In this section you'll find information and updates related to coronavirus that are relevant to the law on debt and debt recovery.
The UK's response to coronavirus is changing regularly and often very quickly. While we'll continue to make every effort to keep this page up to date, there may be short periods where what you read here is not the latest information available. Where possible we've tried to provide links to official sources, so you can check the current situation.
More support is being provided by the UK government to businesses and self-employed individuals. We've listed some of this below:
England: Local Restrictions Support Grant
Financial help is available to businesses that have been forced to close, as well as those that haven't but have been severely impacted due to the local COVID-19 restrictions. Full details of these grants are available here:
Northern Ireland: Localised Restrictions Support Scheme
This additional financial support is available to businesses that have been required to limit their trading or close as a direct result of the restrictions imposed by the Health Regulations.
You will only be able to apply for this financial support if your business was open to the public and was trading from within Northern Ireland at the start of the restrictions (except if it is a 'wet' pub that only serves drinks).
Your business must be one of the specific types of business that this support is intended for, for example if:
There are 3 levels of support available based on the total net value of the property from where the business is operating.
Scotland: Strategic Framework Business Fund
This fund is aimed at financially supporting businesses in Scotland that have been required to close by law or to significantly alter operations as a result of coronavirus restrictions. Grants are paid every 4 weeks in arrears for as long as restrictions last. You can read more about what's available and the eligibility criteria here.
Wales: Restrictions Business Fund
This fund is aimed at supporting businesses in Wales that have been affected by the new restrictions and is mainly intended for the hospitality and tourism sector, along with those in their supply chain.
More funding for this sector is available through Sector Specific Support.
This financial support scheme has been extended. See our Coronavirus (COVID-19) Employment section for more on this.
This scheme has been postponed following the extension of the Coronavirus Job Retention Scheme. See our Coronavirus (COVID-19) Employment section for more on this.
Temporary measures have been put in place to protect commercial and residential tenants who are unable to keep up with rent payments. See our Coronavirus (COVID-19) Property section for more on this.
Income tax
If you were due to make a second self-assessment payment on account on 31 July 2020, you can instead make it at any point before 31 January 2021. However, if you owe £30,000 or less and you can't pay by 31 January 2021, you can benefit from an additional 12-month extension to pay this income tax off in smaller instalments until January 2022 (by when it must be paid in full). If you want to make use of this extension you need to set up a Time to Pay Arrangement online. No interest or penalties will be charged.
Note: no announcements have been made to date to defer corporation tax payments.
VAT holiday
UK VAT-registered business can defer VAT payments that were due between 20 March and 30 June 2020 (other than for VAT MOSS or import VAT).
You don't have to inform HMRC if you defer payment and no interest or penalties will be charged. If you defer, those payments will become due on or before 31 March 2021. However, if you can't pay in full by then, you can make 11 smaller, interest-free payments during the 2021-22 financial year. You will need to opt in to this scheme, which will then extend the time you have for full payment of the VAT until the end of March 2022. If you know or think you won't be able to pay your income tax or VAT even having deferred, contact HMRC as soon as possible as they do have support available through their Time To Pay (TTP) service.
Reduced VAT
There's a temporary VAT rate reduction to 5% for businesses in the hospitality and tourism sector during the period 15 July 2020 to 31 March 2021.
This differs depending on where you are. Rate reductions should be automatically applied by the local authority covering your area.
England
Certain businesses can benefit from a business rates holiday for the 2020-2021 tax year. Currently, this means those in the retail, hospitality and leisure sectors, and nurseries on Ofsted's Early Years Register.
The rates relief available for 2020-2021 is run by local authorities with government financial backing. They will use their discretionary powers to grant relief in line with eligibility criteria set out in the Government guidance. You can check in this guidance to see if your business property is eligible for rates relief.
You can estimate the business rate charge using the business rates calculator.
Wales
Businesses in the retail, hospitality and leisure sectors will receive 100% business rates relief for the financial year 1 April 2020 to 31 March 2021, if their property has a rateable value of £500,000 or less. See their guide for more.
Scotland
Businesses in the retail, hospitality and leisure sectors will receive 100% business rates relief for the financial year 1 April 2020 to 31 March 2021 (even if they have temporarily closed).
Rates relief is also available for businesses providing services to Scottish airports.
Other businesses will get a deduction of 1.6% from their business rates, which will be applied by their local council. See mygov.scot for more.
Northern Ireland
Businesses in the hospitality, tourism and leisure sectors will not have to pay rates for the financial year ending 31 March 2021. This will also apply to most of the retail sector, excluding certain supermarkets and off-licences.
