Self-Employment Income Support Scheme (SEISS) extended

The Chancellor has confirmed the extension of the Self-Employment Income Support Scheme (SEISS), with the announcement of a second and final grant to support the income of self-employed individuals during the Coronavirus outbreak.

The first and current round of grants under the scheme allows self-employed individuals to claim a taxable grant worth 80 per cent of three months’ average monthly trading profits, capped at a total of £7,500 and paid in a single instalment.

It has seen 2.3 million claims to date, collectively worth £6.8 billion.

Applications for this round of grants will close on 13 July 2020. However, the Chancellor has now announced that self-employed individuals will be able to claim a second grant in August. This will be worth 70 per cent of three months’ average trading profits and will be capped at £6,570 in total, also paid in a single instalment.

Individuals do not need to have claimed the first grant to be able to claim the second.

Unlike the Coronavirus Job Retention Scheme (CJRS) for employees, self-employed individuals may continue working, begin a new trade or take on new employment while in receipt of a grant.

The full criteria for qualification for the scheme remain unchanged. Applicants must:

  • Be self-employed or a member of a partnership;
  • Have lost trading/partnership trading profits due to COVID-19;
  • File a tax return for 2018-19 as self-employed or a member of a trading partnership;
  • Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID-19) and intend to continue to trade in the tax year 2020 to 2021; and
  • Have trading profits of less than £50,000 and more than half of their total income come from self-employment. This can be with reference to at least one of the following conditions:
    • Trading profits and total income in 2018-19
    • Average trading profits and total income across up to the three years between 2016-17, 2017-18, and 2018-19.

The scheme is not available to people working through their own limited companies.

Further details about how to apply for the second and final grant will be announced on 12 June 2020.

Money laundering supervision payment deferrals and deregistration announced by HM Revenue & Customs

Businesses that require money laundering supervision from HM Revenue & Customs (HMRC) can receive a six-month payment deferral or deregistration where an annual fee is due between 1 May and 30 September 2020, it has been announced.

HMRC is the money laundering supervisory authority for:

  • money service businesses not supervised by the Financial Conduct Authority (FCA)
  • high value dealers
  • trust or company service providers not supervised by the FCA or a professional body
  • accountancy service providers not supervised by a professional body
  • estate agency businesses
  • bill payment service providers not supervised by the FCA
  • telecommunications, digital and IT payment service providers not supervised by the FCA
  • art market participants.

Businesses in these sectors must pay an annual renewal fee of £300 in respect of each premises covered.

However, on receipt of the reminder notification from HMRC they can now choose either to pay in the normal way or to pay at any time in the following six months.

Businesses that have closed and stopped all activity subject to the Money Laundering Regulations owing to the Coronavirus crisis can opt to deregister for supervision and reregister when they resume. However, Money Service Businesses, Trusts and Company Service Providers cannot trade until the reregistration process is complete.

Maximum Government-backed loan amount for larger businesses increased to £200 million

The Government has announced an increase in the maximum amount that larger businesses can borrow under the Coronavirus Large Business Interruption Loan Scheme (CLBILS) from £50 million to £200 million.

CLBILS loans are offered on normal commercial terms, but are backed by a Government guarantee worth 80 per cent of the amount borrowed. They can be accessed through the 12 accredited lenders for the scheme by the British Business Bank.

The increase will come into effect from Tuesday 26 May 2020 and will mean that larger businesses can borrow up to 25 per cent of turnover, subject to a maximum of £200 million.

At the same time, the Government has introduced restrictions on dividends, share buybacks and executive pay for firms benefiting from CLBILS loans of more than £50 million.

The restrictions will also apply to large businesses accessing the Bank of England’s Covid Corporate Financing Facility (CCFF).

More details about these restrictions are expected to be set out by the British Business Bank on 26 May 2020.

Coronavirus Future Fund open to applications

The Future Fund, which offers convertible loans of between £125,000 and £5 million to innovative companies facing financial difficulties as a result of the COVID-19 pandemic has opened.

The fund is designed to support UK-based companies that have acquired at least equal match funding from private investors.

Aimed specifically at businesses that typically rely on equity investment, the fund is a lifeline for firms that cannot access other forms of Government business support because they are either pre-revenue or pre-profit-based.

To be eligible a business must:

  • be UK-incorporated – if a business is part of a corporate group, only the parent company is eligible
  • have raised at least £250,000 in equity investment from third-party investors in the last five years
  • not had any of its shares traded on a regulated market, multilateral trading facility or other listing venue(s)
  • have been incorporated on or before 31 December 2019.

Businesses will also need to demonstrate that at least one of the following is true:

  • half or more employees are UK-based
  • half or more revenues are from UK sales.

The Future Fund is being delivered by the British Business Bank and will remain open until September.

