Freedom day (or the 19th of July) is almost upon us, and therefore light at the end of what has been a very long tunnel for UK businesses who will once again be able to operate free of restrictions and lockdown measures. However there is still an element of uncertainty about what the future holds given the tough journey that many businesses have been on over the last, almost, 18 months.
It won’t come as a surprise that there is an estimated £6bn in rent arrears. Many businesses have accrued other debt, through additional bank borrowings and government back loans, as well as deferred liabilities, such as those due to HMRC. There are still measures in place to support businesses as they come out of the tunnel to avoid toppling the economy, such as restrictions on winding up petitions and forfeiture action by landlords, and the possibility of agreeing time to pay tax arrears with HMRC.
However some of those support measures will end in Autumn, such as furlough and restrictions on winding up petitions and others have already ended, such as the suspension of rules around wrongful trading. The attitude of HMRC to tax recovery will play a pivotal role and although HMRC will take an ‘understanding and supportive approach’ it is clear that if a business can pay its taxes then it should, and the same applies to payment of rent. Although we are expecting the government to provide a legislative framework to support tenants and landlords in dealing with rent this will only apply to certain sectors and only to COVID rent arrears.
It is therefore important for businesses to take stock; understand what can and should be done now to protect the business moving forward, and for business owners to take stock and understand what can and should be done to protect themselves against any personal liability if, and this will unfortunately be the case for some businesses, it gets into financial difficulties.
Throughout 2020 and 2021 we have updated our business viability guide, and this latest edition explains in more detail the support that is available to UK businesses with a focus on dealing with HMRC, what directors need to know about their director duties and the key financial crunch points over the coming months.