COVID-19 BRIEFING FOR SME’S ISSUED AT 0930 hrs on 20th MAY 2020

OVERVIEW

Business Interruption Insurance Update

Introduction

Last week we told you that the Financial Conduct Authority (FCA) was considering what measures it should take to help businesses that had tried unsuccessfully to claim on their Business Interruption (BI) insurance policies. The Coronavirus pandemic and the Government controls imposed as a result are causing a substantial level of loss and distress for businesses, in particular for SME’s. A large number of claims are being made to insurers under the terms of BI insurance policies. There is continuing and widespread concern about the lack of a positive response to some of those BI insurance policies and the basis on which some insurers are making decisions in relation to claims.

On 1st May 2020 the FCA said that that they intend to obtain Court declarations aimed at resolving contractual uncertainty in selected BI insurance policies. In order to help small and often struggling businesses, the FCA will put forward policyholders’ arguments, in a single collective action, to their best advantage. They are aiming to obtain legal guidance in this way more quickly and at a lower cost to policyholders than would be the case if individual companies took their own direct Court actions.

The FCA recognises that many claims will already be the subject of negotiation or other dispute resolution processes. This proposed action is not intended to impact this normal individual claims process; rather, it is designed to assist policyholders, and particularly SME’s, whose claims are being refused when they think that their insurance company should respond positively. The intended action will not prevent individuals and organisations from pursuing issues through negotiated settlement, arbitration, Court proceedings as a private party, or taking eligible complaints to the Financial Ombudsman Service.

The result of the test case will be legally binding on the insurers that are parties to the test case in respect of the representative sample considered. It will also provide persuasive guidance for the interpretation of similar policy wordings and claims that can be taken into account in other Court cases, by the Financial Ombudsman Service and by the FCA, in looking at whether insurers are handling claims fairly. The FCA wants to ensure that policyholders and insurance intermediaries are properly engaged throughout this process.

Invitation to policyholders and insurance intermediaries to provide information

The Coronavirus pandemic will have affected policyholders in different ways. The issues relevant to the intended proceedings will therefore be wide-ranging and complex. The FCA recognises that the intended proceedings will better achieve their consumer protection and market integrity objectives if they cover as broad a cross-section of policies and issues as is compatible with a speeded-up Court process. The FCA is currently reviewing extensive material provided by insurers to do this.

At this stage, the FCA is inviting policyholders and insurance intermediaries who are aware of unresolved disputes with insurers over the terms of BI policies to engage with them, if they want them to take their concerns into account as part of the test case. In particular, the FCA is asking policyholders who have been affected to supply the following information:

  • Your arguments as to why you consider cover should be available, together with details of policies that you consider should have received a positive claim response but have been rejected
  • Brief relevant facts of your case/s

The FCA will consider all arguments raised by both policyholders and insurers. They will treat the information they receive as confidential and covered by the FCA’s ‘litigation privilege’, which means that they would be entitled not to produce it to a third party or a Court and could not legally be forced to do so.

Please email any material you want them to consider to: [email protected]

Given the volume of information they expect to receive they cannot commit to replying to individual communications.

How the FCA intends to engage with policyholders

They intend to engage with policyholders at key stages of the Court action, including:

  • Considering those arguments and factual circumstances communicated by policyholders and insurance intermediaries to the FCA
  • Using the arguments, policies and fact patterns put forward by policyholders to inform the sample of policy wordings and fact patterns (a summary of the key facts of a case) to be used in the Court proceedings
  • Making public all the ‘pleadings’ (arguments and reasons) in the test case
  • Where policyholders and action groups have appointed legal representatives to represent them, having discussions during the preparation of the FCA’s pleadings and submissions
  • Publishing other material relevant to the test case – provided that the FCA is legally entitled to do so.

Coronavirus Statutory Sick Pay Rebate Scheme

Scope of the Scheme

Employers will be able to make claims through the Coronavirus Statutory Sick Pay Rebate Scheme from 26th May. This new online service is designed for small and medium-sized employers to recover Statutory Sick Pay (SSP) payments they have made to their employees. This scheme will allow SME employers, with fewer than 250 employees, to apply to HMRC to recover the costs of paying Coronavirus-related SSP.

Employers will be able to make their claims through a new online service from 26th May. This means they will receive repayments at the relevant rate of SSP that they have paid to current or former employees for eligible periods of sickness starting on or after 13th March 2020. Tax agents will also be able to make claims on behalf of employers.

