COVID-19: UK Government measures and practical next steps - EY
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1 COVID-19: UK Government measures and practical next steps Measures announced to 20 July 2020 20 July 2020 COVID-19: UK Government measures and practical next steps
2 COVID-19: UK Government measures and practical next steps Over the last few months, the Chancellor has set out what he calls a package of “temporary, timely and targeted measures” to support public services, people and businesses through the disruption caused by the COVID-19 outbreak. The initial measures focused on supporting employment, providing cash flow support to businesses, and increasing welfare support. The Chancellor’s Summer Statement on 8 July then unveiled a “Plan for Jobs” to protect, support and create jobs as part of the Government’s second phase of its economic response. Outside the support being provided to the NHS and the imposition of civil restrictions, the measures can be grouped into six main areas which are being delivered via three distinct channels. Areas being addressed: These aims are primarily being delivered through: 1. Providing liquidity through financing schemes • The banking system in terms of both financing schemes that have been announced; 2. Helping employers to protect jobs • The central tax system (covering cash tax deferral 3. Business support through removal of fixed costs and employment support) as well as the local tax and provision of grants system (for business rates and cash grants); and 4. Cash-flow support, including tax deferrals • The benefit system (for Universal Credit), though 5. Administration, including governance Statutory Sick Pay will be paid by employers and reimbursed to them 6. Benefits entitlements 20 July 2020 COVID-19: UK Government measures and practical next steps
3 UK Government announced responses Phase One — March to June Liquidity and financing Cash flow measures Administration and welfare Coronavirus Business COVID-19 Corporate Financing Tax deferrals Tax compliance Interruption Loan Scheme Facility All businesses were able to have their • HMRC had indicated that, during the (CBILS) Allows larger corporates to raise short routine VAT payments due between “lockdown”, some HMRC enquiries Helps smaller businesses affected by term finance through the issuance of 20 March and 30 June deferred until will be suspended. We expect this coronavirus to access bank lending and commercial paper purchased by the 31 March 2021. compliance enquiry activity will overdrafts if they need to. For loans up Bank of England. now resume in line with the general All businesses and self-employed to £5 million, interest will be free for easing of restrictions people in financial distress, and with the first 12 months. Future Fund: Investment fund outstanding tax liabilities, may be for high-growth companies eligible to receive support with their Statutory benefits Coronavirus Large Business tax affairs through HMRC’s Time To • Removal of minimum income floor Scheme to issue convertible loans to Interruption Loan Scheme innovative companies alongside other Pay service. for Universal Credit (CLBILS) private third party matched investor(s). There is the option to defer July’s • Uprating of Universal Credit Allows companies with turnover of payment on account for those due to Bounce back loans pay then, including trusts and personal • Expansion of eligibility for Statutory more than £45 million to borrow up to representatives. Sick Pay £200 million. Government guaranteed loans for 25% of turnover up to a maximum of £50,000. Fixed costs and grants Employment support Self-employed Business Rates holiday and cash Other measures Coronavirus Job Retention The Self-Employment Income Support grants for retail, hospitality and Scheme (CJRS) Scheme (SEISS) provides two taxable • Statutory Sick Pay rebate for small lump sum grants. The first, which leisure businesses and medium sized businesses The Chancellor has confirmed that the could be claimed up to 13 July is Businesses in these sectors in England launched on 26 May scheme will close at the end of worth 80% of trading profits up to a do not have to pay business rates for • Small business grant funding October. Claims for periods ending on maximum of £7,500 covering three the 2020–21 tax year. There may also or before 30 June must be made by 31 months. be the possibility of a cash grant of up • COVID-19 grant schemes July. Separate claims need to be made to £25,000 per property. for days in June and days in July, The second and final grant can be • Funding for charities even if the employee is continuously claimed from August and is worth 70% • Moratorium on lease forfeiture of furloughed. of trading profits up to a maximum of commercial leases for non-payment £6,570, again covering three months. of rent until (at least) 30 June 2020 20 July 2020 COVID-19: UK Government measures and practical next steps
4 UK Government announced responses Phase Two — July onwards Phase One (March — June) Phase Two – “A Plan for Jobs” (July onwards) Continuing measures Jobs Stimulus measures Capital investment The following measures introduced in CJRS Reduced rate of VAT for Infrastructure package Phase One continue to be relevant in hospitality, accommodation and Phase Two: From 1 July the CJRS covers part-time A £5.6 billion infrastructure package working but from 1 August employers attractions announced by the Prime Minister in • CBILS will be asked to cover part of the cost From 15 July 2020 to 12 January June 2020. • CLBILS of the scheme. 2021, a reduced 5% rate of VAT to apply (previously 20%) to supplies of Public sector and social housing • Corporate Financing Facility Job retention bonus food and non-alcoholic drinks from decarbonisaton • Future Fund A job retention bonus of £1,000 will restaurants, pubs, bars, cafés and A £1 billion scheme offering grants to be available for employers who bring similar premises across the UK. • Bounce Back Loans public sector bodies to fund energy back furloughed employees and pay a From 15 July 2020 to 12 January efficiency and low carbon heat • Business rates holiday and grants minimum specified wage until at least 2021, a reduced 5% rate of VAT upgrades. 31 January 2021. applies (previously 20%) to supplies • CJRS of accommodation and admission to • Statutory Benefits attractions across the UK. Green Homes Grant Kickstart Scheme A £2 billion Green Homes Grant to • SEISS A £2 billion fund to create high quality Eat Out to Help Out make homes more energy efficient. 