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COVID-19: UK Government assistance available to businesses

COVID-19: UK Government assistance available to businesses


This briefing was updated on 3 July 2020.

The UK Government has announced an unprecedented stimulus package to help support businesses in the wake of the COVID-19 outbreak. These measures, originally announced by the Chancellor of the Exchequer in his budget on 11 March 2020, have since been rapidly expanded. The scenario is subject to constant change and the measures appear to have unlimited scope. We are keeping this note updated as further details are released by the UK Government. The date on which it was last updated appears above.

This note provides a summary of the key measures to help businesses which were announced by the UK Government as part of its response to the COVID-19 outbreak. In addition, although not covered by this note, there will be pre-existing measures (and potentially commercial insurance) that businesses may continue to rely upon in order to get through the current crisis. While focusing on measures in England, a number of them are pan-UK and the devolved parliaments have pledged to mirror the measures to the extent necessary. If you would like further details about any of these measures or wish to have an update on them, please do not hesitate in contacting a member of our team.

Useful resources

The UK Government's "COVID-19: support for businesses" hub is currently being kept up-to-date and is available by clicking here and is also sharing information through its Coronavirus Business Support page available by clicking here.

Travers Smith has a number of other COVID-19 related resources on our website that you might find useful, available by clicking here.

Coronavirus Job Retention Scheme

Where employers are considering making employees redundant as a result of the COVID-19 crisis, they are now able to instead make them "furloughed workers".

If an employer chooses to do this and therefore keep them on the payroll, then:

  • the employee will not have been able to do any work for the employer while furloughed until 30 June 2020 (although part-time furloughing is now possible); and

  • the UK Government will contribute 80% of that worker's usual monthly wage costs (subject to a cap of £2,500 per month) (the "Wage Cost Contribution"), subject to those amounts reducing from 1 September 2020.

The employer then has the choice of topping-up their salary, or alternatively the employee may simply receive the lower salary (therefore at no, or near-no, cost to the employer).

Additional costs covered: On top of the Wage Cost Contribution, until 31 July 2020 the employer will also be entitled to claim reimbursement from the UK Government for (i) employers' NICs on the Wage Cost Contribution and (ii) the minimum employer pension contribution of 3% on salary paid between the automatic enrolment 'qualifying earnings' threshold (£520 per month from 6 April 2020) and the Wage Cost Contribution. The employer is not able to reclaim any apprenticeship levy (if applicable) paid on the employee's salary, or national insurance or pension contributions for any topped-up wage they have decided to pay in excess of the Wage Cost Contribution.

How to calculate the usual monthly wage costs: The scheme covers regular payments such as overtime, fees and contractual commission (not just salary) but tips, non-cash benefits, discretionary bonuses and discretionary commission are excluded. For salaried employees, the employee’s actual salary before tax, in the last pay period prior to 19 March 2020 is used to calculate the Wage Cost Contribution. In terms of calculating monthly wage costs for employees whose pay varies (e.g. zero hours workers and casuals) the employer can claim for the higher of either the amount the employee earned in the same month last year or the employee's average monthly earnings from the 2019/20 tax year.

What the employee can do while furloughed: While a furloughed worker, the employee was not able to undertake any work for the employer up until 30 June 2020. Since 1 July 2020, employers are now able to bring furlough workers back part-time, but will be responsible for paying the employee's wages while at work (with the Wage Cost Contribution continuing to apply to the remainder of their wages and the cap pro-rated to reflect any hours worked). To calculate the pro-rated subsidy, the employer will therefore have to calculate the worker's usual working hours, then subtract the hours actually worked during the claim period.

Whether furloughed full-time or part-time, the worker must not undertake any work for the employer during any hours designated as furloughed hours. However, they can undertake training for their employer (provided that they are paid at or above the national minimum wage – any shortfall to be covered by the employer – and do not make any money for, or provide services to, their employer) and volunteer or work provided that (i) it is not for the employer that furloughed them or an associated entity of it and (ii) it is permitted under their contract(s) of employment.   If the furloughed worker is a director, then they are entitled to carry out their statutory duties in relation to filing company accounts or providing other information relating to the administration of the company without losing their furloughed status. Also, if the furloughed worker is a union representative or other elected employee representative, they would have been able to undertake activities for the purpose of individual or collective representation of employees during furloughed hours.

Employee status and agreement: From a practical perspective, the employer will need to have informed the employee in writing of their changed status (to a "furloughed worker") prior to 30 June 2020. The UK Government has confirmed that changing the status of an employee in this way is still subject to existing employment law (and the existing employment contract). Therefore, an employer will need the employee's consent to do so (with the associated risk of the collective consultation regime applying / involving recognised trade unions etc.), unless there is a provision in the contract of employment permitting the employer to temporarily lay off the employee. From 1 July 2020, if the employer wishes to bring furloughed workers back part-time, they will need to enter into a new agreement setting out the working arrangements.