Preparation & Eligibility

To prepare to make their claim, employers should keep records of all the SSP payments that they wish to claim from HMRC. You can read further guidance on checking whether you can claim back SSP paid to employees due to coronavirus (COVID-19) on GOV.UK.

Employers are eligible if they have a PAYE payroll scheme that was created and started before 28th February 2020 and they had fewer than 250 employees before that date. The repayment will cover up to 2 weeks of SSP and is payable if an employee is unable to work because they:

  • Have Coronavirus; or
  • Are self-isolating and unable to work from home; or
  • Are shielding because they’ve been advised that they’re at high risk of severe illness from Coronavirus

Further information

The current rate of SSP is £95.85** per week (see also Note below). Employers can choose to go further and pay more than the statutory minimum. This is known as occupational or contractual sick pay. Where an employer pays more than the current rate of SSP in sick pay, they will only be able to reclaim the SSP rate.

The scheme covers all types of employment contracts, including:

  • Full-time employees
  • Part-time employees
  • Employees on agency contracts
  • Employees on flexible or zero-hour contracts

Interconnected companies and charities can also use the scheme if their total combined number of PAYE employees was fewer than 250 on or before 28th February 2020. Employees do not have to provide a Doctor’s ‘fit note’ for their employer to make a claim under the scheme.

Under the Coronavirus Job Retention Scheme (CJRS), employers can furlough their employees who have been advised to shield in line with public health guidance and who are unable to work from home. Once furloughed, the employee should no longer receive SSP and would therefore be classified as a furloughed employee. Where an employee has been notified to shield and has not been furloughed, the rebate will compensate up to 2 weeks of SSP from 16th April 2020.

Note: ** For the period 13 March 2020 to 5 April 2020 the SSP rate was £94.25 per week

The Coronavirus Future Fund (CFF)

This new CFF scheme will issue convertible loans of between £125,000 and £5 million to innovative and creative sector companies which are facing financing difficulties due to the Coronavirus outbreak. The CFF will open for applications on Wednesday 20th May 2020.

The CFF will provide Government loans to UK-based companies subject to at least equal matched funding from private investors. These convertible loans may be a suitable option for businesses that typically rely on equity investment and are unable to access other Government business support programmes because they are either pre-revenue or pre-profit. The CFF was developed by the Government and is being delivered by the British Business Bank.

Eligibility& Applications

Your business will be eligible if:

  • It is UK-incorporated. If your business is part of a corporate group, only the parent company is eligible
  • It has raised at least £250,000 in equity investment from third-party investors in the last 5 years
  • None of its shares are traded on a regulated market, multilateral trading facility or other listing venue
  • It was incorporated on or before 31st December 2019
  • At least one of the following is true:
    • half or more employees are UK-based
    • half or more revenues are from UK sales

The CFF will open for applications on Wednesday 20th May 2020.

Coronavirus Grant Funding for SME’s via Local Authorities

Introduction

Local Authorities have received and are distributing additional funding to support small and medium businesses in England during the Covid-19 crisis. Each Authority has some discretion about what amounts of money can be distributed to which local businesses in their area. This covers 2 Coronavirus grant schemes:

  • Small Business Grants Fund (SBGF) scheme
  • Retail, Hospitality and Leisure Business Grants Fund (RHLGF)

How much does each Authority get?

This list shows the total amount of money that each Local Authority in England has:

  • received from Central Government
  • distributed to SMEs to date

As of 17th May, over £9.5 billion has been paid out to over 778,000 businesses.

Find out if your business is eligible to receive this or other funding

You should Contact your Local Authority to find out if your business meets their local support criteria and, if so, how much you may be eligible to receive. We also recommend that you check to see if you may be eligible for other loans, tax relief and cash grants in case you’ve missed any previous opportunities. Use the business support finder to see what support is available for you and your business.

Clarification on Directors’ Remuneration & Share Dividends

We are pleased to confirm that, despite some media speculation, organisations that have applied for the Coronavirus Job Retention Scheme (CJRS) and/or the Coronavirus Business Interruption Loan Scheme (CBILS) and/or the Bounce Back Loan Scheme (BBLS) will not be subject to any restrictions on Directors’ remunerations or limits on Shareholder dividends for the duration of these schemes.

We will issue further advice and guidance Bulletins as the Covid-19 situation develops.

Sir Henry Boyle
0930 hrs 20th May 2020

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