COVID-19: UK Government's Latest Measures to Support Businesses
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
AL E R T M E M O R AN D U M
COVID-19: UK Government’s Latest
Measures to Support Businesses
Updated April 7, 2020
If you have any questions concerning
On March 17 and March 20, 2020, the UK Chancellor this memorandum, please reach out to
of the Exchequer announced a set of “unprecedented” your regular firm contact or the
following authors
economic measures to further support UK businesses
and mitigate the economic disruption caused by the LONDON
coronavirus pandemic (“COVID-19”). Subsequently, a Nallini Puri
number of complementary measures have also been + 44 20 7614 2289
npuri@cgsh.com
announced and the official guidance has evolved.
Jennifer Maskell
As part of these measures, the UK government will make +44 20 7614 2325
available to UK businesses an initial £330 billion of government- jmaskell@cgsh.com
backed and guaranteed loans, make a material contribution to the
Melissa Reid
salary and wage bills of those who are furloughed in connection +44 20 7614 2395
with the pandemic and financially support the self-employed. HM mreid@cgsh.com
Treasury and the Bank of England (the “Bank”) have also
launched major financing schemes to help UK businesses bridge Ferdisha Snagg
COVID-19 related disruption to their cash flows. +44 20 7614 2251
fsnagg@cgsh.com
These measures are in addition to those initially announced by the
Chancellor in his March 11, 2020 Budget presentation and by the Bree Morgan-Davies
+44 20 7614 2223
three policy committees of the Bank on the same day, and updated bmorgan-davies@cgsh.com
on March 19, 2020. The two authorities hope that their concerted
action will have maximum impact in reducing the economic Eloise Skinner
shock. +44 20 7614 2296
eskinner@cgsh.com
The UK government has also obtained new legal powers via the
Coronavirus Act 2020 (the “Act”), which received royal assent on Georgia Moorhouse
+44 20 7614 2394
March 25, 2020 after a rapid passage through parliament. The Act
gmoorhouse@cgsh.com
enables the UK government to offer any further financial support
that is required in order to prevent, mitigate or compensate for the
impact of COVID-19 on UK businesses.
This memorandum outlines the recent economic and fiscal measures proposed by the UK government
and certain other developments likely to be relevant to UK businesses.
clearygottlieb.com
© Cleary Gottlieb Steen & Hamilton LLP, 2020. All rights reserved.
This memorandum was prepared as a service to clients and other friends of Cleary Gottlieb to report on recent developments that may be of interest to them. The information in it is
therefore general, and should not be considered or relied on as legal advice. Throughout this memorandum, “Cleary Gottlieb” and the “firm” refer to Cleary Gottlieb Steen & Hamilton
LLP and its affiliated entities in certain jurisdictions, and the term “offices” includes offices of those affiliated entities.ALERT MEMORANDUM
severely affected by the pandemic, there
I. Bank Rate cut
is no requirement to demonstrate such
The Bank’s Monetary Policy Committee impact when making a claim under the
(“MPC”) voted at a special meeting on March 10, scheme, as the UK government has
2020 to cut the Bank’s base rate of interest acknowledged that different businesses
(“Bank Rate”) by 50 basis points to 0.25%. will face different impacts from
However, by March 19, 2020, the MPC found COVID-19.
that conditions in the UK gilt market had
B. Who is an ‘employee’ for this purpose?
deteriorated, and UK and global financial
conditions had generally tightened, prompting Provided they were hired and on a PAYE
the MPC to reduce Bank Rate further to 0.1%, its payroll on or before February 28, 2020,
lowest level ever. claims can be made in respect of any
The reduction in Bank Rate is intended to support employee regardless of whether they are
business and consumer confidence during the employed on an indefinite or fixed term
COVID-19 outbreak and bolster the cash flows of contract or on a full-time, part-time or
businesses and households. It reduces the cost, zero-hours basis.
