UK Government Announces New Job Support Scheme

Last week the UK Chancellor announced a new scheme to help support jobs in the UK.   Currently the UK’s coronavirus job retention scheme helps UK businesses by paying a percentage of wages of those employees on furlough, but that scheme comes to an end in October.  Given that the UK economy remains fragile there was concern that the UK would see more business failures and mass redundancies once the scheme ends.  A number of the temporary measures to help support the UK economy have been extended and the new scheme will hopefully avoid the cliff edge feared, but whether the measures will help keep people in jobs and companies in business we will have to wait and see.  Our employment colleagues have prepared this alert explaining how the new scheme  is intended to work.

The Coronavirus Act 2020 – More Bad News for UK Commercial Landlords as Temporary Measures Extended Again

The UK Government is implementing further measures to protect commercial tenants from rent collection until the end of the calendar year. This is the latest in a number of extensions to the provisions of the Coronavirus Act 2020 that have been enacted to help businesses navigate the effects of the COVID-19 pandemic.

The new measures will have the following effect:

  • extend to 31 December 2020, the moratorium on forfeiture which currently ends on 30 September,
  • prevent landlords from using Commercial Rent Arrears Recovery (“CRAR”) unless they are owed at least 276 days of rent.

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UPDATED Global Insolvency Report: Impact of Covid-19 on Insolvency Laws

Our guide sets out how different jurisdictions are changing their Insolvency Laws to help alleviate additional pressures placed on businesses as a consequence of cash flow pressures caused by COVID-19.

We have updated our guide to introduce a traffic light system to show the current status of these measures and to include further changes to insolvency laws in  Germany and Japan.

Click here to see our guide.

UK Winter Economy Plan – The Tax Angle

The Chancellor of the Exchequer, Rishi Sunak, delivered the government’s ‘Winter Economy Plan’ on Thursday, 24 September 2020.

Set against a marked deterioration in data tracking the spread of coronavirus in the UK signalling a worsening of the health crisis, the statement was afforded heightened importance by the postponement of the Autumn Budget. Given the severity of the impact of COVID-19 on, and the continued fragility of, the UK economy, there is some economic and fiscal logic in delaying the Budget until the depth and breadth of the impact of this latest onset of the virus is better understood. The Chancellor was probably keen to avoid a repeat of the spring which saw him deliver a Budget on 11 March 2020 only to have to then provide an updated emergency statement just nine days later. However, delaying the Autumn Budget may have been greeted with alarm by those hoping it would provide more detail on the government’s plans for softening the disruption faced by businesses preparing for the end of the Brexit Transition period on 31 December 2020, comprehensive, zero-tariff-zero-quota, free trade deal or not.

Understandably, the primary focus of the Winter Economy Plan was on protecting jobs. The Chancellor set out the government’s new scheme to replace the Coronavirus Job Retention Scheme (CJRS)) – the Job Support Scheme (JSS) – and a broadly equivalent scheme for the self-employed – the Self-employed Income Support Scheme (SEISS) Grant extension. The design, operation and merits of the JSS are examined in more detail in an alert by our employment colleagues. There were also extensions to some of the existing loan schemes (including the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Future Fund).

As has been the case throughout the crisis, tax announcements were muted. Big questions weighing on tax policy undoubtedly lie in wait in the months, and years, ahead: Can tax be used to stimulate the economy back to full health once the pandemic has eventually passed? Should tax policy be engaged to reformulate the economy in the years ahead and to help level-up the country? What role is there for tax in rebalancing the nation’s books? Who should bear the greatest tax burden? Is the post-pandemic, post-Brexit, landscape an opportunity for structural tax reform? Even so, the Chancellor did announce three important extensions to existing measures intended to reduce the immediate pressure and cashflow crisis.

In brief, the tax announcements were:

  1. A VAT deferral ‘New Payment Scheme’

The scheme is available to all businesses which deferred VAT due in the period from 20 March to 30 June 2020. HM Treasury estimate over half a million businesses deferred VAT equal to approximately £30bn. It is not clear how much of that has since been paid.

The New Payment Scheme gives affected business the option for spreading the payment of the deferred VAT due (originally due and payable in full on or before 31 March 2021) over 11 equal instalments through the financial year 2021-2022. No interest or penalties will be levied on the ‘late’ payments.

Businesses wishing to take advantage of the scheme need to opt in; it is not automatic. The process for opting in will be unveiled by HMRC early in 2021. Businesses considering spreading the repayment of deferred VAT should check (again) their payment arrangements (e.g. direct debits) are appropriate.

  1. Extension of the temporary VAT reduced rate for hospitality and tourism

Available to all VAT registered business in the hospitality, leisure and accommodation sectors. HM Treasury estimate the measure supports more than 150,000 UK businesses.

Since 15 July 2020, eligible businesses have been able to apply a temporary reduced rate (5%) of VAT on their supplies of food, non-alcoholic drinks, hotel and holiday accommodation or admission to certain attractions. The standard rate (20%) of VAT was due to be reinstated on 12 January 2021 but the Chancellor has extended the period during which the reduced rate applies to 31 March 2021.

