Overview of government funding programs for U.S. based businesses operating in Canada and the UK

Roberto Aburto: OK welcome everyone. My name is Roberto Aburto and this is Gowling WLG's webinar providing an overview of Government funding programs for US based businesses operating in Canada and the United Kingdom. Government programmes are changing swiftly and every jurisdiction has its own unique response so for cross border business certainly unique challenges and it is always a moving target so we are going to do our best to provide a snapshot today of where we are in terms of these programmes. Before we get too far down the road I just want to introduce our panellists today.

Colin Green is a corporate tax law partner in our Ottawa office, he assists his clients in pursuing their corporate objectives both tax driven and otherwise. Colin's been making social distancing work by exploring the surrounding areas best hikes whenever he is permitted to do so.

Stefan Smoktunowicz is a professional support lawyer in our London office, he is highly experienced in banking and finance law with a focus on transactional work. He writes and delivers training for banks, financial institutions, private equity houses, corporations and industry bodies. Stefan has been making social distancing work by putting some new guitar strings on his guitar.

Jonathan Chamberlain is a partner in our London office, he practices employment law working with clients of every size and at every level. Jonathan has been coping with COVID quarantine by baking lots of bread and then walking off the calories in Warwickshire countryside so it is a very scenic experience for Jonathan, we will all jealous of that.

My name is Roberto Aburto located in our Ottawa office, I practice in all areas of litigation with a focus on real estate development. For law school I attended a joint programme with the University of Ottawa and Michigan State University College of Law so I would be remiss if I did not say go green and perhaps we lost some University of Michigan [unclear 01:59.4] at that point but I have been coping with COVID quarantine by mercilessly walking my two small dogs so they are getting sick of me but it is still fun.

This may be an introduction for some of you to Gowling WLG, we are a global firm with offices in 19 cities across nine countries over 1400 professionals worldwide. A few housekeeping points, the slide deck and this webinar will be posted so usually within a week for the materials to get up on our COVID website. Lots of materials on the COVID website as well so we encourage you to check that out. If you have questions for us please use the Q&A function which is at the bottom of your screen, note that the chat function has been disabled. We will do our best to answer general questions at the end sort of time permitting. We will be answering fact specific scenarios but happy to engage in discussions with you if we can be of assistance. Our contact information is included at the end of the slide deck and is also available on our websites so that is also available.

In terms of our agenda, on the next slide we are going to cover a lot of ground today. Colin will speak about two of the federal programmes in Canada, the wage subsidiary and the emergency response benefit and I will speak briefly to risk management and then Stefan and Jonathan will speak about the various funding schemes in the UK. This programme reflects our best information at this point in time but as I said this is a moving target in terms of programmes, things keep changing every day so additional due diligence is recommended on your part. Next slide.

So you are seeing a webinar from a law firm so clearly you are going to see a legal disclaimer, this is not legal advice, there will be unique circumstances and certainly you need to contact qualified legal counsel in appropriate jurisdiction but it is current up to June 16, 2020 but please do keep up to date and make sure that you are looking at the source of information because everything is changing. With that I will turn over to Colin Green.

Colin Green: Good morning. Slide please. OK. So as indicated by Roberto, what I am going to do is provide some brief overview with respect to the scope and structure of programmes that are out there for US parent companies predominantly that are operating in Canada, generally through a subsidiary, a Canadian subsidiary but that is not necessarily required and we have seen an extremely broad array of programmes that have come through, really that were not anticipated and these programmes are predominantly in the form of Government funds and subsidies but they do extend beyond that and here you will see on the slide that there is an overview in terms of measures the Government have taken, the fundamental one we will be discussing is the Canada Emergency Wage Subsidiary (CEWS), in addition to the Canada Emergency Response Benefit (CERB) and then there is the variety of other programmes which we will not have time to delve into today but I will speak to them briefly just so that attendees are aware of the general architecture out there between subsidiaries for employees, for independent contractors in the gig economy, work sharing for looking to reduce the scope and burden that employers are taking by maintaining employees that they do not want to be a full employability for fiscal purposes, work sharing in addition to that there is commercial bank relief, there are emergency business loans, they are advanced out depending upon the scope and size of the participant and then lastly, there is also extensions to various tax deadlines in terms of filing and payment timeline. So really an unparalleled at least to this juncture for what we have seen before, the range of support mechanisms introduced by the Government.

So let us take a closer look at the first two because these are generally the starting point that we circle in at and probably would find to be the most applicable for US entities operating in Canada directly or through a subsidiary. Slide please.

