The Autumn Budget has been scrapped and any possible tax rises postponed until at least April 2021. Instead, the government has unveiled its Covid-19 winter rescue plan. The Winter Economy Plan contains five key measures to help businesses weather Covid-19 this winter and survive into 2021.
The new and improved business support includes the Job Support Scheme and additional grants for the self-employed. Loan terms have been improved and further deferrals of tax payments are being allowed. Finally, the 5% VAT rate for the hospitality sector is being extended.
Job Support Scheme
The current furlough scheme ends on 31 October 2020. The new Job Support Scheme comes on stream on November 1 and runs for six months. Its aim is the same: to keep employees working in real jobs.
Any employee on the payroll on 23 September 2020 is eligible for the Job Support Scheme. This new support package is not restricted to employees furloughed between March and October.
Qualifying employees must work for at least a third of their normal hours to receive 77% of their usual pay. The employer pays for those hours. For the remainder the government and employer each pay a third of the employee’s usual wage. Basically, the employer pays 55% of the employee’s wages for one-third of their normal working time. The government’s contribution is capped at 22% of usual wages up to £697.22 per month. The employer is responsible for employer’s National Insurance and pension contributions on all of the employee’s pay.
Although the Job Support Scheme is targeting SMES and medium-sized businesses, large employers can use it. First, they must demonstrate that their business has been adversely affected. If they qualify and use the scheme, larger employers are not permitted to pay dividends to shareholders or use share buy-back schemes.
Employers seeking financial assistance via the Job Support Scheme can also claim the Coronavirus Job Retention Bonus Scheme for qualifying employees.
2. Additional grants as part of Covid-19 winter rescue plan
Two further grants are being made available to the self-employed. Those eligible for the first and second SEISS grants can claim a third grant. Capped at £1,875, it covers 20% of average monthly profits for three months. We await further details on application opening and closing dates.
A fourth SIESS grant will cover February to April 2021. It is not yet clear what level of support will be provided. However, the grant may be available to self-employed workers who started their business on or after 6 April 2019. Since they will have submitted their 2019/20 tax returns by 31 January 2021, this grant could be based on average self-employed profits, including those reported for 2019/20.
Loan schemes extension
The existing business interruption loan schemes have been extended in the Covid-19 winter rescue plan. Applications for the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Bounce Back Loan Scheme (BBLS) plus the Future Fund will now close on 30 November 2020. The new deadline for loan approvals is 31 December 2020.
Repayment terms for both CBILS and BBLS loans will be extended to 10 years. The £50,000 BBLS package is being rebranded as Pay as You Grow. A key benefit for borrowers is more flexible repayment schedules, including interest-only repayments for up to six months. Struggling businesses will also be able to request six-month repayment holidays.
Taxpayers have more time to pay taxes due by 31 January 2021. For the majority this will include:
- Second payment on account 2019/20
- Balancing payment 2019/20
- Capital Gains Tax 2019/20 (unless subject to 30-day rule)
- First payment on account 2020/21
To take advantage of this deferral taxpayers must apply for time to pay and spread payment over 12 monthly instalments to January 2022.
HM Revenue & Customs (HMRC) will agree time to pay automatically if the total tax due is less than £30,000. Approval will be acknowledged when the taxpayer submits the online application form. Where the tax due exceeds £30,000 or the taxpayer needs extra time to pay, a bespoke payment plan can be arranged via HMRC’s telephone service.
Extra help is available to businesses which chose to defer VAT payments due in the period 20 March to 30 June 2020 until 31 March 2021. They can now spread that deferred VAT payment. Applications must be made online and payment made in 11 equal instalments between April 2021 and March 2022.
In addition, the reduced rate of VAT for the hospitality and tourism sector is being maintained. The rate, which was due to revert to 20% on 13 January 2021, will now apply until 31 March 2021.
Covid-19 Winter rescue plan to help you Cope
If your business has been severely impact by Covid-19 and you need help with a recovery plan, please contact us on 01785 243276.
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