The employee will continue to be subject to the terms of their employment contract for the duration they are furloughed. The employer may go on to make employees redundant during the furlough period or afterwards if there is a genuine redundancy situation. In such a case the employer would have to follow the normal rules on redundancy and employees with at least two years' service would be entitled to redundancy pay. However, this will not affect any previous period of furlough for which the employer can claim funding.

Looking forward: The UK Government has announced how the scheme will evolve over the coming months in order to provide employers with flexibility and gradually get employees back to work. Further details of these changes are available here, but in summary:

From 1 August 2020: The UK Government will cease to pay the Wage Cost Contribution's associated employers' NICs and minimum pension contributions (which the employer will need to start paying).

From 1 September 2020: The Wage Cost Contribution will be reduced to 70% of the worker's usual monthly wage costs (subject to a cap of £2,187.50 per month), with the employer required to top the employee's wages to the 80% (and £2,500 cap) level so that the employee is not worse off by the change.

From 1 October 2020: The Wage Cost Contribution will be reduced to 60% of the worker's usual monthly wage costs (subject to a cap of £1,875 per month), with the employer required to top the employee's wages to the 80% (and £2,500 cap) level so that the employee is not worse off by the change.

Employers can now claim reimbursement for the Wage Cost Contribution and associated costs via a new HMRC online portal. Claims can be made before or after the employer has run the relevant payroll, with payments being made by HMRC within six working days. However, as claims for flexible furlough must take into account actual hours worked, there is an advantage in waiting until there is certainty about the hours worked before making a claim.

While separate to the Coronavirus Job Retention Scheme, businesses may also be interested to know (especially if they are considering terminating both contractors and employees as a result of the current crisis) that the UK Government has announced the Self-Employment Income Support Scheme. This scheme will provide two grants for the self-employed: one of 80% of their average monthly trading profits for three months (averaged over the previous three years), capped at £7,500 and a second grant of 70% of average monthly trading profits for three months, capped at £6,570. To be eligible individuals must (i) already be classified as self-employed for tax purposes; (ii) have trading profits of no more than £50,000 per year which are at least equal to non-trading income; (iii) have filed a tax return from the tax year 2018-19 by 23 April 2020; (iv) have traded in the tax year 2019/20; (v) intend to continue trading in 2020/21; and (vi) have been adversely affected by coronavirus. Those who pay themselves a salary and dividends through their own company are also not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE. The Self-Employment Income Support Scheme is now operational and open to applications.


Any entity (of all sizes and in all sectors) with a UK payroll scheme on or before 19 March 2020 will be eligible for the Coronavirus Job Retention Scheme. The scheme will extend to:

  • Salary costs from 1 March 2020 to 31 October 2020 (subject to the staged step downs on the level of Wage Cost Contributions as detailed above). Employers can use it anytime in this period, although employers will only be able to furlough employees that they have furloughed for a full three-week period prior to 30 June 2020 (closing it for new entries after that date). In practice, this means employees must have been placed on furlough by 10 June 2020 to be eligible for funding, although there are limited exceptions for employees returning from parental or bereavement leave, or from a period of mobilisation as a military reservist, after such date.

  • All workers who are paid through payroll as at 19 March 2020:

    - this can include not just employees but also workers, office holders, salaried LLP members, directors and apprentices; and

    - can include workers who have left the business since 28 February 2020 for whatever reason, (not just redundancy), or been placed on unpaid leave, provided they have been placed on furlough by 10 June 2020.

  • While workers can be furloughed more than once, for the period 1 March to 30 June 2020 they must have be furloughed for at least three weeks each time. From 1 July 2020 until 31 October 2020, there will be no minimum furlough period as employers and employees will be free to agree part-time working arrangements during furlough (although a minimum claim period of one week applies). The Scheme is due to close on 31 October 2020.

  • Employers will need to be able to demonstrate if asked that the reason for the furlough was related to COVID-19.

The UK Government has said it will retain the right to retrospectively audit all aspects of the scheme (including the extent to which the employee might have worked for the employee during the period) with scope to claw back fraudulent or erroneous claims. Accordingly, employers will need to keep records of communications with employees about furlough, the wages paid and associated wage costs. The communication with employees about furlough must be kept for five years until at least 30 June 2025.

Please see our Q&A on the Coronavirus Job Retention Scheme for further details by clicking here, and further details from the UK Government here.

Key facts

Contribution from the Government to Furloughed workers' salaries.
Monthly cap on the Government contribution per employee.
The date from which the scheme will cover eligible salary costs.

For more information, please contact:

Ed Mills
Partner, Head of Employment
+44 20 7295 3424

Loan Guarantee Schemes

Depending on the prospective borrower's annual turnover and needs, it can apply for loans under either the: 

  • Bounce Back Loan Scheme ("BBLS") for businesses of any turnover;

  • Coronavirus Business Interruption Loan Scheme ("CBILS") for businesses with an annual turnover of up to £45 million; or

  • Coronavirus Large Business Interruption Loan Scheme ("CLBILS") for businesses with an annual turnover of over £45 million.