OK. So let us talk about CEWS. Initially when the COVID crisis started to emerge we saw what we would have expected from a Government in the form of an announced 10%25 wage subsidiary but it quickly became apparent that this was going to be in no way shape or form sufficient to provide the coverage that was necessary to forestall the biggest economic drop of employment that we have seen since the great depression and frankly without CEWS as a programme, you know forecasts have indicated that it could have been significantly worse in terms of the scope of unemployment. So CEWS is different from what was announced in form of the initial wage subsidiary and was expanded upon and in a parameter basis, CEWS is a cash subsidiary paid by the Government to employers, effectively to maintain employment, to make sure that they are not terminating employees and this is different from what was initially presented as a reduction of payroll remittances, which was obviously a lot more limited in terms of saying we will reduce the amount of money you have to pay us now the Government is flat out reaching into its pocket coffers and providing significant capitalisation to employers to maintain employees. Eligible employers are able to apply for both CEWS and the previously announced subsidiary, in fact the subsidiary will apply first and then CEWS but from a mechanical position aside in the big picture sense, the assistance that is provided is significant if you receive assistance subsidiaries for the 10%25 wage subsidiary that is accounted against the CEWS amount that the Government pays you but still big picture you are receiving a significant portion, 75%25 wage subsidiary in certain emphasis. Slide please.

Thank you. So in terms of the key differences we have talked about the 10%25 wage subsidiary was limited in application, it provided a maximum payment amount per corporation of $25,000, in terms of that that is minimal right, in terms of the application it would apply. CEWS by contrast does not have a maximum per employer so this can apply virtually if you have 20,000 employees if you meet the other criteria of the programme. So it is much broader in scope, it is projected as being an $83billion dollar programme in terms of the application all the way through but it is still evolving so we do not know what the final form for the later months of the programme or application requirements or scope of payments will look like. It does measure thus far though as one of the most significant and most rapidly assembled social infrastructure programme that Canada has ever rolled out. So as discussed you qualify for the 10%25 wage subsidiary you automatically receive it simply reducing the CEWS component that you receive by 10%25. Slide please.

So eligible employers are given a temporary wage subsidiary as we are working the mechanics of 75%25 of the remuneration paid for up to three months, that is $847 per week per employee or 75%25 of the pre-crisis remuneration for the employee. There are some nuances or non-arms' length employee but let us put that aside and work to the big picture right now. What is interesting here is that you have reduced employee salaries by 25%25, you can be in a position where you are actually receiving 100%25 of the coverage from the Government subsidiaries. Equally, there are additional wrinkles that can be used for this in terms of providing some form of working notice if you want to elongate the period of time before you terminate an employee. To be clear the intent of the programme is not to facilitate termination of employees, in fact even if you are not able, that there is no work for example, available for employees in those scenarios that the employee's not working the Government will even pay the payroll remittance of portions that employers are otherwise required to pay. This would functionally bring the cost of the employees to near zero but the aim and intent of this programme is to let companies maintain full employability all through what was projected to be and hoped to be the worst portions of the crisis. This subsidiary for the wage component of CEWS is backdated to March 15 2020. Slide please.

Again we discussed non-arms' length employees are limited to the apported sum but for all other employees there is structural flexibility in terms of how we work with it. Slide.

In terms of all of remuneration the employees must be working in Canada as we discussed, this includes non-arm's length employees and employers are permitted to bring employees back to work if they have been retroactively terminated and it includes all forms of salary, wages, remuneration but excludes severance pay value of stock options and non-cash benefits. Again if you are an independent contractor we will discuss CERB, the big economy portion payment separately from CEWS. Slide please.

Again, one of the key points to highlight here is that there is no overall cap to the quantum that can be claimed by the employee. This is significant in terms of its scope and application. But really the larger the company the more they have potentially to gain from the benefit pocket. CEWS remuneration again, paid through to the employee and does not extend to independent contractors. Slide.

Is it available to any form or type of employer in Canada whether individual partnership corporation expensive [unclear 11:09.7]. Here from a US prospective if you are operating as a registered branch in Canada that is sufficient or if you are operating through a subsidiary that is sufficient. We have seen certain examples where US companies are operating without a permanent establishment in Canada and without delving into all the nuances on this, the key takeaway is that if you are registered for Canadian tax purposes you are generally able to apply for CEWS if you meet the other requirements. Slide please.

Qualification wise, employers need to attest to a reduction of gross revenue of 15%25 for March and 30%25 for April and May compared to the same month for 2019 or an average of January, February 2020. Now again note there is incredible flexibility here as to which month you apply to, are you looking for the initial month, are you looking for the average of January, February there is also flexibility as to whether you not you deal with this on a consolidated basis or not and then the addition is to whether or not you deal with this on cash or a [unclear 12:10.2] basis. So this program was really set up to try and let people qualify and that and a qualification scenario. You get the program structured to run through to the end of August and employers are encouraged to make best efforts but not required to top up employees to pre-salary levels. Side please.

In terms of applying it is generally best to practice through my appliance in the C area of my account business portal. We have seen times of two to five weeks in terms of applying but you are able to apply retroactively. Slide.

