deferred to January 2021. This applies for all the self-employed and is automatic – no penalties or interest for late payment will be charged in the deferral period.

 

A reminder has been issued that the deferral only applies to payments due up to 30 June. Therefore, payments for periods ending in May and June should be paid as normal.

Any cancelled direct debits should be set-up in time for HMRC to take the due payment.

Any amounts deferred will need to be paid by 31 March 2021.

HMRC have clarified that the following payments can be deferred:

  • quarterly and monthly VAT returns’ payments for the periods ending in February, March and April
  • payments on account due between 20 March 2020 and 30 June 2020
  • annual accounting advance payments due between 20 March 2020 and 30 June 2020

In addition, future repayments will not be offset against deferred VAT although they will be offset against existing debts.

If a payment on account due between 20 March and 30 June is deferred but the balancing payment is outside of these dates, the amount that must be paid is the balancing payment less any deferred payments. Deferring payments will not create a repayment.

HMRC have confirmed that the automatic deferral does NOT apply to payments for VAT MOSS or import VAT. However, it is possible to apply to HMRC for an extension on the payment of custom duties and import VAT if it can be demonstrated that COVID-19 has had a significant impact on the cash position of the business.

Registered Importers who pay VAT and Duty cash (or an equivalent) at the time of importation and are facing severe financial difficulties can request an extension to the payment deadline at the time the payment is due. HMRC will make the decision on a case-by-case basis and the request could be refused.

For further information, please contact the Customs Debt Policy inbox (custdebtrr.customspolicy@hmrc.gov.uk).

Businesses should contact the Duty Deferment Office on 03000 594243 (recommended) or by email cdoenquiries@hmrc.gov.uk or on the COVID-19 helpline on 0800 024 1222.

Income Tax payments from the self-employed due in July 2020 under the Self-Assessment system will be deferred to January 2021. This applies for all the self-employed and is automatic – no penalties or interest for late payment will be charged in the deferral period.

Protection from Eviction

Under measures to be included in the Coronavirus Bill, no business (in England, Wales and Northern Ireland) will be forced out of their premises if they miss a payment in the period to 30 June. Tenants will still be liable for the rent after this period.

Self-Employed Income Support Scheme

The Government has announced that self-employed parents whose trading profits dipped in 2018/19 because they took time out to have children will be able to claim for a payment under the scheme.

Parents who took time out of trading to care for their children within the first 12 months of birth of the child or within 12 months of an adoption placement, will now be able to use either their 2017-18 or both their 2016-17 and 2017-18 self-assessment returns as the basis for their eligibility.

Further details will be published in early July.

The Government has updated the guidance to clarify how the scheme will operate for the period from 1 July.

  • Claims for the first grant must be made on or before 13 July 2020.
  • Applications for the second grant will be in August 2020.
  • The same eligibility criteria will apply to the second grant although the business must have been adversely affected on or after 14 July. An individual does not need to have claimed the first grant to receive the second grant: for example, they may only have been adversely affected by COVID-19 in this later phase.
  • The second grant will be set at 70% of 3 months average trading profits and capped at £6,570.

Further details, along with a link to check eligibility under the scheme, can be found here. The grant is taxable and should also be included as income on any tax credits claim.

“Empty” Business Rates Relief

Property professionals have suggested that owners of premises (such as  restaurants, pubs, bars, nightclubs, theatres, cinemas and gyms) which have been ordered to shut for business as a result of coronavirus regulations are eligible to claim empty rates relief from the day they closed until 31 March, when the government’s support package takes effect, as the property could not be occupied.

As these rates would already have been paid, the advice is that such businesses should consider applying for refunds for these extra days until the end of the month.

With regard to other business sectors, property professionals believe that, given the advice regarding groups not assembling and people working from home, it would be possible for our firms to declare that their offices and work locations are ‘empty’ and so claim relief. However, there is a warning to check that this doesn’t impact any grants the government is offering.

Employee Expenses – General

HMRC has updated its guidance to clarify that, if an employee was travelling to a temporary workplace when placed on furlough or starting to work from home, then the period of furlough or home working will be part of the continuous work at that location.

