Restructuring positives for 2021 and beyond

A year ago, we were trying to consider the financial impact of the coronavirus pandemic when it first fully hit the UK and we were very much still trying to get our heads round new terms, new schemes, new support measures and HMRC extensions.

Although we are far from being ‘out of the woods’ yet, we are keen to take a moment to pause and recognise some of the positives that we are seeing a year on, both from a regulatory and personal point of view.

The Government support schemes, including furlough, tax deferrals and the various loans and grants made available, have helped many businesses survive the past year, keep people in employment and avoid the potential avalanche of insolvencies that many predicted.

Although last year hit many individuals hard in terms of a reduction in income, it also allowed the time to reflect and review their overall personal financial situation more carefully. Research from the Bank of England has shown that in the UK in 2020, individuals repaid the most money borrowed on loans and credit cards in nearly three decades. It is estimated that £7.2bn was repaid in April 2020 alone. As a result of spending less, households have been able to make debt repayments and for many they might now be in a better financial position than they were 12 months ago.

Whilst it remains to be seen what impact the eventual withdrawal of the support measures will have, and unfortunately there is still likely to be large numbers of businesses and individuals that may fall into insolvency, the good news is that a lot of the measures have recently been extended to give further breathing space.

The Corporate Insolvency and Governance Act 2020 (Coronavirus) regulations were extended on 26 March 2021, which extended the protection from creditor action via the suspension of statutory demands and winding up petitions to 30 June 2021. The suspension of wrongful trading provisions has also been extended to the end of June.

On the personal side, some of the personal insolvency measures introduced by  Coronavirus (Scotland) Act 2020 and part 1 of the Coronavirus (Scotland) (No.2) Act 2020  have been extended to end on 30 September 2021. These include:

• The increase of the minimum debt level for creditor petitions to £10,000.
• The extension of the length of the moratorium against diligence from 6 weeks to a period of 6 months.
• The removal of the prohibition against an individual benefitting from more than one moratorium in any 12-month period.

Additionally, some of the interim measures originally introduced by the Acts were made permanent These include:

• Reduction of the Minimal Asset Process (MAP) debtor application fee to £50.
• Reduction of full administration bankruptcy application fee to £150.
• Removal of all bankruptcy debtor application fees where prescribed benefits are in payment.
• Increase in the debt threshold for access to the Minimal Asset Process route into bankruptcy from £17,000 to £25,000.

All of the above rule changes and extensions will assist businesses, individuals and their advisors by allowing further time to consider their actions or, if necessary, make it easier to access any debt relief they may require.

As the successful roll out of the vaccination programme continues and society begins to take its first steps back out lockdown, we are encouraging individuals and businesses to use the extra time wisely and to ensure detailed plans and budgets are put together in order to meet the challenges ahead.

For more information on the legislative changes, or a review of budgets or planned course of action, please contact Duncan Raggett or your usual AAB contact.