As discussed these will be included in the employers income but the deduction corresponding will be provided for payment through the employee. So it is effectively cash neutral for employees, sorry for employers in terms of receipt of the funds and subsequent payment out to employee. Slide.

In terms of employers they would need to ensure they were registered to C area for direct deposit and they should assemble the records to demonstrate the 30%25 reduction and subsequent month's gross revenues. I would also note that once you qualify for one period you automatically qualify for the subsequent month period, this is a month by month application. Slide please.

From a government consultation perspective we did not, we note that they have announced a consultation period to close June 5 for structural changes to the program but have no details as of yet as to the matter of form that these changes will take. Slide please.

So I am going to provide some very brief comments as well on CERB. The anticipation is that this would be less helpful to a US employer, employees in Canada, it is something however that employers, US included, should be aware of if they are operating with independent consultants or big economy practitioners in the Canadian scope market. Actively CERB provides a $500 a week payment for up to 16 weeks and we are nearing the closing end of this programme window. However people are able to apply retroactively. Slide please.

These benefits are taxable. In addition to that we note that in order to achieve these benefits you would need to indicate they have to provide an attestation that they have stopped working because of COVID-19 or otherwise eligible for employment insurance, have to have had at least £5,000 of Canadian sourced income from 2019 and they have to expect or to be without employment for at least 14 days. Slide please.

$5,000 requirement is met fairly easily from a broad range of Government sources or independent economic sources of reported income. Slide.

Again the CRA in my accounts site is used and recommended for application purposes but it can be done very easily and quickly. Slide.

That concludes my presentation.

Roberto: Hey thanks Colin. So just moving on to the risk management element, certainly risk management is part of any decision making process for any business and this includes potential enforcement from the Canada Revenue Agency. Abuses of these federal programmes have been gaining a lot of traction in terms of media attention. Even last week Justin Trudeau's minority government was unable to pass some new penalty provisions in relation to CERB and there is even some discussion about expanding, extending it as opposed to moving on a penalty state. So it's a moving target in terms of the penalties but from a high level it is helpful to understand the distinction between tax planning, tax avoidance and tax evasion. Tax planning is a reduction strategy that meets the specific wording of the legislation as well as the spirit of the legislation. Tax avoidance meets the specific wording but does not meet the spirit and so there can still be penalties in relating to tax avoidance so people like Colin provide tax planning avoiding tax avoidance penalties and then tax evasion is the more overt use gross negligence or intentional acts and it comes with higher penalties and notably the potential for prison time. As a note there is no privilege that connects in terms of correspondence with accountants when you have questions about tax planning verses tax avoidance verses tax evasion so if there is a risk there in Canada, solicitor client privilege does attach to discussions with tax lawyers so something to consider if there is any grey area uncertainty there to make sure you are getting the right advice while minimising your risk. Next slide.

And so the tax avoidance penalties are punitively typically with penalties from 50%25 to 200%25 and again additional fines on top of that for evasion and the risk of prison time. Next slide.

With respect to monitoring these programs for CEWS specifically the CRA is using accommodation of automated queries a third party complete line or a snitch line as the media is terming it follow phone calls and then post payment reviews are on it. Now in terms of the post payment reviews are they on it? The scope of that is unclear. CRA has helpfully said we will figure it out later. So again important to have your ducks in a row to minimise risk. The employer will be required to repay amounts paid under the subsidy of they do not meet the eligibility requirements after the fact as well as penalties. Next slide.

And then so the CRA expects that you are retaining adequate records to support your claim for eligibility and that assumptions are included in those written records and that the nature of the remuneration is considered and documented and maintain a signed attestation and records of any elections just so that you have got all your documentation in a row in the event that there is an audit after the fact. Next slide.

Where the anti avoidance ruling would be 25%25 of the wage subsidy as a penalty on top of repayment of the wage subsidy and for gross negligence it is at this point it's 50%25 on top of repaying the wage subsidy so significant penalties there if it was found to be outside after the fact. Next slide.

So as I said there has been a lot in the news about the penalties and what that is likely to look like so I will speak very briefly to some of the penalties but noticing that you know legislation seems to be coming hard and fast and so this does appear to potentially be a moving target. Next page.

So there has recently been rhetoric about a more aggressive approach CRA's portal is open for complaints and that is sort of the snitch line as well that was referred to for CEWS. The approach for this legislation was to just get the money out as quickly as possible and worry about it after the fact so, you know, where the penalties are after the fact, it could very well be a moving target and is likely to be so. And with that I will pass it on to Stephan.

Stefan Smoktunowicz: Thanks very much Roberto. Good morning from the UK everybody. Next slide please.

So in this part of the session we are going to look at the UK Government Bank Funding Schemes that may be available to US entities who have a footprint in the UK. We will have a look at those schemes in a little bit more detail in a moment. We will look at the main eligibility criteria, some of the key restrictions around accessing those schemes and also I thought it would be useful to provide some practical points if you are thinking about accessing some of those schemes in the UK. Next slide.

