This article was last updated on 5 November at 13:45.
This is haysmacintyre’s dedicated page for corporates on the range of financial, tax and accounting measures being introduced to combat COVID-19 together with our related thoughts and insights on helping businesses with their cash flow and compliance requirements.
We know what impact a recession, new technology, and the current pandemic could have on your business and we can help you make the most of the challenges, as well as the opportunities, that lie ahead. This page will cover matters relating to employees, funding, taxes and HMRC, reporting, governance, as well as additional topics to help you address any concerns you may have.
With the numerous measurements introduced we have created a flow chart summarising the measurements available to companies. Please see here.
Please visit this page regularly as new content will be produced that considers the latest updates and new initiatives.
If you wish to discuss any of the COVID-19 related initiatives or changes please contact your usual haysmacintyre contact or email CV19@haysmacintyre.com.
Matters relating to: EMPLOYEES
Coronavirus Job Retention Scheme (CJRS) and Job Support Scheme (JSS)
The Government introduced the Coronavirus Job Retention Scheme (CJRS) to provide financial support to allow businesses and organisations to continue to pay salaries to those employees that would have otherwise been laid off or made redundant as a result of COVID-19. Following the announcement of a second lockdown in England for the period 5 November to 2 December, the CJRS did not close on 31 October 2020, as previously planned. It will instead continue until March 2021. More information on the latest update of the CJRS can be found here.
The introduction of the Job Support Scheme has therefore been delayed.
Extension to the Statutory Sick Pay (SSP) regime for SMEs
Temporary changes are being made to SSP regulations as part of the Government’s response to helping businesses during this period of disruption. Further details are here. HMRC’s online SSP calculator is available for employers to work out statutory sick pay for employees here.
HMRC have updated their guidance for employers in assessing an employee’s fitness to work for SSP purposes. The guidance now states “if your employee has been self-isolating for more than 7 days because of COVID-19, they can obtain an isolation note from NHS 111 as proof of this if you require it.”
The ICAEW has released useful guidance on the COVID-19 measures introduced for SSP and how employers can recover SSP. The guidance is here.
Share options as an alternative to furloughing
Some businesses might be finding that they need their staff now more than ever. Research and development companies for example, may not have the opportunity to reduce headcount but might still want to reduce their staff costs. For other businesses, it will not be appropriate to furlough management and senior staff who are in decision making roles. There could be an opportunity to consider implementing a share option scheme for certain employees, as an alternative to paying increased salaries. This would reduce the cash burn in the business and will also retain and motivate staff as well as align them to the company’s objectives. More details can be found here.
Furloughed staff as existing EMI option holders
There was a concern that furloughed staff failed to meet the working time requirements of the Enterprise Management Incentive (EMI) legislation (thereby potentially rendering their EMI option as no longer qualifying). HMRC have now advised that furloughed employees will now be entitled to retain the benefits of the EMI scheme.
New legislation will be introduced (as part of the Finance Act 2020) that temporarily relaxes the EMI working requirement condition. The new clause provides that a disqualifying event does not occur in relation to an individual as a result of the individual taking leave, being furloughed or working reduced hours because of COVID-19. It relates to such a reduction in working time during the period from 19 March 2020 to 5 April 2021 (which can be extended by a treasury order until 5 April 2022 if required).
Overall this means those EMI option holders that were furloughed continue to retain their option as a qualifying EMI option.
Explanatory notes to the new clause is here.
Other share schemes and interaction with furlough grant payments.
The ICAEW has published useful commentary on this area, following guidance issued by HMRC on 11 June. The ICAEW’s commentary is here.
Expenses and benefits
HMRC’s guidance has been updated on how to treat certain expenses and benefits provided to employees during COVID-19 to include information about paying travel and subsistence expenses to an employee travelling to a temporary workplace. HMRC’s guidance is here.
Matters relating to: FUNDING
Future Fund – Support for innovative businesses and start-ups
On 20 April the Government announced a £1.25 billion support package for UK businesses driving innovation and development targeted at high growth companies and start-ups to ensure they are protected and can continue to develop new innovative products through the crisis.
As part of that package the Future Fund was introduced: a £500 million (convertible) loan scheme for high growth companies. The funding will be backed by both the Government and the private sector. The fund will provide eligible UK-based companies with between £125,000 and £5 million in funding from the Government, with private investors at least matching the Government’s initial commitment of up to £250 million. The government’s initial guidance is here. Details of eligibility criteria and fund operation, including in-depth FAQs is available on the British Business Bank Website (see here). The scheme documentation (of which most terms and clauses are non-negotiable) are available here.