6-month work placements aimed at those aged 16–24 who are on Universal A scheme to encourage people to Credit and are deemed to be at risk of return to eating out, with a 50% long-term unemployment. discount of up to £10 per head on any eat-in meal from Monday to Wednesday in August 2020 across the UK. Boosting worksearch, skills and apprenticeships Stamp Duty Land Tax (SDLT) A series of measures to boost temporary cut employment skills, including payments of £2,000 to employers in England for Temporary increase in the Nil Rate each new apprentice they hire under Band of Residential SDLT in England aged under 25, and a £1,500 payment and Northern Ireland from £125,000 for apprentices 25 and over, from to £500,000 until 31 March 2021. 1 August 2020 to 31 January 2021. 20 July 2020 COVID-19: UK Government measures and practical next steps
5 Liquidity and financing: COVID-19 Corporate Financing Facility (CCFF) The COVID-19 Corporate Who is eligible? What does it cover? Practicalities Financing Facility (CCFF) • Companies which make “a material • The CCFF will provide funding to • Companies will need to consider if will purchase up to one-year contribution to the UK economy” businesses by purchasing Commercial they are eligible to participate and how duration Commercial Paper Paper long it might take to be approved to on terms comparable to those • No requirement to have previously participate prevailing in markets before the issued Commercial Paper • Minimum size of the loan is £1m with COVID-19 economic shock. primary market purchases limited to • If a Company does not have an existing • Looks at companies’ credit rating pre certain amounts at different credit rating, the ability to use incumbent The scheme will be available for COVID-19 to assess eligibility (as at bands: banks’ credit ratings via Credit new drawings until March 2021. 1 March 2020) • A1/P1/F1/R1 = up to £1bn Benchmark offers another avenue • Credit rating must be “Investment • A2/P2/F2/R2 = up to £600m • Requirement to obtain a credit rating Grade” (ST rating of A-3/P-3/F-3 or or otherwise utilise incumbent banks’ LT rating of BBB-/Baa3/BBB-). A split • A3/P3/F3/R3 = up to £300m credit ratings will mean there is a time rating is not eligible • Duration is one week to 12 months. lag to when non-rated companies will • If subsequently downgraded (i.e. after Drawings can be rolled over be able to access the funding 1 March 2020), company will still be • Pricing should be on “comparable As per updates announced on 19 May eligible terms to those prevailing in the market 2020: • If companies do not have an existing pre COVID-19” — initial pricing seen • Dividend restrictions and restraint on credit rating, they can (1) seek a rating to be the region of a 20-60bps spread senior pay shall apply if Commercial from one of the major agencies or (2) over SONIA Paper is issued with a maturity date utilise incumbent banks’ credit ratings • The scheme will close to new drawings beyond 19 May 2021 subject to certain conditions: in March 2021 • Have, on average, at least three • Early repayment is now an option investment grade bank ratings • There will be public disclosure of issuer • At least two investment grade bank names for those that have issued ratings if BBB+/Baa1/BBB+ or above How is it accessed? Commercial Paper under the scheme (there is no disclosure requirement for • “Public undertaking” entities are not • Full details published by the Bank of simply having established access to able to access the scheme England (BoE) on Monday, 23 March the scheme) 2020 • The facility is available for large housing associations that continue to • Requires a bank to help issue the be assessed as V1 grade for viability Commercial Paper For more information from the Regulator for Social Housing Luke Reeve lreeve@uk.ey.com Tel: +44 (0) 20 7951 6548 20 July 2020 COVID-19: UK Government measures and practical next steps
6 Liquidity and financing: Coronavirus Business Interruption Loan Scheme (CBILS) The Coronavirus Business Who is eligible? What does it cover? Practicalities Interruption Loan Scheme Eligibility criteria has now been published • Aim is to support SMEs, who may have • Companies will need to consider (CBILS) provides loans of up to and includes: limited or insufficient security, to raise what collateral they have available as £5 million, with no interest or additional financing security — unsecured loans of up to fees due for the first 12 months. • UK-based, in business activity only £250,000 are allowed • Provides loans of up to £5m subject to Borrowers will need to approach • Turnover of no more than £45m per sub-limits: (1) 2x annual wage bill; or • They will need to consider which one of the 40+ accredited annum (aimed at SMEs) (2) 25% of turnover; or (3) an amount and how many lenders to approach lenders. • Operate within an eligible industry sufficient to cover liquidity need for and how to give themselves the best sector the next 18 months with appropriate chance of success justification and self-certification (12 • Have a borrowing proposal, which, • On 3 April, the Government announced: months for SMEs > 250 employees) were it not for the COVID-19 • It would stop lenders from pandemic, would be considered viable • Term loans and asset finance with requesting personal guarantees for by the lender tenors of up to six years are available loans under £250,000 • Lender believes the provision of • Overdrafts and invoice discounting • For loans over £250,000, personal finance will enable the business to facilities with tenors of up to three guarantees will be limited to 20% trade out of any short-to-medium term years are available on amounts outstanding on the difficulty CBILS lending after recovery from • The Government will also make a • Must self-certify they have been Business Interruption Payment to business assets adversely impacted by COVID-19 cover the first 12 months of interest • Operational changes will be made to payments and any lender-levied fees speed up lending approvals • Was not an “undertaking in difficulty” on 31 December 2019 • Government provides a guarantee to • Changes have been made to the the lender for up to 80% of facility value. scheme since launch so that Group • On 3 April, the Government N.B. Companies remain 100% liable for turnover for PE or VC-backed announced the extension of the the debt. The Chancellor has so far ruled businesses is no longer aggregated at scheme to all viable small businesses out providing 100% guarantees except the fund level and instead will look at affected by COVID-19, and not under the Bounce Back Loan Scheme the portfolio company level just those unable to secure regular commercial financing How is it accessed? • Full details published on British Business For more information Bank’s website on 23 March 2020 Chris Lowe • Companies to apply for CBILS loans clowe@uk.ey.com directly with one of the 40+ accredited Tel: +44 (0) 7920 775642 lenders 20 July 2020 COVID-19: UK Government measures and practical next steps
