Each day brings fresh challenges as a consequence of the COVID-19 pandemic, giving rise to understandable anxiety among businesses and wider society.

However, there have been welcome announcements from the UK Government and Scottish Government in terms of the support it is providing to those facing or bracing for insolvency in order to mitigate financial liabilities.

Details of some of these measures are set out below and we would encourage businesses to identify as many viable options as is possible in early course:

1. The Bank of England has announced an emergency cut to interest rates, lowering the base rate to 0.1%.

2. Businesses will be able to retain staff for at least a three-month period, during which they will be able to recoup 80% of their employment costs up to a maximum sum of £2,500 per month per employee. It will require the status of employees to be altered to being a furloughed worker. Details of the relevant process to claim reimbursement are awaited.

3. 100% relief from business rates has been announced for the tax year 2020/2021 for various different categories of business including:

  • retail, hospitality and leisure sector businesses with occupied properties; and
  • nurseries (this is new for England – since April 2018, nurseries in Scotland have been entitled to 100% relief);

In England, there is no action required because the rates will be applied to the relevant Council Tax bill. In Scotland, we do not expect there to be any change in process for obtaining relief.

4. In addition to the above, the Scottish Government has announced a 1.6% relief on non-domestic rates for the year 2020/2021, effectively reversing the poundage change for that year. This will be applied automatically to bills going forward.

5. A grant of £10,000 will be available to small businesses that pay little or no business rates in respect of occupied properties. including:

  • England - those who would ordinarily be entitled to Small Business Rate Relief, Rural Rate Relief and Tapered Relief.
  • Scotland – those who would be entitled to Small Business Scheme Relief and Rural Relief. It is also available if a business has applied for Nursery Relief (see point 3 above) or Disabled Relief, where they would be eligible for the Small Business Scheme Relief.

6. There are also cash grants available for businesses in the retail, hospitality and leisure sector. There are some nuances in the Scottish position:

  • England – a grant of up to £25,000 per property is available depending on the rateable value. Where the rateable value is under £15,000, the grant entitlement is £10,000. A rateable value of £15,001 - £51,000 gives rise to a grant entitlement of £25,000. The relevant local authority will write to eligible businesses.
  • Scotland – a grant of £25,000 will be available for businesses with a rateable value of £18,000 - £51,000.

7. VAT payments will be deferred for the three-month period from 20 March 2020 to 30 June 2020. This applies automatically without the need for application and the relevant business will have until the end of the 2020/2021 tax year to pay the deferred tax liability. VAT refunds and reclaims will continue as normal.

8. Income tax payments for self-employed will also be deferred from 31 July 2020 to 31 January 2021. As with the VAT deferral, this is automatic without the need for application.

9. HMRC is also scaling up its Time to Pay arrangements for those with outstanding tax liabilities who are facing temporary financial distress during this period. There is a dedicated telephone line available to contact HMRC for such arrangements: 0800 0159 559.

10. SME businesses and employers with fewer than 250 employees as at 28 February 2020 will be entitled to reclaim Statutory Sick Pay paid to employees. Details of the rebate scheme to claim repayment are awaited.

11. The British Business Bank is rolling out a new business interruption loan scheme, which will be available to SMEs and other businesses with a turnover of less than £45 million to provide access to bank loans and overdrafts of up to £5 million, which will be 80% government backed. This will be similar to the existing Enterprise Finance Guarantee (EFG) arrangements that are already in place. There are 40 lenders currently signed up to the scheme, which will come into force this week (w/c 23 March) and will require businesses to apply to/contact their relevant financial institution to progress assessment as to eligibility.

12. The Bank of England is also making available a financing facility known as the Covid Corporate Finance Facility (CCFF) whereby the Bank of England will purchase short-term debt (with a maturity date of up to one year) in the form of 'commercial paper' from larger firms to support liquidity. The CCFF is aimed at non-financial companies that make a material contribution to the economy and satisfy the eligibility criteria of the Bank of England. A key requirement is that the business was in sound financial health prior to COVID-19, meaning a short or long-term rating of investment grade, as at 1 March 2020, or equivalent. Further details of what is meant by "commercial paper" and the eligibility criteria can be found here and further information on participating lenders is available on the UK Finance website.

13. It may well be possible to make an insurance claim as guidance has been issued that suggests those businesses, including those in the hospitality and leisure sector affected by COVID-19 crisis/lockdown may be able to make a claim (subject to the wider policy conditions being met/complied with). It is therefore worthwhile continuing to review the policies you have in place and engage with your insurers accordingly.

14. If insolvency does occur, the Crown preference provisions giving HMRC an elevated position as a preference creditor will now be delayed from 6 April 2020 and will apply to insolvencies from 1 December 2020 (see our previous note regarding the nature of the preference being given). However, the prescribed part available to unsecured creditors in insolvency will increase from £600,000 to £800,000 in relation to insolvencies with floating charges created on or after 6 April 2020.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.