and improves the availability, of finance – handy, Claims can also be made in respect of the
given the significant funding measures included following, provided they are paid through
in the package of measures (and discussed PAYE: (i) office holders such as
below). company directors; (ii) members of
limited liability partnerships (“LLPs”)
II. Salary and wage support for all UK who are treated as employees for UK tax
employers purposes (so called ‘salaried members’);
On March 20, 2020, the Chancellor announced (iii) agency workers; (iv) apprentices; and
the ‘Coronavirus Job Retention Scheme’, (v) so called ‘limb (b) workers’, who are
pursuant to which any UK employer, regardless individuals that have contracted to
of size and sector, can receive government perform work or provide services
funding to cover 80% of an employee’s salary or personally but are neither employees nor
wage, up to a maximum of £2,500 per month, if independent contractors (for simplicity,
they are furloughed but kept on the payroll in we use the term ‘employees’ and
connection with the pandemic, rather than made ‘employers’ in this part II).
redundant. Employers can top-up the amounts The scheme is also available to
paid by the UK government, but they do not have employees who have been made
to. redundant or otherwise stopped working
since February 28, 2020, if they are re-
In a series of subsequent guidance notes, the UK
employed and then furloughed, as well as
government has confirmed the following:
to employees who have been placed on
A. Who can claim? unpaid leave since that date.
The scheme is available to any business, The UK government has also clarified
charity, recruitment agency, individual that employees who are unable to work
employer and public authority who because they have caring responsibilities
established a UK “Pay As You Earn” resulting from COVID-19 can be
(“PAYE”) payroll scheme on or before furloughed (for example, parents who
February 28, 2020 and has a UK bank need to look after children following
account. There is no requirement that the school closures).
organisation be incorporated in the UK. Vulnerable employees shielding (or
staying at home with someone who is
Whilst the scheme is intended to help
employers whose operations have been shielding) in accordance with government
guidance can also be furloughed if they
2ALERT MEMORANDUM
are unable to work from home and would Where an employee’s pay varies and they
otherwise be at risk of redundancy. have been employed for less than 12
However, the scheme is not intended to months, the claim amount should be an
apply to employees during periods of average of their monthly earnings. If they
incapacity for work or while they are self- have been employed for more than 12
isolating in accordance with government months, it should be the higher of the
guidance. Such employees should instead same month’s earnings in the previous
receive Statutory Sick Pay (see further, year or their average monthly earnings in
part III para E. below) and may be entitled the 2019-20 tax year.
to receive enhanced contractual sick pay Earnings here means the “regular
from their employer during the relevant payments” that an employer is “obliged”
period, but can be furloughed thereafter. to pay, including wages, pay for overtime
Whilst the latest guidance confirms that worked, fees and “compulsory
foreign nationals can be furloughed, the commission”. However, “discretionary
guidance does not yet address commission”, discretionary bonuses, tips,
complexities that may arise for non-cash payments and benefits provided
internationally mobile employees or in through salary sacrifice schemes should
cross-border situations. However, rather not be included when calculating the
than applying the usual tests to determine claim amount.
those who are able to benefit from UK For a salaried member of an LLP,
statutory employment rights, the test earnings means the relevant member’s
appears to simply be whether an profit allocations excluding amounts
employee was, as at February 28, 2020, which are determined by performance
paid via a UK PAYE payroll scheme (whether the member’s or the LLP’s).
(essentially, an employee who has been
D. What does being furloughed involve?
‘paying in’ to the UK tax and social
security system). This will have been An employee will be considered
determined, for the 2019-20 tax year, by ‘furloughed’ if they are placed on a
considering whether a particular temporary leave of absence by their
employee is ‘resident’ and/or ‘domiciled’ employer, for a minimum period of 3
in the UK for tax purposes (or is weeks, and they do not undertake any
performing duties in the UK that are more work, provide any services or generate
than just incidental to non-UK duties) and any revenue for their employer (or any
whether the employer has ‘sufficient linked or associated organisations) during
connection’ in the UK to be subject to the that period. An employee can be
PAYE regime. furloughed more than once.