The scope of the measure is unaffected. As before, any businesses that also utilise the Flat Rate Scheme, the Tour Operators Margin Scheme (TOMS) or any other applicable special retail scheme should consider the impact of the reduced rate (and delayed subsequent reversal) on their VAT calculations and accounting.

  1. ‘Enhanced Time to Pay’ for Self-Assessment taxpayers

Enhanced Time to Pay is available for self-employed taxpayers (with up to £30,000 of Self-Assessment liabilities due) who deferred their second payment on account for the 2019-20 tax year, originally due by 31 July 2020. Any deferred amount was due to be paid on or before 31 January 2021.

Under Enhanced Time to Pay, self-employed taxpayers who exercised the option to defer their second payment on account will, subject to agreeing a payment schedule with HMRC’s  self-service Time to Pay facility, be allowed to pay the tax due over an additional 12 month period with deferred amounts not due to be paid in full until the end of January 2021.

Although it is not clear whether the ‘Enhanced Time to Pay’ will also be available for any balancing payment that would otherwise have been due for payment for 2019-20 on 31 January 2021, the Winter Economy Plan report suggests that it applies only to the deferred July 2020 amount. It is almost certain the first payment on account due for the 2020-21 tax year, also due on 31 January 2021, will be due as normal.

Self-employed taxpayers wishing to take advantage of the extended repayment period should consider clarifying the position to ensure they are fully aware of the full extent of their self-assessment tax due on 31 January 2021. Any self-assessment taxpayer that is not able to pay their tax bill on time, including those who cannot use the online service, are advised to continue to use HMRC’s normal ‘Time to Pay’ helpline to agree a payment plan.

Resetting UK Retail: Response to COVID-19

Empty street in Marylebone district, London, EnglandOn Tuesday 22 September, we hosted our Resetting Retail: Response to COVID-19 event. Our panel of experts, comprising Matthew Lewis, Head of Retail; Richard Lim, Chief Executive, Retail Economics; Paula Laird, Financial Services partner; and John Alderton, Restructuring & Insolvency partner, explored the viability, sustainability and recovery of UK retail as we head towards the three-month mark from the unlocking of UK retail amidst the global COVID-19 pandemic.

Topics included:

  • A look at the retail economy and where retail is on the COVID-19 recovery curve
  • How retailers can assess the vulnerabilities of their business
  • Opportunities and lessons learnt from COVID-19
  • Funding packages and rescue approaches
  • “New normal” risks, such as cash flow pressures, supply and demand, employee considerations, operational costs and Brexit
  • Emerging economic, consumer, regulatory and compliance pressures

A recording of the event is now available to keep you updated. Please click here to view.

Reflections on COVID-19 – Views from Italy

In this blog we examine the economic impact of Covid-19 on the Italian economy, through an analysis of economic data relating to the lockdown period from February to May 2020, an assessment of the impact of the Italian government’s measures, and a view on what the future might look like for the Italian economy.

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How Do The Changes to the UK Insolvency Laws apply to Energy Companies?

As we discussed in our previous blog relating to the Supplier of Last Resort Process, energy company insolvencies bring with them a range of different processes and requirements which other companies do not need to consider.

In particular, the involvement of the Secretary of State and the Gas and Electricity Markets Authority (GEMA) in energy company insolvencies is especially notable. This month, new legislation was introduced to dictate how the Corporate Insolvency and Governance Act 2020 would interact with energy company insolvencies.

On 3 September 2020, The Insolvency (Moratorium) (Special Administration for Energy Licensees) Regulations (SI 2020/943) came into force which make modifications to how the Part A1 moratorium introduced by the Corporate Insolvency and Governance Act 2020 applies to energy companies.

The new regulations mean that directors of energy companies must notify the Secretary of State and GEMA when seeking a Part A1 moratorium, and also when a moratorium is obtained. The directors of the company must also inform the Secretary of State and GEMA about any extension or end of the moratorium.

The regulations also state that even while an energy company is still subject to a Part A1 moratorium, the Secretary of State and GEMA is still able to apply for a special administration order against an energy company.

Part 1A moratoriums also do not prevent GEMA from initiating, carrying out or continuing any legal process in relation to an energy company. Court permission is not required.

Whether we will see instances of energy companies utilising the Part A1 moratorium remains to be seen. However, with the ability of the Secretary of State and GEMA to seek special administration orders regardless, the moratorium may not be providing energy companies with the breathing space that was intended.

Australia’s Directors Continue to Enjoy Two Safe Harbours as the COVID-19 Insolvency Laws Are Extended

The Australian federal government has announced that the temporary changes it enacted in March to the Corporations Act concerning insolvent trading laws and the creditor’s statutory demand regime have been extended to 31 December 2020. The changes were due to expire on 25 September.

Please see out alert for further information.

Reflections on COVID-19 – Views From Germany

Image of human hand pointing at touchscreen in working environment at meetingIn a series of blogs, we will be reflecting on how the coronavirus disease 2019 (COVID-19) has affected local economies and businesses considering the impact of lockdown, how businesses have fared during the pandemic, whether support from the government has helped protect against business failure, which sectors have been hardest hit by the pandemic and which have prospered, as well as considering the impact of a second wave and what the future might hold.

In this first blog, we focus on the impact of COVID-19 on Germany.

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