So what the main schemes? We have four main schemes in the UK on this slide. The first one is the Coronavirus Business Interruption Loan Scheme which we call CBILS, a bit of a mouthful that one, and that is really aimed at businesses with a turnover of up to £45 million. Really the small to medium enterprise space and the funding limit on those schemes is £5 million. The next scheme is the Bounce Back Loan Scheme which is a much smaller scheme in terms of funding limit, a maximum of £50,000 but it is available to businesses of any size so good if you are looking to get a quick injection of cash very quickly into the business, and the third scheme is the Coronavirus Large Business Interruption Loan Scheme which we normally abbreviate to CLBILS to make it a bit easier, that is aimed at slightly larger businesses £45 million plus and on that scheme we have a funding limit of £200 million and then finally we have the COVID Corporate Financing Facility (CCFF) which is really aimed at investment grade rated businesses and the funding limit of that depending on the actual investment grade rating of the business in question is up to £1 billion. I thought it would be useful to put these schemes into a bit of context in terms of actual lending that we are seeing against these schemes. So by far the widest use scheme at the moment is the Bounce Back Loan Scheme that has something like 863,000 businesses using it at an average of £30,500 per business. The second most used scheme is the CBILS Scheme the support scheme and that has at the moment 49,000 business that have been approved and the average lend on that is £205,000 obviously a bit less than the £5 million limit suggested by the scheme. Then as we move to the larger schemes the CLBILS Scheme at the moment has 279 facilities that have been granted an average of £6.34 million per facility and finally the COVID Corporate Financing Facility for investment grade businesses which has a lower limit as you would expect but we have 165 approved businesses and 55 have drawn and we have about £16.37 billion outstanding but overall across the four schemes there is approximately £109 billion of available credit that has been made available so quite big sums. Next slide please.

So if you are looking to access these schemes when are they available till. So the first three schemes, the CBILS and CLBILS and the Bounce Back Loan pretty much available until mid-Autumn, September to November and there have been some mutterings from the UK Government that these schemes may be extended to the end of the year but I think that is probably going to depend on how well the UK Government's and the UK economy rebounds from all of the COVID crisis. The CCFF scheme is available for a bit longer until March 2021 which is good news for investment grade businesses. Then in terms of the kinds of facilities that you can expect to see on these facilities the first two facilities the CBILS and the CLBILS it is a wide range of financing really, term loans and revolving credit, asset backed finance and invoice finance and the terms of these facilities really vary from three years to six years in length. The smaller Bounce Back Loan Scheme is available for six years but that is funding only and then on the COVID Corporate Financing Facility that is a 12 month scheme and that is a commercial paper scheme so that corporates will issue commercial paper usually buyer bare funders. Next slide thank you.

Well let's look at these, let's take a look at these schemes in a little bit more detail to understand how a UK footprint of a US business might be eligible and we will take a look at the CBILS Scheme first this is the facility that you have a £5 million facility limit on potentially and the first criteria is that the UK must be UK based in business activity, what does that actually mean? Well it means that the business have to be trading in the UK not just sort of selling into the UK and really the poor business operation has to be within the UK so in practice that is probably going to mean UK incorporated businesses for the US owner and might have a share in. It may extend to branch businesses but again it depends really what co-operations that branch has in other jurisdictions so if the main business operation is in the US then potentially it may not be eligible so that is something to bear in mind. Once you have looked at that, that the business has to actually generate more than 50%25 of its income from the sale of goods or services but that can be export based as well so if you have a UK business that is principally exporting then potentially that is eligible too.

The next thing is the turnover threshold so I mentioned earlier that the turnover threshold on the CBILS facility is £45 million, how do you actually assess that? Well it really depends on the ownership stretcher of the UK business so if you have got a UK business that has not more than 25%25 ownership by any of the shareholders and the UK business does not have a 25%25 or more shareholding in the other business and it is deemed to be a sole enterprise and that means that you assess turnover on the turnover of the enterprise itself where are you going to put that if you have got a wholly owned subsidiary or a majority owned subsidiary structure and you are really looking at the group turnover when assessing whether or not turnover is £45 million. Anything between the gap, so anything between 25%25 and the wholly owned or majority owned subsidiary, you are looking at whether those business partners, each of the shareholders in the business has any other link to enterprises, so any other for majority or whole subsidiaries, that kind of thing and if they do then you are going to get those pulled in so you are looking at a group basis there.