As a reminder, a workplace stops being temporary when attendance there is expected to be more than 24 months. Tax and National Insurance contributions will then become liable on any payments of travel and subsistence expenses.

Further details of the taxation of staff expenses can be found here.

The Government has announced a temporary tax and NI exemption on home office equipment purchased by employees and reimbursed by the employer.

Based on the information currently provided, in order to qualify the equipment:

  • must have been bought for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak; and
  • would have qualified as exempt from income tax if it had been provided directly to the employee by or on behalf of the employer. This would include any private use being ‘not significant’ and it’s only use being to enable the employee to perform the duties of that employment. There is also a list of excluded items which would automatically trigger a benefit charge in any circumstances such as building works of any type to create a ‘home office’ and these remain in force.

What this means is if an employee needs, say, a scanner at home to work they can buy one and claim the purchase cost back without incurring a benefit charge. This is a relaxation to deal with specific COVID-19 lockdown requirements, the provision of a desk, a chair etc. will still trigger the benefit regulations as they would not be classed as being directly in response to the current situation.

Whilst the rules will apply from the day after the regulations come into force until the end of the tax year 2020/21, HMRC will use its discretion to not collect tax and NI due between 16 March 2020 (the date the government recommended working from home) and the date these regulations take effect.

HMRC has issued further guidance on the tax treatment of expenses and how these should be reported:

  • Unless a statutory exemption applies, providing living accommodation to an employee working at a permanent workplace will remain taxable.
  • Tax relief is available for accommodation at a temporary workplace (less than 24 months) although this should still be reported on the P11D.
  • Lodging expenses (including subsistence) if an employee cannot return home is taxable and can be reported through a PAYE Settlement Agreement.
  • Free or subsidised meals may be tax free if offered to all employees and are limited to a reasonable value.

The full guidance can be found here.

HMRC have published guidance for employers on what equipment, services and supplies are taxable if their employees are working from home due to COVID-19. The guidance applies to employees working from home due to either the workplace being closed or they are following advice to self-isolate. It does not apply to furloughed workers.

  • Mobile phone provided by the employer, limited to 1 per employee, is non-taxable.
  • Broadband – If the employee already pays for broadband then no expense can be claimed. If broadband was not already available then the reimbursement is non-taxable provided it is limited to that required for work purposes.
  • Reimbursing expenses for office equipment employee has purchased and will be retained at their home address is taxable and should be reported on PAYE Settlement Agreement
  • Payments of up to £4 a week (£6 from 6 April) for additional household expenses (such as electricity, heating and broadband) are non-taxable. To claim above this amount, the employee will need to keep receipts
  • Loans at a time of hardship with a value less than £10,000 in a tax year are non-taxable

Further guidance can be found here.

Employee Expenses – Cars

HMRC has issued further guidance on the tax treatment of expenses and how these should be reported:

  • The use of a company car or employees being reimbursed fuel costs for undertaking volunteer work is taxable and should be reported through a PAYE Settlement Agreement.
  • Normally refunding costs of transport from work to home are taxable although there is an exemption for irregular late-night travel if conditions are met. The exemption has been expanded to include employees who regularly travel to work in a car with one or more other employees but are unable to do so due to COVID-19. The maximum number of journeys under the exemptions is 60 in any tax year.
  • Company cars in the possession of the employee remain “available for private use” even if the employee has been instructed not to use the car and asked to keep photographic evidence of the mileage before and after the period of furlough. This applies even if the car cannot be physically returned or collected although HMRC will accept a car is no longer available if car keys (including tabs or fobs) are returned to the employer or a third party as instructed by the employer. Where the contract has not been terminated, this will only apply from 30 days after the keys are no longer available.

The full guidance can be found here.

With home working and furloughing of employees, businesses should review the provision of cars to staff.

Staff who are furloughed cannot provide any work to the business and staff working from home will no longer be travelling for work purposes. This does not however alter the taxable Benefit in Kind on the car.

