Pre-existing businesses sold during lockdown risk missing out on resurgence support
Thousands of pre-existing businesses that have been operational for years and had a change of ownership during the lockdown could possibly be missing out on the government’s Resurgence Support Payment scheme.
Several budding entrepreneurs in the community who had remained buoyant and excited about their future entrepreneurship journey, despite a sudden Delta - outbreak in August this year or were without much options to defer their decision to get into business ownership are frustrated that their applications with Inland Revenue Department for Resurgence Support Payment are being declined.
Nirmal Gupta (name changed) invested his family’s savings and borrowed against their family’s first home to purchase a retail business in Auckland and was in the middle of the sales and purchase process and has made the advance payment when the lockdown happened on August 17.
After anxiously waiting for more than five weeks of Alert Level 4 lockdown with no tangible source of income (or wage subsidy), Gupta completed the sales process as soon as Auckland returned to Alert Level 3 to get back some certainty in their financial situation.
Subsequently, when their business applied for the Resurgence Support Payment (RSP) during the next round, they were shocked and frustrated to learn that their business’ application was declined on the grounds of not meeting eligibility criteria.
“We were shocked to learn that our business which has been in operation for the last 14 years with three full-time permanent employees and two casual staff and was clearly experiencing more than 40 percent revenue-drop, was still considered ineligible for RSP,” an agitated Gupta said.
“From what we know, the government’s RSP scheme is the only cash-support scheme available for businesses, and we would have expected that support was coming to our business without any roadblocks.
“This RSP is meant to help businesses bear some portion of their fixed expenses including rent, bills, and other overheads to endure through the severely restricted commercial environment under the lockdown.
“We expect an empathetic response and not the usual bureaucratic response from the government officials [Inland Revenue Department] during these terribly unsettling times.”
Notably, the government has announced that a business or organisation must have been in business for at least one month prior to August 17 2021 and experienced at least a 30 percent decline in revenue over a continuous seven-day period (set out below), due to the increased Covid-19 alert level (subject to all other criteria being met).
Gupta’s application for RSP was declined on the ground that their business did not exist on or before July 17 to be eligible for getting the RSP.
The Indian Weekender has approached IRD to find out why this particular or similar such applications were being declined as against the commonly understood meaning of the government’s RSP for businesses.
Responding to the Indian Weekender’s query, an IRD spokesperson said, “An Order In Council (OIC) about this states that an applicant needs to have been in business for at least a month prior to August 17, 2021. In this case, the OIC states that the 30 percent revenue decline test (in the affected week relative to the comparative week) is in terms of revenue received by the applicant. The OIC refers, in this respect, to ‘the revenue received by the person’. An applicant in the circumstances you outline would not have received any revenue in the comparative week because they had not yet acquired the business at that point. Therefore, by definition, they would not be able to satisfy the revenue decline test under the OIC.”
IRD’s decision defeats purpose of RSP
Although theoretically correct, IRD’s decision defeats the very purpose of the government’s only cash support to viable businesses experiencing the brunt of the strictest lockdown, argues Gupta.
“Although not anywhere enough to bear the full burden of no commercial activity, RSP does help in sharing some portion of that burden, and when your business is denied even that courtesy and support, then it really feels very frustrating,” Gupta said.
“An RSP support is meant as support for businesses and not individuals so that businesses can endure the impact of zero or restricted commercial activity and not go under, which would be catastrophic for many people including our hard-working staff members and us and their families,” Gupta said.
No data is available on how many businesses changed ownership during lockdown
To make it worse, the govt does not seem to have any data on the number of such businesses which were sold to new owners during the lockdown and if they qualified for the government’s RSP scheme.
“While we do hold information on entity types (company, sole trader, trust, Maori authority etc) that have applied or been approved, we do not hold details on change of ownership or structure,” the IRD spokesperson said.
More than 10,000 new businesses registered in Auckland during the latest lockdown.
Earlier the Indian Weekender approached the MBIE to see if they had the data on the number of businesses that came up in Auckland and New Zealand after the beginning of the latest Delta outbreak on August 17.
An official spokesperson of MBIE told the Indian Weekender that during the period from August 17 to November 8 the number of new businesses with an Auckland postcode was 10,602.
The number of new businesses coming up for the whole of New Zealand for the same period was 23,093.
However, MBIE also was not able to provide accurate figures of pre-existing businesses that were viable and operational before the beginning of lockdown on August 17 and subsequently had a change of ownership.
“The Companies Office have investigated your request for information on changes of ownership. The Companies Office holds information on company shareholders, however, any changes to shareholders of a company do not necessarily reflect a change in ownership, and therefore, any numbers provided would not accurately represent actual changes in ownership. We have therefore not been able to provide figures for this part of your request,” the MBIE spokesperson said.
The Indian Weekender has approached the office of the Minister of Finance and Minister of Revenue for a response around the numbers of such pre-existing businesses that are facing a similar level of financial distress due to Alert level 3 lockdown like other businesses, just under new ownership and a response is awaited at the time of publishing of this story.
It seems as of now that there is a gap in the full scale and the nature of the problem and also clarity if the government’s Resurgence Support payment is intended to support “persons/individuals” or “businesses.”
