Recent Government policies will have a huge impact on all businesses and, therefore, all business owners will need to consider what steps they can take to ensure the business survives.
All business owners, including directors and sole traders, should consider the following steps if you or the business is facing difficulties:
- Talk to suppliers at an early stage in an attempt to agree on payment plans or variations to any contracts, which are in place to avoid penalties.
- Speak to your landlord to ascertain whether the terms of your lease can be varied, whether the rent can be paid monthly rather than quarterly and/or to determine whether a payment ‘break’ can be agreed in the short term.
- Contact the bank and/or financial provider if the business is unable to maintain agreed payments to ascertain whether new terms can be agreed such as a payment break or increased short term lending.
- Consider whether the business is eligible for any of the recent government-backed loans and grants available due to this crisis. More information is available on the government website.
- Speak to HM Revenue & Customs to establish whether the business can have time to pay any tax due. HM Revenue & Customs have a dedicated line available for businesses impacted by COVID-19: 0800 015 9559.
The above list is not exhaustive and other actions may need to be considered including difficult decisions such as making redundancies. However, it is important that you enter into open dialogue and seek professional advice at an early stage.
It is equally important that, if you are a director, you ensure that you comply with your ongoing duties to the company and its shareholders during this difficult time or, if the business is struggling and you are worried that it may be insolvent or become insolvent, you comply with your duties to the creditors and take early advice from your accountant or solicitor especially before incurring any credit or making any payments.
These are unprecedented times but hopefully, with timely, sensible and focused measures, you can ensure that your business survives.
What help is the Government giving to business during the coronavirus outbreak?
The government has pledged to make £330billon of guaranteed funding available and the Chancellor has said that further funds will be made available should demand require it. The British Business Bank will be launched to help businesses to access lending and overdrafts. The government will guarantee 80% of any such borrowing and the scheme will support loans of up to £5 million. Eligibility is subject to various criteria including a UK base and turnover not exceeding £41 million.
Retail, hospitality and Leisure businesses will be granted a rates holiday for the 2020 to 2021 tax year and those with a rateable value between £15,000 and £51,000 may be eligible for a £25,000 grant.
HMRC has a dedicated helpline (0800 0159 559) to provide support to those concerned about their ability to pay.
Small and medium-sized businesses and employers (less than 25 employees as at 28 February 2020) will be able to reclaim up to 2 weeks Statutory Sick Pay (SSP) paid to eligible employees for sickness absence due to COVID-19.
Can self-employed people get any help from the government during the coronavirus outbreak?
The self-employed (together with those earning below £118 per week) can now more easily make a claim for Universal Credit or Contributory Employment and Support Allowance. The government has announced that the requirements of Universal Credit will be temporarily relaxed for those that are required to self-isolate or who are suffering from the virus.
What preparations can I make to protect my business during the coronavirus outbreak?
In what appears to be an ever-changing environment it is important to stay abreast of the most up to date government advice together with that of the health authorities.
Businesses should consider the impact that the virus and its effects might have not only on their suppliers and their customers but also on their staff. Should problems arise then as always it is better that these are addressed at the earliest opportunity. Keeping suppliers, customers and staff appraised of developments are paramount.
Coronavirus UK: Is my business insured for staff working at home?
This will depend upon individual insurance policies and we would recommend contacting your insurers/brokers.
Policies differ significantly and your policy may but will not necessarily include business interruption cover. Where cover is included the precise cover should be checked as some such provisions actually exclude pandemics or require there to have been physical damage to business premises.
The government has said that if your business insurance includes both pandemics and government-ordered closure then you should be covered. It was confirmed by both the government and the insurance industry that advice to avoid pubs, theatres and the like is sufficient to make a claim.
Can my business still recover debt during the coronavirus outbreak?
In short, the answer is yes. You can recover the sums due to you or your company. However, whether there is anyone in the office to activate a payment to you, might be another more practical question. The contracts and agreements that you have in place remain and still stand. There has been an increased call for companies to accept reduced payments or to apply a repayment plan where previously one has not been applied. These requests need to be carefully considered as they could constitute a form of variation to the contract.
What happens to existing business debts during the coronavirus outbreak?
The debts remain, the creditor is still entitled to recover the debt and there will be no writing off of commercial debts. Some contracts do have a Force Majeure clause which in simple terms is a right to suspend or terminate the performance of obligations under a contract when an extraordinary event or circumstance beyond the contracting parties' control prevents one or all of them from fulfilling those obligations.
The current situation has brought into sharp focus the requirements under contracts between parties. The question as to whether a force majeure clause excuses parties from performing their obligations or from doing so on time in the current climate is a hot topic of discussion between businesses. It is important to note that in English and Scottish Law Force Majeure is a contractual clause that must form part of a contract as it is not common law.
Please note, all advice and opinion offered in this article are subject to change in line with the latest government advice.