The government is making changes to insolvency and company law as a result of the COVID-19 pandemic.

The Corporate Insolvency and Governance Bill outlines that struggling companies will be given extra time to consider rescue plans presented to them. As part of the changes, companies will have 20 business days to consider a rescue plan, which can be extended to 40 days at the discretion of creditors or the Court.

The Bill stipulates that a company will remain under the control of directors; however, the insolvency process must be overseen by a licensed insolvency practitioner.

Additionally, restructuring plans have been introduced in the Bill, which will bind creditors and allow the insolvency process to adjust as the COVID-19 pandemic changes.

Colin Haig, President of insolvency trade body R3 said:

‘This Bill represents the biggest change to the UK’s insolvency and restructuring framework for almost 20 years.

‘The measures contained in this Bill will support the profession’s efforts to help businesses navigate the enormous economic damage caused by the pandemic.’

Internet link: Parliament website

On 26 May 2020, HMRC opened up its Statutory Sick Pay (SSP) rebate claim service.

Eligible employers are able to recoup up to two weeks’ worth of SSP payments made to employees off work for COVID-19-related reasons since 13 March 2020 (16 March 2020 if the employee was shielding). This is an ongoing scheme for which an end date has not yet been announced.

The scheme is potentially worth up to £191.70 per employee that an employer has made SSP payments to for COVID-19-related reasons.

For the purposes of making a claim, it does not matter whether the employee was displaying symptoms themselves or was living with someone who was displaying symptoms. It also does not matter whether the employer topped up their earnings (although only the SSP element is eligible for the rebate).

A rebate cannot, however, be claimed in relation to employees who were furloughed at the time of illness or absence, and for whom the separate Coronavirus Job Retention Scheme grant was claimed.

Employers will be eligible for an SSP rebate if they had a Pay as You Earn (PAYE) scheme as of 28 February 2020, and (along with any connected employer) employed fewer than 250 employees as at that date. Employers must also be within their State Aid limits under the EU Commission temporary framework.

Internet link: GOV.UK publications  

On 20 May 2020, the government launched its Future Fund package, which aims to support start-up businesses not eligible for other COVID-19 rescue measures.

The Future Fund offers government loans of between £125,000 and £5 million to UK-incorporated companies, provided private investors at least match the funding supplied by the state.

The package is aimed at supporting innovative early stage companies not eligible for existing COVID-19 support.

The Future Fund is administered by the government-backed British Business Bank (BBB). The loans can be repaid or converted into shares in the Investee Company in a variety of circumstances, including fundraisings, exit events and upon the maturity of the loans.

The fund is currently due to run until at least the end of September.

Internet links: Investor information and company information

Several changes to the CLBILS scheme have taken effect from 26 May. The government has extended the maximum loan size available through the Coronavirus Large Business Interruption Loan Scheme (CLBILS) from £50 million to £200 million.

However, companies borrowing more than £50 million through theCLBILS will be subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan. This will include a ban on dividend payments and cash bonuses, except where they were previously agreed.

Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said:

‘It is good to see the government continue to listen to business concerns and make improvements to existing schemes.

‘These important changes could make a real difference to larger firms in particular, and alongside the other lending support schemes will help ensure that more businesses of all sizes get access to the finance they need to help weather this unprecedented economic storm.’

Internet link: British Business Bank website

On 5 June 2020, HMRC announced a five-month delay to the introduction of the domestic VAT reverse charge for construction services, due to the impact of the COVID-19 pandemic on the sector.

The change will now apply from 1 March 2021 and will overhaul the way VAT is payable on building and construction invoices as part of moves to reduce fraud in the sector. Under the domestic reverse charge, the customer receiving the service must account for the VAT due on these supplies on their VAT return, instead of paying the VAT to the supplier.

The change was originally scheduled to come into effect from 1 October 2019, but was then deferred for 12 months, after industry bodies highlighted concerns about lack of preparation and the impact on businesses.

Now the start date has been put back from 1 October 2020 to 1 March 2021.

There will also be an amendment to the original legislation. Businesses are excluded from the reverse charge on relevant supplies where they are end users, or intermediary suppliers. If so they must inform their subcontractors, in writing, that they are end users or intermediary suppliers.

HMRC says the additional amendment is designed to make sure both parties are clear whether the supply is excluded from the reverse charge. It reflects recommended advice published in HMRC guidance and brings certainty for subcontractors as to the correct treatment for their supplies.

HMRC says it will continue to focus additional resources on identifying and tackling existing perpetrators of fraud in the construction supply chain. It will also work closely with the sector to raise awareness and provide additional guidance and support to make sure all businesses will be ready for the new implementation date.

Internet link: GOV.UK publications