C. What can be claimed? Employees can volunteer for other
organisations, and undertaking training
Employers can, in addition to the capped for their employer whilst on furlough is
£2,500, claim the cost of paying employer encouraged. However, employees must
National Insurance contributions and the be paid at least the Apprenticeship
minimum employer pension Minimum Wage, National Living Wage
contributions required under auto- or National Minimum Wage, as
enrolment in respect of the government- applicable, during any time spent
funded portion (for which the employer training, and the training must not be
remains responsible, unless an employee revenue-generating or involve the
has opted out of auto-enrolment). Further provision of services.
guidance on how to calculate these Company directors can discharge their
amounts will be issued in due course. statutory duties whilst on furlough,
3ALERT MEMORANDUM
provided they do no more than would additional incentives for Small and Medium-
reasonably be judged necessary. sized Enterprises (“TFSME”), which was
announced on March 11, 2020. The TFSME
E. How do I put someone on furlough?
scheme will be financed by the issuance of
Employers must notify affected central bank reserves.
employees in writing of their status as
The TFSME scheme will offer, over the next 12
furloughed workers, and keep a record of
months, four-year funding of at least 10%
that communication for 5 years.
(increased from an initial 5% allowance) of
In respect of office-holders and members banks’ lending to the real economy at interest
of LLPs, any furlough arrangement
rates at or close to Bank Rate. Additional funding
should be adopted formally as a decision
will be available for banks that increase lending,
of the company of LLP.
especially to small and medium-sized enterprises
If any employee has been identified as (“SMEs”). It is anticipated that the TFSME
being at risk of redundancy, the option of scheme will:
being placed on furlough could naturally
be discussed in the context of individual help transmit the effect of the reduction in
and/or collective consultation as a way of Bank Rate to the real economy;
avoiding (or postponing) the dismissal. provide participants with a cost-effective
However, as a general matter, employers source of funding to support additional
are unlikely to have either an express or lending to the real economy; and
implied unilateral right to place an incentivise banks to (i) provide credit to
employee on furlough on reduced pay and businesses and households to bridge
so the arrangement should be discussed through a period of economic disruption;
and agreed with each affected employee and (ii) support lending to SMEs that
(and/or their representatives in the case of typically bear the brunt of economic
collective redundancies) as a temporary downturns.
variation of contract, particularly if an Institutions eligible to participate in the TFSME
employer does not intend to fully top-up will be banks and building societies that are
the UK government’s funding to normal participants in the Bank’s Sterling Monetary
levels. Framework (“SMF”) and that are signed up to
F. When will the scheme be ready? access the Discount Window Facility (“DWF”).
SMF participants that are not already signed up
The UK government’s expectation is that
to the DWF can apply for access alongside
an online claim portal will be established
applying to use the TFSME. Institutions that are
by the end of April, 2020.
not currently SMF participants can apply to join,
Claims under the scheme can be subject to the Bank’s usual eligibility criteria.
backdated to March 1, 2020 and the Collateral must be pre-positioned with the Bank.
scheme will be made available initially Eligible collateral will consist of all collateral
for 3 months, although the Chancellor currently eligible in the SMF.
reiterated in his public address that there
were no financial limits to the scheme, The TFSME will open for drawings on April 15,
which would be extended if necessary. 2020, sooner than anticipated. The Bank
estimates that this scheme should lead to around
III. Financial support for small- or medium- £100 billion being provided in term funding.
sized UK businesses
B. Asset Purchase Facility
A. Term Funding Scheme
On March 19, 2020, the MPC also voted to
The MPC also voted on March 19, 2020 to increase the Bank’s holdings of UK government
enlarge the new Term Funding scheme with and corporate bonds by £200 billion (to a total of
4ALERT MEMORANDUM
£645 billion). The additional purchases of bonds On March 30, 2020 the Bank announced that it
(the majority of which will comprise UK would continue to run, on a weekly basis, three-
government bonds but will include some month term CTRF operations until April 30, 2020
additional sterling non-financial investment- and one-month term CTRF operations until May
grade corporate bonds) will be funded by the 1, 2020 (being the date of the final operation
issuance of central bank reserves. scheduled).