7 Liquidity and financing: Coronavirus Large Business Interruption Loan Scheme (CLBILS) The Coronavirus Large Business Who is eligible? What does it cover? Practicalities Interruption Loan Scheme Eligibility criteria include: • Finance products include term loans, • Companies will need to demonstrate (CLBILS) provides loans of up to revolving credit facilities (including that other than for COVID-19 £200 million for companies with • UK-based, in business activity overdrafts), and for loans up to £50m, disruption, they would be considered turnover of over £45 million. • Turnover of more than £45m per invoice finance and asset finance. to be viable by the lender Companies borrowing more annum Tenors from three months to three than £50 million will be subject • Lenders will still conduct their usual years available to restrictions on dividend • Operate within an eligible industry credit risk checks and therefore payments, senior pay and share sector • Interest is charged at a commercial companies will need to set out a buy-backs. rate of borrowing clear request, supported by financial • Have a borrowing proposal, which, information were it not for the COVID-19 pandemic, • Government provides a guarantee would be considered viable by the to the lender for up to 80% of facility • As with the CBILS scheme, companies lender balance (including interest and fees). will need to consider which and how N.B. Companies remain 100% liable for many lenders to approach and how • Lender believes the provision of finance the debt to give themselves the best chance of will enable the business to trade out of success any short-to-medium term difficulty • Firms owned by private equity are able to access the scheme • Consideration will need to be given • Self-certify that it has been adversely on how the CLBILS loans will interact impacted by COVID-19 • Amount borrowed should not be with existing lending (e.g. security, greater than (i) double the borrower’s • Was not an “undertaking in difficulty” ranking etc.). CLBILS loans must rank annual wage bill; or (ii) 25% of the on 31 December 2019 at least pari passu with all other senior borrower’s total turnover; or (iii) with obligations (including senior and/or • Business has not received a facility appropriate justification and based on super senior obligations) under the Bank of England’s COVID-19 self-certification of the borrower, the Corporate Financing Facility amount may be increased to cover • Companies borrowing more than liquidity needs for the next 12 months £50m will be subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan How is it accessed? • Companies can apply for CLBILS loans directly with an accredited lender. For more information Accredited lenders are listed on the British Business Bank website Chris Lowe clowe@uk.ey.com Tel: +44 (0) 7920 775642 20 July 2020 COVID-19: UK Government measures and practical next steps
8 Future Fund: Investment fund for high-growth companies On 20 April, the Chancellor Who is eligible? What does it cover? Practicalities announced that UK businesses Company specific criteria include: • The Government will make unsecured • Consideration should be given to driving innovation and bridge funding available alongside other expected funding rounds or corporate development will be helped • The company must be an unlisted UK incorporated limited company private third party matched investor(s) events over the life of the loan as it will through the coronavirus drive the conversion or redemption price (incorporation date before 31 December • Loan amounts provided by the outbreak with a £1.25 billion 2019), or a non-UK jurisdiction parent of the loan Government support package. Government of between £125,000 to company that has participated in an a maximum of £5,000,000. Amounts • The Government will receive a minimum The package includes a new Accelerator Programme before 19 April of Future Fund loans must be at least of 8% per annum (non-compounding) £500 million loan scheme for 2020 matched by co-investment from interest to be paid on maturity of the high-growth firms impacted by • The company must have raised at least investors loan. The interest rate shall be higher the crisis. This will be made up £250,000 in equity from third-party if a higher rate is agreed between the • The Government will not set a valuation of £250 million of funding from investors in previous funding rounds in company and the matched investors cap on the price at which the loan the last five years Government (the Future Fund) converts into equity on the company’s • The bridge funding shall automatically and the matching balance from • If part of a group, the company must be next funding round. Where matched convert into equity on the company’s the private sector. the ultimate parent company investors have agreed a valuation cap, next qualifying funding round (including • At least 50% of employees must be UK the Government shall be entitled to the an exit or new funding round) at a The remaining support based or more than 50% of revenues same terms minimum conversion discount of 20% to package is available for small should come from UK sales the price set by that funding round and medium sized businesses • The bridge funding must be used solely Investors must fall within specific categories. for working capital purposes and shall • The loan shall mature after a maximum focusing on research and Investors will not benefit from EIS/SEIS not be used by the company to repay of 36 months and cannot be repaid development and will be treatment on their matched funding. any borrowings, make any dividends or early by the company other