Economic Support – Latest Update

by | Nov 11, 2020 | Business Finance, COVID-19, Self-Assessment Tax, VAT

Following various amendments to the Furlough scheme (CJRS), the Government confirmed on Thursday 5 November that the UK wide scheme would be extended by a further five months, taking it until the end of March 2021.

Extended support was also announced for millions of workers through the Self-Employment Income Support Scheme (SEISS), as well as businesses forced to close as a result of COVID-19 restrictions.

We have provided a round-up of the latest support schemes announced by the Government over the past couple of months, including links to more information. The main highlights are as follows:

  • Extension of Furlough Scheme (CJRS) until end of March 2021
  • Extension of the Self-Employment Income Support Scheme (SEISS) until end of March 2021 with updated terms
  • Business Grants of up to £3000 per month (dependent on rateable value) for businesses forced to close as a result of COVID-19
  • Extension of the CBILS and BBLS business loan schemes to the end of January
  • Relaxed repayment terms for CBILS and BBLS, with the maximum term extended from 6 to 10 years
  • Extension of VAT reduction (to 5%) for the hospitality and tourism industries until 31 March 2021
  • VAT and self-assessment deferral as well as instalment payment plans

Furlough/CJRS Extension

Until the end of March, the government will now pay up to 80% of an employee’s normal pay, capped at £2,500 a month and employers will only be responsible for NICs and pension contributions. The option for employees to work part-time and receive a furlough grant for unworked hours will still be available in the form of ‘flexi-furlough’.

The scheme will provide better support for employers than it has over the past couple of months. While the Government contribution had been decreasing, (to 60% in October) and employer contribution increasing, the new extension will see the Government contribution rise back up to 80%.

Eligibility for the scheme has also been widened, and many employees who did not previously qualify for furlough (such as recent starters and employees who did not stop work for three consecutive weeks before 1 July) will now qualify. Under the new rules, an employee simply needed to have been on an employer’s PAYE payroll before midnight on 30 October 2020. Employment rights are retained by the employee including annual and parental leave.

It’s worth noting that there is also support for individuals who recently lost their jobs but were not placed on furlough. If they were employed (and on payroll on 23 September), but were then made redundant or stopped working, they can be re-employed and furlough claimed for by the employer.

The government has stated that it will review the policy in January to decide whether economic circumstances are improving enough to ask employers to again contribute more. Finally, following the extension of the Furlough scheme, the Job Support Scheme, which was due to come into operation in November, has been withdrawn for now.

Further information on the extension can be found on the Government website.

Business Grants

Businesses forced to close (such as non-essential retail, leisure, personal care, sports facilities and hospitality) as a result of COVID-19 restrictions will be eligible for up to £3000 per month, under the Local Restrictions Support Grant. The support will be allocated as follows:

  • For properties with a rateable value of £15k or under, grants will be £1,334 per month
  • For properties with a rateable value of between £15k-£51k grants will be £2,000 per month
  • For properties with a rateable value of £51k or over grants will be £3,000 per month

These grants will be distributed by the relevant Local Authorities with further detail on this to follow when clarification on the process is received from the Government.

Additional Local Authority funding (totaling £1.1 billion) will also be provided by the Government to support closed businesses that do not have a rateable value or businesses that are severely impacted rather than closed.

Finally, Tier 2 and 3 businesses in the retail, hospitality, and leisure sectors which suffered from reduced demand due to restrictions on socialising introduced between 1 August and 5 November, will receive up to £2,100 per month to cover the period during which they were subject to these restrictions.

SEISS (Self Employment Income Support Scheme)                

To reflect the extension of the Furlough scheme until the end of March, the SEISS has also now been amended to provide a third support grant to cover the winter period.

The six-month SEISS extension will be delivered in the form of two taxable grants:

  • Grant 1 – 1 November 2020 to 31 January 2021. The Government will provide a taxable grant covering 80% of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £7,500 in total.
  • Grant 2 – 1 February 2021 to 30 April 2021. The level of this grant will be reviewed and set by the government in due course.

Payment of the first grant will be made in advance of Christmas, with the window for claims opening on the 30 November.

To be eligible for SEISS, more than half of the claimant’s income needs to come from self-employment, and they must have a trading profit of less than £50,000 in 2018-19, or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.

Latest guidance on SEISS can be found here.

Bounceback Loan Scheme (BBLS)

With loans between £2000 and £50,000 available, the BBLS has provided support to many small businesses. The key amendments announced are the extension of the application deadline until 31 January 2021, and the extension of the maximum loan repayment term from six to ten years.

Other new features of the scheme include the options for business to:

  • move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times);
  • pause their repayments entirely for up to six months (an option they can use once and only after having made six payments).

The scheme continues to be capped at 25% of business turnover, with a 100% government guarantee to the lender. The borrower does not have to make any repayments for the first 12 months, with the government covering the first 12 months’ interest payments.

More information on BBLS can be found here.

Coronavirus Business Interruption Loans Scheme (CBILS)

As with the BBLS, the application deadline for CBILS has also been extended to the 31 January 2021 and lenders will now be able to extend the loan term up to ten years.

The scheme was launched to provide loan facilities to businesses with turnover under £45 million. The scheme provides loans of up to £5 million with an 80% government guarantee to the lender, and the first 12 months of interest payments and fees are covered by the Government.

Further details on the CBILS can be found here.

VAT reduction – Hospitality and Tourism

Having introduced a reduction on the VAT rate (to 5%) for the hospitality and tourism sector, this will be extended until 31 March 2021. The reduced rate applies to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, and to supplies of accommodation and admission to attractions across the UK.

VAT deferral 

For those business that deferred their VAT bills from March 2020 to June 2020, they will be able the to spread their payments as 11 smaller interest free payments over the course of the 2021-22 financial year. All businesses that took advantage of the VAT deferral will be eligible, however, they will need to opt in using a process that HMRC will launch early next year.

Self-Assessment – Enhanced Time to Pay

Self-employed individuals and other taxpayers will be given additional time to pay taxes due in January 2021, building on the self-assessment deferral provided for payments on account in July 2020.

Taxpayers with up to £30,000 of self-assessment liabilities due will be able to use HMRC’s Time to Pay facility to secure a plan to pay over an additional 12 months. Ultimately, self-assessment liabilities originally due in July 2020 will not need to be paid in full until January 2022. Any self-assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can still use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.

More information on Time to Pay can be found here.

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