Given the existential threat posed to many small businesses – particularly those facing an immediate and potentially lengthy collapse in consumer demand as a result of widespread lockdown – SMEs will be looking for all possible cashflow support to ensure they have enough liquidity to survive the current crisis.
In response to the heightened level of risk, the Chancellor announced several measures to support small businesses and those operating in the hospitality and leisure sectors. These have also largely been replicated by the devolved administrations.
SMEs will have access to two principle grant funding schemes in the short-term whereby the government will reimburse local authorities that pay grants to eligible businesses:
Eligibility criteria and data provision requirements for businesses can be reviewed in detail by clicking here for England, here for Scotland, here for Northern Ireland and here for Wales, but principally covers business used as shops, restaurants, cafes, pubs, cinemas, music venues; hotels, guest and boarding houses and self-catering accommodation.
Local authorities will write to businesses if they are eligible for funding. However, we would advise owners and shareholders to be proactive in accessing support by contacting their local authority directly in the first instance. It is worth noting that this may take some time due to unprecedented demand.
Guidance for businesses has been provided on the GOV.uk website setting out details of the Small Business Grants Fund (SBGF) and Retail, Hospitality and Leisure Grant Fund (RHLGF). You can access this by clicking here.
All retail, hospitality and leisure, estate agency and nursery businesses across the UK have been granted a business rates/non domestic rates holiday for the 2020 to 2021 tax year. Eligibility will follow the RHLGF, covering businesses based in the UK used as shops, restaurants, cafes, pubs, cinemas, music venues; hotels, guest and boarding houses and self-catering accommodation. Helpfully, no action is required by businesses as the rate relief will applied to council tax bills in April 2020.
Relief has also been extended to nursery businesses in England occupied by providers on Ofsted’s Early Years Register or wholly or mainly used for the provision of the Early Years Foundation Stage.
With regards to the March quarter date (25 March), the government has announced commercial tenants who are unable to pay rent as a result of the impact of COVID-19 will have protection from forfeiture of their leases until at least 30 June 2020.
The provision will only delay the right to forfeiture – it will not affect a landlord’s right to claim forfeiture or recover rent after the three-month period ends. The government has said it will monitor the impact on commercial landlords’ cash flow and “continues to be in dialogue with them”.
As described elsewhere on our site, businesses and directors may now have access to government schemes to help cashflow during COVID-19. However, both the availability of the new funding packages – as well as the likelihood of increasing liabilities from temporary cessation of trade or reduced trading levels – has raised the question whether directors should be taking on debt in such uncertain times.
We continue to receive calls from clients who are concerned about the solvency and viability of their business as a consequence of COVID-19; especially questions regarding their duties and the risk from ‘wrongful trading’ pursuant to section 214 of the Insolvency Act 1986.
On 28 March, the UK government announced that it will introduce new legislation at the “earliest opportunity” to suspend wrongful trading laws retrospectively from 1 March 2020 for a period of three months (to be extended if necessary). This will allow directors to continue to pay staff and suppliers without risk of personal liability should their business later become insolvent.
In order to support businesses encountering financial difficulty as a result of the COVID-19 outbreak, the government announced on 28 March that it will shortly be introducing versions of the corporate insolvency reforms.
As part of the reforms, it will introduce:
It is not yet clear when these changes will be introduced or when full details will be published. However, parliament is currently in recess until late April.
From 25 March 2020, businesses will be able to apply for a three-month extension for filing their accounts to allow them to prioritise managing the impact of Coronavirus.
Under normal circumstances, companies that file accounts late are issued with an automatic penalty. However, while corporates will still have to apply for the three-month extension to be granted, those citing issues around COVID-19 will be automatically granted an extension. This application must be processed ahead of the filing deadline otherwise the usual fines apply.
Applications can be made through a fast-tracked online system which will take just 15 minutes to complete.
While this option may well be one to consider, it is clearly beneficial to have up to date financials to help you manage your business and its cash flows at this time. Choosing to apply for this extension should therefore be considered carefully especially if credit insurance is integral to your supply and sales process.
An additional 1.6% rates relief on all non domestic properties is also available in Scotland.
We are on hand to support businesses through the ongoing challenges of COVID-19. If you have any questions about local authority funding support or other potential options for managing short-term liquidity challenges, please do not hesitate to contact us.