We are aware that current challenging and unprecedented events are generating many urgent legal questions from our clients, and we are here to help.
GOVERNMENT SUPPORT FOR BUSINESS
Unprecedented government support packages completely change the landscape. The situation changes daily and we will try to keep this summary up to date. Contact us for the latest developments.
The most important proposals include these: -
Coronavirus Job Retention Scheme - this is potentially a “game changer” for employers considering reducing staff numbers or redundancies. The purpose is to maintain permanent jobs through the crisis.
All UK businesses are eligible.
Certain employees are designated as”furloughed workers” - effectively laid off - and the details submitted to HMRC.
HMRC will reimburse 80% of those employees' wage costs, up to a limit of £2,500 per month. The HMRC portal, the detailed scheme rules and the timescale for reimbursement are not yet available but expected soon.
The process for changing the status of employees needs to be handled carefully and in most cases reached by agreement with the employees concerned. Obviously this is expected to be much easier to achieve in view of the potential reimbursement, but it may still be necessary to explain the alternatives, often including redundancy.
VAT and Income Tax Deferral - again all UK businesses are eligible.
The current scheme proposes to defer VAT for the period from 20 March to 30 June 2020. Note that this is a deferral and not a release or grant.
The VAT scheme is automatic with no application required. Payment will need to be made up by April 2021.
Income Tax due on a self-assessment basis by 31 July 2020 will be deferred until 31 January 2021. Again this is automatic with no applications required.
Coronavirus Business Interruption Loan Scheme – a scheme to support small and medium sized businesses to access bank lending and overdrafts.
The government will provide lenders with a guarantee of 80% on loans.
SSP changes - a refund is available for smaller employers with less than 250 employees to reclaim SSP paid for sickness absence due to Coronavirus, currently limited to 2 weeks.
OTHER EMPLOYMENT ISSUES TO CONSIDER
Payment implications for employees absent on sick leave or in “self-isolation” depends on the exact circumstances.
Rights to time off - Greater numbers of employees are needing to make use of statutory rights such as time off to care for dependents and parental leave.
Closures, redundancies, reduced pay - Many businesses are having to make difficult decisions over closures or cost reductions, which will have a substantial impact on employees. The options available depend on circumstances but frequently require consideration of a proposal for voluntary reduction or temporary layoff, with the alternative of voluntary or compulsory redundancies. This issue in particular is now heavily affected by the Job Retention Scheme.
Settlement agreements - In some cases, it will still be safest to conclude termination agreements in the form of binding settlement agreements.
BUSINESS CONTRACTS – DEALING WITH CUSTOMERS AND SUPPLIERS
Force majeure - The most common issue here relates to difficulty in performing contracts, “force majeure” clauses and the implications of termination.
Debt collection will inevitably become more difficult as many businesses suffer cash flow issues.
Negotiating payment holidays or suspensions, particularly under larger contracts and potentially leases, might be practicable, especially where the alternative is a payment default.
Business interruption - Many businesses are asking the question of whether they might have some protection under their insurance terms. It is worth checking insurance policies. A few business interruption cover clauses might be available where closures are caused by a “notifiable disease”, although we believe this will be uncommon.
Give one of our specialists a call for an urgent discussion over any of these legal concerns.