COVID-19: Information for F&B Franchisors in the UK

By Shelley Nadler

03-2020

This is a summary of the measures introduced by the Government to combat COVID-19 that will impact on fast food outlets, cafes, coffee shops and restaurants and the financial assistance from the Government available for these types of businesses.

  1. Lock down situation

    • Regulations came into force at 2pm on 21 March 2020 requiring all restaurants and cafes not to sell food or drink for consuming on the premises - and any part of the premises, or part of the premises, in which food or drink are sold for consumption on such premises must be closed. These restrictions will be reviewed in 28 days from the date the Regulations came into force. The Regulations allowed takeaway and delivery from restaurants and cafes
    • The Prime Minister's Statement of 23 March 2020 provided that People will only be allowed to leave their home for the following very limited purposes:
      • shopping for basic necessities, as infrequently as possible
      • oone form of exercise a day - for example a run, walk, or cycle - alone or with members of your household;
      • any medical need, to provide care or to help a vulnerable person; and
      • travelling to and from work, but only where this is absolutely necessary and cannot be done from home.
    • The Prime Minister stated to ensure compliance with the Government’s instruction to stay at home, it would immediately:
      • close all shops selling non-essential goods, including clothing and electronic stores and other premises including libraries, playgrounds and outdoor gyms, and places of worship;
      • stop all gatherings of more than two people in public – excluding people you live with;
      • stop all social events, including weddings, baptisms and other ceremonies, but excluding funerals.
    • Government guidance states that people can continue to enter premises to access takeaway services, including delivery drivers but Government guidance on social distancing must be complied with (two meters between customers and shop assistants, small groups only and queue control)
    • The Government will look at these restrictions in three weeks, and relax them if the evidence shows they are able to.

     

  2. Government aid for employees


    New Coronavirus Job Retention Scheme ("furlough grant")

    • all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis
    • To qualify for the furlough grant employees must have been on your payroll on 28 February 2020. Employees that are full time, part time, and on flexible/zero hours contracts qualify.
    • "Furlough" means on leave of absence and not carrying out any work for the organisation, the minimum length an employee can be furloughed for to make a claim is 3 weeks
    • Covers up to 80% of the salary (up to £2,500/month), plus the associated Employer NIC and minimum Employer Auto-Enrolment Pension contributions of anyone not working (but retaining job) as a result of Covid-19
    • For variable/zero hours contracts where pay varies, there are prescribed methods for calculating the monthly pay that you can claim for
    • Wages back dated to 1 March 2020
    • Initial period of 3 months from 1 March 2020, but extended if necessary
    • No limit on funding
    • Will be in the form of a grant (not a loan) provided by HMRC, though exact details to be announced
    • Scheme expected to be up and running by the end of April

      (For more detailed information please see Appendix)

    Statutory Sick Pay “SSP” for Small or medium sized businesses

    • SSP is payable to qualifying employees and is now payable from day 1 for those who self-isolate or are unwell because of COVID-19 (the first 3 days are normally unpaid). The current rate of SSP is £94.25 per week.
    • HM Treasury has announced that small and medium sized employers (those with fewer than 250 employees) may recover this cost where SSP has been paid as a result of COVID-19 from 13 March for a maximum of two weeks’ sickness per employee.

    Extra support for the welfare system

    • Increasing the Universal Credit standard allowance, for the next 12 months, by £1,000/year
    • Increasing the Working Tax Credit basic element, for the next 12 months, by £1,000/year

       

  3. Government support for hospitality business

     

    COVID Commercial Financing Facility (CCFF) for large companies

    • New scheme being launched by the Bank of England to help companies which make a material contribution to the UK economy to bridge Coronavirus disruption to their cash flows through loans.
    • Up to 12 months support under a COVID Commercial Financing Facility
    • To be eligible the business must have had, prior to being affected by COVID-19, a short or long- term rating of investment grade, or financial health equivalent to an investment grade rating
    • Further details are available from the Bank of England (please see Appendix for details)

      (For more detailed information please see Appendix)

