Specialist guidance on coronavirus for businesses

Supporting your business through the coronavirus pandemic (COVID-19) – your questions answered

To help us address your concerns and provide information that is relevant to your business, please tell us which areas you would like information about by completing the form or find the full information below.

Please note, all information should be taken as general guidance. It is not intended to be a definitive statement of the law nor relied on as advice. All information is correct at the time of publication.

Coronavirus Q&A

Managing issues relating to actual or potential insolvency

What can I do if I am unable to pay my debts as they fall due?

Being unable to pay your debts when they are due could be a temporary (coronavirus) related position, or more a serious/fundamental issue with your business. In either case, it is important to think about your situation and the future of your business carefully and consider taking professional advice. It can be helpful to engage with key stakeholders early, for example HRMC, lenders, landlords and/or other suppliers to your business. You may be able to negotiate (temporary) variations of terms with them.

The government has been active in issuing policies and guidance as well as temporarily changing the law during the crisis (e.g. government backed loans, furloughing, restricting landlords’ enforcement powers and suspending “wrongful trading” laws). It is a constantly changing playing field, so we recommend that you research whether any (government supported/coronavirus related) loans, funding or support are available to you as well as checking the up to date position in respect to other means of supporting or protecting your business, seeking professional advice if assistance is required.

Notwithstanding that the government has introduced a number of temporary measures to support UK businesses and companies, it is also important to objectively evaluate whether your business remains viable, now or in the future, and to assess your staffing needs for the future; the furlough scheme is only a temporary fix. Obtaining professional advice early, from solicitors, insolvency practitioners and/or accountants, may be critical to your business surviving.

Correct as at 19 May 2020

As a director, am I personally liable if my business enters insolvency?

Directors can become personally liable for losses to creditors if they trade beyond the point where legislation dictates that they should have ceased to trade in order to minimise those losses. Whilst some of the relevant legislation has been suspended during the current coronavirus crisis, this does not mean that there is no risk. Personal liability can also attach to directors who breach their duties or cause the relevant company to act inappropriately. It is important to speak to professionals as early as possible if your company or business is insolvent, likely to become insolvent or of dubious solvency. This will help you avoid placing the relevant business or company and/or its board at risk. It also gives the professionals the best opportunity to rescue the company or business.

The insolvency options available to a company or business dramatically decline as it runs out of money and/or (over)stretches its credit terms. The likelihood of avoiding an insolvency process is significantly improved the earlier that the relevant company seeks advice, engages with stakeholders and implements appropriate changes.

Correct as at 19 May 2020

What can I do if my business is necessarily dependent upon key suppliers and/or customers who may be at risk of falling into an insolvency process, being unable to supply me or pay my invoices?

You can consider revising your terms to offer stronger protections for you, such as retention of title clauses. A retention of title clause ensures that the seller retains legal ownership of goods until certain conditions are met, which will normally include payment in full for the relevant goods. Retention of title is a very complex area of law, so even if you consider you have adequate protection it is worth checking that you have the cover that you believe you have. A retention of title clause is also of little or no value unless you take practical steps in relation to your supplies, including ensuring that the relevant products are clearly identifiable as having been supplied by you.

You can also reduce payment periods; ensure that invoices are delivered electronically to persons able to authorise and pay them; and consider diversifying your customer and supplier bases.

We recommend that you also check existing insurance policies and consider claiming under them and/or obtaining additional or better insurance cover, such as credit insurance.

Correct as at 19 May 2020

What can I do if I am facing (likely) enforcement action from my lender or HMRC and/or have issues with a tenant or landlord?

Most creditors, in particular HMRC, have no desire to force their debtors into formal insolvency processes, as it means they are far less likely to get paid. They would prefer to engage with their debtors to revise payment terms and even, in some cases, reduce the level of debt to ensure that they get more than they would in an insolvency.

Equally an underperforming tenant is often better than no tenant at all, which can give rise to rates liabilities and other costs for a landlord. Most landlords are not able to forfeit leases or effect corporate rent arears recovery at the moment. The government is also proposing to introduce a new bill, the Corporate Insolvency and Governance Bill, that will prevent landlords issuing statutory demands or winding up petitions against tenants if the reason the tenants cannot pay is because of the virus.

Correct as at 19 May 2020

I am proposing to enter into a transaction or joint venture, what can I do to protect myself in the event of the insolvency of the other party?

In these uncertain times, protecting yourself against future uncertainties when entering into any contract may be critical to that the asset, project, opportunity or benefit isn’t lost (in part) to you. Careful wording is required to ensure that relevant clauses and protections are enforceable in the event of the other party’s insolvency.

Correct as at 19 May 2020

I’ve heard the government has suspended the rules concerning ‘wrongful trading’. Do directors need to worry about personal liability for continuing to trade whilst insolvent during the pandemic?

The government has suspended legislation relating to wrongful trading, as noted above. This is an appropriate decision in the circumstances and is undoubtably a welcome relief for many businesses. However, it does not provide directors with blanket immunity from the risk of personal liability. Where a company is insolvent, or of dubious solvency, the directors’ duties to the relevant company are considered (by a court) with reference to the company’s creditors, not its shareholders. Directors must therefore act in a way that promotes or protects the creditors’ interests. Breaching those duties can still lead to personal liability. Any decision to continue trading a company which is insolvent, or of dubious solvency, must be taken with these considerations in mind.

Correct as at 19 May 2020

Contact an insolvency solicitor

Furloughing staff and the Coronavirus Job Retention Scheme

What is the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme is designed to reduce the need for businesses to make staff redundant and to help employers in sectors where working from home is not an option. By introducing the scheme, the government hopes to minimise job losses during the coronavirus pandemic and protect the economy.

When a member of staff is ‘furloughed’ they keep their job, but do not work. Typically, their pay is reduced.

When employers furlough staff, they may currently claim a proportion of the employee’s pay from the government under the Coronavirus Job Retention Scheme.

If properly furloughed, employers may claim up to 80% of an employee’s salary (subject to a cap of £2,500 per month) from the government. The scheme will remain in place in its current form until 31 July 2020.

The government has indicated that from August, employers currently using the scheme will have more flexibility to bring their furloughed employees back to work part time whilst still receiving support from the scheme. The amended scheme will run for three months from August through to the end of October 2020. Employers will be asked to pay a percentage towards the salaries of their furloughed staff. The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month. More specific details and information around its implementation will be made available by the end of May 2020.

Further details on the scheme are available on the gov.uk website.

Correct as at 15 May 2020

Can all employers use the Coronavirus Job Retention Scheme?

Employers who can access the scheme will have:

  • created and started a PAYE payroll scheme on or before 19 March 2020;
  • enrolled for PAYE online (this can take up to 10 days); and
  • a UK bank account.

The government has said that the scheme is designed to help employers who cannot maintain their current workforce because their operations have been ‘severely affected’ by the pandemic to retain their employees and protect the UK economy.

