Impact of Economic Lockdown

As the spread of coronavirus has extended across the UK, Prime Minister Boris Johnson has now asked all citizens to avoid leaving their homes other than for essential purposes. All pubs, bars, public venues, non-food shops, public spaces and schools in England and Scotland have now been asked to close, resulting in the widest curfew in UK peacetime. The Chancellor Rishi Sunak prepared a ‘war package’ of at least £330 billion of support to UK businesses and individuals through the coronavirus outbreak, plus a new legal power to offer whatever further financial support is necessary, and this amount has been substantially extended by subsequent announcements.

Financial Support Schemes for Business: The Chancellor confirmed that for major events with suitable insurance in place, the Prime Minister’s social distancing announcement was sufficient to allow them to claim on that policy. Information about Government support has been centralised on the Coronavirus Business Support hub, measures include:

1. Business Bounce Back Loans: To provide rapid access to funding this loan scheme launched on 4 May, via a simple online form it allows businesses to borrow between £2,000 and £50,000. During the first 12 months loans will be interest free and there will be no repayments. The Government is providing lenders with a 100% guarantee for the loan and will pay any fees and interest for the first 12 months.
2. Coronavirus Business Interruption Loan Scheme (CBILS): This Scheme is now open to offer small and medium businesses in any sector loans of up to £5 million with an interest-free period of 12 months. CBILS applies to UK businesses with a turnover below £45 million per year where more than 50% of the turnover is generated from trading activity. Eligibility has been extended so that all viable small businesses can benefit, not just those that are unable to secure regular commercial financing. Loans, asset finance, invoice finance and overdrafts are available through UK lenders accredited by the British Business Bank, which includes most high street lenders and finance specialists. The scheme provides the lender with a government-backed partial guarantee of 80% against the facility balance, with an overall cap for each participating lender. Decision-making on eligibility is fully devolved to the lender, but lenders are not allowed to request personal guarantees on loans under £250,000. There is wide criticism of the delay induced by the need to undertake underwriting checks on the remaining 20% of loan value. Uptake has been relatively slow as a result, and some lenders are excluded from the market by their lending criteria. For further details, contact your lender or click here.
3. Commercial Tenancy Protection: The Coronavirus Act protects from eviction commercial tenants who are unable to pay their rent in the next three months as a result of coronavirus. Rent will still fall due but no action for eviction can take place from now until 30 June (as may be extended). This applies to all commercial tenants in England, Wales and Northern Ireland. To increase protection for tenants the Government is also introducing measures to temporarily ban the use of statutory demands (made between 1 March and 30 June) and winding up petitions presented from 27 April, through to 30 June, where a company cannot pay its bills due to coronavirus. Secondary legislation will also prevent landlords using Commercial Rent Arrears Recovery unless they are owed 90 days of unpaid rent. In Scotland the Coronavirus (Scotland) Act has increased protection by extending the non-payment of rent termination notice period from 14 days to 14 weeks. 
4. VAT Deferral: All UK businesses are eligible to defer VAT payments which are due between 20 March 2020 and 30 June 2020. The deferred payments must be made by 31 March 2021. Eligibility is automatic, with no application required, but the Government has advised businesses which normally pay by Direct Debit to cancel it, otherwise payment will be taken as normal. Businesses that are struggling with other taxes have been advised to use the government’s ‘Time to Pay’ service.
5. Business Rates Relief: Business rates are a devolved matter administered by local authorities and so questions around eligibility need to be directed to the relevant authority. The current grants and exemptions largely apply to retail and leisure businesses impacted by social-distancing restrictions. The list has been expanded since the ‘lockdown’ restrictions were announced on 23 March.

England:

• Business rates holiday: All hospitality, retail, leisure and nursery businesses irrespective of rateable value have been granted a 12-month business rate holiday for the whole tax year 2020-2021. This applies for each eligible property. Central government will be reimbursing local authorities directly for the cost of the relief. Government has provided a list of the types of businesses that it expects to be caught by the relief in its Business Rates Retail Discount guidance. As for other reliefs, properties need to be used wholly or mainly for one of the qualifying purposes and a detailed but not exhaustive list is included. Where the business has had to close temporarily due to the government’s advice on COVID19 it will be treated as occupied for purposes of this relief. Most scenarios included in the guidance result in nil business rates being due, other than where a property becomes and remains unoccupied during this financial year, in which case unoccupied property rates become due from 01/01/2021 to the end of the financial year. There is no need to apply for the relief as it will be applied to April 2020 business rates bills, but bills should be checked carefully to ensure that this has occurred.
• Small business grants: Grants of £10,000 are available for all businesses currently in receipt of Small Business Rate Relief or Rural Rate Relief. Local authorities began distributing the grant from 1 April and will be contacting eligible businesses directly, so there is no need to apply.
• Retail, hospitality and leisure grants: Retail, hospitality and leisure businesses with a property with a rateable value up to £15,000 will receive a one-off and non-repayable grant of £10,000. Businesses with a property that has a rateable value of over £15,000 and less than £51,000 will receive a grant of £25,000. Local authorities have now received the funding, it is likely that they will contact eligible businesses directly.