On April 2, 2020 the Bank announced that it will The CTRF is a flexible liquidity insurance tool
utilise the Corporate Bond Purchase Scheme that allows participants to borrow central bank
(“CBPS”) that was launched in August 2016 to reserves (cash), in all major currencies, in
purchase at least £10 billion of eligible sterling exchange for collateral. Eligible collateral
non-financial corporate bonds in coming months, comprises collateral assets eligible in the SMF.
increasing the level of purchased corporate bonds The CTRF is open to banks and building societies
to at least £20 billion. Furthermore, the Bank has that signed up to the DWF.
increased the maximum purchase size per bond in The CTRF provides funding for a period of either
each auction, as stipulated under the CBPS, from 1 or 3 months, which will allow participants to
£10 million to £20 million. use the CTRF as a way to bridge beyond the point
An updated list of corporate bonds eligible for at which drawings under the TFSME can be made
purchase under the scheme will be published in in order to support lending to the real economy as
mid-April, 2020. Eligible bonds are expected to quickly as possible.
comprise conventional investment grade senior The size of the CTRF operations will be
unsecured or secured, unsubordinated debt unlimited, and the price will be a fixed rate of
securities that are, inter alia, admitted to official Bank Rate plus 15 basis points. A maximum of 1
listing on an EU stock exchange and have a bid will be accepted from a single participant.
minimum residual maturity of 12 months (no The minimum bid size will be £5 million, with
perpetual debt). Bonds with standard par call increments of £1 million.
options within 3 months of the maturity date may
be considered eligible for purchase going The Bank will keep the operation of the CTRF
forwards and may be included in an updated under review. Further operations will be
eligible list. Bonds with complex or non-standard announced as required, based on demand and
structures and convertible or exchangeable bonds market feedback.
will not be eligible. D. Coronavirus Business Interruption Loan
The Bank will undertake operations via reverse Scheme
auctions beginning on April 7, 2020. The Bank On March 11, 2020 the UK Chancellor
intends initially to hold three purchase operations announced the ‘Coronavirus Business
a week on Tuesdays, Wednesdays and Thursdays. Interruption Loan Scheme’ (“CBILS”), a
The Bank will keep the size of the scheme and temporary loan scheme delivered by the British
purchase pace under review in light of prevailing Business Bank, which became available the week
market conditions and any future MPC decisions. commencing March 23, 2020.
C. Contingent Term Repo Facility The scheme provides support to UK SMEs with
On March 24, 2020, the Bank announced that it a turnover of no more than £45 million per year,
was activating the Contingent Term Repo Facility for up to 6 years. The scheme provides
(“CTRF”) as a temporary enhancement to its participating lenders with a government-backed
existing sterling liquidity insurance facilities with guarantee of 80% on each loan (subject to pre-
operations initially run on March 26, 2020 and lender cap on claims) and, with the UK
April 2, 2020. government covering the first 12 months of
interest payments and any lender-levied fees,
5ALERT MEMORANDUM
seeks to bolster lenders’ confidence in continuing The Act also suggests the UK government may
to provide financing to SMEs. be considering going further by permitting
regulations to be made regarding the payment of
More than 40 lenders including Barclays, RBS,
“additional amounts” to employers who have
HSBC and Lloyds will provide funds under the
paid Statutory Sick Pay.