It has also said that all employers are eligible to claim under the scheme and that the government recognises different businesses will face different impacts from the coronavirus.

Correct as at 15 May 2020

Which employees can be furloughed?

Employees that were on your PAYE payroll on or before 19 March 2020 can be furloughed for the purposes of the Coronavirus Job Retention Scheme. The government has confirmed that this means that a Real Time Information (RTI) submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020. If the employee was employed on or before 19 March 2020, but the RTI was not made on or before 19 March 2020, a claim cannot be made in respect of that employee.

Employees can be on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed. Office holders, directors, LLP members and some other specific types of worker may be eligible, subject to the rules of the scheme.

If you the employee redundant, or they stopped working for you, on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages from the date on which you furloughed them, even if you do not re-employ them until after 19 March 2020. This applies as long as the employee was on your PAYE payroll as at 28 February 2020, which means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020.

Note that an employee can be furloughed by more than one employer. However, the latest guidance confirms that If an employee has had multiple employers over the past year, has only worked for one of them at any one time, and is being furloughed by their current employer, their former employer/s should not re-employ them, put them on furlough and claim for their wages through the scheme.

To be eligible for the government payments, an employee cannot undertake work for, or on behalf of, their employer when on furlough prior to 31 July 2020. This includes providing services or generating revenue. This would suggest, for example, that answering emails and/or calls, or doing any part of the employee’s normal duties must not happen.

From August 2020, the government has indicated that employees will be able to work, but the details of the amended scheme have not yet been published.

Correct as at 15 May 2020

How does an employer put an employee on furlough in the first place?

To be eligible for salary reimbursement, employers must first inform their employee that they have been furloughed. If this requires a change to the employee’s contract of employment, the government has indicated that the change should be made by agreement.

To be eligible for the grant under the scheme, employer must confirm in writing to the employee that they have been furloughed and a record of the communication has to be kept for five years.

Based on the law at the moment, you cannot imply that an employee has been furloughed. It must be a positive act.

See also Does the employee have to agree to be furloughed? and Do we need to collectively consult about being furloughed?

Employers should seek legal advice before implementing a period of furlough.

Correct as at 15 May 2020

Does the employee have to agree to be furloughed?

Staff must agree to go on furlough. They cannot be forced.

It is very unlikely that employers will have a clause in staff contracts that allow furlough to be imposed on staff. Even if there is, it is unlikely to be safe to rely on that clause given the government’s policy that the employee must consent.

See also How does an employer put an employee on furlough in the first place?

Correct as at 15 May 2020

Do employers need to collectively consult about being furloughed?

There is some debate on this. If you are furloughing 20 or more staff in a 90 day period, you may have to follow special ‘collective consultation’ rules. Whether these rules apply depend on your circumstances.

If you fail to follow the rules when you should have done, each affected employee may claim up to 90 days’ pay as compensation. Employers should therefore seek legal advice where 20 or more employees are affected.

The rules on collective consultation can also apply when proposing to dismiss 20 or more staff in a 90 day period as redundant, so you need to be aware of this rule when considering terminating employees’ employment due to a downturn in business.

Correct as at 15 May 2020

How do I get access to the government’s payments?

There in a website portal operated by HMRC into which you input relevant details. HMRC will then make assessments and determine the level of payment to be made to the employer.

The portal can be found here.

Further detail on the process is listed under the question ‘How do employers apply for payment from the government?

Correct as at 15 May 2020

How long must an employee be furloughed for?

To take advantage of the government funding under the scheme, employees must be furloughed for a minimum of three weeks.

Correct as at 15 May 2020

Can furlough stop and start?

Employees can be taken off furlough and put back on, provided that each period of furlough is at least three weeks.

To do this you will need to have the proper written agreement in place with the employee that allows furlough to stop and start. Without this, you will need to agree each period of furlough separately.

Correct as at 15 May 2020

How much will furloughed employees be paid?

The basic rule is that employers will receive up to 80% of wage costs, up to a cap of £2,500 per employee per month. The government has created a calculator, which will work for most employees. The calculator does not work if employees:

  • receive any top-up pay in the claim period
  • returned from statutory leave such as maternity leave in the last three months
  • get director’s payments
  • have been transferred under TUPE
  • have been employed at separate times throughout the year
  • receive employer pension contributions outside of an auto-enrolment pension scheme
  • receive any discretionary payments in the pay periods you are claiming for
  • have an annual pay period

Further detailed guidance on what can be included in the calculations and how to undertake those calculations can be found on the gov.uk website.

Salary for the purposes of the scheme does not include discretionary bonuses, tips, discretionary commission payments and benefits in kind (e.g. health insurance benefits).

Employers may choose to (but are not required by the government to) “top up” employee pay above the 80% / £2,500 cap.

Employers can also claim for employer National Insurance contributions and employer minimum pension contributions.

The government has said that employers must:

  • keep a copy of all records for six years, including:
    • the amount claimed and claim period for each employee
    • the claim reference number for your records
    • your calculations in case HMRC need more information about your claim
  • tell the employees that the employer has made a claim and that they do not need to take any more action
  • pay the employees.

Correct as at 15 May 2020

How long will the scheme run for?

The government has said that the scheme will run from 1 March 2020 until the end of July 2020, and then an updated scheme will operate from 1 August until 31 October 2020.

Correct as at 15 May 2020

If an employee cannot work for their employer while furloughed, what can they do?

A furloughed employee cannot do anything that provides services to or makes money for the employer that has furloughed them.

A furloughed employee can:

  • take part in volunteer work, as long as it does not provide services to or generate revenue for the employer; and
  • engage in training (but there are rules on pay here so you would need to check the position before staff training began).

Correct as at 15 May 2020

Can furloughed employees work elsewhere for another employer?

An individual can be furloughed by more than one employer if they have two jobs.

If their contract of employment with their existing employer allows, or the employer agrees, furloughed employees are permitted to work for another (new) employer, notwithstanding that they have been placed on furlough.

Correct as at 15 May 2020

What if I have already made an employee redundant?

If you made employees redundant on or after 28 February 2020, you can re-employ them and then agree with them to go on furlough.

You can then make a claim for their wages through the scheme, subject to the 80% rule etc.

Note, however, that the latest guidance confirms that if an employee has had multiple employers over the past year, has only worked for one of them at any one time, and is being furloughed by their current employer, their former employer/s should not re-employ them, put them on furlough and claim for their wages through the scheme.

Correct as at 15 May 2020

How do employers apply for payment from the government?

Further details are awaited from HMRC. However, the basic steps are as follows:

  1. Furlough your employees in accordance with the above guidance and in accordance with an appropriate ‘furlough letter’ provided in conjunction with legal advice;
  2. Submit information about the employees to HMRC through the new portal. The government has confirmed that to claim you will need:
    1. your ePAYE reference number;
    2. the number of employees being furloughed;
    3. National Insurance numbers for the furloughed employees;
    4. names of the furloughed employees;
    5. payroll/employee number for the furloughed employees (optional);
    6. your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or company registration number;
    7. the claim period (start and end date);
    8. amount claimed (per the minimum length of furloughing of three consecutive weeks);
    9. your bank account number and sort code;
    10. your contact name; and
    11. your telephone number;

Employers will need to calculate the amount they are claiming.