So each business is obviously going to have its own structure and it's important to look at that when you are assessing whether or not you are eligible for [unclear 26:26] scheme. On the plus side if you are a private equity investor venture capital company or business angel, if you are looking at a single company you can have a stake of up to 50%25 rather than 25%25 in the business and that may allow you to consider that UK business as a single company but again it may depend on whether that UK business has shareholdings in other businesses as well and also a private equity investor's turnover and its turnover from the other investments would be excluded from the turnover calculation when you are looking at that. So that is really the turnover. In terms of other key criteria, the UK business needs to have a buying proposal which the lender would consider viable if COVID-19 hadn't happened. Obviously there is a fair amount of discussion for lenders here but the UK Government is trying to encourage lenders to lend where it can on this facility. The business will have to self-certify that it has been adversely impacted by COVID-19, that may be relatively straight forward depending on the sector but obviously if a business has doing fairly well then it may be more difficult to prove that, for example, if you are in the tech sector and then the other thing that banks may want are security and guarantees and to support the scheme in our experience some banks are looking to existing security structures to achieve that but it may be that additional security or guarantees are required to make the scheme viable for the lender. Next slide please.

So what about the key restrictions, well the turnover test is a very strict test so it is unlikely that you will be able to sort of tweak the balance sheets to be able to get around that and there are certain sectors that are excluded from the CBIL Scheme which include banks, insurers and reinsurers but not insurance brokers. There are also state aid test that apply so if the UK business has had any kind of state aid there are EU rules that apply and that may mean that UK business can't actually get access to the scheme. Additionally there are tests around whether or not the business was viable ass at the end of last year which are looked at in a lot of detail in the British Business Banks frequently ask questions which you will see a link to at the bottom of this slide. The other thing to bear in mind is that even if the business is viable and on the face of it can apply for the scheme. Each of the lenders that are accredited under the CBILS Scheme are actually restricted in what they can lend in terms of their maximum aggregate lending caps because behind this scheme and the CLBILS Scheme sit government guarantees at 20%25 of the lend so there are caps on what the lenders can lend which will be a reason why as we see the scheme progress that we see some of the lenders unable to lend against this scheme. Next slide thank you.

So that is a CBILS scheme, the smaller perhaps like a loan scheme, again sort of similar in concept in terms of eligibility criteria and the business has to be relevant to be new the established style before 1 March this year, again it must be engaged in trading or commercial activity in the UK and that essentially means that it has got to be a UK incorporated company or limited liability partnership or tax residents in the UK. Unlike the CBILS scheme there is no turnover tests so it can apply to any type of business, but again more than 50%25 of accrued income has to be derive in trading activity so another 50%25 sounds fair, and also the borrower has to show that the loan is going to be used to provide economic benefit to the business, it cannot just borrow it for the sake of it. In terms of what you can borrow here is capped at 25%25 of the UK business and over. Next slide, thank you.

In terms of restrictions one thing to bear in mind is that despite the relatively low facility limit, £50,000 that does not mean you can go back to the banks once you have repaid it and ask for another 50,000 etc. to get you up to a million, or two million etc. it is really a one off application so you are restricted to the 50,000. And also if you have got a business in your wider group that is access funding via any other schemes or this scheme actually, then there are restrictions about accessing the scheme, so that is something to bear in mind just in case you have a wider group in the UK or wider footprint that has accessed other schemes.

Again we have types of business that are restricted, banks, building societies etc. and another restriction here is that the business itself cannot be in any sort of liquidation or bankruptcy or similar process at the time of the application for the scheme.

Again we have got State Aid rules that apply which are similar to the ones that I have explained already, and again we have a link here on the slides that will be made available following the session with some more of the FAQs from the British Business Bank on that. Next slide.

So there are the smaller schemes, in terms of the larger schemes the CLBILS scheme which as a reminder is lending up to 200 million, again similar kind of tests here. The thing that I would flesh out from the slide is that the turnover point, so turnover of more than 45 million, and again similar assessments in terms of whether or not you are a sole enterprise, whether you are a group enterprise and again if you have private equity or venture capital back business then those businesses are treated separately for the sake of assessing turnover.

In terms of the restrictions, there are certain other restrictions that apply here. So the first one is on the borrowing limits and you will see that in terms of borrowing limits that apply on the CLBILS scheme it is essentially either double the amount of the UK wage bill, 25%25 of the UK businesses turnover, that is annual turnover, or 12 months liquidity needs. What is not clear from the British Business Bank is whether that is an either/or or whether it is the maximum amount of those, but clearly that is a discussion to have with your preferred bank if you do choose to look at one of those schemes.

The other thing to bear in mind is the restrictions around share payments and also senior management pay. So for facilities of up to £50 million there can be no increase in dividend payments over the duration of the facility, so if you are a UK business, or have a UK business that is currently paying dividends then current levels can be sustained on facilities of up to 50 million, but you are not going to be able to increase them, and that may be as the business improves, so that is something to bear in mind.

On facilities over £50 million it gets more severe because there are actual prohibitions on dividends and share related payments and also around senior management pay rises and cash bonuses. So if you are a US business looking to extract cash via dividends from a UK business and you are borrowing more than 50 million then you may not be able to, so that is something to bear in mind. Obviously if you have existing facilities already there may be other dividend restrictions and paid restrictions have applied in any event. Next slide please.