scheme as term loans, overdrafts, or asset-based
lending secured on equipment or invoices. Statutory Sick Pay is currently paid at a rate of
£95.85 per week (having increased from £94.25
Eligibility will be determined by application. The
on April 6, 2020) to eligible employees on a five
CBILS was initially limited to SMEs that were
day work schedule (with different amounts
unable to secure regular commercial financing.
payable to those on other types of schedules), for
However, on April 2, 2020 the UK Chancellor
up to 28 weeks in any period of incapacity for
indicated that the scheme would be made
work or in any series of linked periods of
available to all viable SMEs affected by COVID
incapacity for work. A repayment mechanism
19, regardless of whether they could secure
will be established over the coming months (the
commercial financing outside of the scheme.
Act mentions deductions from amounts
For facilities below £250,000, the UK Chancellor otherwise payable to the UK’s tax authority, HM
also confirmed that accredited lenders are not Revenue & Customs (“HMRC”) as one possible
permitted to take a personal guarantee. For larger route), and, in the meantime, employers should
facilities, personal guarantees may still be keep accurate records of staff absences and
required at a lender’s discretion; however, payments of Statutory Sick Pay.
recoveries are capped at 20% of the outstanding
With effect from March 13, 2020, the eligibility
balance of the facility after the proceeds of
criteria for Statutory Sick Pay have also been
business assets have been applied. Furthermore,
relaxed in two respects:
principal private residences cannot be taken as
security under the CBILS. These amendments Statutory Sick Pay is payable from the
will apply retroactively to any financing first day of sickness absence, as an
arrangements that have already been put into enhancement to the usual rule (which
place under the scheme as well as all new provides for payment from the fourth
facilities. qualifying day in any period of incapacity
HM Treasury estimates this scheme should for work); and
unlock up to £1 billion of attractive working Statutory Sick Pay is payable to any
capital loans to support UK SMEs. As of April 2, employee who is ill because of COVID-
2020, it was reported that more than £90 million 19, or who is following UK government
of loans have been approved for approximately advice (available here) to self-isolate
1000 SMEs under the CBILS. whether or not they are ill or showing any
symptoms of COVID-19.
E. Support for UK employers
F. Grants for certain small enterprises
Employers with fewer than 250 employees
(which is estimated to include approximately 2 Approximately 700,000 small businesses that
million employers), as at February 28, 2020, will already pay little or no business rates will be
be eligible for a government refund of up to 14 eligible for £10,000 grants to help meet business
days’ of Statutory Sick Pay paid to any employee costs (the UK government estimates that this is
who, on or after March 13, 2020 is either ill or roughly the cost of 3 months of rent). Local
required to self-isolate because of COVID-19. authorities will write to businesses that are
Under the Act, an employer who fraudulently or eligible for grants, and funding is expected to be
negligently receives a refund is liable to a penalty provided in early April, 2020.
not exceeding £3,000. Additionally, a cash grant of up to £25,000 may
be available for businesses in the retail,
6ALERT MEMORANDUM
hospitality and leisure sectors operating from Purchases will be made in the primary market via
premises that have a rateable value (for business eligible dealers and after issuance from eligible
rates purposes) of over £15,000 and less than counterparties in the secondary market.
£51,000. The CCFF will operate for at an initial period of
IV. Financial support for larger UK 12 months, and the Bank will provide 6 months’
businesses notice of withdrawal of the facility.
A. Covid Corporate Financing Facility More information regarding the operation of the
CCFF can be found in our memorandum
HM Treasury and the Bank have launched the
(available here) and on the Bank’s website. As of
Covid Corporate Financing Facility (“CCFF”) to
April 2, 2020, it was reported that the CCFF has
provide funding to businesses by purchasing, at a
delivered close to £1.9 billion of support to
minimum spread over reference rates, newly
investment grade firms.