Where there are fewer than 100 furloughed staff, employers will have to input details direct into the HMRC portal. If there are 100 or more furloughed staff, employers will be asked to upload a file with the required details for each employee (i.e. name, National Insurance number, claim period, claim amount, payroll/employee number).

HMRC will retain the right to retrospectively audit all aspects of your claim.

Correct as at 15 May 2020

Contact an employment solicitor

Reducing staff costs, excluding furlough

Can employers temporarily suspend employees on zero pay?

Without a clear contractual right to suspend in these circumstances, there is no clear route to employee suspension. Imposing suspension without agreement may give rise to claims against the employer, so agreement should be sought to changes to pay and working hours.

Even with such a clause, this clause must still be exercised reasonably by the employer and this will depend on the size and financial means of the employer and the length of the proposed change.

Can employers temporarily suspend employees on reduced pay?

Employers need a clear contractual right to reduce pay and suspend employees temporarily. Asking employees to stay at home for a temporary period on reduced pay would be a proposed contractual change.

Agreement from employees should be sought and employers in this situation should aim to be transparent with employees about the reason for the temporary suspension and what potential alternatives might look like. This might include having to consider redundancies.

For example, certain airlines are currently seeking to agree periods of unpaid leave with employees, with reduced payments spread over several months to minimise the impact on employees.

What is lay-off? Is it different to suspension?

Lay-off is when an employer takes an employee off work and off pay for at least one working day. It is used as a response to lack of work, and as an alternative to making redundancies.

There is a statutory scheme for lay-off and short-time working, but a lay-off clause in the employment contract is required in order to implement this.

What is short-time working?

Short-time working is similar to lay-off, but rather than providing no work, the employer provides some, reduced, work. Less than half a normal week’s work and pay will trigger the statutory short-time working protections for employees, subject to eligibility requirements.

Are employees entitled to any money if put on lay-off or short-time working?

A statutory ‘guarantee payment’ is payable to employees, subject to certain requirements. The maximum payment is £29 per day for up to five ‘workless’ days in any three-month period, so a total maximum of £145. Part-time payments are calculated pro rata.

An employer could choose to pay more at its discretion and this discretion must be exercised fairly and in a uniform manner to avoid complaints of unfair treatment amongst the workforce.

Can lay-off trigger redundancy?

There are mechanisms within the lay-off scheme through which redundancy is triggered. If the lay-off lasts for four weeks in a row, or six weeks in a 13-week period, employees can opt for redundancy. In those cases a statutory redundancy payment would be triggered.

Can an employer introduce a lay-off or short-time working provision if they don’t already have one in employment contracts?

This would be a change to contractual terms and conditions and consent would be required. Employees may be willing to give consent at this unpredictable time if it is a measure to avoid redundancy.

What are the tax effects of waiving remuneration?

For tax purposes, the tax effect of a waiver depends on its timing. If the remuneration is given up before it is treated as received for tax purposes, the remuneration given up will not be taxable earnings. If the remuneration waived is given up after it is treated as received for tax purposes, the employee remains taxable on the remuneration given up.

A related point is where an employee repays a bonus as a result of the coronavirus crisis. Currently, such a repayment would not be taken into account for reducing an employee’s tax.

Contact an employment solicitor

Recovery of debts due to my business

What do I do if my customers have not paid outstanding invoices by the due date?

Maintaining cashflow is vital to all businesses and robust credit control procedures are an essential part of this. The current coronavirus pandemic is creating breaks in the chain and, as it was unforeseen, most businesses do not have contingencies in place. If a customer doesn’t pay you by the due date, we advise talking with them as soon as possible. This is especially important given the current situation. By understanding each other’s circumstances, you may be able to agree a solution that works for both of you.

However, if your customer is avoiding you and not willing to discuss the non-payment, it may be a warning sign that they don’t want to, or are unable to, pay you. In these circumstances it is advisable to consider the options available to give yourself the best chance of collecting the debt.

Contact a debt recovery solicitor

Banking and business lending

What can I do to safeguard my existing borrowing arrangements during this period of uncertainty?

You should consider your existing financial covenants and, if possible, run revised modelling based on current conditions to see if breaches are likely in the forthcoming testing periods. The government, Bank of England and the Financial Conduct Authority are strongly encouraging lenders to maintain and extend lending, support their customers and not let fundamentally sound businesses collapse. If you have concerns about your ability to meet your obligations, you should speak to your lender as soon as you can. This will allow them to understand your situation and advise you of the approach they are taking to support businesses that might be facing challenging financial conditions.

Correct as at 13 May 2020

Times are hard and cashflow is tight. What financial options are open to me?

The government is running various schemes for businesses facing financial hardship as a result of the coronavirus outbreak, aiming to move quickly to get funds to businesses in need. Details can be found via the government’s own website. Mainstream lenders (for example high street banks) participate in the scheme and the government guarantees some or all or the loan. Options include:

Any new loan or security terms should be reviewed by a solicitor – please contact us for advice.

Correct as at 13 May 2020

What about non-government help?

A number of banks and lenders have announced additional support for businesses during the coronavirus outbreak. These include additional or extended overdraft limits, repayment holidays, waiving fees or extending existing loan terms. Speak to your bank and ask what help they can offer. If the bank agrees to change your loan terms, please contact us if you would like advice on what the changes mean for you.

Correct as at 13 May 2020

My bank has asked me for a personal guarantee to support my business loan. What does this mean for me?

If your bank asks for a personal guarantee, you should seek independent legal advice on your obligations are under the guarantee. The most important thing to realise is that by entering into a personal guarantee for the liabilities of your business, you can become personally liable for the business’s debts.

Correct as at 13 May 2020

Contact a banking solicitor

Terms and conditions of commercial contracts

What do I need to look for in the contracts I have in place with my customers and/or suppliers?

It is advisable to review any commercial contracts you have in place to find out whether you or your customer/suppliers rights and/or obligations may be affected. Check the consequences of a failure to comply, including any rights by either party to terminate.

Correct as at 13 May 2020

What happens if a contract I have in place with my suppliers/customers has been breached?

A breach of contract may provide the non-breaching party with an entitlement to damages, including liquidated damages. A liquidated damage is a fixed or determined sum that is agreed when a contract is formed and will be paid on a specific breach to compensate the injured party.

The contract may include indemnities for breach of contract. An indemnity is when one party takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual as a result of the first party’s breach.

A breach of contract may also provide the injured party with a right to terminate the contract. Alternatively, if the coronavirus pandemic caused the breach the contract may catch this event as a force majeure event.