than available through Innovate UK’s bonus payments to staff, management, with the agreement of all investors. grants and loan scheme. How is it accessed? shareholders or consultants or, in If outstanding at this time, the loan respect of the Government loan, pay any shall, at the option of a majority of • The scheme has launched and is open for advisory or placement fees or bonuses the principal amount held by matched applications until the end of September to external advisers investors (i) be repaid with a redemption 2020. Funds will be deployed on a first premium; or (ii) convert into equity come, first served basis. Further details are available on the British Business Bank’s website • The application process is investor led. The investor or lead investor of a group of investors must certify they meet the For more information scheme eligibility criteria and provide Chris Lowe Roxane Markarian key investment details clowe@uk.ey.com rmarkarian@uk.ey.com • Investors and the Future Fund both invest using a convertible loan agreement which Tel: +44 (0) 7920 775642 Tel: +44 (0) 20 7951 2588 is predefined and cannot be negotiated 20 July 2020 COVID-19: UK Government measures and practical next steps
9 Liquidity and financing: Bounce Back Loan Scheme The Bounce Back Loan Scheme Who is eligible? What does it cover? Practicalities will help small and medium- The Scheme was launched on 4 May and • Businesses will be able to apply for • The Chancellor has said that for most sized businesses to borrow eligibility criteria include: a loan of £2,000 or 25% of their firms, loans should arrive within 24 between £2,000 and £50,000. turnover, up to a maximum of £50,000 hours of approval The Government will guarantee • UK-based, in business activity and was 100% of the finance (both established by 1 March 2020 • The Government will make a business • There will be no forward-looking tests capital and interest). interruption payment to cover the of business viability • Can self-certify that it has been interest in the first twelve months of There will be no interest or fees adversely impacted by COVID-19 • Lenders are not permitted to take the loan to pay for the first 12 months personal guarantees or take recovery • Was not an “undertaking in difficulty” and no repayments will be due • There are no fees to access the Scheme action over a borrower’s personal on 31 December 2019 (if it was, the during the first 12 months. assets (such as their main home or business must confirm it complies with • No repayments will be due during the personal vehicle) additional state aid restrictions under first 12 months The Government has worked de minimis state aid rules) • The interest rate for the facility is set with lenders to agree a low rate • The Government will support the • Is not using the Government support at 2.5% per annum for all businesses of interest for the remaining Scheme by guaranteeing, to the period of the loan. provided by CBILS, CLBILS or CCFF, lender, 100% of the loan and interest unless the Bounce Back Loan will refinance the whole of any such support • Loan terms will be up to six years. Early repayment is allowed without • Businesses who have already received early repayment fees a loan of up to £50,000 under CBILS and would like to transfer it into the • N.B.Company remains 100% liable for Bounce Back Loan Scheme, can the debt arrange to do this with their lender until 4 November 2020 • Is not in bankruptcy or liquidation How is it accessed? or undergoing debt restructuring at the time it submits its application for • The scheme is being delivered through finance a network of accredited lenders. Accredited lenders are listed on the • Derives more than 50% of its British Business Bank’s website income from its trading activity (this requirement does not apply to charities • Companies should approach an or further-education colleges) accredited lender of their choice For more information • Companies must complete a short, Chris Lowe • Is not a credit institution, an insurance company, a public-sector organisation standardised online application which clowe@uk.ey.com or a state-funded primary or self-certifies that the business is Tel: +44 (0) 7920 775642 secondary school eligible for a loan under the Scheme 20 July 2020 COVID-19: UK Government measures and practical next steps
10 Employment support: Coronavirus Job Retention Scheme, up to 30 June 2020 The Government is providing Who is eligible? HMRC guidance Practicalities grants which cover 80% of a The scheme is open to any employer in the • The grant is based on salary in the last Employers will need to consider the retained furloughed worker’s country which had a PAYE scheme on or pay period prior to 19 March 2020, or relevance of furloughing to their business pay, up to a cap of £2,500 a before 19 March 2020 and is registered for in line with the provisions for employees and then, if appropriate, undertake month. online PAYE services. It covers the cost of with variable pay. The grant can cover workforce planning, recognising the Any entity with a UK payroll wages which can be backdated to 1 March. employees with more than one employer usual risks and requirements to avoid and certain non-employees (including discrimination in selecting people for can apply but the claim must Employers will need to designate affected company directors) paid via PAYE furloughing. be made online. Claims can employees as “furloughed”, and notify be made by the business or them of this change — changing the status • Discretionary bonuses (including tips) Employers will need to explore the by an agent authorised to act of employees is subject to employment law. and non-compulsory commissions as contractual and employment law position for PAYE purposes and access The employee should not undertake work well as non-cash payments are not part of furloughing their staff. Very few UK the employer’s PAYE online for the employer, or a linked or associated of “pay” styled employment contracts will contain organisation, while furloughed — the provisions governing how to do it and what services. Amounts overclaimed • The employee is subject to tax and scheme does not provide support for the it means. can now be adjusted for through National Insurance costs of “working” employees. a subsequent claim. There is Irrespective of whether consent (or any • The employer needs to pay National now a process