In cooperation with our British partner office Colman Coyle, we bring you an overview of how the United Kingdom is dealing with the coronavirus crisis.
The basic legislation that allows the UK government to take action to combat the coronavirus pandemic and its effects is the Coronavirus Act 2020. This special law entered into force on 25 March 2020 and specifies the powers of public authorities and measures taken by the UK government in times of emergency.
The main measures to help businesses in the British Isles overcome the crisis include measures to pay sickness benefits, direct financial assistance, protection against termination of lease contracts and taxes.
Changes to the sickness benefits payment scheme
The measure ensures that sickness benefits are paid by the state from the first day of illness or isolation (quarantine).
Some employers who have already paid sickness benefits to their employees may request reimbursement from the government.
This measure only applies to employers with less than 250 employees. They can apply for reimbursement of sickness benefits for the first two weeks of illness, if the sickness benefits were paid in connection with covid 19. Certificate of incapacity for work is not required. However, employers may ask employees to present a certificate of isolation issued by the National Health Service (NHS) or a certificate from a general practitioner. Confirmation from the NHS is processed online.
Financial assistance to industrial enterprises
Another measure changed the limits for government financial aid to industrial enterprises. The total amount of support is currently capped at £ 12,000m. The measure should not result in the forced nationalization of private companies. For this reason, it is explicitly stated that the state may not take over the shares in a company without its consent and that any partial aid may not exceed £ 30m (£ 10m in Scotland), unless the United Kingdom House of Commons has given its consent. The term "financial assistance" is defined very broadly and may include obtaining a loan or equity contribution, direct loans, guarantees, insurance, etc.
Restrictions on Termination of Commercial Leases
In the event of a delay in the payment of rent, the state has taken measures to help tenants of commercial premises. It is prohibited for landlords to sue the tenant for evacuation of the leased premises due to the payment of rent. This ban is currently valid until 30.06.2020, with the proviso that it can be extended. The prohibition shall also apply to legal proceedings which have already been initiated, or it was decided in favor of the landlords.
However, the measure did not prevent landlords from sending pre-litigation summons to tenants to pay the rent due or from filing a petition to open insolvency proceedings with the tenant.
Impact on credit agreements for entrepreneurs
British government has not yet issued any official instructions to financial institutions on how to behave in relation to business loans. Nevertheless, the interest rate cut by the Bank of England may have an impact on credit conditions. The credit rate was reduced to an unprecedented 0.1%.
Special measures for selected enterprises and sectors
Retailers and entrepreneurs in the field of leisure activities and hospitality will be exempt from the commercial space tax for the period of 2020-2021. The relief applies only to entrepreneurs who use business premises (real estate) with a value not exceeding £ 500,000.
The British government has also prepared a program of direct subsidies. The amount of subsidies for retail, leisure and hospitality entrepreneurs can be up to £ 10,000 or £ 25,000 - depending on the value of the commercial space used by the entrepreneur.
Special subsidies are also prepared for small businesses and self-employed persons, which employ a maximum of 9 people. The maximum amount of the subsidy in these cases is £ 10,000.
Small and medium-sized enterprises employing between 10 and 249 workers can apply for a contribution of up to £ 100,000.
Another measure is special loans for entrepreneurs, which the government has secured in cooperation with the British Business Bank. Repayment period of the loans will be 6 years. The UK government will pay interest for the first 12 months and will also guarantee up to 80% of the loan.
Tax relief
In the area of taxes, entrepreneurs are allowed to defer VAT payments until 30.06.2020. Deferred payment of VAT applies to all entrepreneurs, regardless of size, and is automatic - so there is no need to apply for it.
Businesses that do not have the means to pay taxes as a result of the coronavirus crisis can contact the British Tax Administration (HMRC) and ask for an agreement. The result may be a "payment time" agreement, which will shift the payment of taxes and temporarily suspend the collection of taxes due. It will also be possible to agree with the tax administration on an individual repayment schedule, which will take into account the specific possibilities of the taxpayer - entrepreneur. Additional tax relief will be provided in the form of remission of fines and interest on arrears.
The article was prepared in collaboration with Oksana Howard - a partner in the London office of Colman Coyle, based in Wells House, 80 Upper Street, Islington – London, more at www.comancoyle.com or Oksana.Howard@colmancoyle.com.