issued commercial paper of up to one-year
maturity and meeting certain other eligibility B. Coronavirus Large Business Interruption
criteria issued by non-financial businesses Loan Scheme
(including their finance subsidiaries) which are
considered to make a material contribution to the On April 2, 2020, HM Treasury announced the
UK economy. ‘Coronavirus Large Business Interruption Loan
Scheme’ (“CLBILS”) which is intended to
Funding will be provided on terms comparable to provide support to larger UK businesses which
those prevailing in markets in the period before are unable to obtain relief under the CBILS
the COVID-19 economic shock, and will be open (above).
to firms that can demonstrate they were in sound
financial health prior to the shock (i.e., The scheme provides participating lenders with a
companies that had a short or long-term rating of government-backed guarantee of 80% on each
investment grade, as at March 1, 2020, or loan up to £25 million in value in order to
equivalent). The scheme is intended to help such encourage lending to UK businesses with an
businesses across a range of sectors that have annual turnover of between £45 million and £500
been affected by a short-term disruption of cash million per year. The scheme aims to support UK
flow to finance their short-term liabilities. businesses that were viable before the COVID-19
outbreak but which now face significant cash
UK incorporated companies, including those flow difficulties and are unable to secure standard
with foreign-incorporated parents and a genuine commercial financing. The scheme will help give
business in the UK, companies with significant such businesses access to short term loans,
employment in the UK or firms with their overdrafts, invoice finance and asset finance.
headquarters in the UK, should normally qualify
for the CCFF scheme. Eligibility decisions will Like the CBILS, the CLBILS is also expected to
be made by the Bank’s risk management staff. be delivered through accredited commercial
Commercial paper issued by non-bank financial lenders. It is intended that facilities backed by a
companies will, in principle, be eligible, subject guarantee under CLBILS will be offered at
to the Bank being satisfied that the company commercial rates of interest.
makes a material contribution to corporate Businesses in all sectors are eligible to apply for
financing in the UK. CBILS with the exception of banks and building
Commercial paper issued by leveraged societies, insurers and reinsurers (but not
investment vehicles or from companies within insurance brokers), public sector organisations,
groups that are predominantly banks, investment including state-funded primary and secondary
banks or building societies will not be eligible. schools. The CLBILS will be launched later this
month and further details regarding the scheme
(including eligibility) are expected.
7ALERT MEMORANDUM
V. Financial support for the self-employed and Interestingly, in his public address, the UK
for members of partnerships Chancellor made what he called a “fair and
reasonable observation” on the UK tax and social
The UK Chancellor yesterday unveiled his much
security system, noting that in light of parity
anticipated ‘Self-employment Income Support
between the scheme and the Coronavirus Job
Scheme,’ which will provide financial support to
Retention Scheme, it is now much harder to
the self-employed (including members of
justify inconsistencies in the amount of tax and
partnerships) at a level which is the same as that
National Insurance paid by employees and the
provided to employees under the Coronavirus Job
self-employed “if we all want to benefit from
Retention Scheme: grants equal to 80% of
State support”. Whilst refusing to provide any
average profits (in up to the last 3 tax years, if
further details at this time, he declared that “we
applicable) up to a cap of £2,500 per month,
must all pay in equally in future.”
initially for the 3 months of March, April and
May, 2020. The scheme supplements for the self-employed
the following three support measures previously
The scheme is available to anyone who meets the
announced:
following five criteria:
The Coronavirus Business Interruption
You are self-employed or a member of a
Loan Scheme (see part III D. above),
partnership;
which is available to the self-employed
You have lost trading or partnership
provided their activity is channelled
trading profits as a result of COVID-19;
through a business account;
You have either filed a tax return for the
As described further in part VII B. below,
2018-19 tax year as self-employed or as a
the next income tax payments on account
member of a trading partnership or, if you
due under the self–assessment system,
are late to file, you do so in the next 4
which would otherwise be due by July 31,
weeks;
2020, may be deferred to the end of
You traded in the 2019-20 tax year, you January, 2021; and
are trading (or would be except for
The “minimum income floor” will not be
COVID-19) when you apply for the grant
applied during any period a self-
and you intend to continue to trade in the
employed person is required to stay at
2020-21 tax year; and
home or is ill as a result of COVID-19,
You have trading profits of less than nor generally from April 6 for the
£50,000 and more than half of your total duration of the pandemic, if they wish to
income comes from self-employment. apply for monthly welfare payments
This can be demonstrated either through (Universal Credit) to help with living
trading profits and total income in the costs.