The British Business Bank has produced useful tables comparing (and available by clicking the links) the BBLS to the CBILS and the CBILS to the CLBILS.

Some of the key terms are:

1. Government Guarantee. The UK Government will provide the lender with a guarantee for either 80% (under CBILS and CLBILS) or 100% (for BBLS) of the outstanding loan meaning it is more likely to be approved by the lender.

2. Interest. The UK Government will pay the first 12 months of interest on behalf of borrowers for loans under the CBILS and BBLS (but not the CLBILS). Commercial rates of interest (taking into account the UK Government guarantee, the benefit of which the lender is required to pass onto the borrower) will apply to loans under the CBILS and CLBILS. The interest rate applicable under the BBLS will be 2.5% per annum.

3. Facility Limit. Depending on turnover, loans under the different schemes will be for:

  • up to £50,000 under BBLS;

  • up to £5 million under CBILS; and

  • up to £200 million under CLBILS (although loans for over £50 million will have restrictions attached – see below).

4. Duration of Loans. Loans under the BBLS will be for 6 years (although there will be no penalty for early repayment). The tenor of loans under CBILS is (i) up to six years for term loans and asset finance and (ii) up to three years for overdrafts and invoice finance. Under CLBILs, the maximum repayment term is 3 years.

It is important to note that the UK Government guarantee are only to the lender, so the borrower remains fully liable to repay 100% of the debt (including any interest). However, borrowing under the CBILS or BBLS is likely to be particularly attractive to businesses facing a short-term cash-flow issue in view of the interest free element.

Applications: The schemes are operated through accredited lenders (including most high-street banks) of the British Business Bank. Fewer lenders are currently accredited to offer the BBLS as are accredited to offer the CBILS and CLBILS. Initial experience with the CBILS has shown that eligibility criteria for the scheme are complex and banks are taking time to operationalise it, however applications under BBLS are expected to be more streamlined with money flowing within days.

Restrictions: A business borrowing more than £50 million under CLBILS will be subject to additional negative undertakings during the period of the loan. The business will be prohibited (until the loan is repaid in full) from (i) paying dividends not previously declared, (ii) agreeing any new share buy-backs and (iii) paying cash bonuses or awarding any pay rises to senior management (including the board) except where they a) were declared before the CLBILS loan was taken out, b) are in keeping with similar payments made in the preceding 12 months, and c) do not have a material negative impact on the borrower’s ability to repay the loan.

Security: The requirement for a borrower to give credit support will depend on each lender's policies. It is not expected that lenders will require any security under the BBLS but where there is sufficient security available for loans under the CBILS and CLBILS it is likely that the lender will take such security. More specifically, loans under the CLBILS will need to rank at least pari passu with other senior obligations (including secured and/or super-senior obligations, if any) of the borrower. Lenders will not be able to use anyone's primary residential property as security under the loan and lenders cannot require personal guarantees for loans under the BBLS or, under CBILS and CLBILS, for (i) more than 20% of the loan or (ii) loans under £250,000.

Fees: While participating in the CBILS and CLBILS, lenders will be required to pay a fee to the UK Government to access the guarantee, however borrowers will not be required to pay any such fee. There are not expected to be any non-guarantee-related lender-levied fees under the BBLS and the UK Government will cover such fees under the CBILS (except that fishery, aquaculture and agriculture businesses may not qualify for the full fee payment).

Issues for existing borrowing

Whilst the schemes will offer welcome liquidity to companies suffering financial stress, the incurrence of additional debt may be restricted under existing debt facilities. Careful attention should be given to debt incurrence capacity under any such arrangements. Waivers may be required (potentially on a tight timetable) to avoid triggering a default entitling existing lenders to accelerate their debt and enforce security. Clearly, the greater the number of existing lenders, the more logistically challenging this will be. It may not be an issue where the scheme partner bank is already the business' main lender. Ultimately, existing lenders may be comfortable with their borrower incurring unsecured loans in reliance on the government guarantee; the alternative (enforcement leading to an insolvency process) is typically destructive of value as compared to a consensual solution.

Issues for directors: As well as satisfying the usual corporate benefit rules which apply to every company when taking on debt or granting guarantees/security, when considering whether to borrow in circumstances of financial distress, directors should be mindful of their duties to creditors and, in particular but subject to the proposed changes detailed at section 10 below, the need to avoid wrongful trading. Company directors should have an objectively justifiable reason for taking on new debt. This involves having a clear understanding of the financial position of the company and a plan for avoiding an insolvency, often with the benefit of professional advice. It is important to consider whether there is a reasonable prospect that taking on new debt, together with any planned capital raising and/or cost-saving measures, will enable the company to survive. Whilst the plan need not be 100% certain, it is important that it is not fanciful or remote. This same analysis also applies to the CCFF scheme outlined at section 3 below.


