Concerned about the way coronavirus will affect your livelihood? See below legal information: for employers, employees, business owners, landlords, tenants and individuals with mortgages or who work from home.
Provided by corporate solicitor Karen Salmon and Consultant Employment Solicitor Simon Renton at Marlborough Law. If you have any questions about small business or family law, estate planning or wills, please call their Hungerford office on 01488 508008 or Marlborough office on 01672 552552. Video meetings can be arranged at this time.
Karen talks to Penny about the support she is giving to businesses right now to understand what the government is offering, the timescales involved, the requirements to produce forecasts and cash flows and how to deal with outstanding debts and invoices without alienating your suppliers or contractors.
Click right to listen.
Contractual Sick Pay
This is payable in principle, for all the circumstances when SSP might be payable. This means that (for eligible workers) contractual sick pay will be paid in the first instance, and then (after it is exhausted), SSP. Check the contract to see what is payable. There is no statutory right to contractual sick pay in the UK. Many employers run “discretionary” sick pay for employees.
Statutory Sick Pay
For small businesses with staff, including those who work through their own limited companies, where a director or employee has to self-isolate or falls sick with coronavirus, the affected individual can be paid Statutory Sick Pay (SSP) for up to two weeks and reclaim the cost in full from the government through PAYE liabilities. This relief applies as long as the business has fewer than 250 employees on 28th February 2020. As SSP cannot normally be reclaimed, this will certainly help.
By law medical evidence is not required for the first 7 days of sickness. The government strongly suggest that employers currently use their discretion around the need for medical evidence. The Government has announced that a temporary alternative to the fit note will be introduced in the coming weeks which can be used for the duration of the COVID-19 outbreak. This system will enable people who are advised to self-isolate to obtain a notification via NHS 111 which they can use as evidence for absence from work, where necessary.
The government is legislating for SSP to be paid from day one, rather than day four, of your absence from work if you are absent from work due to sickness or need to stay at home to care for someone who has contracted COVID-19. Once the legislation has been passed, this will apply retrospectively from 13 March.
This relief cannot be claimed by sole traders and partners who do not have employees.
The rules for “normal” sickness and therefore SSP remain unchanged.
If you are not eligible for SSP – for example if you are self-employed or earning below the Lower Earnings Limit of £118 per week – and you have COVID-19 or are advised to self-isolate, you can now more easily make a claim for Universal Credit (UC) or new style Employment and Support Allowance.
For more information on how to claim, please visit www.gov.uk/universalcredit and www.gov.uk/guidance/new-style-employment-and-support-allowance
An employee can be sent home to self-isolate because of health & safety considerations and a duty of care to the workforce.
Do Businesses have to close?
Current ACAS guidance is that if someone with COVID-19 comes into the workplace, it does not have to close. In England, HPT will get in contact to discuss the case and carry out a risk assessment with the lead responsible person. This will likely include a “deep clean.” At present, most workplaces reopen.
Coronavirus Business Interruption Loan Scheme
Small- and medium-sized businesses affected by coronavirus have the option to apply for a loan under the temporary Coronavirus Business Interruption Loan Scheme. Under this new scheme, the British Business Bank will be able to make loans to affected businesses of up to £5 million per loan, with up to 80% of each loan backed by a free government guarantee.
Please note that the announcement implied that high street banks would be involved in the scheme but this is not the case and the 80% guarantee is through the British Business Bank only. There will also be no interest charged for 6 months and will eventually be rolled out by the High Street Banks.
Most of the banks are offering the government backed loans now with no interest to pay for 12 months or set up fees. See: www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/
You will need to produce a forecast and cash flow to show the impact of COVID-19 on your business.
HSBC UK, for example, is working closely with Government and UK Finance to identify emerging issues and make sure customers and businesses have the advice and support they need. They have introduced a range of measures to help you through these uncertain times, including:
· Allocating £5bn to lend to help businesses that need support
· Fast-tracking new video technology so that we can proactively contact customers to offer help in a more personal way
· Launching a helpline to support any customer queries (08000 121 614, open 8am – 6pm Monday to Friday).
In addition, they can also talk to you about:
· Repayment holidays to free up cash within businesses
· Reviewing overdrafts or trade loans to allow stock to be held for longer
· Providing trade finance solutions to support you with your supply chain.
More information can be found here.
Small businesses in the retail, hospitality and leisure industries will pay no business rates for 2020/21 and now also have a £25,000 lump sum payment as well.
Other small businesses many will also be eligible for a £10,000 cash grant (as long as the rateable value is below £51,000). It will be issued by the local authorities automatically, although we do not have a timescale.
Deferred VAT Payments
All businesses filing a VAT return between 20 March and 30 June will not have to pay the liability in the usual timescale. It will become due at the end of the 2020/2021 tax year. This is due to be reviewed after June 2020. They may potentially defer it again. Beware this is a DEFERRMENT not a credit. This liability will remain with your business until it is paid. Please try and put some funds aside to pay this liability.
Tax Time to Pay
If you are self-employed or own a business and you are concerned about not being able to pay your tax bills because of COVID-19, you may be eligible for support through Her Majesty’s Revenue and Customs’ (HMRC) Time to Pay service.
These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
HMRC’s Time to Pay service will be scaled up to give businesses affected by coronavirus more time to pay their taxes. HMRC will also waive late payment fines and the 3.5% annual interest where a business is unable to contact HMRC or pay their tax due to coronavirus.