If you or another party to the contract is in breach you should seek commercial litigation advice.

Correct as at 13 May 2020

What is ‘force majeure’?

Force majeure clauses are common in commercial contracts. The term force majeure means “superior force”. A force majeure clause may encompass “acts of god”, such as earthquakes or hurricanes, and certain acts which are unforeseeable, such as industrial action.

If one of the events listed in a force majeure clause occurs, the clause will usually set out what the parties must do next. For example, a party claiming force majeure may have to notify the other and take reasonable steps to mitigate the effect of the event impacting performance. The onus is on the party seeking to rely on the force majeure clause to prove that the force majeure event has prevented, hindered, delayed or affected the performance of the contract.

A force majeure clause may provide for an extension or postponement of performance, or enable one or both of the parties to terminate the contract.

Correct as at 13 May 2020

What should I be thinking about if my contract has a force majeure clause?

If force majeure clauses have been included in your contract, consider whether the clauses might be triggered by or against you and seek advice. It should be noted that if the clause includes the occurrence of a pandemic, following the classification by the World Health Organisation of coronavirus as a “global pandemic”, this clause is likely to be triggered.

If you need advice on the interpretation of a force majeure clause you should contact our Commercial team. If the parties to the contract are already disputing matters relating to performance, we advise that you urgently contact seek commercial litigation advice.

Correct as at 13 May 2020

What can I do if a contract doesn’t have a force majeure clause in it?

If there is no force majeure clause, or the impact of the coronavirus outbreak is outside its scope, the parties may need to consider whether the contract has terminated by operation of law or any other basis, such as “frustration”. The doctrine of frustration applies where events occur that result in a situation fundamentally or radically different from what was in the contemplation of the parties when the contract was made. However, the doctrine of frustration is rarely available in practice and is unlikely to apply where performance is merely delayed.

If frustration does not apply but the pandemic is nevertheless affecting performance, please refer to ‘Pursuing and defending business disputes’.

Read more about law on frustration.

Correct as at 13 May 2020

What should I do if my contract contains a business continuity plan and policies?

Many businesses may have generic crisis and business continuity plans. These may need to be reviewed to ensure they are effective for this specific crisis and the challenges it brings. In such a novel situation, it is likely that these policies may need to be adapted to enable businesses to properly comply with them.

Correct as at 13 May 2020

How can I mitigate a breach of contract?

Examples of mitigating actions could include using alternative goods or services suppliers where the usual one is unable to provide these, working remotely where possible and taking advantage of the various deadline extensions and assistance offered by the government. There may also be other express provisions in the contract requiring parties to mitigate their losses in certain circumstances.

If it is not possible to rely on the force majeure clause to avoid a breach of contract, there may be other provisions within the contract or principles under English contract law that enable a party to do so. You should seek legal advice if you consider that there has been or there is a potential breach of contract.

For advice on interpreting and understanding the terms of your clients contact a commercial contracts solicitor. If matters become contentious as a result of the pandemic, our Commercial Litigation team is best placed to advise you on your liability, your options and your rights.

Correct as at 13 May 2020

Contact a commercial contracts solicitor

Pursuing and defending business disputes

What happens if we cannot supply goods or services because of reasons relating to COVID-19? Or what should we do if the other party to the contract seeks to rely on COVID-19?

In either case, it is important to establish the effective cause of non-performance. Is the reason for non-performance the virus itself, for example a business having to close because of legislation, or is it a temporary but remediable supply issue?

In the right set of circumstances COVID-19, or matters relating to it, could enable a party to terminate a contract. In other cases, it may result in the committing of a repudiatory breach of contract which entitles the other party to damages.

We recommend seeking legal advice on your rights and guidance on the best action at the earliest opportunity.

Correct as at 27 April 2020

I am struggling to meet my contractual obligations due to the pandemic. Can we agree an extension of time as a way of avoiding action?

This will depend on whether time is of the essence.

A contract may provide a mechanism for extensions and if it does you should ensure that you follow the contract strictly, complying with any formal notice provisions. You should check whether there is any contractual penalty for late performance and undertake a financial risk assessment before proceeding.

Correct as at 27 April 2020

Can we agree to terminate a contract that cannot be fulfilled due to the coronavirus pandemic?

A mutual agreement to terminate is an option. However, care should be taken to ensure that the termination effectively discharges you of all obligations so you avoid any claim for damages being pursued against you. Always seek legal advice before agreeing to terminate a contract.

Correct as at 27 April 2020

What should we do if the other party disputes the effect of the coronavirus pandemic?

Parties to any dispute should always attempt to establish their respective positions and assess whether there is any scope for resolution. It is unlikely that many parties to a contract will have had experience of dealing with a pandemic and therefore this is a new territory for all.
It is advisable that both parties explore means of mitigating their position. Legal advice should always be sought at the earliest opportunity to ensure that you do not waive or weaken your position in the event that matters cannot be amicably resolved.

Correct as at 27 April 2020

How should we communicate with our prospective opponent?

Any conversations about resolution or attempts at reaching a resolution should be conducted on a clear ‘without prejudice save as to costs’ basis. This heading should be used at the start of any conversation or used as a header in correspondence.

Any communication, if not written, should be clearly recorded in an attendance note where possible. If you require legal advice, this will be required by your solicitor as evidence, along with all contractual paperwork.

Correct as at 27 April 2020

I have a business dispute. Does the government imposed lockdown mean that I have additional time to bring an action?

Whilst there have been various legislative changes as a result of the pandemic, the statute of limitations remains unchanged. For a contractual dispute, you have six years from the date of breach to pursue a claim. For negligence claims (whether or not against a professional) you have six years from the date of loss, or if later three years from the date of knowledge of the loss.

Limitation issues can be complex. If you are uncertain, it is important that you speak with a commercial litigation solicitor to ensure that deadlines are not missed or that certain steps are taken so that your claim does not become barred.

Correct as at 27 April 2020

Can I still issue court proceedings during the lockdown?

The courts are still operating. New claims can continue to be issued and should be issued in good time, with additional consideration to limitation periods. The time periods for service, acknowledgment and filing of defences remain unchanged. However legislative changes have permitted the parties to extend certain deadlines by up to 56 days (previously 28 days) where the parties agree.

Correct as at 27 April 2020

How will the court conduct hearings and trials during the lockdown?

Legislation and guidance from the courts is that as many hearings as possible should be conducted
remotely. A court will not postpone a trial simply because physical attendance is not possible. Hearings are likely to be heard by telephone or Skype.

Inevitably the change in the functioning of the courts is resulting in a build-up of cases and adjournment of some matters. The knock-on effect is that there will be a delay in cases being heard or set down for directions and trials of some cases may well be postponed for several months in certain courts.

Correct as at 27 April 2020

Is there an alternative to issuing court proceedings during lockdown?