    Coronavirus Business Interruption Loan Scheme (CBILS) for small businesses

    • CBILS is a new scheme, announced by The Chancellor at Budget 2020, that can provide facilities of up to £5m for smaller businesses across the UK who are experiencing lost or deferred revenues, leading to disruptions to their cashflow
    • Currently established for businesses with turnover of up to£45m (up from £41m)
    • Lending scheme through the British Business Bank from £1,000 up to £5m (increased from up to £1.2m) per company with government meeting interest costs for the first 12 months. Finance terms are from three months up to 10 years for term loans and asset finance and up to three years for revolving facilities and invoice finance
    • The scheme provides the lender with a government-backed guarantee against 80% of the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. NB – the borrower always remains 100% liable for the debt

      (For more detailed information please see Appendix)

    Grants for retail, hospitality and leisure businesses

    • A £25,000 grant will be provided to retail, hospitality and leisure businesses in England operating from smaller premises, with a rateable value between £15,000 and £51,000.
    • Funding will be provided via local authorities, we suggest contacting an Economic Development Officer at each relevant local authority.

      (For more detailed information please see Appendix)

    Rates Relief

    • All property occupiers in the retail, leisure and hospitality sectors including restaurants will receive 100% rates relief between 1 April 2020 and 31 March 2021 with no limit to Rateable Values
    • Relevant occupiers don’t need to take any action. It will be applied by the local council in the April Business Rates invoice.

      (For more detailed information please see Appendix)

    Support for businesses that pay little or no business rates (“small companies”)

    • The government will provide additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR). This will provide a one-off grant of £10,000 to businesses currently eligible for SBRR or rural rate relief, to help meet their ongoing business costs.
    • Funding for the scheme will be provided to local authorities by government in early April 2020.

      (For more detailed information please see Appendix)

    Time to Pay arrangements “TTP”

    • TTP has been available to businesses for over a decade, but HM Treasury has announced a stepping up of resource and a specific COVID-19 helpline that businesses can call
    • TTP allows a business to defer current (as opposed to prospective) tax debts (principally corporation / income tax, payroll taxes and VAT – but theoretically any other tax or duty) by converting settlement to instalments over a 3-12 months period
    • Any business is theoretically eligible to apply. It is, however, critical to ensure supporting facts (and documentation) are available to evidence cash flow concerns.

      (For more detailed information please see Appendix)

    Deferral of VAT

    • VAT payments due from businesses between 20 March 2020 and the end of June 2020 will be deferred.
    • No VAT registered business will have to make a VAT payment normally due with their VAT return to HMRC in this period. Payment of VAT will be deferred to the end of the tax year
    • it is assumed that there will be no need to apply and all UK VAT registered businesses will simply defer payment until their VAT return period ending 31 March, 30 April or 31 May.

      (For more detailed information please see Appendix)

    Grants through the coronavirus Self-employed Income Support Scheme

    • this is a self-employed support scheme which gives self-employed workers a taxable grant of up to 80% of average monthly earnings for the next three months
    • to qualify you must have trading profits of less than £50,000 and more than half of your income must come from self-employment and you must have submitted a tax return for tax year 2019/20
    • the grant will be paid in one instalment and this payment is expected to be in early June
    • HMRC will contact directly those eligible for the scheme and invite them to apply online
    • Self-employed individuals who have not yet submitted their tax returns for tax year 2018/2019 have until 23 April 2020 to do so and still be eligible for this support

       

  4. Government support for commercial tenants


Protection from eviction for commercial tenants

  • Commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction
  • These measures mean no business will automatically forfeit their lease and be forced out of their premises if they miss payment up to 30 June 2020
  • There is an option for the Government to extend this period if necessary
  • This is not a rental holiday. All commercial tenants will still be liable for their rent but are protected from eviction if they are unable to pay their rent
  • This change will come into force when the Coronavirus Bill receives Royal Assent (shortly after 25 March 2020)
  • Practical effect of this measure is to remove the immediate cashflow pressure of quarter rent day but the Government has made clear that the negotiation is now with lessee and landlord to reach a solution on payment

Click here for further detail on the new funding initiatives.

See also our Coronavirus (COVID-19) page.