2018-19 tax year or across the 1, 2 or 3
available trading years going back to VI. Coordinated action with other central
2016-17. banks to enhance the provision of global US
dollar liquidity
The UK Chancellor believes that 95% of those
who receive the majority of their income from In a measure that is also calculated to bolster the
self-employment or trading partnerships will supply of credit to households and businesses, the
qualify under the scheme, the remaining 5% Bank will join the Bank of Canada, the Bank of
having an average income of c.£200,000. Japan, the European Central Bank, the Federal
Reserve and the Swiss National Bank in
HMRC will be contacting potentially eligible
increasing the frequency of 7-day maturity
individuals directly and invite applications once
operations on their standing US dollar liquidity
the scheme is operational, which is expected to be
swap lines, which are an important liquidity
no later than the start of June, 2020.
backstop to mitigate strains in global funding
8ALERT MEMORANDUM
markets, from weekly to daily. These daily employed) is eligible for this optional deferment,
operations commenced on March 23, 2020 and although it also states those who are able to pay
will be carried out until at least the end of April, their payment on account on July 31 should do
2020. The central banks will also continue to hold so. No application is required to take advantage
weekly 84-day maturity operations. of the deferral, and it has been confirmed that no
late payment penalties or interest will be levied
VII. Fiscal measures in response to COVID-19
where payment is deferred to January, 2021.
A. Support for payment of tax
Taxpayers are also able to set up ‘budget payment
Businesses and self-employed individuals in plans’ with HMRC during the deferral period to
financial distress, and with outstanding tax help them put aside funds to cover the deferred
liabilities, may be eligible to receive support with payment on account when it becomes due.
their tax affairs through a “Time to Pay” service
The relevant government guidance has been
provided by HMRC. Arrangements are agreed on
updated recently to refer to ‘self-assessment
a case-by-case basis and are tailored to a
payments on account’, rather than to ‘income tax
taxpayer’s specific circumstances and liabilities.
payments on account’. This seems to be aimed at
B. Tax deferral clarifying that any deferral extends to the full
The Chancellor announced, in his press self-assessment payment that a taxpayer is due to
conference on March 20, 2020, that the next make on July 31, 2020 (which may relate to a
quarter of UK value added tax (“VAT”) payments combination of income tax and National
(any VAT amounts that would have been due Insurance contributions) and not only to the
from businesses to HMRC in the period from component of such payment that relates to
March 20 to June 30 this year) will be deferred. income tax.
The government has now confirmed in guidance C. Business rates relief
that this deferral is optional and that it does not
The UK government will introduce a business
extend to payments due under the VAT Mini One-
rates’ ‘holiday’ for businesses in the retail, leisure
Stop Shop (or “MOSS”) regime or to import
and hospitality sectors in England in the 2020-21
VAT.
tax year. The scope of this measure extends to all
Businesses that opt to defer will still need to businesses in those sectors, regardless of their
submit their VAT returns on time but will instead size. No action is required from businesses: the
be given until March 31, 2021 to account for the measure will be applied automatically to bills for
relevant amounts (with the effect of easing the period beginning April 2020, with existing
current cash-flow problems caused by the impact bills being reissued where necessary to reflect the
of COVID-19). Late payment interest and holiday.