Decision-making on whether a business is eligible for the schemes is fully delegated to the accredited lenders, but the basic eligibility criteria are:

  • the borrower being UK based (trading in, not just selling into, the UK and has the core of its business operations in the UK regardless of where it is incorporated);

  • the borrower generating at least 50% of its turnover from trading activity (subject to certain exemptions, such as for charities);

  • the funds being applied for business purposes and used to support primarily trading in the UK (or, in the case of loans under the BBLS that they will be used to provide economic benefit to the business, such as for working capital, and not for personal purposes);

  • the borrower (which can include sole traders / freelancers so long as the business is operated through a business account) having an annual turnover of no more than £45 million (for CBILS) or more than £45 million (for CLBILS). In assessing this test:

    (a) the qualifying period will be the 12 months preceding application;

    (b) where a borrower is part of a corporate group (i.e. controlled on either a legal or de facto basis) then the turnover test will be applied to that wider corporate group rather than just to the borrower – it is expected that this will include global rather than just UK turnover; and

    (c) where the borrower is a portfolio company of an investment fund, the turnover test will be calculated on a business by business basis, following a UK Government announcement on 16 April 2020 (so that portfolio companies are not be disqualified by virtue of needing to combine the turnover of all portfolio companies majority-held by a single sponsor) - a welcome announcement as we understand that many lenders were aggregating the turnover of all portfolio companies majority-held by a single sponsor;

  • the borrower will need to self-certify that it has been adversely impacted by COVID-19;

  • the borrower not having already used the CCFF (see section 3 below) or any of the other loan guarantee schemes;

  • in the case of loans under the BBLS, the borrower not having not borrowed under CBILS, CLBILS or the CCFF (see section 3 below) unless the amount being borrowed under the BBLS will repay the entity of such borrowings;

  • the borrower not being in certain prohibited finance, insurance or public sectors;

  • for loans under the CBILS or CLBILS, the borrower having a borrowing proposal (including evidence normally required by that lender for approving a loan, such as management accounts, forecasts, business plans etc.) which, were it not for the current pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty;

  • in the case of loans under the BBLS, the borrower not being in bankruptcy or liquidation or undergoing debt restructuring at the time it submits its application; and

  • the borrower not being an "undertaking in difficulty" as at 31 December 2019 (or showing that it otherwise is compliant with applicable state aid rules - there are different rules depending on the size of business and when they were incorporated).

While they still may be eligible, fishery, aquaculture and agriculture businesses may not qualify for the full interest and fee payment exemption referred to above.

Further details from the British Business Bank are available here.

For more information, please contact:

Matthew Ayre
Partner, Head of Finance
+44 20 7295 3304

Barry Newman
Partner, Finance
020 7295 3451

COVID Corporate Financing Facility ("CCFF")

Since 23 March 2020, the Bank of England (the "BoE") has been able to lend to large corporates by buying commercial paper (effectively an unsecured short form debt instrument). Corporates are expected to be able to borrow up to £1 billion each, depending on credit ratings and subject to constant review, and will need to borrow a minimum of £1 million and in multiples of £100,000. 

Some of the key terms of the commercial paper include that:

  • the maturity of commercial paper will be between one week and twelve months (although it can be repaid early if the borrower so decides);

  • in terms of pricing, the BoE will purchase the commercial paper on terms comparable to those prevailing in the markets before the economic shock from COVID-19, being more precisely:

    ➢ for primary market purchases, it will purchase commercial paper at a minimum spread above a reference rate, based on the current sterling overnight index swap (OIS) rate. The respective reference OIS rate will be determined at 09:45 on the day of the operation;

    ➢ for secondary market purchases, it will purchase commercial paper at the lower of amortised cost from the issue price and the price as given by the method used for primary market purchases as set out above. The BoE will also apply an additional small fee (currently set at 5bps and subject to review) for use of the secondary facility, payable separately; and

    ➢ the respective spreads are subject to review by the BoE, but by way of illustrative example as at 23 March 2020 these were 40 bps for a relevant A2/P2 short-term credit rating (see 'Eligibility' section below regarding minimum credit ratings);

  • drawdowns under the facility will be available for an initial 12 month period (ending March 2021) and at least 6 months' notice will be given before closing it;

  • the commercial paper can be in a simplified version based on the ICMA standard, but while other simplified versions may be considered they cannot have any non-standard features (such as extendibility or subordination); and

  • the commercial paper will be issued directly into Euroclear and/or Clearstream.

This facility therefore is designed to provide companies access to pre-crisis terms of debt (rather than anything more favourable – for example there is no interest holiday akin to the CBILS discussed above).

If a business issuing commercial paper under the CCFF with a maturity after 19 May 2021 will be required to commit to the BoE that it will show restraint on the payment of dividends and other capital distributions and on senior pay during the period in which their commercial paper is outstanding.

If a business considers itself eligible and wishes to borrow funds under this scheme then they should consider approaching their current bank (or, if their current bank does not offer commercial paper then select a bank that does from the link available here).

The BoE will publish weekly details of all businesses that have borrowed money under the CCFF (together with the amount borrowed).  

