ACT NOW NOT NEXT APRIL

The UK has been subject to national and local lockdowns since 23 March 2020, and the government has put in place a number of temporary measures to support businesses in these unprecedented times.  Many of these provisions have now been extended until March 2021. However there is a perfect storm brewing and more than ever management needs to look forward and consider their options.

HMRC

HMRC recently announced its latest £30bn VAT deferment scheme such that VAT liabilities due between March 2020 and June 2020 do not need to be paid in full until the end of March 2022.  You need to opt into this scheme and can opt to pay it in up to 11 instalments in the period April 2021 to March 2022.  If you do not opt in then the VAT is due by 31 March 2021.
 
Any other taxes such as PAYE, VAT and Corporation tax have all been payable on their due dates, subject to any sympathetic HMRC time to pay arrangements.  There are no reliable estimates of the total tax arrears.  In addition to compound matters with effect from 1 December 2020, all HMRC arrears for PAYE and VAT become a secondary preferential creditor, making Company Voluntary Arrangements (“CVA”) much more difficult to be viable as HMRC will have to be paid in full before any funds become available for the general body of unsecured creditors.

Coronavirus Job Retention Scheme

Covering 80% of the cost of furloughed staff, this scheme currently ends on 31 March 2021.
 
Business Rates Relief Scheme

90% of independent shops, pubs, restaurants and other qualifying businesses have benefited from a business rates exemption.  This relief currently ends on 31 March 2021.
 
Protection of Commercial Tenants 

The government imposed ban on commercial forfeiture has recently been extended such that landlords cannot take action for non payment of rent against their tenants.  The British Property Federation (“BPF”) estimates unpaid rent by the end of 2020 at £4.5bn, growing at a rate of £1.5bn each quarter. The ban ends on 3 March 2021 and the government has described it as a “final extension”.

Suspension of Wrongful Trading 

In order to encourage managements to carry on, the government suspended wrongful trading, initially from 1 March 2020 to 30 September 2020, and then reintroduced the suspension on 26 November 2020 until 30 April 2021.

Government guaranteed Coronavirus Business

Interruption Loan Scheme (“CBILS”)
 
The well publicised CBILS loans, ranging from £50,000 to £750,000, and taken up by over 175,000 businesses with a value of over £20bn, currently ends on 1 January 2021.
 
The Perfect Storm?

With a no deal Brexit appearing ever more likely, business life for many companies post 31 March 2021 is positively frightening.  The BPF and HMRC are already expressing their concerns that companies that can pay are not paying. A huge concern is that collection measure post 31 March 2021 will be unable to distinguish between the capable and incapable.  R3, the trade association of the UK’s insolvency and restructuring professionals are predicting an imminent spike in corporate failures in Q1 2021, and it is not difficult to see why.

Why act now?

All UK companies currently have a quasi moratorium from creditor action until 31 March 2021. Many are hoping that the government will extend this however the current noise is that this is less likely than likely.

It has always been the case that the earlier help is asked for the more we can do.  If a post 31 March winding up petition or eviction triggers the request for help then the options are limited.  Creditors currently are realistic, in particular HMRC, and we have recently been able to obtain unanimous support for three CVA’s returning payments to creditors of 30p, 35p and 50p in the £.  These businesses now have a realistic chance of survival post 31 March 2021.

How can we help?

On a confidential, no fee, no obligation basis, and subject to capacity, one of our directors will work with your clients for 1-2 days to just explore the options available.  There is a relative small window of opportunity to look at positive restructuring options.  We urge you to act now whilst the moratorium is in place rather than when your clients are in the eye of the storm.

Please don’t hesitate to contact one of us if you wish to discuss further.
  

Paul Ellison                          07967 471211 / [email protected]
Robert Keyes                       07500 933 022 / [email protected]
Gareth Roberts                    07979 706 392 / [email protected]
David Taylor                         07855 231 103 / [email protected]