And then finally the Bank of England fronted CCFF scheme, so this is a commercial paper scheme. The requirements here are that you have principally got to make a material contribution to the UK economy, but that includes UK incorporated companies with overseas parent companies. So what we have been seeing in terms of the companies that are drawn on the CCFF facility is that we have got a lot of overseas names that we are seeing so the likes of BASF and the likes of Nissan, Toyota, people like that are drawing under this facility to sort of help their UK based businesses.

In terms of being able to access the facility, there is an investment grade requirement and that is that as of 1 March 2020 you need to have had short or long term investment grade rating from SMP Readers Fitch or DBRS Morningstar as set out on the left hand side of the screen. If the business does not have that and that does not necessarily mean that it is game over because individual banks may have their own internal credit rating on businesses which could be used if the Bank of England are happy with that and alternatively a business may be able to look to one of the credit rating agencies and have a discussion around whether or not they can get a credit rating, but there may be more discussions to have with the Bank of England around whether or not that is viable in terms of access.

In terms of documentation requirements, there are standard form requirements that apply here, so specimen commercial paper documents are available on the Bank of England's website and again if you are lending into a UK entity and essentially it has got a US parent then the Bank of England is likely to be looking for a guarantee and legal opinion from the main group entity if it is not a UK entity.

In terms of the prohibitions these are very similar to the CLBIL scheme so again we have prohibitions on distributions and senior management pay and that is really going to be provided in terms of an undertaking from the company to the Bank of England and again you cannot use this in conjunction with the other schemes and there are restrictions around what types of entities can use the facility, but ultimately the scheme is at the sole discretion of the Bank of England and HM Treasury. Next slide, thank you.

So there is a little bit more information on both of the last two schemes on this slide and again the British Bank website and the Bank of England website have more details. Next slide.

And finally a few practical points before I hand over to Jonathan. The first thing I would say is to engage early when the creditors lend, so if you think a UK business would like to tap into one of these schemes, get a discussion going with the lender sooner rather than later. The list of accredited lenders are on the relevant websites. It may be tempting to shop around lenders for best price, as with any banking facilities what you tend to find is if you are a new borrower with a new lender then the credit application process may take longer, so it may be worth thinking about whether or not you go to an established relationship lender to look at these schemes first.

In terms of funding proposals and financial information, obviously getting together the core financial information and your borrowing application are going to be very important. In terms of the documentation that you can expect, a lot of the smaller schemes, certainly CLBIL scheme and the bounce back loan scheme will be on bank standard form documents, so it is worth thinking about whether there are any restrictions in local documents that would prevent lending, security and any other subordination requirements restrictions etc. around lending at the UK level because you may find that the standard form documentation in the UK has specific requirements around that and that could cause some problems later up the line which you do not want to have, so it is worth thinking about that earlier rather than later.

It is worth bearing in mind that although we are not seeing 100%25 approval ratings for all of the facilities across the board and the banks are restricting facilities for certain amounts, that does not mean that you cannot look to banks for other funding alternatives and we are seeing some people doing that as well, so if you cannot tap into the COVID funding, have a think about a discussion with the lender around alternatives. There is also a UK government page which is quite useful which has information about a lot of the financial scheme.

So with that I will pass over to Jonathan who is going to talk about some of the employment schemes.

Jonathan Chamberlain: Good afternoon. Well we have in the UK our equivalent of the Canadian schemes, we have the coronavirus job retention scheme, known colloquially as the furlough scheme. Furlough is a term that is used in the US, it has been for many years, it is not really a term that we had used in the UK up until now, but we borrowed it from you, so thank you very much for that.

How the scheme works, it is a temporary scheme which is open to all UK employers until 31 October this year. I will come back to what is going to happen toward the end of that deadline in a little while but for now the important thing to note is this, when I say all UK employers I don't mean UK registered companies or UK based businesses I mean any business in the UK which has a payroll registered with our tax authorities, HMRC, Her Majesty's Revenue and Customs, the equivalent to the IRS because in the UK employers have to operate withholding taxes on payroll.

The self-employed account for their tax in a tax return at the end of the year but most everybody pays most of their taxes through payroll which means that this has been a really easy scheme to operate and access and it means that if you are a US branch or a US subsidiary in the UK whatever your corporate status if you had a payroll you could access the scheme.

Now it was also incredibly generous as to which employers could apply for it. It was any business which was affected by COVID-19 which is very very wide and you didn't have to prove any degree that you were affected by it or particular impact, there were no thresholds, if your business was adversely affected by COVID-19 you could claim.

