Covid 19: Advice for Employers and Business Owners
The government has provided unprecedented assistance for businesses and employers, but is it enough and what liabilities will have to be faced when life returns to normal?
The calculation for most is simple: to get expenditure down to the level of income. If you cannot do that and are fortunate enough to have reserves, the problem becomes how long can you afford to, or do you want to, support your business in such uncertain times? We review below some of the challenges facing employers, and provide practical advice as to steps employers may take to help get through these extraordinary times.
Where employers do not have enough work for all their employees, the first responses include:
- Taking advantage of government’s Coronavirus Job Retention Scheme (the Scheme) to furlough employees and save the entire cost of their employment.
- Reducing employees’ hours and/or salaries.
It may be that employees are not bound to agree such measures but the feedback we are receiving is that almost all employees readily agree, prepared to play their part in the survival of the business.
If agreement cannot be reached or if the drop in income is so severe, more drastic measures will need to be considered such as redundancies or an orderly winding up of the business.
Grants, Exemptions, Loans and Deferrals
The government’s schemes to assist business may be divided into two categories: grants and exemptions which do not have to be paid back and loans and deferrals which do. Please do not hesitate to call us if you would like more information about these schemes, full details of which are available on the government websites.
Grants and Exemptions
- The Coronavirus Job Retention Scheme will reimburse employers for employees’ salaries up to 80% of their salary or £30,000, whichever is less.
- The Coronavirus Self-employment Income Support Scheme permits the self-employed to claim a taxable grant worth 80% of trading profits up to a maximum of £2,500 a month.
- Certain businesses which have closed as a result of Covid-19 measures such as shops, leisure companies and estate agents are exempted from business rates in 2020-21.
- Under the Small Business Grant Fund all eligible businesses in England in receipt of either Small Business Rates Relief or Rural Rates Relief will be eligible for a payment of £10,000.
- Under the Retail, Hospitality and Leisure Grant certain businesses in England will be eligible for a cash grants of £10,000 per property which has a rateable value of up to and including £15,000, or £25,000 per property which has a rateable value of over £15,000 but less than £51,000. Businesses which are not ratepayers or properties with a rateable value of £51,000 or over are not included in this scheme.
Loans and Deferrals
- The Coronavirus Business and Large Business Interruption Loan Schemes support businesses by providing lenders with a guarantee of 80% on loans up to a certain amount depending upon the turnover of the business:
- Annual turnover of up to £45 million: loan/finance up to £5 million;
- Annual turnover of £45m to £250 million: loan/finance up to £25 million; and
- Annual turnover over £250 million: loan/finance up to £50 million;
These obvious caveats with these loans are that they are subject to the lenders’ usual due diligence as to the viability of the business and they are loans: they will need to be repaid in an uncertain post covid world.
- In order to assist businesses with cashflow, the government is permitting some tax payments to be deferred without paying a penalty.
- VAT payments due between 20 March and 30 June 2020 may be delayed until 31 March 2021
- Self Assessment payments on account due in July 2020 may be delayed until 31 January 2021
- Other payments, such as PAYE, may be delayed if you cannot pay them because of coronavirus. You should contact the HMRC coronavirus helpline to request an extension.
It would appear unavoidable that practical terms for the payment of these deferred sums will be introduced in due course. For the time being, they remain on business balance sheets for payment at the end of the deferred periods.
Section 82(1) of the Coronavirus Act 2020 provides that ‘a right of re-entry or forfeiture, under a relevant business tenancy, for non-payment of rent may not be enforced, by action or otherwise, during the relevant period’. The relevant period ends on 30 June 2020 and is subject to review.
For business tenants, this is a welcome but temporary relief. Rent is still due and most leases provide for interest on late payment of rent. Getting a fair and proportionate balance between the interests of tenants and landlords is an extremely difficult task given the variety of resources, borrowings and interests of the parties.
For the time being, landlords and tenants are advised to talk: it is in everyone’s interests to reach a fair compromise: for the tenant to remain in business and for the landlord to retain an income from its premises. As with any negotiations, it is good to know the worse case scenario and if would like to review your lease or your proposals in more detail, please do not hesitate to contact us.