For other businesses, a 4-month rates holiday applies for April, May, June and July (excludes public sector and utility companies). See nibusinessinfo.co.uk for more.
This scheme, which is open until 31 January 2021, is available to all UK small businesses. It is 80% backed by the government, who will also pay the interest and fees for the first 12 months of the loan.
If you make use of this facility for an amount below £250,000, you will not be required to give any personal guarantee for repayment of the outstanding loan. Above £250,000 you may be required to do so, but some safeguards are built in: e.g. your main home can't be used as support for a personal guarantee.
To qualify you must:
Depending on the type of finance you're taking under this scheme, the length of the loan will be between 3 and 6 years.
There are over 100 approved lenders for the scheme. For more information, see the British Business Bank and GOV.UK.
This loan scheme for small businesses is open to applications until 31 January 2021. These loans are 100% backed by the government, making it possible for small businesses to access them quickly and more easily than some of the other loan schemes.
Businesses can borrow between £2,000 and up to 25% of their turnover to a maximum of £50,000. The loans are interest free for the first 12 months and no repayments are due during this time.
Although the Bounce Back Loan is for a 6-year term, this can be extended to 10 years under the Pay as You Grow flexible repayment scheme. Under this scheme, interest-only repayment periods and repayment holidays are also available.
For more information, see GOV.UK and the British Business Bank.
This is a UK-wide scheme to provide support for the self-employed (including members of partnerships). The original SEISS was split into 2 grants. This has now been extended to offer 2 further grants that will last for 6 months from November 2020 until April 2021. The grants will be paid in 2 lump sums, which need not be repaid, each covering a period of 3 months.
Qualifying for the scheme
To qualify you must declare that:
You must also have been eligible for the original 2 SEISS grants (although you don't need to have actually claimed either of them). This means you must:
Different criteria apply if you have loans covered by the loan charge or you're a farmer claiming farmers' averaging relief.
How much can you claim
The 3rd grant will be paid in a single taxable instalment. It will cover 80% of your average monthly trading profits for the period from 1 November 2020 until 31 January 2021. The grant is capped at £7,500. You can make your claim here.
The 4th grant will also be paid in a single taxable instalment to cover the 3-month period from 1 February 2021 to 30 April 2021, but the level of support isn't yet known.
See the main business support pages for England, Wales, Scotland and Northern Ireland
There is also a Coronavirus business support finder that you can use to find help that's available to you from all the UK jurisdictions.
On 28 March 2020, the UK government announced that it would amend insolvency law to give companies breathing space and keep trading while they explore options for rescue.
On 26 June, the Corporate Insolvency and Governance Act 2020 came into force.
The Act creates a new moratorium intended to give companies breathing space to explore options for survival.
The directors of an eligible company can get a moratorium by filing relevant documents at court. Normally, a company with an outstanding winding-up petition would need a court order to apply for a moratorium. But before 30 March 2021, they will also be able to simply file papers at court.
There must also be a statement from an insolvency practitioner (the monitor) that, in their view, it is likely that the moratorium would result in the rescue of the company as a going concern.
The initial moratorium lasts for 20 business days. The directors can extend the moratorium for a further 20 business days, provided they can – among other things – confirm that all moratorium debts have or will be met. Further extensions (up to a maximum of 1 year) require the consent of creditors. The court may also extend the moratorium. There does not appear to be a maximum extension period if the extension is granted by court order.
During the moratorium
Creditor protections
There are protections for creditors (or members) of the company to apply to court for relief on the grounds that the management of the company's affairs, business and property unfairly harms their interests.
Eligibility
Companies are generally eligible, unless they:
Under the Act, a restructuring plan can be proposed between a company and its creditors (and/or members) for the purpose of dealing with financial difficulties.
This will apply to any company liable to be wound up under the Insolvency Act 1986 that has encountered (or is likely to encounter) financial difficulties that affect its ability to carry on business as a going concern.
Any creditor or member whose rights are affected by the plan must be allowed to participate in the process, and be given enough information to vote on the plan. However, those with no genuine economic interest in the company can be excluded.
The voting majority for each class is 75% in value. If passed, the plan has to be approved by the court, who will assess whether it's just and equitable. However, it's also possible for the court to sanction the plan where a class has voted against it. It can do that if:
'Relevant alternative' is whatever the court considers would be most likely to happen if the plan were not sanctioned.