In order to stop the BIK, the employee would need to return the car and hand in the keys for a minimum period of 30 days. We would also recommend that it is confirmed in writing or by email that the car will not be available to them for this period.

If the employee wishes to keep the car then the BIK can be reduced by the employee paying for their private mileage (which, with travel restrictions, is likely to be low).

Insolvency Rules

The Government has published a number of factsheets to explain the changes being introduced.

The most significant point is that these clarify that, for a temporary period, small suppliers will be exempt from the requirement to continue to supply a customer which has entered an insolvency or restructuring procedure or obtained a moratorium.

For this purpose, a small supplier is defined as meeting 2 out of:

  • Turnover not more than £10.2 million
  • Gross assets on the balance sheet not more than £5.1 million
  • Average number of employees not more than 50

in its last financial period. Turnover is proportionally adjusted if the period was not a year.

For suppliers in their first financial period, the conditions become:

  • Average turnover for each complete month not more than £850,000
  • Gross assets on the balance sheet at the date the customer began insolvency procedures not more than £5.1 million
  • Average number of employees not more than 50

The factsheets, which include further guidance and examples, can be found here.

The Corporate Governance and Insolvency Bill is now going through Parliament which will introduce a series of amendments to insolvency and company law in response to the coronavirus outbreak.

The Act will introduce a moratorium which will give companies breathing space from their creditors while they seek a rescue. The company will remain under the control of its directors but the process will be overseen by a licensed insolvency practitioner. The business will have 20 (extendable to 40) business days to consider a rescue plan. This period can be extended with the agreement of creditors or the Court.

There will also be a change to the use of termination clauses in supply contracts – it will no longer be possible for a supplier to rely on contractual terms to stop supplying, or vary the contract terms (such as price) with the company, where a company has entered an insolvency or restructuring procedure or obtains a moratorium during this period of crisis. However, this will not apply to financial contracts or to financial services firms.

The business will have to pay for supplies received after the start of the insolvency process but will not be required to clear debts that predate this while it is arranging its rescue plan. However, there will be exemptions to the requirement to continue to supply the company, for example where it would cause the supplier hardship.

There are also provisions to force dissenting creditors to be bound by the plan provided the Court finds it to be fair and equitable and that the creditor would be no worse off if the company entered an alternative insolvency procedure.

The new regulations also temporarily remove the threat of personal liability for wrongful trading from directors in the period between 1 March to 30 June and prohibit creditors from filing statutory demands and winding up petitions for coronavirus related debts.

Certain financial services firms have been excluded from parts of these reforms as their regulators already have powers to intervene and there are special insolvency regimes available to them.

In order to assist companies in dealing with COVID-19, a number of changes are being made to the insolvency rules.

  • The Wrongful trading rules (which can hold directors personally liable for company debts) are being suspended (retrospectively) from 1 March 2020 until such date as the government determines.
  • There will be a new moratorium preventing creditors applying for administration orders or petitioning for the winding up of the company while it seeks a rescue or restructure. During this time the company’s supplies will be protected so that the company can continue to access raw materials and utilities. The necessary legislation is expected shortly.

The rules relating to Wrongful trading (under which Directors can be held personally liable for company debts) are being temporarily suspended from 1 March. However, laws relating to fraudulent trading and director disqualification will remain in force as a deterrent against director misconduct.

Further guidance can be found approximately two-thirds of the way down here.

Workplace Pensions

The Pension Regulator has yet to make any announcements on the deferral of employer pension scheme contributions and it remains incumbent on employers to have a business continuity plan (BCP) which sets out what actions would be taken if events, including of course the current coronavirus issue, impact the running of their scheme.

We understand that pension providers have started dialogue about options to delay pension contributions but this is awaiting clarification and we are aiming to issue another update as soon as we have clear guidelines.

The Government has already announced that where employees have been furloughed under the Coronavirus Job Preservation Scheme then employers will be able to claim associated costs of those employees, including national insurance and pension contributions in addition to salary costs.