A Convertible Loan Agreement has been created for those who intend to apply, which can be found here. Further details of this loan scheme and how to apply can be found on the British Business Bank website.

Coronavirus Commercial Property Q&A

Like many other sectors, the commercial property industry has been significantly affected by the coronavirus pandemic and the subsequent Government lockdown and economic slump.

The rules around commercial leases have also been changed temporarily, to help businesses that are struggling due to the crisis, which has left landlords and property management firms with many questions.

To try and provide clarity to this ever-evolving situation, we have looked at some of the most common questions landlords have and provided answers to help them better understand the current rules regarding commercial leases.

Can my tenant stop paying rent or end their lease? 

Considering the extreme financial strain that many businesses are experiencing many tenants are beginning to refuse to pay rent, ask for a reduction in rent or are seeking to terminate their lease early.

Whether a tenant can do this and on what grounds will vary from one lease to the next, depending on what was agreed under the original terms of the lease.

Landlords should review and consider:

  • any break clause that allows tenants to terminate the lease early;
  • any turnover provisions dependent on the income generated from the premises; and/or
  • any force majeure clause.

Most leases provide for rent to be payable without deduction, meaning that tenants will not be able to withhold rent because of COVID-19, unless any specific lease provisions allow them to do so. Meanwhile, rent suspension clauses generally only relate to where a property is damaged or lost altogether due to destruction.

The common law doctrine of frustration may come in to play when it comes to terminating a lease. Tenants may try to prove that there is some form of illegality or failure of common purpose that renders performance of the lease/contract impossible or so radically different from the parties’ expectations and that termination is therefore justified.

This approach is yet to be thoroughly tested via the courts and it is not clear whether the narrow definition of frustration applies to a commercial lease. A court is not likely to relieve a tenant of their contractual obligations as the bar set for such a claim is very high.

My tenant has stopped paying rent, can I evict them?

As part of the Government’s Coronavirus Act 2020 (the Act), new measures were introduced to protect commercial tenants. Section 82 of the Act bans the forfeiture of commercial leases until 30 June 2020 for non-payment of rent due to COVID-19, thus preventing evictions.

It is not yet clear whether the Government intends to extend this period further, but it has indicated it may depend on the requirements of the lockdown period.

My property is empty, but trespassers have moved in, does this rule prevent me from evicting them?

No – this legislation is designed solely for existing tenants. If you have trespassers or squatters in your property you can still undertake a repossession order under the existing rules.

If I cannot evict them, do they still have to repay the rent owed?

Yes – despite the Government’s move to prevent evictions from commercial premises, rent arrears will still accrue and are expected to be repaid in future.

In some cases, this may be by agreement between a landlord and tenant, but in other cases, landlords may be required to seek debt recovery procedures to recover rent that is owed (be aware that some procedures have been temporarily banned). Before taking either step it is recommended that you seek legal advice.

If I can’t evict them can I take other debt recovery steps, such as a statutory demand?

The Government has temporarily banned the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions presented from Monday 27 April, through to 30 June, where a company cannot pay its bills due to coronavirus. This will help ensure these companies do not fall into deeper financial difficulty.

The Government is also introducing new legislation to provide tenants with more breathing space to pay rent by preventing landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.

However, the Government has made it clear that tenants shouldn’t use this as an opportunity to avoid paying or delaying a rent payment if they are not significantly affected by COVID-19.

What other steps should I be taking if I cannot use debt recovery or forfeit the lease via an eviction? 

Most standard commercial leases include an obligation on the tenant to comply with all statutes and notices or orders made by competent authorities, which means that they would be in breach of that covenant if they fail to comply the Government’s current COVID-19 directions. Landlords also must comply with this and it is why you should try to work with tenants to come to a suitable arrangement.

Therefore, in the first instance, it is advised that you seek legal advice before opening up a dialogue with your tenant. Once you have taken appropriate legal advice you may wish to come to an agreement with your tenant over current and future rent payments. Depending on your own needs it may be possible to agree on how the rent will be paid in future, including a method for making up rent arrears.

I have a commercial mortgage on the property that needs to be paid, what support is available to me? 

The Government has supported the buy-to-let residential sector via guaranteed mortgage holidays, however, the same support hasn’t been offered to commercial landlords that have a mortgage to pay.

Despite this, many lenders are extending similar offers to commercial landlords and it is recommended that you speak to your mortgage provider to secure a payment holiday if you require one.

I’m a landlord for a property that is in a wider shopping centre/area that is required to close as a result of the COVID-19 measures?

If a larger landlord closes a centre or any common parts, tenants and their landlords will need to check the lease as to the overall landlord’s obligations and any potential claims.

My tenant is eligible for a grant based on their business rates. However, I pay their business rates as part of the rental agreement. Can I receive the grant instead? 