A dedicated helpline has been set up to help businesses and self-employed individuals in financial distress with outstanding tax liabilities to receive support with their tax affairs.
Through this, businesses may be able to agree a bespoke Time to Pay arrangement. If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.
Please note that your accounting staff cannot ring HMRC on your behalf for COVID-19 financial hardship issues as they will want to speak to the business owner. However, we suggest you give as little information as possible and purely note ‘cash flow issues.’ Ask for an extension of a couple of months and then you will call back to give them an update, rather than accepting a payment plan straight away.
If your company has a large HMRC bill for PAYE/VAT or Corporation Tax due in the next month, please talk to your accountant or call HMRC to discuss before making a payment.
For more information, please check the HMRC site.
Coronavirus Job Retention Scheme (As of 23/03/2020)
Under this scheme all UK employers will be able to access support to continue paying part of their employee’s salary for those employees that would otherwise have been laid off during this crisis. The scheme will be in place for THREE months initially and all UK businesses are eligible.
The salary subsidy will be paid through a new HMRC system and will reimburse 80% of ‘furloughed’ workers wage costs, up to a cap of £2,500 per month. You are not allowed to work for your current firm or any firm if you are “furloughed” and your firm is claiming for you.
Current HMRC systems are not set up to facilitate payments to employers.
This scheme will be backdated to 1st March 2020.
HMRC will have to create a new IT software system to run the scheme. This will take until April to complete as it requires a brand new system to reverse pay staff normally paid under PAYE rules. There will need to be tight control of the job subsidy to avoid abuse by employers who could see it as a way to simply lay off staff with no intention of rehiring them.
It is also not clear whether Directors and shareholders of owner managed companies can put themselves ‘on furlough’ or how it affects zero hours workers. However the government is indicating this scheme will cover as broad a group as possible.
To access the scheme you will need to:
- Designate affected employees as ‘furloughed workers’, and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation;
- Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)
While company directors are remunerated through payroll and would be classed as “employed” by HMRC, filling out “employment pages” on a self-assessment tax return, they do not normally have employment rights under employment law unless there is a specific employment contract. Most small businesses do not have an employment contract with the directors. This is why things like minimum wage legislation do not apply to directors, so directors can therefore structure their remuneration package in a more tax efficient way than an employee.
In employment law, a director of a limited company has the status of an office holder. While employees’ rights and duties are defined by an employment contract, the rights and duties of an office holder are defined by the Companies Act 2006 and the Company Constitution (as per Companies Act 2006). Office holders are not usually covered by employment legislation unless specifically mentioned – see www.gov.uk/running-a-limited-company
1. Monitor cash flow on a daily basis.
2. If dealing in currency contracts check Exchange Rate daily and make sure you have tight conditions regarding price changing.
3. Avoid unnecessary expenditure.
4. Renegotiate Payment Terms and pricing.
5. Possibly change suppliers.
6. Tighten up credit control – even for those you consider good customers. We all have to pay the mortgage.
7. Offer early payment discounts.
8. Talk to your bank manager before it gets too bad.
9. Consider salary reductions for a short period with a payback commitment when things turn around.
10. Consider invoice discounting
11. Consider diversifying to, for example, online training.
12. Check your cyber security for workers working from home.
13. Re-draft your terms and conditions.
14. Keep in touch with employees in isolation by video conferencing or telephone to avoid “cabin fever”.
15. Keep in touch with customers and suppliers to make sure they know the situation.
16. Walk away from business which isn’t good for the company in the long term.
17. Don’t let customers or suppliers hold you to ransom.
18. Make sure your insurance policies are up to date and cover what you need them to cover.
19. Make sure you try and put some funds aside, if possible, to cover any “DEFERRED” liabilities so they do not cause problems next year.
Businesses that have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc. is sufficient to make a claim as long as all other terms and conditions are met.
Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.
The government has agreed with mortgage lenders that they will offer repayment holidays of 3 months to households in financial difficulty due to COVID-19.
This will also apply to landlords whose tenants are experiencing financial difficulties because of COVID-19 but the offer of a payment holiday can be made available to customers who are up to date with payments and not already in arrears.
Customers who are concerned about their current financial situation should contact their lender at the earliest possible opportunity to discuss if this is a suitable option for them.
Emergency legislation will be taken forward so that landlords will not be able to start proceedings to evict tenants for at least a 3 month period. This applies to private and social renters and at the end of this period, landlords and tenants will be expected to work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances.
Any self-assessment payments due on 31st July 2020 including payments usually made on account will be deferred until 31st January 2021. Again I stress the word “DEFERRED” not written off. It will remain a liability.
Universal Credit and Working Class Tax Credit
These will both increase by £1,000 a year for the next financial year starting on 6th April 2020. There is no guarantee that the increase will remain after April 2021.
Home Working Expenses
If you have moved to home working you may be able to claim working from home expenses, please answer the questions in the link to find out if you are eligible and how to claim: www.gov.uk/tax-relief-for-employees/working-at-home
If you are self-employed and receiving Universal Credit and you have COVID-19 or are advised to selfisolate, the requirements of the Minimum Income Floor will be temporarily relaxed. This change took effect on 13 March and will last for the duration of the outbreak, to ensure that self-employed UC claimants will receive support.