Alternative dispute resolution (ADR) is something that all parties should consider before commencing court proceedings, irrespective of any pressures that the courts are under due to the pandemic. ADR can allow disputes to be resolved more quickly and cost-effectively. Read more about mediation and its benefits.

You could consider engaging in mediation or if proceedings have not been issued, resolving the dispute by arbitration could be an option. Indeed, the parties may be contractually obliged to undertake ADR prior to commencing court proceedings.

Correct as at 27 April 2020

How does remote mediation take place?

Several mediation practices already conduct mediations remotely, therefore the recent pandemic has not unduly troubled mediators. It will still be possible for the parties to have private conversations in their own virtual room and for all parties to be put into the same virtual room with the mediator for the purpose of discussions. Careful preparation by the lawyers will mean that a virtual mediation can be just as effective as one that is conducted in person.

Correct as at 27 April 2020

Can we use arbitration as an alternative to mediation or court?

A contract may already make provision for arbitration. If it does not the parties could seek to agree to use arbitration as a means of resolving their dispute.

Arbitration is similar to court proceedings in that the outcome, known as the award, is binding on the parties just like a court order is. The difference is that the parties have more freedom on the steps and action to be taken in preparing their case, and the arbitrator (or panel) are appointed based on the expertise of the subject matter.

The current global impact of the pandemic is likely to lead in an increase in arbitrations, particularly because an arbitration award (unlike a court judgment) is automatically enforceable in a foreign jurisdiction. With the added pressures faced by the courts, arbitration will present a cheaper, faster and more flexible resolution procedure.

Correct as at 27 April 2020

How do we sign court documents during the pandemic?

In most circumstances, documents relating to legal proceedings can be signed using electronic signatures such as PDF, electronic signature platforms or a photograph of a wet ink signature. During the pandemic, the court has agreed that they will accept documents signed in that way. However, the document must be signed. A document will not be accepted if it does not bear a signature.

Legal advice should be sought to ensure a document is executed correctly.

Correct as at 27 April 2020

How do we sign legal documents during the pandemic (excluding court documents)?

It is generally accepted that electronic signatures will be valid on legal documents, provided there is an intention to be bound and the relevant requirements have been complied with. Particular care should be taken if that document is in relation to a deed, and/or a document that requires a witness or involves issues outside of English jurisdiction.

Legal advice should be sought to ensure a document is executed correctly.

Correct as at 27 April 2020

Contact a commercial litigation solicitor

Commercial leases for landlords and tenants

Does a tenant who cannot trade have to pay rent?

Most leases contain a clause suspending the requirement to pay rent where premises cannot be occupied due to an event which is covered by the landlord’s insurance policy. It is highly unlikely that the coronavirus pandemic is an insured risk.

The measures announced by the UK government as at 23 April 2020 do not include a release from any contractual obligations to pay rent. Section 82 of the Coronavirus Act 2020 prevents a landlord from taking action to forfeit a lease to which Part 2 of the Landlord and Tenant Act 1954 applies until at least 30 June 2020. This restriction applies to forfeiture by peaceable re-entry and by court proceedings.

Correct as at 21 May 2020

Can a landlord use commercial rent arrears recovery (CRAR)?

On 24 April 2020 the government introduced regulations to restrict the use of CRAR to cases where the rent is more than 90 days overdue. In any event, CRAR cannot be used for sums other than the annual rent. Nor can CRAR be used on mixed use properties.

Correct as at 21 May 2020

Can a landlord issue court proceedings for rent arrears?

There is no prohibition on commencing court proceedings and although a number of courts are closed, a large number are operating on skeleton staff numbers. This means that a landlord can issue a court proceeding for rent arrears at this time. However, money claims are not considered to be priority work and it may take some time for court proceedings for rent arrears to be dealt with.

Correct as at 21 May 2020

Can a landlord serve a statutory demand for rent?

On 23 April 2020 the government announced that it intended to temporarily ban the use of service of a statutory demands and winding up petitions where tenants are unable to pay bills due to coronavirus. This is a means to give tenants breathing space. The government has also said it expects tenants to pay what they can afford in recognition of the strain on commercial landlords.

The Corporate Insolvency and Governance Bill 2020 was published on 20 May and is likely to become law on 3 or 4 June 2020. This will prevent a winding up petition being presented from 27 April until at least 30 June where the landlord relies on a statutory demand served between 1 March and 30 June.

It will also prevent action on a winding up petition issued between 1 March and 30 June unless the landlord can show it has reasonable grounds for believing that coronavirus has not had a financial effect on the tenant company, or the company would have been unable to pay even if coronavirus had not had a financial effect on the tenant. This is likely to be very difficult so in practice we expect to see all petitions stop while these provisions apply.

Like the other measures which seek to protect tenants unable to pay rent at present these measures could be extended beyond 30 June 2020.

Correct as at 21 May 2020

What should we do if we want to arrange a temporary waiver or rent concession?

We recommend that any waiver or concession is documented in writing. You will want to consider whether any concession needs to be subject to conditions. Where there is a guarantor, they will need to be involved to avoid inadvertently releasing him or her from future liabilities.

Correct as at 21 May 2020

Can a landlord draw down on a rent deposit?

Yes. There are no coronavirus restrictions on withdrawing sums from a rent deposit. The terms of the rent deposit deed should be followed. This may require notice to be given. Consideration should be given as to how to serve a valid notice.

Correct as at 24 April 2020

Can a landlord forfeit a commercial lease?

Section 82 of the Coronavirus Act 2020 restricts forfeiture of leases to which Part 2 of the Landlord and Tenant Act 1954 applies for non payment of rent. Part 2 does not apply to mining leases, tenancies under six months (unless there is provision to extend the term or the tenant has been in occupation for more than six months), farm business tenancies or tenancies covered by the Agricultural Holdings Act 1986.

Under section 82 a landlord is prevented from starting court proceedings or effecting peaceable re-entry to forfeit a lease for non payment of rent until at least 30 June 2020. Where a landlord had commenced proceedings before the act came into force, the court cannot make an order for possession to take effect before 30 June 2020. If an order for possession has already been granted it cannot be enforced before 30 June 2020.

Forfeiture for breaches other than non payment of rent is unaffected by the act. It will be necessary to serve a section 146 notice and allow a reasonable time to pass before seeking to forfeit the lease.

Practice Direction 51Z to the Civil Procedure Rules automatically stays all possession proceedings and the enforcement of all possession orders for a period of 90 days from 27 March 2020. The Practice Direction ends on 30 October 2020 and is expressed to be made so as not to endanger public health. As a consequence, a landlord wishing to forfeit a lease for reasons unconnected with the failure to pay rent may only do so by peaceable entry for the time being.

Correct as at 24 April 2020

Will a break option still apply?

Yes, a break option still applies as there are no restrictions on either party relying on an option to end a lease early. Care will need to be taken to ensure that the requisite break notice is properly served. Currently there are occasional issues with postal service and there are only a few process servers willing to effect personal service, so where possible allow plenty of time for service.