EIS/SEIS and Future Fund
The Government has published an amendment to the Finance Act 2020 which advises that the repayment or conversion of any future fund loans will not result in any clawback of (S)EIS reliefs under the ‘receipt of value rules’ which should preserve existing income tax relief claimed. However, the legislation does not go as far as to consider any shares acquired through the conversion of a Future Fund Convertible Loan Note to be a qualifying holding for EIS purposes, which could mean that any investor holding such shares in a personal capacity in the future could be prohibited from making further EIS-compliant investments in a company. Explanatory notes to the new clause is here.
As previously announced the actual Future Fund investment (being a convertible loan) does not itself qualify for (S)EIS.
Extending eligibility for the Future Fund
HM Treasury has announced changes to the Future Fund scheme’s eligibility criteria, which mean that UK companies who have participated in highly selective accelerator programmes and were required, as part of that programme, to have parent companies outside of the UK, will now be able to apply for investment.
The second part of the £1.25 billion support package is £750 million of grants and loans as targeted support for SMEs that focus on R&D. This funding will be via Innovate UK’s grant and loan scheme by extending that scheme. Innovate UK will accelerate up to £200 million of grant and loan payments for its 2,500 existing Innovate UK customers on an opt-in basis. An extra £550 million will also be made available to increase support for existing customers and £175,000 of support will be offered to around 1,200 firms not currently in receipt of Innovate UK funding. The first payments were expected to be made by mid-May.
Details of the announcement are here.
Business interruption loans
For smaller businesses: Bounce Back Loans (BBL) is a new small business fast-track finance scheme with a 100% government guarantee. Qualifying businesses can borrow between £2,000 and £50,000 (and no more than 25% of turnover). The loans will be repayment and interest free for the first 12 months. Applications are intended to be short and simple via an online form with the cash to be received in days. To facilitate the quick application process there should be no forward-looking tests of business viability and no complex eligibility criteria. The announcement is here. The scheme launched on 4 May. The BBL runs alongside the other COVID-19 loan schemes. We expect further announcements, especially regarding the criteria on eligibility. At present there is no definition of small business and it is not known whether any sectors do not qualify.
For SMEs: the British Business Bank (BBB) together with 40+ lending providers are providing a range of financial options enabling a SME (turnover of less than £45m) to borrow up to £5m, with the first 12 months being interest-free and the loan being 80% backed by a government guarantee under the CBILS. Further details of CBILS are here. Improvements to the scheme were announced on 2 April, which include substantially limiting the lender’s right to request (demand!) personal guarantees. Lenders can no longer request personal guarantees for loans under £250,000 and for loans over £250,000, personal guarantees will be limited to just 20% of any amount outstanding on the CBILS lending after any other recoveries from business assets. The scheme went live on 23 March and the BBB strongly recommends that the business’s current lender (assuming they are also a provider) is approached online. Current providers are here. On 27 April the Government announced that they were taking additional steps to ensure that lenders have the confidence they need to process finance applications quickly. This includes removing the per lender portfolio cap for the government guarantee and changing the viability tests so that all banks will need to assess is whether a business was viable pre COVID-19. Following this announcement the FCA issued this statement. The BBB has also issued a useful FAQs webpage here.
CBILS – R&D Health Warning: both the SME R&D tax relief scheme and CBILS are classified as Notified State Aid (NSA). There are specific rules that affect R&D claims in that an R&D project may only have one source of NSA. Therefore, an R&D project that is funded (even partly) by CBILS will be ineligible for the SME R&D tax relief scheme (although remains eligible for the R&D expenditure credit scheme – but that is less generous). On this area HMRC issued the following:
“The Government has notified CBILS as a State aid under the European Commission’s new Temporary Framework for COVID-19. The measure is a fully notified aid, so the restriction on receipt of other State aid (s1138(1)(a) CTA 2009) potentially applies, if the CBILS relates specifically to the company’s R&D expenditure [on a project] rather than being intended more generally to support the company. This will depend on the facts.”
This is a helpful clarification from HMRC in that they will accept that a claim under the SME scheme is unaffected if the CBILS was used for general business purposes/support. However if the application relates directly to R&D spend (or part of) the project(s) will fail to qualify.