Although the CCFF will offer welcome liquidity to eligible companies, important considerations apply for a company taking on new debt as discussed in section 2 above.


To be eligible for the CCFF:

  • The borrower will need to make a "material contribution to economic activity in the United Kingdom".
    ➢ This should be satisfied if (i) it is a UK-incorporated company (regardless of whether it has a foreign parent) with genuine business in the UK, (ii) it has significant employment in the UK, or (iii) its headquarters are in the UK.
    ➢ The BoE will, in addition, take into consideration the borrower's UK revenues, UK customer base and number of operating sites in the UK.

  • The borrower should be able to "demonstrate they were in sound financial health prior to the shock".
    ➢ The BoE will accept borrowers with the following credit ratings (from at least one of S&P, Moody’s, Fitch or DBRS Morningstar) as at 1 March 2020:
    • short-term credit rating of at least A-3 / P-3 / F-3 / R-3; or
    • long-term credit rating of at least BBB3 / Baa- / BBB low.
    ➢ If the borrower does not have a short-term or long-term credit rating as at 1 March 2020 then the BoE will need to "assess that the issuer is of equivalent financial strength" in order to give it access to the facility. There are two ways for borrowers to show this: either (i) be internally rated as investment grade as at 1 March 2020 by multiple banking counterparties as shown on a central consolidated list (created for this purpose and maintained by Credit Benchmark) or (ii) get a form of retrospective "point-in-time" credit rating as at 1 March 2020 from one of the major credit rating agencies.

    Based on this eligibility criteria, the CCFF would be more suitable for larger companies with more sophisticated corporate treasury operations and investment grade standing. The CBILS and CLBILS (discussed in section 2 above) are likely to be a more suitable option for smaller, unrated, companies unfamiliar with commercial paper issuance. 

  • Companies, and other entities within their groups, can only access one of the CCFF, BBLS, CBILS and CLBILS (see section 2 above).
  • Banks, building societies, insurance companies and other financial sector entities regulated by the BoE or the FCA (including any companies within groups which are predominantly in such business) will not be eligible. Leveraged investment vehicles and public bodies or public undertakings (where the UK or other EU state can exercise dominant influence) will also not be eligible.

  • There will be no requirement for the borrower to have previously issued commercial paper.

Further details are available here.

For more information, please contact:

Spencer Summerfield
Partner, Co-Head of Corporate
+44 20 7295 3229

Paul Dolman
Partner, Co-Head of Corporate, Head of Private Equity and Financial Sponsors
+44 20 7295 3274

Matthew Ayre
Partner, Head of Finance
+44 20 7295 3304

Barry Newman
Partner, Finance
020 7295 3451

Future Fund

The UK Government has launched a new scheme (the "Future Fund") which will be available until at least the end of September 2020, under which it will use the British Business Bank to invest alongside private investors in businesses that have raised more than £250,000 from private investors in the past 5 years. This is most likely to be utilised by venture-capital-backed start-ups.

The investment will be made by way of a convertible unsecured bridge financing loan, with at least 8% annual (non-compounding) interest and a 3 year term (without the ability for the company to unilaterally repay early without investor consent). The loan can convert into senior equity at a discount of at least 20% (or, in certain circumstances, be redeemed with a 100% redemption premium) upon the first of maturity, further successful funding rounds or a sale/IPO of the business. Over 50% of the aggregate amount of convertible loans must be provided by third party investors, and the UK Government's portion of the overall funding needs to be between £125,000 and £5 million. The money cannot be used to (i) repay any borrowings; (ii) pay any dividends; (iii) pay any bonuses; or (iv) pay any advisory fees.


The Future Fund eligibility criteria requires a borrower:

  • to have raised at least £250,000 from third party investors in the past 5 years and having third party investors willing to invest further;

  • to be the ultimate parent of its group, UK registered (unless the business has been required to establish a non-UK ultimate parent for the purposes of accelerator programmes such as TechStars or Y-Combinator) and incorporated on or before 31 December 2019;

  • to not being listed; and

  • to have either at least half of its employees being UK-based or at least half of its revenues being UK sales.

Further details are available here.

For more information, please contact:

Spencer Summerfield
Partner, Co-Head of Corporate
+44 20 7295 3229

Paul Dolman
Partner, Co-Head of Corporate, Head of Private Equity and Financial Sponsors
+44 20 7295 3274

Tax deferral


The UK Government has announced that all businesses in the UK are able to defer their VAT payments for the rest of this quarter (applicable from 20 March 2020 to 30 June 2020) until the end of the 20/21 tax year. No application will be required, and any businesses wishing to defer do not need to tell HMRC prior to doing so. Businesses wishing to defer should temporarily cancel any direct debits they have set up for the payment of VAT payments to HMRC. Businesses should continue to file their VAT returns by the relevant date as normal.


The UK Government has confirmed that all businesses in financial distress, and with outstanding tax liabilities, will be able to receive tailored support from the HMRC through the "Time To Pay" service.

