Coronavirus (COVID-19) – help and support for hospitality businesses
Following the announcement on 20th March by the Prime Minister all pubs, restaurants, bars, nightclubs and cafes throughout the UK will now have closed.
After the guidance earlier in the week that consumers should stay away from hospitality venues, but with no closure requirement, yesterday’s announcement at least brings certainty and clarity.
Chancellor Rishi Sunak’s, announcement on 20 March outlined an unprecedented series of measures to support businesses and protect the income of employees. We applaud this step. It may help many businesses come through this crisis, as well as provide the means to support their employees and protect their workforce for the future needs of the business.
Much of the detail of precisely how the support announced will be delivered remains unclear. It is expected it could be weeks until banks and HM Revenue & Customs (HMRC) are ready to respond fully. This update summaries the key points from the information available so far.
The guidance below is for hospitality businesses. General guidance for businesses can be found here.
Coronavirus Job Retention Scheme
Under the new Coronavirus Job Retention scheme, government grants will cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis.
The scheme, open to any employer in the country, will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It will continue for at least three months.
To claim under the scheme employers will need to:
- designate affected employees as ‘furloughed workers’ and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
Other details announced include:
- HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. This means employers will need to pay staff and claim the money back
- Employers do not need to pay 20% of wages in order to qualify for the 80% reimbursement payment
- This is a grant, not a loan, so it does not have to be repaid to government
- The reimbursement will cover furloughed employees who were on the payroll as at 28th February 2020 onwards
- Redundancies and lay-offs after 1st March can be ‘unwound’
- Employees on short time working (reduced hours) will not be eligible to have an element of salaries repaid, only those on furlough.
It is not yet clear whether the ‘wages’ will include tips, tronc, gratuities and service charges.
HMRC is working urgently to set up a system for reimbursement – we understand existing systems are not set up to facilitate these payments to employers.
Businesses that need short-term cash flow support may benefit from the VAT deferral announced (see below) and may also be eligible to apply for a Coronavirus Business Interruption Loan.
The next quarter of VAT payments will be deferred, meaning businesses will not need to make VAT payments until the end of June 2020. Businesses will then have until the end of the 2020-21 tax year to settle any liabilities that have accumulated during the deferral period.
The deferral applies automatically, so businesses do not need to apply for it. VAT refunds and reclaims will be paid by the government as normal.
Income tax payments
Income tax payments due in July 2020 under the self-assessment system will be deferred to January 2021.
Income tax self-assessment payments due on the 31 July 2020 will be deferred until the 31 January 2021. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.
PAYE liabilities were not specifically mentioned in the Chancellor’s address. Our experience so far is that HMRC are readily granting deferral of this liability on a month by month basis on application to HMRC via their helpline.
Take-away planning rules relaxed
To support the food industry and help provide meals for people who need to self-isolate, the government has relaxed the planning regulations. This allows pubs and restaurants to provide takeaways without a planning application.
Other sources of support
The government has announced several areas of support they are working on for businesses. Whilst some of these are not immediately available, we recommend you keep monitoring your position and talk with your funders, creditors and banks until some of the support outlined below starts to flow through.
Time to pay
HMRC have set up a dedicated Time to Pay helpline for businesses impacted by coronavirus – details at https://www.gov.uk/government/news/tax-helpline-to-support-businesses-affected-by-coronavirus-covid-19.
Early indications are that HMRC are being supportive and agreeing deferrals as well as suspending interest and late payment penalties. Whilst VAT and self-employed payments on account are to be automatic deferrals for other tax liabilities such as PAYE, corporation tax and other income tax payments due as but it is crucial that you contact them rather than simply not pay on time.
We would encourage all affected businesses to take advantage of this. However, the helpline is likely to be very busy and you may have a long wait to speak to an operator, so some persistence will be required.
Please make a note of the time, date and operator you speak to, or if you do not get through, the dates and times you attempted to call.