The main difficulty in operating this scheme is that employees can do no work for the employer whilst they are on furlough as we now call it and there are also administrative points like furlough has to be for a minimum of three weeks so what some companies have done is have rotating furloughs, some employees go on for three weeks then they swap with colleagues and they come back to work fulltime for three weeks and then they swap again. As the scheme has been consistently extended, at first it was only going to apply for a couple of months, we will come on to why it was extended in a moment because the drivers for that are quite interesting and there are some interesting timetables as the schemes start to wind up and there are issues about what doing no work meant so lots of companies wanted to communicate with their employees who were on furlough as to what was happening in the business, did that contravene the no work rules, well we took the view that it didn't and later on Government guidance confirmed that was the case. Employees have been able to give evidence in court, they have been able to take part in redundancy consultations, remember that one because we will come back to it later, but crucially they haven't been able to generate any value for their employer. That will change as the scheme winds down in the coming weeks and months we will see how that will change but as of now and as and when the scheme was introduced if you are on furlough you did not work for your employer.

Now what does furlough mean? Employers can claim up to 80%25 of a furloughed employee's usual wage costs up to £2,500 a month plus social security, payroll taxes, we call them national insurance in the UK and certain mandatory retirement pension plan contributions which employers are directed by statute that they have to make. They could also be claimed back. Employers were free to top up to 100%25 if they wanted to, some have, particularly in professional services for example but most obviously didn't. It has been fair to say I think that the scheme has been regarded as a most tremendous success in terms of keeping the economy afloat. About eight and a half million people have benefited from it, it had cost about 15 billion to date, these are the figures towards the end of May and it has contributed to the fact that UK unemployment has only risen by about 600,000 since COVID-19 really started to impact in March which is a pretty good result. However, however, the scheme is now being phased out and let's look at that on the next slide please.

The first point to note is this, the scheme was closed to new entrants, companies could not put anyone else on furlough who hadn't already been on furlough on 10 June. There are exceptions for people who were on family leave, in the UK we have a statutory maternity leave system and what has been happening is people are on maternity, the terms of which can often be quite generous, the element the state pay if you are on maternity leave is not very generous at all but many employers will top that up and it will be worth more to somebody on maternity leave than they would get on furlough, so funnily enough they weren't furloughed when they were on maternity leave but when they have come back then there isn't actually a job for them to return to so at that point they can be furloughed but otherwise the scheme is now closed so why am I even talking to you about this at all because this is supposed to be a webinar about which programmes are available to you and I'm cheerfully telling you that this programme isn't available to you anymore and that might now seem a precipitous drop in the number of people who are staying on the webinar but let's hope not because there is some important stuff that I would like to talk to you about because really if you have a business in the UK, you have clients with businesses in the UK and they have not been taking advantage of the furlough scheme when they have been able to up to now, before 10 June then well you have got bigger issues than that frankly because, as I say, the scheme has been a huge success, it has been really easy to operate, the Government set up a website through which claims could be made and of course we all thought Government IT project this is going to be a disaster, no-one's getting any money, actually apart from inevitably the first 24 hours when it crashed under the weight because they always do, the scheme worked really well and people have been getting payments promptly and easily.

So what we are not talking about the situation that you or your clients will be concerned with in the UK is what is happening as the scheme is winding down. Well the first point to note is that you can still make claims for employees on furlough but the total number of employees you can claim for is capped at whatever the biggest number you claimed for was before 10 June so it is entirely possible because the business cycle you had 50 employees on furlough in April, you only had 30 employees on furlough in May, as of June you can claim for up to 50, not 51. You are capped at that 50 that you were doing in April.

It is necessary to have a written agreement with your employees as to the terms of their furlough that they are working to. It has always been necessary. It has always been a condition but it is now particularly important because of how arrangements can change because from 1 July employees are able to do some work, now you recall that I said that it was a cardinal rule that employees couldn't do any work at all. The idea is the balance is now going to shift between employer and Government. So from 1 July employees can do some work and if they work then the employer pays for those hours and the Government will make up the difference up to the previous cap, 80%25 of the £2,500 a month but then over the next few months until the end of October then the amount the Government pay goes down and the amount the employer is required to pay goes up because the Government from 1 August is going to require employers to pay social security contributions, national insurance as we call them and then in September the Government is only going to pay up to 70%25 of the costs up to the cap, but employers, if they have employees on furlough are required to fund that additional 10%25, they can't just take the Government money and say sorry employees you are not going it, they have to make up the difference and then in October the burden shifts by another 10%25 so you can see that employers are incentivised to get some money and to bring people back to work.