to allow money The scheme covers employees on the PAYE form of negotiation) is required or feasible Insurance and Apprenticeship Levy overclaimed to be paid back payroll and notified to HMRC on an RTI in the time available, any terms relating to (if applicable) on the payments to the where no further claims will be submission on or before 19 March 2020. furloughing should be recorded in writing. employee. It will be taxable on the Employees that were employed and on Employers must confirm in writing to their made. Potential underclaims grant and will get a deduction for the payroll as of 28 February 2020 who were employees that they have been furloughed. should be raised with HMRC. made redundant or stopped working for the payments to the employees under HMRC has stressed that it retains the right normal principles The scheme in this form was employer between then and 19 March can to audit all aspects of the arrangement. open until the end of June. New also qualify for the scheme if the employer • Individuals with employees that are not Employers will need to keep a copy of all rules will then apply to the end re-employs them and furloughs them. employed as part of a business are not records in relation to claims made for six taxable on grants received under the of October (see next page). years and copies of agreements to furlough scheme Claims for periods ending on or employees for five years. before 30 June must be made What does it cover? by 31 July. • The funds provided are grants, not loans Under this form of the scheme, • There is no obligation for the employer the minimum period an to cover the remaining 20%, though the employee can be furloughed for employer can do so if they wish is three weeks. An employee For more information • The monthly cap is applied to wages, can be furloughed more than with a further grant covering the David Ellis Rob Riley once. employer’s National Insurance cost and dellis@uk.ey.com rriley@ey.com auto-enrolment contributions Tel: +44 (0) 20 7980 0163 Tel: +44 (0) 20 7806 9572 20 July 2020 COVID-19: UK Government measures and practical next steps
11 Employment support: Coronavirus Job Retention Scheme, from 1 August to 31 October 2020 On 12 May 2020, the Who is eligible? What does it cover? Practicalities Chancellor announced that the • Whilst the eligibility criteria for • From July, Government support will only In bringing employees back after furlough, CJRS will be extended to the employers for this period will remain apply to hours not worked and from employers will need to consider a a number end of October 2020. unchanged, employers who were not August, this support will be reduced of key issues including: From July to October, however, furloughing employees prior to 1 July • For worked hours, employees will be • Profiling which people to return to work the CJRS will operate with 2020 will not be eligible to participate in paid by their employer subject to their and by when. This will require workforce the more flexible version of the scheme employment contract and employers greater flexibility. Employers planning based upon scenario modelling currently using the scheme • Except for those returning from will be responsible for paying the tax, NI (what will be needed), availability (not all statutory parental leave, no claim will and pension contributions due on those people will be able or willing to return) will be able to bring furloughed be able to be made for employees who amounts and workforce segmentation (not all employees back part-time. had not been furloughed for at least • When claiming the CJRS grant for employees do the same thing) This should allow businesses to three full weeks prior to 1 July 2020; furloughed hours, employers will need to start to increase activity, while • Planning for a safe and healthy in order for the current three week report and claim for a minimum period of managing costs. transition. This could involve the furlough period to be completed by 30 seven calendar days subject to month end development of safe return to work Furloughed employees will still June 2020, the final date by which an principles and governance, employee receive a minimum of 80% of employer could furlough an employee Level of Government contribution consultation and engagement and site/ wages (capped at £2,500 per for the first time was 10 June 2020 office safety and occupancy planning • From July the monthly cap will be month), but the Government • There will no longer be a minimum proportionate to the hours not worked. • How to protect the workforce and keep will ask employers to cover the period for which employees must be them engaged as they return. Measure Employers will be required to bear part cost of hours worked from July furloughed could include tracking and monitoring, of the salary costs of their furloughed and contribute to the cost of • Employees will be able to undertake staff from August employee listening, a focus on wellbeing hours not worked from August. work for the employer, or a linked • From August the Government will pay benefits etc or associated organisation, whilst 80% of wages up to a maximum cap of • What “return” means? Will there be a Claims for days in July cannot furloughed and will be able to return to £2,500 and employers will pay employer continued interest in remote working? be made before 1 July. work part-time from 1 July 2020 NI and pension contributions for the Will people need to come back do the Separate claims need to be hours the employee does not work • Employers: same thing, or will an element of re- made for days in June and days • From September the Government will pay • Will be able to agree any working purposing be needed? in July, even if the employee is 70% of wages up to a maximum cap of continuously furloughed. arrangements with previously furloughed employees £2,187.50 for the hours the employee does not work. Employers will pay For more information • Must agree with their employee any employer NI and pension contributions new flexible furloughing arrangement and 10% of wages for hours not worked David Ellis and confirm that agreement in writing • From October the Government will pay dellis@uk.ey.com • Will have flexibility to claim under 60% of wages up to a maximum cap of Tel: +44 (0) 20 7980 0163 the CJRS for the hours that are not £1,875 for the hours the employee does worked (i.e. there is no longer a need not work. Employers will pay employer Rob Riley for a ‘full time’ furlough) NI and pension contributions and 20% of rriley@ey.com wages for hours not worked Tel: +44 (0) 20 7806 9572 20 July 2020 COVID-19: UK Government measures and practical next steps