Coronavirus Future Fund

The British Business Bank has issued some Frequently Asked Questions to assist Investors providing the funds to be matched by the loan. These note that:

  • Applications will be processed on a “first come, first served” basis.
  • The application is made by the “Lead Investor” on behalf of the company and other investors.
  • There is no limit to the number of companies that can be invested in but a separate application must be made for each company
  • The Lead Investor does not have to be the largest investor but must be investing at least £12,500
  • The total number of investors (including the Future Fund and Lead Investor) is limited to 149 so that no prospectus is required
  • It is their understanding that the scheme will not meet existing rules for tax reliefs, including SEIS and EIS
  • Equity funding of at least £250,000 must have been raised in the period 1 April 2015 to 19 April 2020 from third-party investors (which excludes Founders, Directors and Employees or their connected parties)

There is also extensive guidance on the information that will be required to support the application. The FAQs can be found here.

Find out more and apply via the British Business Bank here.

“Support Finder” Tool

The government has launched a new ‘support finder’ tool to help businesses and the self-employed identify what financial support is available to them.

This can be found here.

HMRC Videos and Webinar

]HMRC has produced a number of videos and a free webinar to help businesses understand the assistance available to them.

These can be found here.

Coronavirus Bounce Back Loan
The previous requirement that the business not be “an ‘undertaking in difficulty’ on 31 December 2019” has been removed.
Applications for the loan have now opened and further details of the scheme have been issued by the British Business Bank. These include:
  • the claimant must be a UK limited company or partnership or tax resident in the UK
  • the amount of the loan is limited to 25% of a business’ turnover
  • interest rate is at 2.5% pa, with the government covering the first 12 months
  • there are no fees on early repayment
  • no security can be required in the form of personal guarantees or over a borrower’s personal assets
  • the claimant (and any member of any group of which it is a part) must derive more than 50% of its income from trading activity
  • a group may only make one claim and may not also claim for Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, or the Covid Corporate Financing Facility, unless that loan will be refinanced in full by the Bounce Back Loan Scheme facility

The details on the scheme and the banks through which applications should be made can be found here. Further details can also be found here.

Pension Schemes

Small Self-Administered Schemes (SSAS) and Self-Invested Personal Pensions (SIPP):

HMRC have announced a number of measures to assist Pension Schemes. In particular:

  • Pension Scheme Returns will NOT be required for the 2019/20 tax year due to difficulties in obtaining the required valuations.
  • If a valuation is required (for example, when funds are designated for a drawdown pension), then HMRC will accept that special circumstances exist if, due to COVID-19, trading in the share has been suspended or the closing price is not a proper measure of value. This would allow an alternative method of valuation to be used.
  • HMRC will accept payment holidays on loans to connected parties and rent holidays on commercial property as arm’s length commercial decisions (and so not giving rise to an unauthorised payment charge) without a valuation. The Scheme should still be able to demonstrate that the decision was on an arm’s length commercial basis.

Further details can be found here.

Additional Funding to Local Councils

The government is to provide £617 million to local authorities to provide additional support to small businesses, particularly those that pay council tax rather than business rates, and so have missed out on other support.

Whilst local authorities have discretion based on local economic need, the government has asked them to prioritise businesses in shared spaces, regular market traders, small charity properties that would meet the criteria for small business rates relief, and bed and breakfast owners.

To qualify, a business must be small, under 50 employees, and they must also be able to demonstrate that they have seen a significant drop of income due to coronavirus restriction measures.

The maximum grant will be £25,000 with councils having further discretion on payments of up to £10,000.

Tax-Free Childcare and 30 hours Free Childcare

HMRC have issued guidance on temporary changes during Coronavirus. These include:

  • Furloughed staff and those not able to work or working less will need to reconfirm that they still meet the criteria.
  • Time spent on Statutory Sick Pay will count as working and meeting the minimum income requirement
  • Staff made redundant will no longer meet the criteria. If employment is started again, applications can be made 31 days before the start of the new job
  • The self-employed may need to confirm that they still meet the criteria. Grants through the Self-Employment Income Support Scheme will count as earnings.
  • For those claiming Universal Credit, they will no longer qualify for Tax-Free Childcare. However, they may still qualify for 30 hours free childcare.
  • Local authorities will be able to extend the 31 March deadline for Critical workers to apply for 30 hours free childcare.
  • Critical workers who have exceeded the maximum income of £100,000 per year because of increased hours due to coronavirus may still be eligible for 30 hours and Tax-Free Childcare.

