COVID-19: Government legislation and local authority support measures

With SMEs making up 99 per cent of the UK economy, Partner Tony Wright assesses the government measures being delivered locally to support small businesses.

Given the existential threat posed to many small businesses – particularly those facing a prolonged collapse in consumer demand as a result of the pandemic and local lockdowns – SMEs will be looking for all possible cashflow support to ensure they have enough liquidity to survive the current crisis.

A number of measures have been introduced by the Government over the course of the pandemic to support SMEs. However, some of these have now been withdrawn, with those listed below remaining in place after 30 September 2020.

Local Authority grant funding schemes

The Small Business Grant Fund (SBGF) and Retail, Hospitality and Leisure Grant Fund (RHLGF) ended on 30 September 2020. However, a new fund has been introduced for businesses affected by local lockdowns:

  • Local Restrictions Support Grant (LRSG)
    • Businesses in England that have been forced to close for at least three weeks due to local lockdown restrictions imposed by government:
      • Closure must have occurred on or after 9 September, funding is not retrospective
      • Businesses have been unable to provide their usual in-person customer service
      • For those that have a rateable value of less than £51,000, a cash grant of £1,000 will be received for every three-week period
      • For those that have a rateable value of more than £51,000, a cash grant of £1,500 will be received for every three-week period

Further guidance on the LRSG can be found on the website. You can access this by clicking here.

Business rates relief

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.

Landlord changes

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 31 December 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 period ends. The government has said it will monitor the impact on commercial landlords’ cash flow and “continues to be in dialogue with them”.

Changes in wrongful trading legislation

A temporary suspension of statutory demands and winding up petitions remains in place having been extended from 30 September 2020 until 31 December 2020.

The temporary suspension of wrongful trading laws expired on 30 September 2020 and has not been extended.

Account filing

From 25 March 2020, businesses have been 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.

Related team

Tony Wright

Tony Wright

  • Partner
  • Restructuring Advisory
  • London