12 Other employment issues Each of England, Scotland Health and safety obligations Practical considerations For more information Wales and Northern Ireland Employers will need to understand the Employers should ensure risk assessment David Ellis have the power to develop their make-up of their workforce including requirements are met including for those dellis@uk.ey.com own framework for lifting the identifying vulnerable employees and working at home. In respect of COVID-19 lockdown restrictions. There Tel: +44 (0) 20 7980 0163 ascertaining which employees are affected persons, staff should be kept continue to be slight divergences entitled to sick pay and for how long. informed, but individuals should not be in approach across the UK and Rob Riley They should collect employee health data named. Employers should be mindful there are now powers given in line with GDPR/Data Protection Act of the duty to protect employees from rriley@ey.com to local government for “local 2018. potential discrimination and harassment. Tel: +44 (0) 20 7806 9572 lockdowns” in England. Changes to terms and conditions Practical considerations For more information Employers will need to be aware of Employers should look to consult where David Ellis any limits on the ability to impose new required on changes to employee terms dellis@uk.ey.com employment terms such as flexible and conditions and update employee Tel: +44 (0) 20 7980 0163 working (including changes to duties, policies and consider how this can best hours or location), travel bans or be done in practice within the current Rob Riley redeployment to other roles. guidance on social distancing. rriley@ey.com Tel: +44 (0) 20 7806 9572 20 July 2020 COVID-19: UK Government measures and practical next steps
13 Self-Employment Income Support Scheme The Self-Employment Income Who is eligible? What does it cover? Practicalities Support Scheme provides The scheme only applies to people who Each grant is based on average monthly HMRC has looked to invite those that are financial support for self- are self-employed (including members trading profits. eligible to make an online application employed workers. of partnerships) and provides similar through the GOV.UK website. The To work out the average trading profit Up till 13 July 2020, workers support to the measures announced for claims service opened on 13 May 2020. figure, HMRC will add together the total could claim a taxable grant employed workers. This is the only way to access the scheme. trading profit for the three tax years of up to 80% of their average To be eligible, the following requirements (2016/17, 2017/18 and 2018/19 where The grant must be reported on the monthly trading profits over the must be met: applicable) then divide by three (where relevant tax return and will be subject last three tax years (2016/17, applicable). to tax and Class 4 National Insurance as 2017/18 and 2018/19), • The individual must be already in self- well as being treated as income for tax up to a maximum of £7,500 for employment Where an individual has not been trading credit and universal credit purposes. a three month period, paid as a for the full three years, but at least • The individual must have submitted single instalment. started trading between 2016 and 2019, In order to claim the second grant, the their tax return for the 2018/19 tax HMRC will use the figures for those years individual’s business must have been year no later than 23 April 2020 (note From August 2020, workers for which a Self-Assessment tax return adversely affected by COVID-19 on HMRC may consider penalties where will be able to claim a final was filed, e.g. if an individual traded in or after 14 July 2020. Claims for the returns are late) taxable grant of up to 70% of 2017/18 and 2018/19, it will be the second grant will be able to be made in their average monthly trading • The individual must have traded in the trading profits for the two years divided August 2020. profits over the last three tax 2019/20 tax year and be continuing by two. years (2016/17, 2017/18 and to trade when they apply (or would be Those who pay themselves a salary and 2018/19), paid out in a single except for COVID-19) dividends through their own company instalment covering three • The individual has reduced trading are not covered by the scheme but months’ worth of profit, and profits due to COVID-19; HMRC has will be covered for their salary by the capped at £6,570 in total. indicated it will take a risk-based Coronavirus Job Retention Scheme if It is possible to claim the approach to compliance with this they are operating a PAYE scheme. second grant without having requirement Each partner in a partnership will need claimed the first. In addition, the individual’s trading profit to make a claim based on their own must have been less than £50,000 in circumstances. the 2018/19 tax year, or their average trading profit over the last three tax years must be less than £50,000 a year. More than half of the individual’s income For more information must have come from self-employment David Ellis Tom Evennett during the above periods. dellis@uk.ey.com tom.evennett@ey.com Tel: +44 (0) 20 7980 0163 Tel: +44 (0) 20 7980 0890 20 July 2020 COVID-19: UK Government measures and practical next steps