While these arrangements are agreed on a case-by-case basis and it is difficult to apply general principles to what is and is not possible, we understand that HMRC has already been very receptive to requests for deferrals of tax payments.

Specific circumstances can be discussed with HMRC using their new COVID-19 dedicated helpline (0800 024 1222 between 8am-8pm on Monday to Friday and 8am-4pm on Saturday). Examples of arrangements that HMRC may discuss with a business are:

(a) agreeing an instalment arrangement; or

(b) cancelling penalties and interest where there are administrative difficulties in contacting or paying HMRC immediately.

In relation to instalment arrangements, HMRC will assess the income, expenditure and assets of the taxpayer and what is being done by the business to get their tax payments back in order. HMRC will then determine whether the business should be able to pay immediately or not, and if not, the timeframe that the business needs to get its payments back on track. More in depth questions may be asked by HMRC where a business has previously been granted time to pay, and in complex situations HMRC may ask for evidence before making a decision. Businesses should continue to file all relevant returns unless otherwise agreed with HMRC.


For more information, please contact:

Russell Warren
Partner, Tax
+44 20 7295 3227

Business Rate Relief

All retail, hospitality and leisure businesses in England will benefit from a 12-month business rates relief for 2020/2021. While it has a limited sectoral scope, the relief is likely to be popular for eligible businesses which have long cited business rates as being an issue even when the economy is strong. There is no rateable value limit on this relief and will therefore apply to all premises in those sectors.

It will apply from the April 2020 council bill and while most businesses are not expected to need to take any action, some local authorities have decided to operate an application process.


To be eligible, the business must:

  • be based in England; and

  • be an occupied property wholly or mainly used as a shop, restaurant, café, drinking establishment, cinema, live music venue, for assembly and leisure, hotels, guest and boarding premises or self-catering accommodation.

This is a test on use rather than occupation; businesses which are occupied but not wholly or mainly used for the purposes listed above will not qualify for the relief. The UK Government has stated that businesses which have closed temporarily due to the UK Government's advice on COVID-19 should be treated as occupied for the purposes of obtaining the relief.

Further details are available from the UK Government for retail, hospitality and leisure businesses by clicking here (including a non-exhaustive list of those businesses the UK Government considers will benefit from the relief which they are regularly reviewing) and for nurseries by clicking here (including details of properties that will benefit from the relief).

For more information, please contact:

Russell Warren
Partner, Tax
+44 20 7295 3227

Grants for Small Business

The UK Government is providing three grants to small businesses based on their business rates banding:

(a) Small Business Grant: £10,000 to all businesses regardless of sector currently eligible for small business rate relief (rateable value less than £15,000) or rural rate relief (e.g. being the sole post office in a small village). This is expected to cover 700,000 of the country's smallest businesses.

(b) RHL Business Grant: £25,000 to all retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.

(c) Discretionary Grant: £25,000 or up to £10,000 (discretionary) to small businesses who have "suffered a significant fall in income due to the COVID-19 crisis" but are not eligible for the Small Business Grant or RHL Business Grant. Local authorities have discretion, but recipients should:

(i)   be a small business (i.e. satisfying two of the following tests: (i) annual turnover under £10.2m, (ii) balance sheet assets under £5.1m and (iii) under 50 employees) which was already trading on 11 March 2020;

(ii)  have relatively high ongoing fixed property-related costs (e.g. rent or mortgages); and

(iii) occupy property, or part of property, with a rateable value or annual rent/mortgage payments below £51,000.

Despite the discretion, the UK Government has asked that local authorities to prioritise small businesses with shared spaces, regular market traders, small charity properties, bed and breakfasts that pay council tax rather than business rates and charity properties.

The Small Business Grant and the RHL Business Grant will be made to the person who (according to the billing authority's records) was the ratepayer for the property as at 11 March 2020. In a shared office arrangement, a more typical arrangement is that the landlord charges a rent inclusive of rates (to the extent that they are payable, as many small businesses in particular already benefit from reliefs). In this case, it's likely that the landlord will receive the grant but politically is likely to be under pressure to share the benefit of this with the actual occupants in proportion to their rental contributions.

The Small Business Grant and RHL Business Grant will not be available for properties occupied for personal use (e.g. private stables or beach huts) or for recipients who are in liquidation or dissolved as at 11 March 2020.

While most businesses are not expected to need to take any action to apply for the Small Business Grant, we understand some local authorities have decided to operate an application process. Businesses are expected to need to actively contact their local authorities for the RHL Business Grant and the Discretionary Grant

Further details are available here and here.


For more information, please contact:

Matthew Ayre
Partner, Head of Finance
+44 20 7295 3304

Barry Newman
020 7295 3451

Russell Warren
Partner, Tax
+44 20 7295 3227

Statutory Sick Pay

As background, businesses are required to pay a minimum amount of Statutory Sick Pay (currently £95.85 per week as of 6 April 2020) for employees who are off sick for up to 28 weeks. Statutory Sick Pay is normally payable from the fourth day of sickness absence.

