A range of government support packages have been announced to help the UK real estate sector. David Farr provides a quick guide to all the options.
Retail, hospitality and leisure businesses operating in England will be granted a business-rate holiday for the 2020/2021 tax year. Eligible properties include: shops, restaurants, cafés, bars, cinemas, live music venues, hotels, guesthouses and boarding houses, self-catered accommodation, estate agents and bingo halls. Scotland and Wales are introducing similar measures.
Local authorities will write to eligible businesses to arrange payments and re-issue business-rate bills where applicable. However, businesses that have already received a bill should ask to be rebilled, and firms should also get confirmation from their lender that non-payment of tax will not breach any covenants.
Grant funding schemes
Small businesses with a rateable value of up to £15,000 can claim £10,000 through the Small Business Grant Fund (SBGF). Under the Retail, Hospitality and Leisure Grant Fund (RHLG), business properties with a rateable value of £15,000-£51,000 are entitled to a cash grant of £25,000. Again, local authorities will contact businesses that are eligible.
Businesses outside of the retail, hospitality and leisure sectors may still be able to claim existing business rate exemptions. Empty Properties Relief can be applied to empty buildings for three months, and industrial properties (warehouses, for example) can extend this for a further three months. Other properties, including listed buildings, buildings with a rateable value below £2,900, and properties owned by charities and amateur sports clubs, can remain exempt until they are reoccupied. Hardship relief is also available where a property owner would be in financial difficulties without it, or where relief is in the interests of local people.
To claim either relief, owners must apply to their local authority.
UK VAT-registered businesses, including overseas landlords, can defer the VAT due between 20 March and 30 June 2020. Tax-payers have until 31 March 2021 to pay the liabilities accumulated during the deferral period. VAT filings must still be made and any VAT refunds and reclaims will continue to be paid by HMRC as normal.
There’s no need to contact HMRC. Businesses should, however, cancel their direct debit and obtain confirmation from their lenders that such non-payment of tax will not breach any covenants.
Time To Pay arrangements
Businesses at risk of missing a tax payment due to COVID-19 should call HMRC’s dedicated helpline (0800 024 1222). HMRC will consider individual circumstances and tax liabilities on a case-by-case basis. Businesses concerned about future payments should wait to call the helpline until nearer the time.
Income tax payments on account
Landlords with an income tax payment on account due on 31 July 2020 have the option to defer payment until the 31 January 2021 deadline. Again, no application is required, and tax-payers won’t be charged late payment penalties or interest during the deferral period. Check with lenders that such non-payment of tax will not breach any covenants.
New financing initiatives
Two financial initiatives have been introduced to support firms facing short-term funding concerns:
The COVID Corporate Financing Facility (CCFF) will see the Bank of England buying short-term debt from larger companies that contribute to the UK economy. Firms must have been able to obtain funding on similar terms before the crisis. Detailed information on the CCFF is available from the Bank of England, together with a list of banks that can assist.
CBILS and CLBILS
Backed by the British Business Bank, the Coronavirus Business Interruption Loan Scheme (CBILS) will provide UK-based small- and medium-sized enterprises (SMEs) with loans of up to £5 million for up to six years. The first 12 months of interest payments and lender fees will be covered, and commercial lenders will receive an 80% guarantee on each loan. SMEs must have an annual turnover of no more than £45 million.
A similar scheme is also available to larger businesses with turnover up to £500 million. To qualify, businesses must present a viable borrowing proposal that will enable them to trade beyond any short or medium-term difficulty. While many details are yet to be announced, we recommend interested firms contact their bank as soon as possible.
The Coronavirus Job Retention Scheme allows UK employers to claim up to 80% of monthly salary for furloughed workers (maximum of £2,500), as well as National Insurance and minimum automatic enrolment employer pension contributions.
Businesses with fewer than 250 employees can claim a statutory sick pay refund for employees off work due to COVID-19 for up to two weeks. For Real Estate Investment Trusts, HMRC will decide whether to assist with cashflow concerns resulting from the Property Income Distribution requirement on a case-by-case basis.
Other tax considerations
Finally, it is worth businesses reviewing leases and rental arrangements to discuss temporary rent reductions or concessions, but they will also need to make sure that the tax consequences are considered to mitigate any immediate tax charges. Businesses should also re-assess existing tax positions (eg, use of existing tax losses) to optimise cashflow, and should ensure no capital allowances are left unclaimed that could prove invaluable in the short term.
If you would like any support in dealing with the issues discussed in this article, contact David Farr.