Further details can be found here.

Business Interruption Insurance

The Financial Conduct Authority (FCA) is urging small and medium sized enterprises who have experienced difficulties making claims under business interruption (BI) insurance policies during the pandemic to join its test case challenging insurers’ decision making.

Further details, including the email address to contact, can be found here. Please note: Responses are required by the FCA by 20 May 2020.

Governance Changes

The Government has published a number of factsheets to explain the changes being introduced.

The legislation will also ease the administration burden by allowing companies to hold closed AGMs, conduct business and communicate with members electronically, and extends filing deadlines, during the period of the pandemic. These provisions will also be retrospective meaning that companies which have held AGMs but didn’t meet the requirements of their constitution will have done so in accordance with the law.

Local Authority Discretionary Grants Fund

The eligibility criteria have now been amended so that the business must:

  • be based in England
  • have relatively high ongoing fixed property-related costs
  • occupy property (or part of a property) with a rateable value or annual mortgage/rent payments below £51,000
  • have been trading on 11 March 2020
  • have been adversely impacted by the coronavirus

The Government has issued details of the grants to be made available to support small and micro businesses with fixed property costs not eligible for other grant schemes.

Grants will be made of £25,000, £10,000 and any amount up to £10,000. The grants do not have to be repaid but are taxable income to the business.

To be eligible a business must:

  • be based in England
  • have fewer than 50 employees
  • have fixed building costs such as rent
  • have been trading on 11 March 2020
  • have been adversely impacted by the coronavirus

Councils have been asked to prioritise:

  • small businesses in shared offices or other flexible workspaces, such as units in industrial parks or incubators
  • regular market traders
  • bed and breakfasts paying council tax instead of business rates
  • charity properties getting charitable business rates relief, which are not eligible for small business rates relief or rural rate relief

A business cannot apply if it:

  • pays business rates
  • is in administration, insolvent or has received a striking-off notice
  • is already receiving support under another government grant scheme (such as Small Business Grant Fund or Retail, Hospitality and Leisure Grant)

Eligible businesses can also apply for the Coronavirus Job Retention Scheme (furloughing employees), the Self-Employed Income Support Scheme and other coronavirus-related loans.

Applications should be made to the local council who will run the process and decide if a grant is to be offered. As the grants are considered state aid, applicants will need to confirm they have not exceeded the relevant threshold.

Further details of the grant can be found here.

Guidance on Assessing Going Concern

The ICAEW has prepared a short document to guide businesses in assessing the Going Concern status of their enterprise. Whilst it is written for directors of limited companies (for whom this is a statutory obligation), the points made on forecasting would also be relevant to other business structures considering the impact of COVID-19.

The document can be found here.

Military Reservists

The Coronavirus Job Retention Scheme guidance on military reservists has been clarified. An employee who is a military reservist returning to work after a period of mobilisation after 10 June, can be furloughed for the first time, provided that:

  • the employer has already claimed for another employee for a furlough period of at least 3 consecutive weeks, between 1 March 2020 and 30 June
  • the employee was away on a period of mobilisation that started before 10 June and returned from that mobilisation after 10 June
  • the employee was on the PAYE payroll and included on an RTI submission on or before 19 March 2020

The maximum number of employees who can be furloughed is increased by the number of military reservists being furloughed for the first time.

Regional Assistance

Additionally, assistance is being provided by the devolved governments in Scotland and Wales.

Businesses in Scotland can access the business helpline number on 0300 303 0660 (open Monday to Friday 8.30am to 5.30pm). Further information is available here.

Details of assistance for businesses in Wales is available here.

Please contact your engagement partners at Simmons Gainsford if you would like more information or need any assistance.

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