As a response to COVID-19, the UK Government has introduced legislation to change the rules so that employees are covered by Statutory Sick Pay if they:

  • self-isolate because they or someone in their household or someone in their household "bubble" has symptoms of COVID-19;

  • self-isolate because they are notified to do so as a result of the UK Government's 'test, track and trace' scheme; or

  • are extremely vulnerable and have been advised to shield

The UK Government has also introduced further legislation requiring Statutory Sick Pay to be paid from the first (rather than fourth) day of absence for any COVID-19 related absence, with retrospective effect from 13 March 2020.

Under the new Coronavirus Statutory Sick Pay Rebate Scheme, certain SME businesses are now able to claim back Statutory Sick Pay paid to employees for sickness absence due to COVID-19, up to a maximum of two weeks per employee (up to £191.70 per eligible employee). Such Statutory Sick Pay can now be reclaimed by eligible employers through an online service.

The rebate scheme will not cover any enhanced sick-pay offered (contractually or otherwise) by employers, and businesses are still required to fund the up-front cost of such sick-pay (potentially causing painful cash-flow issues in the current climate). However, it could be especially valuable to low-skilled workforce-heavy businesses if a large percentage of the workforce is off sick at any one time.


To be eligible to claim back the Statutory Sick Pay:

  • the employer must be UK based and have had fewer than 250 employees on 28 February 2020. For these purposes:

    (a) corporate groups will be treated as being a single employer but only employees in the UK will count; and

    (b) it is our expectation that portfolio companies of investment funds will not be treated as belonging to the same corporate group as other sister portfolio companies;

  • the employer must maintain a record of staff absences (although no doctor note is required) and payments of Statutory Sick Pay;

  • the employee is eligible for Statutory Sick Pay and is off work due to COVID-19; and

  • the payment must have been made on or after 13 March 2020 for employees self-isolating because they or a member of their household has suspected symptoms; on or after 16 April 2020 for employee shielding; or on or after 28 May 2020 for those self-isolating under the 'test, track and trace' scheme; or on or after 6 July 2020 for those self-isolating because someone in their bubble has suspected symptoms. 

For more information, please contact:

Ed Mills
Partner, Head of Employment
+44 20 7295 3424

Protection from eviction

Mirroring measures previously announced for domestic tenants, the UK Government has confirmed that landlords of commercial premises will be prevented from taking steps to forfeit and recover possession of those premises if a tenant fails to pay rent.

The Coronavirus Act 2020 (the "CA") provides protection to business tenants for non-payment of yearly rent, service charges, insurance contributions and other sums due under a business tenancy from 25 March 2020 until 30 September 2020. This does not affect enforcement action already underway although the arrears subject to the protection of the CA do not have to relate to the March and June 2020 quarters alone.

The leases benefiting from this protection are those business leases to which Part 2 of the Landlord and Tenant Act 1954 apply. The Ministry of Housing, Communities and Local Government has clarified this by stating that the protection against forfeiture in the CA is intended to apply to all commercial leases. It has not clarified whether this applies to commercial leases where the tenant is not in actual occupation, but we expect that to be the case (otherwise where a commercial tenant has a sub-tenant then the landlord could circumvent the CA by forfeiting the intermediate commercial lease, thereby terminating an occupational sub-tenant, subject to any application for relief).

A landlord can still forfeit and recover possession of premises as a result of other breaches of lease, for example, failure to comply with 'keep open' clauses, insolvency defaults or breaches of repair covenants. The landlord's rights to do so depend on the drafting of the particular lease, and remain subject to the statutory right of tenants to apply to the courts for relief.

The CA does not currently protect business tenants from the corresponding debt claim that a landlord will have where rents aren't paid under a lease (together with any interest or penalties due thereon which will be dictated by the terms of the lease), or the other remedies of a landlord such as recourse to rent deposits, guarantees and their rights under the Commercial Rent Arrears Recovery statutory regime ("CRAR") although, in respect of CRAR see further below. This means that, while businesses that go into arrears on their rent will be relieved that they cannot be evicted in the short-term, they will need to repay the arrears in full plus accrued interest once the protection is lifted (be that 30 September 2020 or later if the UK Government extend the protection) to avoid facing eviction at that point.

Pursuant to the Corporate Insolvency and Governance Act 2020 (see section 10 below for further details), there is a temporary ban on the use of statutory demands and winding up petitions where a company cannot pay its rent due to COVID-19. The UK Government has also put in place legislation to prevent landlords using CRAR unless they are owed rent for 189 days or more.

Although this is an ever-changing picture, we continue to recommend that landlords and tenants enter into discussions regarding rent suspensions and repayment terms, and document what is agreed to avoid later disputes. In doing so, tenants should be mindful as to their ability to repay suspended or delayed rent in the near future. 