The grants are given to the ratepayer, who would presumably be the landlord in this case. Unless the rateable value of the hereditament is less than £15,000 (in England) the landlord would not qualify for the grant. The landlord would, in any case, need to decide whether to pass on any grants received to the tenants if an offer were made to them.

Should Tenants ‘Keep Open’ their Premises?

Some lease clauses require a business to ‘keep open’ or specify ‘operating/opening hours’. Of course, due to the restrictions that came into effect on 26 March 2020 under the Health Protection (Coronavirus, Restrictions) (England) Regulations 2020, this is no longer possible.

Even if a business can technically remain open, this may not be possible if a business owner decides they do not wish to expose the public to the risk of infection.

Where a tenant is obliged to ‘keep open’ the premises the regulations provide a defence to the requirement if it can be established that by keeping the premises open, they will be acting unlawfully. What’s more, the courts are often reluctant to enforce specific keep open provisions to force tenants to re-open.

I have insurance on the property, could this cover the current disruption to rents? 

Every insurance policy is somewhat different and so landlords should review their policy and speak with their insurance provider or broker to understand what cover is available to them.

While some policies may include business interruption cover, it is unlikely to cover much more than damage to their property or, in a limited number of cases, where Government action has meant that it is illegal for premises to remain open.

Unfortunately, cover for infectious diseases is often an opt-in extra and most will require the disease to have been classified as ‘notifiable’, which COVID-19 has been since 5 March 2020.

Business owners and landlords are finding that their policy, despite various clauses and protections, does not provide a payment as a result of COVID-19. If you believe that your insurer has taken steps to prevent you from claiming under the cover you have, you may be able to take legal action against them, so you should seek legal advice first.

How we can help

We appreciate that you may have many more questions that you wish to ask that are specific to your requirements. If you would like support with your commercial property queries, please speak to our commercial property team.

COVID-19 Top 5 tips for Commercial Tenants

The current lockdown restrictions will have caused problems commercial tenants across all sectors. Our Retail specialist, Robert Rosenberg gives his top 5 tips for commercial tenants:

1. Really this should be one, two and three – TALK to your landlord. Landlords should not be scary but they are scared of this. We all are. They have families too.  You need to “share the pain” with landlords. We recommend picking up the phone and start with small talk. Then tell them how you are having to make cuts but that your staff and customers are so important to keep going.  Then ask them for their help. Start back asking for 3 months’ rent free. This is clearly the best.

2. If you can’t get rent free ask for monthly rents.  If you pay quarterly it is a huge drain on cash flow – if you can pay monthly that is clearly fairer.

3. Ask for a discount off the rent – say 50% for a couple of months.

4. In normal times (if you can remember them) a landlord can change the locks on you if you don’t pay the rent.  Not at the moment – the UK Government has put a stop to that until the end of June.

5. Ask for a lower service charge – if no one is around to tend to the building then the service charge should be lower.

If you need further assistance you can always call us on 020 8349 5504 or send an email and we will do our best to help.

Companies House announces an extension for late filing of accounts

In the light of the current COVID-19 pandemic, and companies focusing their time on trying to keep their business afloat, Companies House has announced that businesses will be able to apply for a 3-month extension for filing their accounts.

Generally speaking, if a company is late in filing their accounts, Companies House will automatically issue a penalty notice and the later the accounts are filed after the deadline, the higher the amount of the penalty. Once issued, a late filing penalty can be appealed against. However an appeal will only be successful in very limited circumstances and companies wishing to appeal must:

  • give a specific reason for not filing their accounts on time
  • include all relevant details, such as dates and times
  • prove the circumstances were out of the company’s control, for example a fire destroyed their records a few days before their accounts were due

This joint initiative between the Government and Companies House will mean businesses can prioritise managing the impact of COVID-19.

It is very important to note that companies will still however, have to apply for this extension as it does not come into effect automatically for all companies. Failing to apply in time means companies risk having their name struck off the register.

How long does it take for before a company is struck off for non-filing of accounts?

The procedure and timing of this is set out in section 1000 of the Companies Act 2006. This requires the Companies Registrar to send at least two formal letters to the company in default, and if no reply is received to either letter, publish a notice in the Gazette to inform the world at large that the company will be struck off two months after the date of that notice. The process usually takes around four months. A company has 14 days to respond to the first letter, failing which, the Registrar will, within 14 days send the second letter. 14 days after sending the second letter, the Registrar will in the absence of receiving a reply, publish a notice in the Gazette, two months after which, the Registrar can strike off the company.

How likely is a company to get an extension?

Companies House say that any company applying for an extension citing issues around COVID-19 will be automatically and immediately be granted an extension. Companies can apply through a fast-tracked online system which is stated to take just 15 minutes to complete.