If the break is conditional, for example on providing vacant possession or undertaking reinstatement works, consideration will need to be given to whether the conditions can be met. If conditions cannot be met force majeure, a clause in a contract that allows the agreement to be broken in the event of unforeseeable circumstances, is unlikely to assist the tenant. This is because there are seldom force majeure clauses in leases. A tenant may want to rely on the doctrine of frustration, although there is no certainty that this will apply.

An unconditional break clause will still operate if the tenant cannot gain access to remove their possessions. Failure to remove to give vacant possession following a valid break notice will be a breach of the yield up obligations only. A landlord would have a claim for damages. It could require payment of double rent under the Distress for Rent Act 1737. The landlord would owe the tenant a duty of care as an involuntary bailee of the goods left behind.

Correct as at 24 April 2020

Is the lease frustrated as the tenant is prevented from occupying due to government restrictions?

There is no case in which a lease has been frustrated. Frustration requires an outside act which the parties could not have, and did not, contemplate. In 2019 the court decided that Brexit did not frustrate a lease. In 2004 in Hong Kong the court decided that SARS did not frustrate a lease. To some extent the length of the disruption caused by the coronavirus pandemic and the length of the lease will determine whether a court faced with a tenant arguing that its lease is frustrated is prepared to agree that the doctrine does apply to COVID-19. It may be that tenants who are unable to take advantage of a break option or who have shorter leases are better placed than those with long term leases to make a case for their lease being frustrated.

Correct as at 24 April 2020

Can a landlord pass on increased cleaning costs to tenants?

This will depend on the terms of the lease. In most cases we would expect increased costs of cleaning, the provision of hand sanitizer and other similar items will be covered by most service charge clauses.

There may be issues where a centre, building or estate has been kept open for essential services or key workers, but other commercial occupiers are not permitted to open or to work from their premises. In such cases arguments about “reasonable proportions” or “fair and reasonable” amounts may arise.

Correct as at 24 April 2020

Are landlords in breach if they refuse to allow access to premises?

Most leases contain a covenant to allow the tenant quiet enjoyment of the premises and contain an implied covenant that the landlord will not derogate from grant. If premises are closed by the landlord, there may be a breach of these covenants. However, we will need to review this on a case by case basis and consider the detailed government guidance on which business can and cannot open for business.

Landlords and tenants are expected to follow the government’s guidance to close specified businesses. Neither the act nor the guidance contain a general requirement for offices to close. Government guidance is that apart from the limited list of businesses that are required to shut down, “it is important for business to carry on” and entry to offices may be allowed where work cannot be done from home.

Certainly within offices, certain rules must be followed (social distancing, no person exhibiting symptoms must travel to work, for example) and it should be ensured that employees are able to follow Public Health England guidelines. Therefore, if, for example, a landlord prevents access to offices it may be that this is a breach of quiet enjoyment / derogation from grant, but we will need to look carefully at the facts of each case.

Correct as at 24 April 2020

Contact a property litigation solicitor

Validity of insurance policies

Will my insurance cover me for a breach of contractual obligations due to coronavirus?

You need to review your existing cover, especially business interruption insurance. You may have cover for loss of use of a premise due to contamination for example. There may however be specific requirements in relation to unoccupied premises. You therefore need to check the policy for notice periods and other formal requirements. If you are required to make notifications make sure you comply with your obligations in relation to how and when to notify. You also need to consider whether insurer consent will be required for any steps you anticipate taking to respond to events, such contingency plans for working locations.

Correct as at 21 May 2020

What should I do about my business interruption insurance?

Most standard business interruption insurance policies are designed to only cover loss caused by physical damage at the insured’s business premises. This means they are unlikely to provide cover for coronavirus-related losses. However, some policies do provide extended cover for non-physical damage such as closure of premises or denial of access.

The most likely route is by way of extended cover for loss due to the occurrence of notifiable infectious diseases (essentially those which have been classified by the UK government as notifiable to Public Health England). Many policies that include this kind of extended cover specify particular notifiable diseases. As COVID-19 was not classified as notifiable until 5 March 2020 it will not be specified, meaning the policy won’t pay out.

Some policies do not specify particular notifiable diseases, meaning they may provide cover. In this situation, the insured is likely to have to show that it was unable to use its business premises due to government restrictions or advice. Closing solely out of caution is unlikely to be enough, but as government guidance has grown more stringent throughout March this will have become easier.

We recommend checking your policy wording carefully and discussing your coverage with your broker where relevant. If you believe your policy provides cover, you should make a claim as soon as possible. If your insurer refuses to pay out, obtaining professional legal advice may help. The courts are available as a means of resolving disputes where necessary and since 1 April 2019, small businesses are eligible to use the Financial Ombudsman Service (FOS). The FOS is free to use and can make enforceable awards of up to £350,000

Correct as at 21 May 2020

Contact a financial litigation solicitor

Corporate and business governance

The company is required to hold board meetings and or general meetings of the shareholders in the near future. How do we do this with people self-isolating?

The practicalities of calling and holding such meetings should be considered and it would be sensible to check relevant provisions of the company’s articles of association and any shareholders agreement. This includes, for example, the number of directors that are required in order for board meetings to be quorate and whether attendance at such meetings can be by telephone/ video calls, rather than personal attendance. Consider whether there are provisions allowing for alternate directors and proxy voting. Large-scale physical general meetings are unlikely to be possible in the near future and so alternative arrangements should be considered.

The government has announced that new legislation will be introduced to allow companies greater flexibility in holding AGMs, Potentially, this will allow AGMs to be held online or postponed. However, the legislation has not yet been announced and we await further details.

Correct as at 19 May 2020

A shareholder or director of the Company has contracted coronavirus. What are the implications if they become seriously ill or even die?

You might consider, for example, reviewing the articles of association and any shareholders agreement for relevant provisions that would apply in the event of the death or serious illness of a shareholder or director. Consider whether you have a cross option agreement (an agreement which obliges the company to purchase a deceased shareholders’ shares from their estate, which are often backed by life assurance).

Correct as at 19 May 2020

The deadline by which we need to file our company accounts is this month, but the accounts will not be finalised in time. What should I do?

Companies House recently announced that from 25 March it will automatically grant a two month extension to file company accounts. Companies House has advised that companies should act before the filing deadline.

Although the law provides a three month extension, it is not normally Companies House policy to allow extensions unless there are extreme circumstances. However, due to coronavirus, policy has changed to automatically allow for a two month extension and then another month after that if companies can demonstrate extreme circumstances.

Correct as at 19 May 2020

Contact a corporate solicitor

Intellectual property queries

I was due to make a filing to the UK Intellectual Property Office (IPO) and I am worried about missing a deadline due to the coronavirus pandemic. What can I do?