penalties will not be charged in connection with
D. Delay to IR35 reforms
payment deferred as envisaged by the
Chancellor’s announcement. The government Reforms to the off-payroll working rules
has also confirmed that it will process VAT (“IR35”) that would have applied from April 6,
refunds and reclaims as normal during the 2020 for people contracting their services to large
deferral period. or medium-sized organisations outside the public
sector have been delayed until April 6, 2021. The
Similarly, payments on account that are due
planned reforms are an anti-avoidance measure,
under the self–assessment system on July 31,
aimed at contractors who are effectively
2020 may, if the impact of COVID-19 causes a
providing the same service as employees, but via
taxpayer difficulty in making payment on time,
a limited company, giving a different tax result.
be deferred to January 31, 2021. Government
Once live, they will mean that the recipient of
guidance indicates that anyone who is due to
services (where it is a large- or medium-sized
make a self-assessment payment on account on
organisation in the private sector) will be
July 31 (and not just those who are self-
9ALERT MEMORANDUM
responsible for determining the employment On March 19, 2020 the Lord Chief Justice issued
status of the individual ultimately performing a statement (available here) making it clear that
those services. The UK government has stressed the default position is now that hearings should
that the delay will not become a cancellation and be conducted with one, more than one or all
that it remains committed to putting the reforms participants attending remotely, whilst noting
in place. that attendance of hearings in person may still be
necessary in some cases. The Courts have also
VIII. Other UK developments
resolved to deal with many more matters “on
A. Shareholder meetings paper” rather than by way of a hearing.
ICSA, The Chartered Governance Institute and On April 2, 2020, the Courts and Tribunals
Slaughter and May have published guidance on Judiciary announced that a New Practice
planning annual general meetings (“AGMs”) in Direction 51ZA – Extension of Time Limits had
the light of the COVID-19 outbreak. This been approved. The Practice Direction allows
guidance, which has been reviewed by the UK parties to agree an extension up to 56 days
Department for Business, Energy and Industrial without formally notifying the court (rather than
Strategy, suggests that companies consider their the previous 28 days) so long as that does not put
contingency plans in light of the spread of a hearing date at risk and also makes certain
COVID-19. clarifications of Practice Direction 51Y in
The guidance notes that companies will need to relation to audio and video hearings. It takes
consider their own individual circumstances, effect immediately and ceases to have effect on
including their constitution, but provides a October 30, 2020.
number of practical options which reflect UK C. Companies House services
regulation. These options include, for example,
Corporates should be aware that, as from March
delaying the AGM if notice has not yet been
17, 2020 and until further notice, Companies
issued, or postponing or adjourning the AGM, or
House has suspended all same day services due
conducting a hybrid AGM (if permitted under the
to the COVID-19 outbreak. The London,
articles of association) if notice has already been
Edinburgh and Belfast offices have been closed
issued. More information can be found in our
since March 18, 2020. Any documents that would
memorandum (available here).
previously be sent to London must now be sent to
B. Operation of English Courts Companies House in Cardiff which, as of April 7,
The English Courts have undertaken to continue 2020, remains open.12
their work during the COVID-19 outbreak. Court Companies House have reiterated that if
staff are included in the scope of key workers companies do not apply for an extension and their
who will be able to continue to send their children accounts have been filed late, an automatic
to schools despite the general school shutdown penalty will be imposed, with the registrar having
effective as of the end of the school day on March very limited discretion not to collect a penalty.
20, 2020. However, the Courts have Any appeals based on COVID-19 will be
acknowledged that “it will not be business as reviewed on a case-by-case basis using the
usual” and “there will be bumps along the road as existing policy for appeals based upon
[they] get used to new ways of working.” unforeseen poor health.
The Courts are actively working on processes to …
facilitate remote hearings via telephone or video
facilities. CLEARY GOTTLIEB
1 2
Paper documents delivered to Edinburgh must now be Paper documents delivered to Belfast can be delivered to
delivered to the Companies House letterbox next to the the reception desk on the ground floor of The Linenhall.
office building.
10You can also read