Scotland:

Scottish Economy Secretary Fiona Hyslop confirmed that the Scottish government would replicate the same measures in England for Scottish businesses, adding that an agreed economic framework with the UK government was critical to be able to deliver help rapidly to those who needed it. However, as a devolved matter, there are noteworthy differences between the implementation of the rates relief schemes in England and Scotland. Details of the grants and reliefs announced are available here.

a) Reliefs

• All non-domestic properties in Scotland will get a 1.6% rates relief, effectively freezing the poundage rate next year. This relief will be applied automatically.
• Scottish retail, hospitality and tourism businesses have been granted 12 months rates relief on occupied properties, which includes for example fishing huts, even if those properties are now unoccupied as a result of coronavirus. These reliefs are to be made available automatically through this year’s rates bill.

b) Grants

• Small business grants of £10,000 will be available to all small businesses who qualify for Small Business Bonus Relief or Rural Relief.
• For retail, hospitality and leisure businesses with a property with a rateable value between £18,000 and £51,000, a one-off and non-repayable grant of £25,000 will be available on their frist property. In contrast to England, the Scottish government has confirmed that certain categories of property are not eligible for the relief, including boathouses, caravans and self-catering accommodation. Applications for grants are made via online forms available through local councils. From 5 May businesses are able to apply for 75% grants on each subsequent property that meets the criteria.
• A Tourism & Hospitality Enterprises Hardship Fund has opened to support creative, tourism and hospitality companies that are not eligible for business rates relief, this includes field sports tourism businesses. It offers rapid access to £3,000 hardship grants for companies with up to 50 employees, whilst larger grants of up to £25,000 are available for those that can demonstrate a requirement for additional support. Applications are being managed by the Enterprise Agencies in partnership with Creative Scotland and VisitScotland.

UK Reliefs for Employers

Coronavirus Job Retention Scheme: To prevent redundancies this scheme will be available between 1 March and 30 June, and can be used to reimburse employers for part of the cost of salaries for jobs impacted by coronavirus. Any affected employer in the UK will be eligible and can use the scheme to continue paying salary to those employees that would otherwise have been laid off. The employer has to designate the employee as a ‘Furloughed Worker’ (FW) – a new term which essentially means that the worker has been laid off on a temporary basis only. Workers are eligible for furlough if they were on the businesses PAYE payroll and notified to HMRC on an RTI submission on or before 19 March. Any workers who were on payroll as of 28 February who left, or were made redundant can also be re-employed and put on furlough. The change in employment status can only happen with the employee’s consent. To be eligible for the grant employers should write to their employee confirming that they have been furloughed. Under the new scheme HMRC will pay a grant to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. The employer can choose to withhold the balance of the employee’s wage with the employee’s consent. Those on zero hours contracts are eligible for the job retention scheme, their grant would be the higher of their earnings in the same month of the previous year or their average monthly earnings in 2019/20.

Employees cannot undertake any work for their employer while designated as a FW, with the exception of company office holders who are permitted to perform statutory duties only. The changes are subject to the usual UK employment law provisions, which means that there may be the possibility for negotiations to take place. It seems unlikely that most employees would refuse to be classified as a FW or to consent to the salary reduction in exchange for the continuation of their role, as the alternative outcome could be redundancy. Details of FWs will need to be submitted via a new HMRC portal which launched on 20 April. The minimum duration a worker can be furloughed for is three weeks, they can be furloughed for longer and also multiple times. Businesses facing short-term cash flow issues are advised to use the CBIL credit facility. If contractually allowed, a FW is permitted to start working for another employer whilst furloughed.

1. Reimbursement of Statutory Sick Pay: The Government has committed to refund the cost of Statutory Sick Pay (SSP) for all UK based small businesses with up to 250 employees (as on 28 Feb 2020) for up to two weeks of coronavirus-related leave per employee. This is either following a diagnosis of coronavirus, or due to being unable to attend work due to self-isolation. In addition, SSP will be payable from day one of sick leave rather than day four, and the weekly rate has increased slightly to £95.85. This change will apply retrospectively from 13 March 2020, but details of how the cost will be reclaimed has yet to be determined. Employers will need to maintain a record of staff absences and SSP claims made, but evidence of illness can be obtained as an ‘isolation note’ from NHS 111 online rather than as a Doctor’s ‘fit note’.
2. Planning permission relaxation: For a period of 12 months, England’s permitted development rights now allow pubs and restaurants to provide a takeaway service without having to apply for planning permission. Scotland has allowed similar activity by relaxing enforcement for three months.