Companies should revisit the statements made of their CBILS application as well as monitor/record how the CBILS money is being spent to demonstrate it was used for general purposes.
For larger businesses: on 2 April the CLBILS was announced, which is a scheme for larger businesses. On 16 April the CLBILS was extended to encompass all larger viable businesses (the annual turnover of more than £45 million – the upper cap of £500 million was removed). All firms with a turnover exceeding £45 million are able to apply for up to £25 million of finance, increasing to £50 million of finance for firms with a turnover of more than £250 million. The finance will be lent at a commercial rate of interest. Similar to the CBILS, the Government provides the lender with an 80% guarantee. As with CBILS, the CLBILS is managed by the British Business Bank (BBB) wand operated by accredited lenders. Further details are on the BBB website here. The Government’s latest announcement is here.
For other larger businesses (investment grade companies): the Covid Corporate Financing Facility (CCFF) announced as part of the £330bn package and launched collectively by HM Treasury and the Bank of England to provide additional help to firms to bridge COVID-19 related disruption to their cash flows. The CCFF operates via the borrower issuing commercial paper. This scheme is available for applications. Further details, as published by the Bank of England, are here.
Mortgage payment holidays
Additional financial support for business owners and the self-employed has come in the form of a three-month mortgage holiday for homeowners struggling to make repayments due to the effects of COVID-19. This also includes buy-to-let mortgages. While a number of lenders had already announced repayment holidays, the Government’s latest announcement means now all lenders will have to honour the three-month time frame. Anyone struggling with repayments is advised to contact their lender directly.
Matters relating to: TAXES AND HMRC
No business is required to pay VAT from 20 March 2020 to 30 June 2020. HMRC have confirmed that the VAT deferral scheme ended on 30 June and have issued guidance on what businesses now need to do (including setting up previously cancelled direct debits). HMRC’s announcement is here.
Our analysis of the VAT aspects relating to COVID-19 including bad debt relief and other VAT measures and considerations are here.
Deferring payment of taxes
HMRC has set up a dedicated COVID-19 helpline (0800 024 1222) to help those in need to discuss and agree a bespoke TTP arrangement. It is understood that HMRC’s approach is an open willingness to allow businesses to defer tax payments. What is key is communicating with HMRC prior to the tax due date and that the business remains compliant with all its tax filing deadlines. Early action on this is highly recommended. Current experience is that HMRC are taking a light touch on the information they require before agreeing to a payment plan. Further details are here.
We understand that the HMRC Coronavirus helpline can provide a short term PAYE deferral. They have also mentioned that if a business is in receipt of a CJRS claim at least 50% of the Income Tax and National Insurance Contributions liability must be paid before they can discuss a TTP arrangement.
Should you require a payment plan you can contact the Payment Support Service (0300 200 3835) Monday to Friday between 08:00 and 16:00.
HMRC guidance and advice is ever evolving, but the key message is if you are unable to settle a tax liability on time, contact HMRC before the liability becomes due for payment. Falling to do so will result in penalties in addition to interest payments.
Quarterly payment regime
As a result of the financial downturn many companies may have now overpaid their quarterly payments to date and may become eligible to request a repayment from HMRC – further details are here.
Early Corporation Tax repayment
HMRC have updated their guidance covering situations where a company seeks repayment of tax before a return has been filed. This may arise be where a business knows that it has suffered (or is anticipated to suffer) large losses in a subsequent accounting period due to COVID-19. HMRC’s revised guidance is here and for companies that pay their tax by quarterly instalments, the guidance is here.
This is a welcome change and follows representations made by the ICAEW’s Tax Faculty.
Self-assessment Income Tax payments
For the self-employed, self-assessment Income Tax payments due on 31 July 2020 are to be deferred until 31 January 2021. This means both the 31 July 2020 and 31 January 2021 payments become due on 31 January 2021. This is automatic with no application required. No interest will be charged during the deferral period. HMRC also updated its guidance (on 25 March) to make it clear that the deferral of self-assessment Income Tax payments applies to all self-assessment tax payers, not just the self-employed.
Other assistance for the self-employed is available here.
Have you received your business rates grant? For details on the changes to business rates, please see here.