The UK IPO recognises the disruption to business caused by the coronavirus pandemic. It has declared all days following 24 March 2020 to be “interrupted days” until further notice. This action relaxes the requirements on applicants and rights-holders to act by certain deadlines, as any deadlines which fall on an interrupted day will be extended to the next non-interrupted day. The situation was reviewed on 17 April 2020 and the UK IPO have decided to continue with the period of interruption until further notice”.

This period of interruption does not apply to time periods set out under the Madrid system, where the UK IPO may be acting as a receiving office.

Correct as at 15 May 2020

Can I make a filing to the UK Intellectual Property Office (IPO) on an interrupted day?

IPO staff are equipped to work from home and will continue with business as usual as far as possible. This means that you can still file on interrupted days. Where possible we will continue to meet the original deadlines for our clients, rather than wait for the end of this period of interruption.

Correct as at 15 May 2020

Will the filing date of my new application be affected by the interrupted days?

New trade mark and design applications will not have their filing dates affected by these interrupted days if they are filed at the UK IPO and do not claim priority from a previous application. These will continue to be assigned a filing date under the usual rules.

Correct as at 15 May 2020

Do I need to ask for an extension to respond to examination reports during this period?

The UK IPO has announced that it will allow four months to respond to new examination reports issued in relation to trade mark applications, not the current two months. This removes the need to request an extension.

It is not possible to automatically extend the reply period for design examination reports, but extensions are available on request.

Correct as at 15 May 2020

Will there be a delay in the publication of trade marks on interrupted days?

Most accepted trade marks will be published for opposition purposes as usual. There may be a delay for some because of the need to notify owners of any earlier UK marks (and international marks with UK designation) identified within the search report as this is currently only done by post.

Correct as at 15 May 2020

Should I expect a delay with my correspondence with the Intellectual Property Office (IPO) on interrupted days?

There will be a delay in receiving postal versions of trade mark and design registration certificates. The IPO will continue to receive and process international applications and registrations and correspond with holders by email where possible.

Correct as at 15 May 2020

Contact an intellectual property solicitor

Visa sponsorship, right to work checks and stranded employees

If employees or students are unable to attend work or their studies due to illness, are sponsors of non-EU nationals who are Tier 2 or Tier 5 employees, or Tier 4 students required to report absences that they have authorised?

No, employers and educational organisations, will not be required to report absences that they have authorised. This means employees and students can follow government guidelines on self-isolation without the fear of having their visa removed.

Are sponsors required to withdraw sponsorship when an employee is absent from work without pay for four weeks or more, or when a student is unable to attend for more than 60 days?

No. In this situation sponsors will not need to withdraw sponsorship. It will be at the sponsor’s discretion if they think there are exceptional circumstances e.g. relating to the coronavirus. The Home Office recognises that decisions on whether to terminate employment or withdraw individuals from their studies are for sponsors themselves to make. They will not take compliance action against sponsored individuals who are unable to attend work, college or university due the coronavirus pandemic.

In addition to this, action will not be taken against sponsors who authorise absences and continue to sponsor employees or students despite absences due to coronavirus. The Home Office will keep absence periods under review. We suggest that sponsors, where possible, ask for some evidence that the absence is related to the coronavirus. Of course, as the NHS isn’t currently actively testing for the virus evidence may be difficult to obtain and you may wish to seek legal advice.

I have an employee who is on a UK visa and unable to return home because of the coronavirus pandemic. Can they extend their visa?

Guidance from the government states that people with a visa who can’t return home due to the coronavirus pandemic can extend their visa. The extension will apply to anyone whose visa expired after the 24 January and who can’t leave the UK because of travel restrictions or self-isolation.

The extension has been put in place to give these individuals peace of mind that they will not be penalised for overstaying their visas when the situation is out of their control due to the coronavirus pandemic. The extension is set to last until 31 May 2020 and will be kept under regular review in case (as is likely) further extensions are needed.

People who want to apply for visas to stay in the UK long term can temporarily do this in the UK. This will mean people can apply to switch routes, e.g. from Tier 4 Student to Tier 2 General Workers, without having to the leave the country.

Do I still have to conduct right to works checks during this period?

Yes, although from 30 March 2020 right to work checks for employers have been temporarily adjusted due to the coronavirus pandemic. This is a welcome move that makes it easier to carry out the checks.

It is important to understand that whilst the checks have been made easier to conduct, they continue to be necessary and employers must continue to check the prescribed documents listed in the Home Office guidance. It is still an offence to knowingly employ anyone who doesn’t have a right to work in the UK.

The coronavirus pandemic has left some people unable to evidence their right to work. During this period, employers must be extra cautious to make sure they don’t discriminate against any job applicants or employees simply because they can’t provide documents.

Read more about the adjustments to right to work checks and post COVID-19 measures.

Does the furlough scheme apply to sponsored employees?

It depends. The furlough scheme only applies if the employee is employed by a UK entity through PAYE. This means it may not apply to some workers employed under Tier 2 Intra-company Transfer scheme (ICT).

We have received a copy of an email from the government that states:

The Government has made provisions to allow employers to retain employees during interruption to commercial activity because of the pandemic. Employers can apply for support from the Government that can assist with these current difficulties. Employees whose leave in the UK is subject to conditions that they have no recourse to public funds may be able to secure assistance (subject to meeting all requirements) through-

  1. Statutory Sick Pay
  2. Contributory-based Employment and Support Allowance
  3. Support provided to employers through the Coronavirus Job Retention Scheme
  4. Some other work related benefits.

I have employees (British nationals and foreigners) stranded outside of the UK. What can I do?

On 30 March 2020 the government announced measures to help British nationals stranded abroad. Read our practical tips for anyone who is struggling to get home to the UK due to the coronavirus pandemic restrictions.

I am unable to contact an EU processing centre. Why is this?

The EU Settlement Resolution Centre telephone lines are currently closed due to the coronavirus pandemic. There is an automated message to state centres will open once they are able to do this safely. However, no indication is given of when this may be.

Do employers have to report sponsored migrants who are working from home?

The coronavirus pandemic is having a huge impact on businesses that rely on migrant workers. The Home Office has confirmed that all employers who have a licence to sponsor non EU workers will not have to report a change of location for all sponsored migrants working from home at present.

How can I contact the Home Office?

Employers who have employees whose visa has expired must contact the Home Office to let them know and so they can issue extension.

The government has set up a Coronavirus Immigration Help Centre. Calls are free of charge.

Telephone: 0800 678 1767 (Monday to Friday, 9am to 5pm)

Email: CIH@homeoffice.gov.uk

It is very difficult to get through to the helpline and we have been informed that the government’s preference is for people to submit enquires by email. This is because a number of caseworkers are working from home. However, there is still a considerable delay in obtaining a response.

Contact an immigration solicitor

Implications on construction contracts and development agreements

What are the implications of the coronavirus pandemic on my construction contract?

