Covid-19

In its daily briefings, the government has been announcing the rollout of several significant measures designed to mitigate the financial impact of COVID-19 on businesses. Particular attention has been paid to those sectors most affected by the spread of the virus, the hospitality and travel sector.

The situation changes daily with new measures introduced on a rolling basis. A brief overview of the current level of support includes:

• Guarantees to pay 80% of wages for employees unable to work up to £2,500
• Deferment of VAT and income tax payments to the next quarter
• Statutory sick pay relief for small business
• 12-month business rates holiday for companies in the most affected sectors
• Grant funding of £10,000 for business eligible for small business rate relief or rural rate relief
• Grant funding of £25,000 for retail, hospitality and leisure business
• Loan guarantees worth up to £330 billion through the Coronavirus Business Interruption Loan Scheme and COVID-19 Corporate Financing Facility

Last updated: May 2020

To keep up to date with government’s measures to support businesses, go to the dedicated COVID-19 business support guidance publication with updates on the schemes available and how to apply: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19

As an employer it is an employer’s duty to protect the health, safety and welfare of their employees and other people who might be affected by their business.

In line with the government guidelines, employers are expected to act in the best interests of their staff. In recent weeks, a huge section of the UK workforce has been confined to working from home, bringing with it issues around remote working that many businesses have never had to deal with before.

Absence from work for sickness is another challenge for businesses. While the government has provided statutory sick pay relief for small businesses, there are many other possible legal implications from changed working circumstances.

Already many businesses have let staff go, have sought to reduce wages or placed staff on unpaid leave where possible.

As the area of employment law is broad, we cover HR and employment law issues in a separate article, which you can access here.

What the government is doing about tax

One of the first measures introduced by the government was a commitment to offer more lenient terms of payments due to HMRC. While other costs can be cut, the sudden disruption has left many businesses worried about dipping into their reserves put aside for VAT and corporation tax.

Most recently, the government announced the deferment of company’s VAT liability to June 2020, providing businesses with short term cash reserves.

HMRC launched a new helpline number for business owners to discuss tax liabilities and other problems arising from COVID-19. This helpline is in addition to the HMRC’s Time To Pay Scheme.

HMRC stated it would look at each situation on a case-by-case basis, with particular support for the sectors most affected, such as travel and tourism. Beyond that you can discuss a range of options HMRC may be able to offer, including:

• Deferring payments
• Suspending debt collection proceedings
• Cancelling late payment penalties
• Cancelling interest on late payments

How COVID-19 may affect existing contracts with customers/clients and suppliers

There has been much discussion around the status of contractual rights during this period. Due to government advice, many events have been cancelled, which have an impact on both the organisers and those who have paid to attend, exhibit or participate. These cancellations may leave both parties with costs – some of which may be covered by cancellation fees.

Many of these contractual discussions are focus on the “force majeure” clause and whether COVID-19 falls into this category. This also has an impact on the ability to claim for insurance, as part of business interruption.

Additionally, as a result of the sudden drop-off in sales, many businesses are looking to cut costs rapidly. This may mean ending ongoing or retained contracts earlier or changing the terms or timing of existing contracts to reflect the new situation. Whether you are looking to make contractual changes or are subject to clients/customers looking to make changes, it is advisable to consult with a contract law specialist.

We cover contract issues arising from COVID-19 in a separate article which you can read here >

For any issues relating to contracts or litigation, Carter Bond can support you. Call our team on 020 3475 6751 and we’ll be happy to assist