14 Cash flow support: Government tax deferrals No application was needed for VAT payments Practical considerations For more information the deferral of VAT due before All UK VAT registered businesses could • The deferral of VAT payments was an Tony Bullock (Indirect taxes) 30 June 2020. defer VAT payments due between 20 automatic payment holiday with no tbullock@uk.ey.com For deferral of all taxes, there March 2020 and 30 June 2020 until 31 application required. Note that Direct Tel: +44 (0) 20 7951 3408 is a dedicated HMRC helpline March 2021. No interest will arise on the Debits will now need to be re-activated to call (0800 0159 559) or an payments that are deferred. • VAT refunds and reclaims will be approach should be made to There was no automatic deferral for paid by the Government as normal the group’s CCM. We strongly import VAT and duty but deferral may be although we are aware of some delays recommend engaging before a possible in specific circumstances. as HMRC resources have been focused payment becomes due and not on COVID-19 simply delaying payment of tax due. Where it is difficult to get Payments on account Practical considerations For more information through to the helpline, a record should be kept of attempts Taxpayers can defer their self-assessment • No interest or penalties will be Tom Evennett made. payment on account due on 31 July 2020 applied to any tax that is deferred. tom.evennett@uk.ey.com until 31 January 2021. The deferral is The deferral applies to all taxpayers Tel: +44 (0) 20 7980 0890 optional. with an income tax liability to pay on account Time to pay Practical considerations For more information All businesses in financial distress, and • The expectation is that there will Tony Bullock (Indirect taxes) with outstanding tax liabilities, may be be a lighter touch applied to those tbullock@uk.ey.com eligible to receive support with their sectors/industries already impacted Tel: +44 (0) 20 7951 3408 tax affairs through HMRC’s Time To Pay (e.g., restaurants, tourism and service. The arrangements will be agreed entertainment) Jim Wilson (Tax Controversy and Risk on a case-by-case basis. This is for all • HMRC expects these to be exceptional Management) taxes within HMRC’s jurisdiction, so will as businesses should be returning to jwilson8@uk.ey.com cover PAYE, Air Passenger Duty and paying tax on time although that will Tel: +44 (0) 20 7951 5912 corporation tax. clearly depend on circumstances 20 July 2020 COVID-19: UK Government measures and practical next steps
15 Cash flow support: Cash tax management The Government’s Tax payments Practical considerations For more information announcements are not the Review instalment payments for the Businesses should contact HMRC and Kerry Mckeown only ways to manage cash tax. current year if relevant and claim look to submit amended returns and kerry.mckeown@uk.ey.com There are other tax related repayments if appropriate. Review claim refunds of overpayments as soon measures, which are not Tel: +44 (0) 20 7806 9450 payments already made in light of tax as possible. specific to COVID-19, attributes to see if repayments can to manage liquidity. They will need to model the impact of Katie Selvey-Clinton (Capital be generated. In particular, consider withholding taxes on any cross-border allowances) revisiting capital allowances claims (and flows and consider the tax impact of kselvey-clinton@uk.ey.com disclaimers) for earlier periods. changes to operating models or supply Tel: +44 (0) 20 7951 3723 chains. Research and development tax Practical considerations For more information credits Research and development expenditure Roxane Markarian Where appropriate, businesses should credit (RDEC) claims can be reviewed and rmarkarian@uk.ey.com be optimising and accelerating the repayments authorised separately from Tel: +44 (0) 20 7951 2588 submission of R&D claims in order to a company’s overall tax affairs. receive cash back as soon as possible. However, repayments will not be made where there are other outstanding tax debts (deferral of VAT does not create a debt for these purposes). VAT Practical considerations For more information Look to recover VAT as quickly as possible Unlocking process and systems Chris Lewis by streamlining processes or introducing limitations can improve ongoing VAT clewis1@uk.ey.com accruals to create immediate cash flow recovery as well as an opportunity to Tel: +44 (0) 1189 281411 benefits. Take advantage of reliefs where reclaim VAT not recovered in the past. customers are delaying payment. Ben Woodfield ben.woodfield@uk.ey.com Tel: +44 (0) 20 7197 1123 20 July 2020 COVID-19: UK Government measures and practical next steps
16 Fixed costs: Business rates and property considerations The Government has introduced Business rates Practical considerations For more information a business rates holiday for The Government has provided a list of • No actions need to be taken to claim the Alex White retail, hospitality and leisure qualifying properties that is not exhaustive holiday, although local authorities may businesses in England for alex.white1@uk.ey.com but instead serves as guide for local have to reissue bills the 2020 to 2021 tax year Tel: +44 (0) 20 7951 9350 authorities to draw comparison and apply • Those businesses that cannot benefit alongside certain cash grants. relief as they see fit. The Government has from the holiday should explore other however provided a list of properties they reliefs that already exist in the business expressly consider to fall outside of the relief. rates system Commercial rent payments Practical considerations For more information The Government confirmed that commercial Once the forfeiture moratorium is lifted, Colette Withey landlords will be prevented from exercising tenants will (absent other agreement) colette.withey@uk.ey.com the right to take back the premises become immediately liable for the unpaid Tel: +44 (0) 161 333 2830 (forfeiture) for non-payment of rent until rent (potentially up to 6 months’ arrears). (at least) 30 September 2020, where This may make non-payment of rent non-payment of rent is due to COVID-19. unattractive. Contractual rent concessions Any current forfeiture proceedings cannot may be more attractive to both landlord result in the tenant being asked to give up and tenant — for example rent reduction/ possession of premises prior to (at least) deferral, rent free periods or changes to 30 September 2020. the usual payment cycle i.e. quarterly to monthly payments. The Government has also temporarily banned (i) the use of statutory demands Concessions need to be agreed and (where made between 1 March 2020 documented (usually by side letter), being and 30 September 2020) as the basis clear that the concession is temporary and for a winding up petition presented after detailing when it will end. Some concessions 27 April, and (ii) winding up petitions may require lender or other third party (i.e. presented from Monday 27 April through superior landlord) consent. Tenants should to September 2020, unless there are also bear in mind that statutory demands reasonable grounds to believe COVID-19 are not entirely prohibited (where not used has not had a “financial effect” on the for winding up petitions) and a winding up recipient of the petition or the non- petition will only be prohibited “if (and only payment would have occurred anyway. if) the company’s financial position worsens In each case the expiry deadline can in consequence of, or for reasons relating be extended in line with the forfeiture to, COVID-19”. moratorium. In addition, landlords will be prevented from using Commercial Rent Arrears Recovery (CRAR) unless they are owed at least 189 days of unpaid rent. 20 July 2020 COVID-19: UK Government measures and practical next steps