So on the next slide we are going to start to look at some of the practical implications of that, how is this working for business and hopefully the next slide will appear, excellent, now the CJRS, when it was first brought in, with typical British cynicism known as the redundancy deferral scheme. Let me just take a step back for a moment we have this concept of redundancy in UK law which is when your employment is terminated because you don't have enough work to do and there are certain employment protection regimes which apply in those circumstances and compulsory payments that an employer has to make if employees are made redundant. Think of it as a reduction in force programme or at least that is a way of thinking about it for the collective redundancy rules. The collective redundancy rules, a version of which applies in every country across the EU require employers to consult with trade unions or employee representatives for a minimum of a certain number of days before the make the employees redundant. The crucial number is 45 days. And that is why I said I was going to mention this earlier, the scheme became extended over the summer because at one stage the Government realised that big employers in the UK were all about to announce they had started consultation on a massive wave of redundancies.

The trigger is if you are going to make 20 or more people redundant at the particular establishment in which they are working and the airlines, other transport companies, were talking about making tens of thousands of people redundant so that was why the scheme was extended. But that 45 day timetable is still going to run. It's going to be hitting us round about mid-September. In fact it is going to bite earlier than that because you are going to need to start a consultation with the workforce and if you don't have unions in place their elected representatives you will need to arrange the election so that is why I have said 45 days plus and the bad news about those rules is that if you don't follow them properly it's a 90 day penalty, not a 45 day penalty but a 90 day penalty for failure to consult. So you need to be looking ahead as an employer to what are going to be my labour needs when this scheme comes to an end at the end of October and you need to be starting to be planning for that now and getting ready to launch your consultation in mid-September.

Now that unfortunately isn't the only problem that you will face. One of them is whistle blower claims and this was mentioned earlier in relation to Canada where it is a safeguard that the Government can build in to prevent abuse of the programme and they have done exactly the same in the UK. There is a special whistleblowing hotline in HMRC which has been running, if the technology was still like this off the hook as employees have telephoned to say my employer is claiming furlough from me but making me work. Employees have rushed to drop their employers in it with the tax man and there is going to be a reckoning for that because as HMRC start to audit these claims and to see which ones should never have been made they will be asking questions, there will be a temptation for employers to fire the whistle blower, whoever made the call and those employees are protected by legislation. It is the equivalent of what was brought in in the US under Sarbanes Oxley, whistle blowers are protected. They are not incentivised like they are in the US to make claims and gain a percentage of the fine, we don't have that yet but if they are dismissed or subjected to a detriment because they have blown the whistle they have extensive statutory protection and that runs alongside the ordinary employment protection regime that we have for employees, the right not to be unfairly dismissed because as well as the collective consultation for redundancies you have to consult individually with employees who are being made redundant and that process can take a couple of weeks.

So there is a lot of planning, a lot of work to be done as we start to wind this scheme down so I hope it was worth you staying on the webinar to listen to that even if the chance to make claims for some of your workforce has now passed.

So that is the end of my presentation and I think we are now going to take questions Roberto?

Roberto: Yeah, so we have about 5 minutes left so we will make sure that we are committed to finishing within the one hour. I know that one of the questions that was asked a few times was about the slides and again we will endeavour to have those posted on the Gowling WLG's COVID-19 website within the next week.

One of the questions, I think for Colin Green is talking about the structures required to participate in the Canadian programmes, Colin can you speak to that?

Colin: I'll hop right into that actually if you have time.

Thanks Jim for your question, thank you Roberto for passing it though. So, you know, obviously we are always limited in terms of scope of application but I will offer the following general comment. When you are operating in the Canadian scheme, under the Canadian structure sphere of tax you are, it is necessary to assess whether or not in entity a corporation, individual, what-have-you, is carrying on business in Canada. If you are carrying on business in Canada that comes with some fairly immediate tax filing requirements in terms of filing and return. Take the next step and here were are working at a work highway level international cross border taxation.

If you are operational and actually earning income within a scope of activity in the Canadian sphere that is a permanent establishment (PE) so to all the questions as to whether or not a UK parent or a Canadian sub or US parent or a Canadian sub of the US parent, JV partnership what-have-you the starting point of the analysis would be whether or not we are dealing with a permanent establishment.

If there is a permanent establishment, if you are telling the Canadian Government look we are an income in respect of this scope of profit it is apparent [unclear 55:27] has registered as a branch same issue that would put that entity in a position to benefit from the Canadian Government programme it was reviewing because those programmes are designed to assign Canadian employees irrespective of whether or not they are employed by a Canadian sub or foreign entity or a Canadian parent company controlled entirely in Canada.

So in all instances what you would do is you would go through emails just to make sure that you have the appropriate scope and presence, that the Canadian Government in terms of the permanent establishment and tax and income are trivial with the Canadian scope profits then you would go through and apply the application programme so we have helped a wide number of foreign entities gain significant benefits under the Canadian market programmes that were reviewed by virtue of having that presence in Canada and going through the correct filing. So I just would flag that point because I think it is important for people. Thank you.

Roberto: I think at this point we are going to wrap it up. So thank you everybody for joining us and, you know, if you have any questions don't hesitate to reach out and contact us, you can get our contact information on the slides and are available online so thank you everybody for joining us.