Where a plan is proposed within 12 weeks of the end of the new moratorium period, it can't affect the rights of creditors in respect of either moratorium debts or pre-moratorium debts that weren't subject to the moratorium restrictions.
The Act temporarily:
This applies to any statutory demand served between 1 March 2020 and 31 March 2021. It prevents them forming the basis of a winding-up petition presented at any point after 27 April 2020.
A petitioner can still present a winding-up petition against a company if they have reasonable grounds to believe that the inability to pay is not the result of COVID-19.
Likewise, a court could still make a winding-up order if it's satisfied that the debts would have arisen even if COVID-19 had not had a direct financial effect on the company.
These restrictions will apply retrospectively. That means existing winding-up orders will be cancelled if they were made for coronavirus-related reasons between 27 April 2020 and 26 June 2020 (the date the Act was passed).
For winding-up orders that were based on petitions presented between 27 April 2020 and 31 March 2021, the commencement date of the winding-up will be the date of the order, not the petition. This will have a number of knock-on effects, including that dispositions of property by the company made after the date of the petition will not be automatically void, as they would be otherwise.
Contracts for the supply of goods or services will often allow suppliers to take action if the company they're supplying becomes subject to an insolvency procedure, e.g. by allowing them to end the contract. This helps the supplier to manage the risk of continuing to supply the goods/services but not getting paid.
The Act provides that certain suppliers won't be able to make use of such clauses. This applies even if the right to end the contract arises before an insolvency procedure, but wasn't taken up (the right is suspended when the insolvency procedure begins).
This restriction doesn't apply where the company or supplier is involved in financial services, including insurance companies and banks.
There is a temporary exemption, which began on 26 June and lasts until 30 March 2021, for suppliers that are defined as small entities. Broadly, a supplier is a small entity if at least 2 of the following 3 conditions apply to its most recent financial year:
(If the supplier is in its first financial year, these conditions are adjusted accordingly.)
If a supplier isn't a small entity, there are still exceptions. They can still end the contract if:
Under both the Coronavirus (Scotland) Act and the Coronavirus (Scotland) (No. 2) Act, those with significant debts have more flexibility to apply for bankruptcy and more protection from creditors.
The changes will apply until 31 March 2021, and could be further extended to as far as the end of September 2021.
We've listed the main changes below, but see the Accountant in Bankruptcy website for more information on both the first act and the second act.
A moratorium is the period during which those owed money can't take any formal action against those who owe it. The purpose is to give those in debt time to consider their options and get appropriate advice.
The moratorium starts on the date on which an individual or other eligible entity gives the Accountant in Bankruptcy (AiB) notice that they intend to apply for bankruptcy (also known as 'sequestration'). It now ends after 6 months, rather than the usual 6 weeks. It's also now possible to give notice to the AiB more than once in a year.
If you're thinking of making use of this, keep in mind that if a moratorium is approved, your details will be published on the public Register of Insolvencies and this will probably affect your credit score.
Creditors can now only apply to court to make an individual or entity bankrupt (also known as 'sequestration') if they're owed £10,000 or more. The previous limit was £3,000.
MAP bankruptcies are designed to be a simpler process for those on lower incomes and with few assets. Previously, you can't make use of MAP if your debt exceeds £17,000, but that threshold has now been raised to £25,000. Any student debt you have is ignored for the purposes of calculating this total. Also, the MAP application fees have reduced from £90 to £50, and have been removed entirely if you receive certain benefit payments.
Meetings of creditors can now take place virtually. All forms (except Form 9) prescribed by the Bankruptcy (Scotland) Regulations 2016 can be signed using an electronic signature.
Businesses can still take court action to resolve disputes during the pandemic, provided you're not a landlord taking action in response to rent arrears. It's likely claims will take longer than normal.
If your claim is already in progress, it is likely to be handled differently.
Her Majesty's Court and Tribunal Service (HMCTS) is making use of phone and video hearings. If a particular hearing can't be carried out in this way and it's urgent, it'll be held in a priority court and tribunal building (i.e. one that's not been closed due to the pandemic).
You can still find the relevant court in relation to your hearing here.
HMCTS published and will continue to update additional guidance for all court and tribunal users during the pandemic. There are also weekly operational updates.
All Sheriffdoms have moved to Phase 3 allowing all existing cases to continue to be progressed. New claims under the simple procedure (i.e. those where you may be due a sum of money of up to £5,000) can be registered online or in paper form. See Civil Online for more information, and the Scottish Courts and Tribunals website for information on court arrangements generally.
For the situation in Northern Ireland see Judiciary NI.