17 Grants and sector-specific measures Grants are cash-payments for COVID-19 government grants Practical considerations For more information organisations. There are now three different grants Alex White Some COVID-19 grants come available through the business rates alex.white1@uk.ey.com from UK Government, some system: Tel: +44 (0) 20 7951 9350 from devolved administrations • Small Business Grant Fund — grants up • Properties included in this scheme and others from non-government to £10,000 are those which on 11 March 2020 bodies. were eligible for relief under the Certain sectors (such as airlines Small Business Rate Relief Scheme and airports) may ultimately (including those with a rateable value need to have a support package between £12,000 and £15,000) put together by the Government. • Retail, Hospitality and Leisure Grant — • Covers properties within these sectors We also understand that existing grants up to £25,000 which on 11 March 2020 had a grants will continue as usual. rateable value of less than £51,000 and would have been eligible for a There are new grants for discount under the business rates COVID-19 related activities and holiday (see earlier section) had that on the next page we highlight scheme been in force for that date a major new grant from UK • Local Authority Discretionary Grant • To qualify for this businesses must be Research and Innovation. Fund — grants up to £25,000 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 20 July 2020 COVID-19: UK Government measures and practical next steps
18 The Sustainable Innovation Fund: Round 1 Innovate UK, as part of UK Who is eligible? What does it cover? Practicalities Research and Innovation, is • Aid may be granted to organisations • COVID-19 has affected R&D across • These grants are a form of state investing up to £55 million to that were not in difficulty on 31 all sectors, and the aim of this aid under the COVID-19 Temporary fund single and collaborative December 2019, but faced difficulties competition is to help all sectors of Framework for the UK research and development or entered into difficulty thereafter as the UK recover, grow and create new projects as part of the • The project’s total eligible costs must a result of the COVID-19 outbreak opportunities from the aftermath of Sustainable Innovation Fund. be between £100,000 and £500,000 the global health pandemic • Large companies are only eligible if The aim of this competition is to • Each funded partner can claim a they include at least one SME in the • The proposal must show evidence help all sectors of the UK rebuild maximum of £175,000 against their project consortium of key challenges as a direct after the effects of COVID-19. eligible project costs. This amount consequence of COVID-19, and how • Applicants must also carry out the cannot exceed their cumulative the project can help solve them project activity in the UK and intend to aid total of £800,000 if they have exploit the project results from or in • In addition, the proposal must received other funding as part of the the UK consider its impact on climate change COVID-19 Temporary Framework and/or environmental sustainability • Projects must be ready to start by 1 • Innovate UK would also like applicants October 2020. They can last between to address where necessary, equality, three and nine months How is it accessed? diversity and inclusion in relation to • Companies must complete an the project, the organisation(s) and application form the approach to innovation • The application will be reviewed by up to five independent assessors. The assessors are experts from both business and academia • Before the grant is confirmed, applicants may be asked for more information 20 July 2020 COVID-19: UK Government measures and practical next steps
19 Global EY COVID-19 Response Tracker Our Response Tracker The Response Tracker currently covers 136 jurisdictions around the globe provides a snapshot of the 5/26/2020 Page 1 EY has produced a number policy changes that have been of further trackers covering the following topics: announced in 136 jurisdictions around the world in response to • Force Majeure the COVID-19 crisis. • Global Mobility Our associated COVID-19 global • Global Trade stimulus tracking tool provides Considerations a set of interactive dashboards which allow businesses to • Immigration Policy filter the information and a • Labour and Employment workflow management facility Law that enables allocation of tasks • Tax Controversy within the organisation. • US State and Local Taxes • Transfer Pricing These are all publicly available on the EY website. 1/1 To download the latest Response Tracker visit: ey.com/en_us/tax/how-covid-19-is-causing- EY Tax COVID-19 governments-to-adopt-economic-stimulus-- Response Tracker 9 July 2020 For more information Chris Sanger csanger@uk.ey.com Tel: +44 (0) 20 7951 0150 20 July 2020 COVID-19: UK Government measures and practical next steps
20Contact Chris Sanger Rob Walker Chris Lowe Luke Reeve Jon Morris David Ellis Tax policy Lead on Government Capital and debt advisory Capital and debt advisory Liquidity management People advisory services csanger@uk.ey.com stimulus clowe@uk.ey.com lreeve@uk.ey.com and restructuring dellis@uk.ey.com +44 (0) 20 7951 0150 rwalker@uk.ey.com +44 (0) 7920 775642 +44 (0) 20 7951 6548 jmorris10@uk.ey.com +44 (0) 20 7980 0163 +44 (0) 118 928 1218 +44 (0) 20 7951 9869 Kerry McKeown Roxane Markarian Tony Bullock Colette Withey Rob Riley Cash tax management Grants Indirect taxes Commercial law and Employment law kerry.mckeown@uk.ey.com rmarkarian@uk.ey.com tbullock@uk.ey.com contracts rriley@ey.com +44 (0) 20 7806 9450 +44 (0) 20 7951 2588 +44 (0) 20 7951 3408 colette.withey@uk.ey.com +44 (0) 20 7806 9572 +44 (0) 161 333 2830 20 July 2020 COVID-19: UK Government measures and practical next steps
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