While private homeowner landlords on buy-to-let mortgages will benefit from recently-announced payment holidays on their mortgages, there are not currently any similar proposals in respect of mortgage payments on commercial property. While this may concern commercial landlords who expect certain tenants will soon fall into arrears, the UK Government has confirmed that it is actively monitoring the impact on commercial landlords' cash flow and this position might change. The UK Government is currently consulting with various landlord bodies about further possible measures in respect of non-payment of rents. Landlords should consider reserving rights to revisit any rent concessions they put in place if the UK Government announces measures for support with unpaid rent.

For loans falling under FCA regulation, it has issued guidance that no responsible lender should be considering repossession as an appropriate measure at this time and should grant payment holidays where needed as a result of COVID-19. Where appropriate, landlords should enter into discussions with their lenders in conjunction with any concessions granted to their tenants.

Further details as to the considerations that either landlords or tenants will have during this time are available on our website here and further details from the UK Government on the protection from eviction are available here.


For more information, please contact:

Simon Rutman
Partner, Head of Real Estate
+44 20 7295 3379

Changes to the insolvency regime

The UK Government has introduced measures (some of which are on a permanent basis) to improve the UK's insolvency system in response to the COVID-19 situation.

Pursuant to the new Corporate Insolvency and Governance Act 2020:

  • A temporary suspension of winding up petitions and statutory demands. Creditors are prevented from presenting a petition to wind up a company on the basis of an unpaid debt unless they have reasonable grounds to believe that the grounds for winding up the company would still have applied if COVID-19 had not had an effect on the company. This temporary suspension applies from 27 April 2020 to 30 September 2020.

    Further, any statutory demand served between 1 March and 30 September 2020 cannot be used as the basis of a winding up petition against a company after 27 April 2020.

    There are also provisions which rectify situations where a petition has already been issued or a winding-up order made in contravention of the new measures.
  • A temporary suspension of the wrongful trading provisions for company directors, applying retrospectively from 1 March 2020. The Court will not hold a director responsible for the worsening of the financial position of the company or its creditors during the period between 1 March 2020 and 30 September 2020. There is no requirement to show that the company's worsening financial position was due to COVID-19.  This temporary measure applies to the directors of most companies, but certain types of companies are excluded (such as insurance companies, banks and financial services companies).  Importantly, there is no change to directors' duties more broadly (including the obligation to act in the best interests of the creditors when a company is insolvent) or to the fraudulent trading regime. The risk of disqualification or other actions against directors for breach of duty or misfeasance therefore remain.

  • Prohibition on ipso facto clauses in contracts for the supply of goods or services. Clauses which permit the supplier to terminate (or vary the terms of) a supply contract on an insolvency of the customer will be ineffective.  Suppliers will also be prevented from terminating a contract based on past breaches once the customer enters an insolvency procedure. Suppliers will only be able to terminate (or vary) the contract with the consent of the relevant office-holder or the directors (if the company is in a solvent restructuring procedure) or by applying to court and demonstrating that the continuation of the contract would cause the supplier hardship. A number of types of supply contracts are exempt from these new rules, broadly those involving financial services and those covered by the existing continuation of essential supplies regime.  Contracts with small suppliers who meet prescribed criteria are temporarily exempt until 30 September 2020.

  • A new, free-standing, moratorium from most types of creditor action, which can be instigated by the directors of a company in financial distress through a relatively simple out of court process. Whilst the moratorium will be overseen by a "monitor" (an insolvency practitioner), the directors will retain the day-to-day control of the company.

    The moratorium is available for use by the majority of companies, however there are detailed eligibility requirements (some of which have been relaxed temporarily to account for the effects of COVID-19). The moratorium will only be available for use by a company that is (or is likely to become) unable to pay its debts and where there is a likelihood of rescuing the company as a going concern.

    The initial term of the moratorium is 20 business days, however this can be extended once by the directors, or otherwise with the agreement of creditors or with court approval. It could be used to provide breathing space whilst a company is preparing for a CVA or scheme of arrangement or a solvent sale or other consensual restructuring.  Once in the moratorium, the company will only be required to pay those pre and post-moratorium debts prescribed by the legislation and there are restrictions on certain actions (such as the disposal of certain assets and the incurrence of further debt) without the consent of the monitor or the court. The moratorium is also required to be widely notified on the company's website, place of business and company documents.
  • A new court-approved restructuring plan proposal similar to the existing scheme of arrangement under the Companies Act 2006, but with the ability for the court to bind all creditors to a restructuring plan even where not all classes of creditor have voted in favour of it (known as cross-class cram down) provided that the court is satisfied that those creditors would not be worse off in the likely alternative (such as administration). This tool would be available to companies in financial distress in order to impose an arrangement or compromise aimed at addressing the company's financial difficulties.

For further details, see our more detailed note available here.


For more information, please contact:

Edward Smith
Partner, Head of Restructuring & Insolvency 
+44 20 7295 3482

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The rapid global spread of the Covid-19 virus has resulted in significant market volatility and is placing an immense strain on the business community. Get guidance and practical advice on key operational and legal issues.

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