New Business Interruption Loan Scheme
A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch in a matter of weeks to support businesses to access bank lending and overdrafts.
The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence to continue to provide finance to SMEs.
The government will not charge businesses or banks for this guarantee, and the scheme will support loans of up to £5 million in value. The government will cover the interest on these loans for the first 12 months of interest payments (originally 6 months).
However, we understand the details of the loan scheme are not yet clear to the banks. Banks are hoping to have more details during the week commencing 23rd March.
A new lending facility from the Bank of England will also help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans.
You can also find useful information and resources on the website of our regulatory body, the ICAEW at: https://www.icaew.com/insights/coronavirus/business-interruption. This includes resources offering practical advice on supply chain risks, travel and insurance.
Grants for retail, hospitality and leisure businesses
The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.
Businesses in these sectors will receive a grant of either:
- £10,000, if they have a rateable value of under £15,000; or
- £25,000, if they have a rateable value of between £15,001 and £51,000.
You are eligible for the grant if your business is based in England and it is in the retail, hospitality and/or leisure sector.
Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used:
- as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
- for assembly and leisure
- as hotels, guest and boarding premises and self-catering accommodation
You do not need to do anything to access the scheme. Your local authority will write to you if you are eligible for this grant.
Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority.
Guidance on all the above grants will be provided to local authorities shortly.
Statutory Sick Pay
The government will bring forward legislation to allow small and medium sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:
- Employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people employed as of 28 February 2020.
- This refund will cover up to two weeks’ SSP per eligible employee who has been off work because of COVID-19
- Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
- Employers should maintain records of staff absences, but employees will not need to provide a GP fit note
- The eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to self-isolators comes into force
- The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible. Existing systems are not designed to facilitate employer refunds for SSP.
At the moment, there is no further detail on how you access this support, or how quickly it will become available to you. We will continue to monitor the situation and keep you informed.
The government will increase the Business Rates retail discount to 100% from 1st April 2020 t0 31st March 2021 and extend it to the leisure and hospitality sectors. They will also increase the planned rates discount for pubs to £5,000.
No application is required, so we recommend you cancel any business rates direct debits that will roll over automatically from the previous year.
Taken together with existing small business rate relief (which provides full relief for businesses using a single property with a rateable value of £12,000 or less), an estimated 900,000 properties, or 45% of all properties in England, will receive 100% business rates relief in 2020/21.
Businesses that received the retail discount in 2019-20 will be rebilled by their local authority as soon as possible.
Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority.
The government will provide an additional £2.2 billion funding for local authorities to support small businesses that already pay little or no Business Rates because of Small Business Rate Relief (SBBR).
This additional funding will provide a one-off grant of £3,000 to around 700,000 business currently eligible for SBRR or Rural Rate Relief. For a property with a rateable value of £12,000, this is one quarter of their rateable value, or comparable to 3 months of rent.
Landlords are very aware of the situation. There is no instruction or pressure from the government to forgive commercial rents.
Each landlord is unique in their response and it is a matter of negotiation. We advise that you speak to your landlord and ask for assistance
The next rent quarter day is Tuesday 24th March. If possible, take action before then and consider any direct debits that may be set up to pay rents.
Guidance for employers
If the situation is so severe that you need to take action to cut-costs, then the government has produced guidance and information regarding your obligations when it comes to laying-off staff or placing them on short-time working, this can be found at:
Our regulatory body, the ICAEW, has also provided some useful information and resources:
Other help for business
Including updates on the latest announcements and new measures of support, as well as useful helplines and ICAEW insights, this page is one to keep an eye on.
If you are a WMT tax client who subscribes to our fee protection service, you can also benefit from free advice from the business and employment law matters helplines included in the service package.
We understand how worrying the current situation. We will continue to keep you informed and seek ways to ensure the support you need is available. As the situation changes and develops we will of course keep you informed.
If you have any questions or queries, please direct them to your WMT client service partner in the first instance.