Extended relief for businesses as COVID-19 cases continue to increase
On 24 September 2020, the Government announced the extension of several measures to continue to support businesses through the ongoing COVID19 pandemic, including:
- The extension of the temporary VAT reduced rate for hospitality and tourism (5%) until 31 March 2021.
- The extension of several temporary loan schemes, so that applications for the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme, Coronavirus Large Business Interruption Loan Scheme and Future Fund can now be made until November 2020.
- The ability for businesses to pay deferred VAT due in March to June 2020 over the financial year 2021-2022, rather than being required to pay it in full at the end of March 2021. Importantly, despite all businesses being eligible, a business wishing to make use of this payment scheme will need to ‘opt in’.
- A new scheme to replace the furlough scheme – the Job Support Scheme – which my colleague, Patrick Glencross, summarises here.
On the same day, amendments to the Corporate Insolvency and Governance Act 2020 (CIGA) were laid before Parliament and are due to come into force on 29 September 2020. I reported on the provisions of CIGA, which came into force in June 2020, in my blogs in May and June. CIGA (amongst other things) imposes temporary restrictions on the ability of creditors to wind up a company, as well as introducing new processes to protect companies in financial distress (e.g. the 20-day moratorium, a new restructuring plan and restricting suppliers from invoking termination clauses when a company enters into an insolvency procedure).
These amendments extend the ‘relevant period’ under CIGA from 30 September 2020 in relation to (amongst other things):
- The prohibition on creditors from using statutory demands and winding-up petitions unless they can prove a company’s financial difficulties are not as a result of COVID19. The prohibition has been extended until 31 December 2020.
- The temporary provisions relating to the new moratorium procedure, which relax the entry requirements, which will now apply until 30 March 2021.
- The relaxation of company annual general meeting requirements to 30 December 2020.
- The small supplier exemption from the scope of the prohibition on termination clauses in supply contract to 30 March 2021.
The provisions relating to the suspension of liability for wrongful trading have not been extended and are due to end on 30 September 2020.
It is hoped that the extensions to the Act will prevent aggressive creditor action throughout the Autumn and Winter into the new year. Such measures show a commitment by the Government to continue to protect businesses and to assist with cash flow, where possible, although they clearly do not go as far as the measures announced at the height of the pandemic. Notably, the stay on possession proceedings was not extended beyond 20 September 2020, with a new process now in place to manage such proceedings over the next 6 months. My colleague, Jocelyn McLeod, reported on this recently here.
If you are worried about how any of the above may affect your business please contact Joanna Ford at firstname.lastname@example.org