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23rd March 2020COVID-19 – Guidance for Business

19th March 2020

The Government has issued COVID-19 guidance for employers and small businesses. The guidance assists employers with issues facing the health and wellbeing of employees as well as informing them of certifying absences from work. Directors who have to temporarily close their business due to COVID-19 may be able to access support in a number of areas, listed below.

A detailed explanation of the government’s support for business can be found here.

Insurance

You need to think about how your business insurance will work if you temporarily close due to an outbreak of the virus. The Government confirmed on 17 March 2020 that the direction they have given to business is sufficient to trigger a claim under a Business Interruption Policy.

Advice from the FSB Insurance Service is:

Check your policy wording: Standard policies may not include any protection if your business suffers due to an outbreak of disease, regardless of circumstance.

  • Firstly, you must check the business insurance policy, or speak with your broker to see if you have Business Interruption cover under your commercial insurance policy. Business Interruption insurance covers the income that businesses lose after a disaster, and often comes up when discussing terrorism cover (for example, after the London Bridge attack, local businesses that were forced to close for a period of time would have been able to claim for revenue lost under this clause).
  • If you have Business Interruption cover, you will need to check whether you have an extension for “notifiable diseases”. If you have this in the policy wording, you will need to reach out to your broker/insurer to confirm whether coronavirus is covered. The UK Government has declared COVID-19 a notifiable disease and, as stated above, it was confirmed on 17 March that the UK insurance industry are accepting claims if you have the cover in place.

Rent

As the March quarter approaches next week, a lot of landlords will be in fear of receiving letters from tenants saying they are unable to pay.

We advise landlords and tenants alike. There is no definitive advice we can give except for a common sense approach.

What can you do as a tenant?

We are aware of tenants writing to landlords advising them they cannot pay the March quarterly rent. Most tenants have rental deposits lodged with the landlord and in the event of a non-payment the landlord legally has every right to take from the rental deposit under the rental deposit deed and ask the tenant to make it good.

The best advice we can give people who unfortunately find themselves in this position is to prepare a detailed cash flow and enter into a sensible dialogue with the landlord. A number of tenant clients have advised us that they are paying 50% of the March quarterly rent.

What practical steps can and/or should a landlord take? 

It is clear that landlords need to think very carefully about what steps they should or should not take, and should seek appropriate advice. A landlord who wrongfully prevents or restricts an occupier or its customers accessing a property in the absence of receiving a rental payment may well find itself open to a legal claim and/or an aggrieved occupier.

Despite the levels of panic which seem to be (rightly or wrongly) setting in, we are finding that most landlords are generally taking a more common sense and cautious approach, with some being more proactive than others.

The steps which could or should be taken by landlords and tenants in relation to the property they own or occupy, in varying degrees, include:

  • Keeping up to date– monitoring the situation on a day to day basis, keeping up with the latest guidelines issued by the authorities and sharing the same with tenants and employees.
  • Communication – communicating with occupiers to see what steps are being taken to help protect against the risk and highlighting the importance of cleanliness and hygiene.
  • Assessing the risk– conducting risk assessments, considering factors specific to the property, such as its physical characteristics (g. would it be possible to isolate areas if necessary), its use and its occupiers.
  • Enhanced security– establishing more stringent security (e.g. building entry) procedures for occupiers, employees and visitors and considering ways to reduce social contact.
  • Remote working– recommending to occupiers that their employees work from home if possible.
  • Enhanced cleaning– following guidance in terms of cleaning communal areas and managing waste disposal, as well as more frequent cleaning of those areas which are at high risk of spreading the virus (door handles, taps, lifts, stair rails).
  • Supply chain– considering any possible impact on disruption to any supply chain.
  • Have a contingency plan– management teams meeting more regularly to review continuity plans, and making and updating contingency plans in line with developments.

As with any area of the law, where there is such uncertainty, much will depend on the facts and each property would need to be analysed on a case by case basis with appropriate advice sought.

Business rates

As the new business rates year commences, businesses will want to defer their business rates payment. We recommend that you speak with your Local Authority.

Banks

Every client who is suffering cash flow issues needs to speak to their bank to establish what facilities are available. It is highly recommended that before you approach the bank you have a robust cash flow prepared with a sensitivity analysis.

 Employees

In a lot of our clients’ businesses, salaries are the largest expense but also the most sensitive. Changes to employee arrangements are incredibly sensitive and any proposed changes must be carried out in conjunction with a competent employment lawyer. Over the course of the last week we have spoken with clients in regard to the following scenarios:

  • Asking employees to take unpaid leave and paying them a reduced monthly salary.
  • Asking employees to take temporary pay cuts.
  • Reducing working hours. This is allowable in most cases as long as the reduced hours are not more than 50% of a normal working week (Speak to an employment lawyer as contracts of employment differ).
  • Redundancy – Hopefully, this is a last resort.

Monthly VAT and quarterly Corporation Tax payments

Larger businesses falling into this category should look at both their 2020 budgets/forecasts and advising HMRC of reduced payments as soon as possible.

Corporate Taxation refunds

You should consider looking to change your year-end if the effect of COVID-19 causes losses and this can accelerate tax repayments.

Insolvency

If you are struggling and contemplating this then please do contact us at info@hwfisher.co.uk. Often a plan can be put together with the help of an insolvency specialist that can stave off unwanted liquidations.

19 March 2020
The information contained in this guidance has been obtained from public sources and every attempt has been made to ensure its accuracy at the date of publication. In this ever changing environment, this information is subject to change and we will not accept liability for losses arising from changes in the law or the interpretation thereof.

 


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