The Business Bulletin
Are we heading for an economic cliff? How prepared are you for when the COVID-19 related financial support and other interim measures fall away?
To deal with the financial impact
debt has accrued, including over £4.5
months, these early signs of trade will
of coronavirus the Government laid
billion in rent arrears.
continue.
down what was to become the Corporate Insolvency & Governance Act 2020 (“CIGA”), which became law in June 2020 and had retrospective effect to March 2020. CIGA was seen as a balancing act between the detrimental impact the severe restrictions would have for trading on one hand against shielding business from depleted cash flow on the other. In January 2021, the House of
Furthermore, there is an estimated
announced an easing of bounce back
lending, together with deferred tax
loan repayments in an effort to ease
liabilities, which is most likely going
cash flow demands.
to make HM Revenue & Customs (“HMRC”) a major creditor in most insolvencies, resulting in them having significant influence on the destiny of businesses. This influence is made all the greater following the recent upgrading of HMRC to
Lords debated over the continued
secondary preferential status when
restrictions on creditor enforcement
formal insolvency is required. In short,
imposed by CIGA. These restrictions
this means HMRC are virtually first
were intended to expire on 30
in the queue and this will result in
September 2020 but were extended
all likelihood unsecured creditors
to 31 December and subsequently 31
(including all general trade creditors)
March 2021.
receiving no or a minimal return in
At pretty much the eleventh hour following a budget completely
Furthermore, the Government have
£70 billion of Government-backed
most insolvencies. So, is there any good news I hear
This is welcome news as my concern is many businesses will have taken these loans when they were first launched at a time when COVID-19 would “be over by Christmas” and none of us had heard of the Kent strain – i.e. the business would have several months to recover before the first payment was due or the loan was taken as an insurance policy which was going to be repaid in full with no consideration given to affording the extra monthly repayment should the situation arise. The second and third lockdowns put pay to that and with repayments
silent on this area, the deadline was
you ask? As I sit writing this article
becoming due, many businesses
extended in late March to the end of
on the afternoon on April 12th,
will not welcome the extra payment
June 2021. In general, the restrictions
non-essential retail is open and
now due. Therefore, hopefully the
prevented the service of statutory
there were queues this morning at
extra breathing space will enable the
demands/winding up petitions,
pubs, hairdressers and Primark with
recovery to match the repayment
landlord enforcement and suspended
consumers eager to spend and return
schedule.
wrongful trading provisions. As a result
to normal. Hopefully for businesses
of these restrictions, the latest data
who have been closed for a
suggests an unprecedented level of
considerable portion of the last twelve
12 | Issue 9 – Finance
In addition, recognising the resulting position of HMRC and the detrimental effect COVID-19 has