UK Reliefs for Workers:

1. When is it safe to go to work? There is some confusion between Scotland and England over what work outside the home is permitted under current lockdown restrictions. Rishi Sunak, the Chancellor, has emphasised that essential travel includes to any work that cannot be done from home, provided that it can be done safely in the workplace taking into account enhanced social distancing and hygiene requirements. Where it is not possible to follow the social distancing guidelines in full in relation to a particular activity, businesses have been advised to consider whether that activity needs to continue for the business to continue to operate. Specific guidance for farms and outdoor businesses in England has been published which covers scenarios such as shared cabs and livestock handling where it is not possible for workers to observe social distancing guidelines at all times. However, Scottish First Minister Nicola Sturgeon has emphasised that only travel to work in essential occupations can take place, and all businesses which remain open must ensure the two metre distancing rule is adhered to. To this end, Scotland has asked all building sites that are not essential for fighting coronavirus (e.g. a hospital) to close, but has said that self-employed gardeners and window cleaners who can work safely alone may continue to do so. Businesses and individuals need to assess their risk and working practices on a case by case basis. 
   
   The classification of key workers also differs between England in Scotland. In England all those involved in food production and the food chain are key workers by default, and their children can attend school if they cannot be cared for at home. Whilst in Scotland individual local authorities decide the eligibility of private sector workers based on whether or not their absence from the workforce would have a significant impact on Scotland. Many local authorities have not included agriculture within this group.
2. Renters: The government has announced £1 billion of support for renters through Universal Credit, so that the local housing allowance will now cover at least 30% of market rents. This will apply to all private renters who are new or current claimants of the housing benefit element of Universal Credit who are struggling to meet rent payments as a result of coronavirus. Universal Credit is partially devolved, with the Scottish government making specific choices on how the housing element is paid in Scotland by the Department for Work and Pensions. To this end, the new increase in Universal Credit and housing support will apply across the UK. 
   
   Renters will also benefit from new protections from eviction proceedings . From 26 March 2020, landlords are required to give renters three months’ notice that they are seeking possession, meaning that no legal proceedings can be commenced until after this buffer period. Furthermore, all ongoing housing possession actions will be suspended from 27 March 2020 for the next 90 days, meaning that no cases currently in the system or about to commence can progress to the stage where someone could be evicted. Both this suspension and the buffer period on new legal proceedings can be extended if Government feels it is necessary to provide additional protection to private and social renters. Non statutory guidance has been published. Landlords are obliged under an extended ‘pre-action protocol’ to reach out to tenants to understand what financial situation they are in, prior to proceedings taking place.
   
   The Welsh Government is adopting the same measures as England. In Scotland the rent arrears period for Private Residential Tenancies has been temporarily increased from three months to six months before evictions can be granted, and on 19 March 2020 the Housing and Property Chamber effectively closed for business and postponed all hearings and case management discussions, meaning that no new eviction orders for private rented tenancies can be granted until 28 May 2020 at the earliest . The Coronavirus (Scotland) Act also made all grounds for eviction in the private rented sector discretionary. Renters in England and Scotland claiming Universal Credit or housing benefit but who are still struggling to pay housing costs may be eligible for a Discretionary Housing Payment.
   
   Landlords remain legally obligated to ensure properties meet the required standard, meaning that urgent, essential health and safety repairs should be made. An agreement for non-urgent repairs to be done later should be made between tenants and landlords. Local authorities are also encouraged to take a pragmatic, risk-based approach to enforcement. The three month mortgage holiday for homeowners is also to be extended to landlords of tenants who are struggling to pay rent. In Scotland the Private Rent Sector Landlord Covid-19 Loan Scheme opened on 5 May and offers eligible landlords who have five or fewer properties, up to 100% of lost rental income for a single property.
3. Self-employed: The Self-employed Income Support Scheme will pay those affected by a reduction in income as a result of coronavirus a taxable grant worth 80% of their average taxable profits over the last three years, up to £2,500 per month. For farmers claiming farmers’ averaging relief, the calculation will be based on the amount of profit before farmers’ averaging relief is applied. The scheme will be open for at least three months. It is only open to those with trading profits up to £50,000, and who make a majority of their income from self-employment. To minimise fraud only those already in self-employment (who have a tax return for 2019) can apply, but an extra four weeks are now being provided to submit a 2019 tax return. An eligibility checker is available now, and online applications will open on 13 May 2020. Other support for the self-employed includes delaying Income Tax Self-Assessment payments due on 31 July 2020 until 31 January 2021. Anyone classed as self-employed will be eligible for this and no application is required. The access for the self-employed to Universal Credit and Employment and Support Allowance has also been improved.
   
   There has been some criticism that the scheme does not support the recently self-employed. The Scottish Government has addressed this by launching a Newly Self-Employed Hardship Fund to target people and businesses who are ineligible for other Scottish Government or UK Government schemes. Applications are made via local authorities. Another group who are excluded from existing state schemes are those who run a small business and pay themselves through dividends. UK Small Businesses Minister Paul Scully has said he is working on a scheme to address this.
4. Seasonal labour: Access to labour is an urgent concern for many food businesses relying on seasonal migrant labour, The Government has confirmed that workers ‘on furlough’ can take on an additional job provided their contract of employment allows it. So workers from many sectors including hospitality and tourism are a potential labour source, however workers can be recalled from furlough with little notice. The Government has now launched its Pick for Britain campaign whilst farm businesses advertising for seasonal workers have reportedly been inundated with offers.

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