Although many food retailers may benefit from an increase in spending, the closure of restaurants, cafes and bars along with the inevitable dampening of consumer spending has undoubtedly hit food, beverage and agri-business (FB&A) companies. As with many areas of the economy, these companies will be under intense pressure as existing cash reserves and credit facilities are exhausted.

The Irish government, the European Commission and other public organisations have taken unprecedented action to support businesses and protect jobs.

We have highlighted below some of the measures, supports and issues which are most relevant to the FB&A sector.

Tax

Over the last number of weeks, a number of COVID-19 related measures have been announced. We have highlighted below those which may relevant for companies in the FB&A sector:

• Repayments and refunds, particularly of VAT and PSWT, are being prioritised.
• Where any instalments of excess R&D tax credits are due to be paid in 2020, a request can be made to bring forward the payment date. The company’s corporation tax return for the accounting period ending in 2019 must be submitted at the time of the request.
• The RCT rate review (relevant for certain entities involved in meat processing activities) which was scheduled to take place in March 2020 was suspended as the process may have resulted in a subcontractor’s RCT rate increasing due to changes in their tax compliance position.
• Certain measures have been introduced to ease the burden on SMEs including the suspension of debt enforcement activities and interest on late payments of VAT and payroll.
• The application of the corporation tax surcharge (for late filing of corporation tax returns) for accounting periods ending June 2019 onwards (ie due by 23 March 2020 onwards) is suspended until further notice and there will be no restriction of reliefs (such as loss relief and group relief) due to the late filing.

Revenue also issued guidance around the circumstances in which various payroll tax reliefs and concessions will not be impacted due to a person being in Ireland as a result of COVID-19 related travel restrictions. Likewise, Revenue clarified that they are prepared to disregard the presence or absence of individuals including employees and directors of a company for corporation tax purposes. In all cases it will be important to maintain a record of the facts and circumstances giving rise to the presence in or outside Ireland.

We discuss in more detail the Irish tax measures announced in response to the spread of COVID-19 here.

It is worth mentioning that many companies, including those in the FB&A sector, overlook the availability of R&D tax credits. As these credits are refundable, they could act as a vital source of cash flow to companies struggling with liquidity issues. Any businesses involved in R&D should consider reviewing their R&D tax credit position to maximise the amount of cash refunds available to them.

Global Issues

Many companies in the FB&A sector will have international operations and will be grappling with COVID-19 related issues globally. The summaries prepared by member firms in the Taxand network – the world’s largest independent tax organisation is available here.

Cash Flow

In relation to cash flow problems companies will need to review their indebtedness and existing finance arrangements. If companies are facing liquidity issues they will need to address credit already drawn and credit available for drawing.  Companies who engage with existing funders early if there are credit issues are more likely to get a favourable response.

If a company runs into financial difficulty and is unable to pay its debts in full as they fall due, directors must act to protect the interests of company creditors. Directors must not allow the company to continue to trade and incur further credit where there is no reasonable prospect of those creditors being paid. They can expose themselves to personal liability if they do so.

When deciding whether or not to provide additional liquidity to a company a lender will assess the ability of the company to repay, the viability of the business of the company and the measures being taken by the company in response to COVID-19.  For further guidance on understanding business risks see our detailed briefing here.

Supports introduced by the Government to assist FB&A companies in their efforts to keep the businesses alive during COVID-19 include the Bord Bia Navigating Uncertainty Program which offers a suite of supports for businesses in this sector.  The program offers a series of webinars and information on both short-term and medium-term supports being offered by the Government that are aimed at assisting FB&A companies.

Financial Supports

• The Strategic Banking Corporation of Ireland have established a Covid-19 Working Capital Loan Scheme. Details on the eligibility criteria and the application process can be found here.
• The SME Credit Guarantee Scheme has been extended to encourage additional lending to impacted SMEs. Details on the key eligibility criteria and application process can be found here.
• MicroFinance Ireland is offering support to Microenterprises as an immediate measure to specifically deal with the exceptional circumstances. Applications can be made through the MFI website or the relevant Local Enterprise Office.
• The Sustaining Enterprise Fund has been established by Enterprise Ireland to provide financial support to Irish companies (but excludes those involved in primary agriculture or aquaculture) impacted by COVID-19. Further details are available here.
• The European Commission will soon finalise a support package to include private storage aid for dairy and meat products, exceptional derogation from EU competition rules applicable to the milk, flowers and potato sectors and the introduction of flexibility for certain existing market support programmes. Further details are available here.

Further analysis on the impact that COVID-19 is having on borrowers and lenders generally can be found here.

Employment Related Measures

Employers across the FB&A sector may be experiencing a downturn in demand with an associated impact on production levels.  In those circumstances, employee issues such as lay-off, short-time work and/or redundancies may become relevant.

The Government has introduced a series of emergency measures designed to financially support both employers and employees in the context of the ongoing COVID-19 crisis.  We discuss these measures here.

Employers may seek to avail of the Temporary Wage Subsidy Scheme (TWSS) designed to encourage employers to keep employees on the payroll with the intention of being ready to recommence work at full capacity once possible.  The TWSS subsidises the wages of eligible employees in circumstances where an employer’s business activities have been or will be adversely impacted by the COVID-19 crisis. Our guidance on TWWS is available here.

To date, the various financial supports have been refined and rescoped by the Government a number of times.  Therefore, it is advisable that employers keep this aspect under ongoing review during this time. As the supports are interim in nature, employers may need to consider more permanent measures in relation to their capability to retain workforces at pre-COVID-19 levels.

How Can We Help You?

We are committed to helping your business and meeting your concerns during this challenging time. We have a specific COVID-19 Hub on our website to help you.

If you would like to consider any of the topics discussed please contact Rachel Fox (Tax), Breffni Sheridan (Corporate), Nuala Clayton (Employment), Padraic Kinsella (Banking) or your usual William Fry contact.

Contributed by Nuala Clayton, Ciarán Herlihy & David O’Shea