In April’s edition of HMRC’s Stamp Taxes newsletter, HMRC explained how to get the share register updated without a physically stamped document. HMRC adopted temporary measures for dealing with Stamp Duty which allows share registers to be updated by a registrar without a physically stamped document. No post should be sent to the Birmingham Stamp Office. Instead, an electronic copy of relevant forms and related documents should be emailed to firstname.lastname@example.org. Once the notification and payment (if applicable) of Stamp Duty has been checked, HMRC will email a letter. HMRC’s letter should then be presented to the relevant registrar (or Companies House) together with the instrument of transfer which now permits them to update the share register. HMRC also advises that where an instrument of transfer has previously been posted to the Stamp Office that document should be resubmitted by email using the new process as the instrument of transfer will not be dealt with until the COVID-19 measures end.
HMRC also announced temporary measures to deal with the stamping of Stock Transfer Forms (see here) and the payment of Stamp Duty during the crisis. See here.
The proposed changes have been deferred until April 2021. Further details are here.
We are also considering other ways to help businesses generate cash. One possibility is shortening current accounting periods to accelerate claims for reliefs under the R&D tax schemes as well as claims to carry back current year tax losses. This action should be considered over the coming months.
Matters relating to: REPORTING AND GOVERNANCE
Accounting for government COVID-19 support measures
In these unprecedented times, accounting for government grants or governmental assistance by other means has come sharply into focus as the Government has been making unprecedented levels of assistance available. Further details about the support measures available are here.
Reporting obligations and governance
As COVID-19 continues to spread with deepening effects on the economy and restrictions to daily life, entities with 2019 and early 2020 year ends must consider the effects on their activities and how these are reflected in their financial statements. The impacts must also be considered for the practicalities of the reporting and auditing process and planned for accordingly. Our initial thoughts on these effects and implications can be found here.
It is a priority for all organisations to reduce immediate and long-term impact. COVID-19 is now on everyone’s risk mitigation strategies. Some emerging risks are difficult to foresee and the impact on organisations cannot be judged. Further details for key actions that require consideration in the current climate are here.
Insolvency Laws – Corporate Insolvency and Governance Act
The Corporate Insolvency and Governance Act (the Act) received Royal Assent on 25 June. This law introduces temporary amendments to insolvency law (and company law) to help businesses navigate and address the challenges imposed by COVID-19. The law is here and accompanying explanatory notes are here. On 28 March the Government announced measures to relax insolvency laws, including the temporary suspension of the ’wrongful trading’ provisions for company directors so they can keep their businesses going without the threat of personal liability. These temporary provisions are retrospective from 1 March 2020. They also announced that changes would be made to enable UK companies undergoing a rescue or restructure process to continue trading, giving them breathing space that could help them avoid insolvency. The Act now introduces those changes (as well as others).
Company Law changes and Companies House filing deadlines
Our analysis of the Company Law changes pursuant to the Corporate Insolvency and Governance Act are here. This includes legislation to ensure AGMs required by law can be carried out safely, consistent with the restrictions in place to address the spread of COVID-19. Companies will temporarily be extended greater flexibilities, including holding AGMs online or postponing the meetings.
From 25 March, corporates are able to apply for a three month extension to filing their accounts. Further details here.
The FCA has requested a delay, by listed entities (but not AIM companies), on their forthcoming announcements of preliminary financial accounts.
Gender Pay Gap
Deadlines for this year’s reporting (2019/2020) have now been suspended and there will be no expectation on employers to report their date. Further information is here.
It has been widely reported that cases of fraud or fraudulent attempts have substantially increased during the crisis. Fraudsters are taking advantage of this emergency and change of working environment measures to defraud organisations. We set out here our fraud awareness and preventative measures that organisations need to consider during these uncertain times.
COVID-19 is a global crisis, and businesses need to access local knowledge from around the world to manage their operations. haysmacintyre is the south UK member of MSI Global Alliance, an association of independent but like-minded legal and accounting firms with over 260 member firms in more than 100 countries. MSI has established a dedicated COVID-19 webpage to share the articles of our fellow member firms, committed to helping international businesses navigate these uncertain times. The website is here. If you are interested in the COVID-19 measures introduced by a particular country and cannot find any details on the MSI dedicated page please email CV19@haysmacintyre.com.
For our thoughts on the practical steps to Business Continuity please see this article (prepared by Natasha Frangos, Partner, haysmacintyre in collaboration with Shalini Khemka, Founder, E2E).
Businesses that have cover for pandemics and government-ordered closure or unspecified notifiable disease and government-ordered closure should be covered. Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Unfortunately, it is expected that most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemic. Further details here.