Recent government advice has put the UK into lockdown and we have been asked to avoid non-essential travel and increase social distancing. Similar restrictions are being made across the world as the impact of the coronavirus is felt by many nations. It is clear there will be difficulties in the construction industry. Parties will no doubt struggle to fulfil their contractual obligations. In addition, there are uncertainties around whether the supply chain will be able to deliver; any breaks will result in delays to or the suspension of programmes.

It seems highly probable that the coronavirus pandemic itself will be found to constitute a force majeure. This will only be applicable if the contract was entered before the coronavirus outbreak. Alternatively, contracts will be “frustrated”. This means they literally cannot be performed.

Continue reading our guide to force majeure and frustration in construction contracts.

What are the implications of the coronavirus on my development agreement and getting the development done?

Property development agreements comprise a series of events and as each is reached and satisfied, the project moves on:

  1. Obtaining planning permission;
  2. Starting on site;
  3. Completing works.

COVID-19 has the potential to affect the timetable at any of these stages. Our Construction team has produced guidance on each of these stages.

Contact a construction solicitor

VAT deferral, payments and returns

The chancellor announced a VAT payments deferral on 20 March to support businesses with cashflow during the coronavirus pandemic. What are the details and how can I claim this?

The announcement means that all businesses with a UK VAT registration have the option to defer VAT payments due between 20 March and 30 June 2020. Businesses have until 31 March 2021 to pay any VAT deferred as a result of this announcement. HMRC will not charge any penalties or interest on payments deferred by this announcement.

Businesses do not need to inform HMRC if they wish to defer payments. They can opt in to the deferral simply by not making VAT payments due in this period. Businesses that pay by direct debit should cancel their direct debit with their bank. This can normally be done online and should be done in sufficient time so that HMRC does not attempt to automatically collect on receipt of their VAT return.

Should they wish, businesses can continue to make payments as normal during the deferral period and can continue to make ad hoc payments after the deferral period to repay any deferred VAT up to 31 March 2021. HMRC will also continue to pay repayment claims as normal.

Correct as at 19 May 2020

What payments are covered by this announcement?

All payments of VAT to HMRC due between 20 March 2020 and 30 June 2020 can be deferred until 31 March 2021. This includes:

  • payment for quarterly returns ending 29 February due 7 April;
  • payment for quarterly returns ending 29 March due 7 May;
  • payment for quarterly returns ending 29 April due 7 June;
  • payment for monthly returns due in this period;
  • payments on account due in this period; and
  • annual accounting advance payments.

Correct as at 19 May 2020

Can I defer payment of import VAT/customs duties as part of this announcement?

Until recently, the position was that you must pay import VAT and customs duties in line with existing rules.

HMRC announced on Friday 10 April that they will consider requests from UK VAT registered businesses who import goods from outside the EU to suspend the monthly March deferment account payment for import VAT and customs duty, which is due this Wednesday 15 April. The timing of the announcement does not provide much time for importers to contact HMRC and request this suspension.

Requests for this suspension must be made via one of three channels listed below.

  • Telephone the HMRC Duty Deferment Office on 03000 594 243. Lines are open Monday to Friday, 9am to noon, and 2pm to 4pm.
  • Email the HMRC Duty Deferment Office at cdoenquiries@hmrc.gov.uk
  • Telephone the COVID-19 helpline on 0800 024 1222. Lines are open Monday to Friday, 8am to 4pm.

The applicant will need to explain how the pandemic has impacted the business’s finances and cashflow, and suggest a belated payment plan. Once an agreement is reached, HMRC will not approach the bank guarantor to ask for the outstanding payment.

No interest will be charged by HMRC, and the compliance status of the importer will not be affected. The importer can continue to use their duty deferment account as usual during the payment suspension period.

A similar approach is available for VAT registered importers who do not use a deferment account and will struggle to pay import VAT and customs duty on particular imported shipments. Currently the goods will not be released from customs control at the port or airport without either a deferment account or immediate payment. However, importers can contact HMRC at the above email address to request a suspension period. HMRC suggest that these agreements may require that the importer creates a bank guarantee.

Correct as at 19 May 2020

Does the deferral apply to other taxes/duties such as Machine Games Duty, Insurance Premium Tax, withholding tax etc?

No, unless covered by another government announcement, you must pay all other taxes/duties in line with existing rules.

Correct as at 19 May 2020

Does deferral apply to VAT due to be paid in relation to disclosures and assessments due to HMRC?

No, only VAT payments due alongside normal VAT returns between 20 March and the end of June will be deferred. For any other debts, HMRC’s Time to Pay scheme has been enhanced. Additionally, HMRC has a dedicated helpline for those who cannot pay because of COVID-19. The telephone number is 0800 024 1222 and lines are open Monday to Friday, 8am to 4pm.

Correct as at 19 May 2020

Can I still make a VAT payment at my usual time?

Yes, the deferral is optional.

Correct as at 19 May 2020

Will there be any changes to the VAT MOSS or EU refunds systems?

No, this announcement does not cover any payments or policies relating to the VAT MOSS or EU refunds system.

Correct as at 19 May 2020

What happens after the VAT deferral ends?

VAT payments due following the end of the deferral period will have to be paid as normal.

Businesses will be given until the end of 2020/21 financial year to pay any VAT they deferred as a result of this announcement. Payments must be made on or before 31 March 2021.

Correct as at 19 May 2020

How do Time to Pay (TTP) arrangements interact with the new arrangements?

For TTP arrangements made for payments due before 20 March 2020 you will need to continue to make these payments. If you are struggling to meet these obligations, you can contact the dedicated helpline on 0800 024 1222.

For TTP arrangements made for payments due between 20 March 2020 and 30 June 2020 only you can benefit from the ability to defer payment until 31 March 2021. You do not need to notify HMRC. You will need to cancel any direct debts set up for these arrangements.

If you are struggling to pay your tax bill on time HMRC is also delivering an enhanced Time to Pay offer to fit the specific impacts of COVID-19. Time to Pay is available to all businesses and individuals who are in temporary financial distress as a result of COVID-19 and are unable to pay their tax on time or having existing liabilities. HMRC has set up a dedicated helpline to enable those eligible to get practical help and advice which can be reached by calling 0800 024 1222.

Correct as at 19 May 2020

Do I still have to submit VAT returns?

Businesses must continue to submit VAT returns as normal.

Correct as at 19 May 2020

What happens if I can’t submit accurate returns?

In normal times HMRC expect you to apply for estimation. HMRC still require you to apply in writing. As it is unlikely that you will get a response in time, you should as a minimum log the matter by phone and obtain a reference number/ officer name for proof.

Correct as at 19 May 2020

Will any interest or penalties apply to the delayed payment?

No.

Correct as at 19 May 2020

Will any interest or penalties apply to a delayed VAT return?

These may still be charged if the return is submitted late. HMRC has published updated guidance about the impact of COVID_19 measures on reasonable excuse, penalties and appeals.

Correct as at 19 May 2020

Contact a tax solicitor

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