Thousands of pre-existing businesses that have been operational for years and had a change of ownership during the lockdown could possibly be missing out on the government’s Resurgence Support Payment scheme.
Several budding entrepreneurs in the community who had remained buoyant and excited about...
Thousands of pre-existing businesses that have been operational for years and had a change of ownership during the lockdown could possibly be missing out on the government’s Resurgence Support Payment scheme.
Several budding entrepreneurs in the community who had remained buoyant and excited about their future entrepreneurship journey, despite a sudden Delta - outbreak in August this year or were without much options to defer their decision to get into business ownership are frustrated that their applications with Inland Revenue Department for Resurgence Support Payment are being declined.
Nirmal Gupta (name changed) invested his family’s savings and borrowed against their family’s first home to purchase a retail business in Auckland and was in the middle of the sales and purchase process and has made the advance payment when the lockdown happened on August 17.
After anxiously waiting for more than five weeks of Alert Level 4 lockdown with no tangible source of income (or wage subsidy), Gupta completed the sales process as soon as Auckland returned to Alert Level 3 to get back some certainty in their financial situation.
Subsequently, when their business applied for the Resurgence Support Payment (RSP) during the next round, they were shocked and frustrated to learn that their business’ application was declined on the grounds of not meeting eligibility criteria.
“We were shocked to learn that our business which has been in operation for the last 14 years with three full-time permanent employees and two casual staff and was clearly experiencing more than 40 percent revenue-drop, was still considered ineligible for RSP,” an agitated Gupta said.
“From what we know, the government’s RSP scheme is the only cash-support scheme available for businesses, and we would have expected that support was coming to our business without any roadblocks.
“This RSP is meant to help businesses bear some portion of their fixed expenses including rent, bills, and other overheads to endure through the severely restricted commercial environment under the lockdown.
“We expect an empathetic response and not the usual bureaucratic response from the government officials [Inland Revenue Department] during these terribly unsettling times.”
Notably, the government has announced that a business or organisation must have been in business for at least one month prior to August 17 2021 and experienced at least a 30 percent decline in revenue over a continuous seven-day period (set out below), due to the increased Covid-19 alert level (subject to all other criteria being met).
Gupta’s application for RSP was declined on the ground that their business did not exist on or before July 17 to be eligible for getting the RSP.
The Indian Weekender has approached IRD to find out why this particular or similar such applications were being declined as against the commonly understood meaning of the government’s RSP for businesses.
Responding to the Indian Weekender’s query, an IRD spokesperson said, “An Order In Council (OIC) about this states that an applicant needs to have been in business for at least a month prior to August 17, 2021. In this case, the OIC states that the 30 percent revenue decline test (in the affected week relative to the comparative week) is in terms of revenue received by the applicant. The OIC refers, in this respect, to ‘the revenue received by the person’. An applicant in the circumstances you outline would not have received any revenue in the comparative week because they had not yet acquired the business at that point. Therefore, by definition, they would not be able to satisfy the revenue decline test under the OIC.”
IRD’s decision defeats purpose of RSP
Although theoretically correct, IRD’s decision defeats the very purpose of the government’s only cash support to viable businesses experiencing the brunt of the strictest lockdown, argues Gupta.
“Although not anywhere enough to bear the full burden of no commercial activity, RSP does help in sharing some portion of that burden, and when your business is denied even that courtesy and support, then it really feels very frustrating,” Gupta said.
“An RSP support is meant as support for businesses and not individuals so that businesses can endure the impact of zero or restricted commercial activity and not go under, which would be catastrophic for many people including our hard-working staff members and us and their families,” Gupta said.
No data is available on how many businesses changed ownership during lockdown
To make it worse, the govt does not seem to have any data on the number of such businesses which were sold to new owners during the lockdown and if they qualified for the government’s RSP scheme.
“While we do hold information on entity types (company, sole trader, trust, Maori authority etc) that have applied or been approved, we do not hold details on change of ownership or structure,” the IRD spokesperson said.
More than 10,000 new businesses registered in Auckland during the latest lockdown.
Earlier the Indian Weekender approached the MBIE to see if they had the data on the number of businesses that came up in Auckland and New Zealand after the beginning of the latest Delta outbreak on August 17.
An official spokesperson of MBIE told the Indian Weekender that during the period from August 17 to November 8 the number of new businesses with an Auckland postcode was 10,602.
The number of new businesses coming up for the whole of New Zealand for the same period was 23,093.
However, MBIE also was not able to provide accurate figures of pre-existing businesses that were viable and operational before the beginning of lockdown on August 17 and subsequently had a change of ownership.
“The Companies Office have investigated your request for information on changes of ownership. The Companies Office holds information on company shareholders, however, any changes to shareholders of a company do not necessarily reflect a change in ownership, and therefore, any numbers provided would not accurately represent actual changes in ownership. We have therefore not been able to provide figures for this part of your request,” the MBIE spokesperson said.
The Indian Weekender has approached the office of the Minister of Finance and Minister of Revenue for a response around the numbers of such pre-existing businesses that are facing a similar level of financial distress due to Alert level 3 lockdown like other businesses, just under new ownership and a response is awaited at the time of publishing of this story.
It seems as of now that there is a gap in the full scale and the nature of the problem and also clarity if the government’s Resurgence Support payment is intended to support “persons/individuals” or “businesses.”
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