In the absence of an autumn 2020 budget, the government has announced a package of targeted measures that will enable businesses to protect jobs and manage their finances over the forthcoming winter months.
The plan comprises job support, grants and payment plan relaxation terms for bounce back loans, self-assessment and VAT.
These are summarised below:
- The New Job Support Scheme
- VAT deferral ‘New Payment Scheme’
- Enhanced Time to Pay for Self-Assessment taxpayers
- Extension of access to finance schemes
- What is the Bounce Back Loan Scheme (BBLS) – “Pay as you Grow” Option?
- Are there any VAT rate changes?
- Self- employment income support scheme (SEISS) grant extension
(This applies to self- employed individuals such as sole traders and partnerships only)
What is the New Job Support Scheme (JSS)?
Following the proposed cessation of the coronavirus job retention scheme in October 2020, the government will be introducing a new Job Support Scheme from 1st November 2020.
Employees will need to work a minimum of 33% of their usual hours. For every hour not worked the employer and the government will each pay one third of the employee’s usual pay, and the government contribution will be capped at £697.92 per month. Employees using the scheme will receive at least 77% of their pay, where the government contribution has not been capped.
The employer will be reimbursed in arrears for the government contribution. The employee must not be on a redundancy notice. The scheme will run for six months from 1st November 2020 and is open to all employers with a UK bank account and a UK PAYE scheme.
However, employees must be on an employer’s PAYE payroll on or before 23 September 2020. This means a RTI submission notifying payment to that employee to HMRC must have been made on or before 23 September 2020
All SMEs will be eligible; large businesses will be required to demonstrate that their business has been adversely affected by COVID-19, and the government expects that large employers will not be making capital distributions (such as dividends), while using the scheme.
The HMRC “Job Support Scheme Factsheet” is available here.
HMRC intend to release more guidance shortly – which may also be subject to updates.
What is the VAT deferral ‘New Payment Scheme’?
The government will give businesses which deferred VAT due in March to June 2020 the option to spread their payments over the financial year 2021-2022. Rather than paying in full at the end of March 2021, businesses will be able to choose to make 11 equal instalments over 2021-22.
All businesses which took advantage of the VAT deferral can use the New Payment Scheme. Businesses will need to opt in, but all are eligible. HMRC will put in place an opt-in process in early 2021.
Enhanced Time to Pay for Self-Assessment taxpayers
The government will give the self-employed and other taxpayers more time to pay taxes due in January 2021, building on the Self-Assessment deferral provided in July 2020.
Taxpayers with up to £30,000 of Self-Assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. This means that Self-Assessment liabilities 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 continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.
Extension of access to finance schemes
The government is extending the following four temporary loan schemes for new applications until the 30th November 2020 :
- Bounce Back Loan Scheme (BBLS) – Pay as you Grow Option
- Coronavirus Business Interruption Loan Scheme (CBILS)
- Coronavirus Large Business Interruption Loan Scheme (CLBILS)
- Future Fund
What is the Bounce Back Loan Scheme (BBLS) – “Pay as you Grow” Option?
Under the current scheme, the borrower does not have to make any repayments for the first twelve months, with the government covering the first twelve months’ interest payments. Under the new Pay as you Grow options, Bounce Back Loan borrowers will all be offered the choice of more time and greater flexibility for their repayments.
Under the Pay as you Grow option, the government will give all businesses that borrowed under the BBLS the option to repay their loan over a period of up to ten years. This will reduce their average monthly repayments on the loan by almost half. UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times), or to pause their repayments entirely for up to six months (an option they can use once and only after having made six payments). These changes will provide greater flexibility to repay these loans over a longer period and in a way that better suits businesses’ individual circumstances.
Are there any VAT rate changes?
The temporary VAT reduced rate of 5% for hospitality and tourism is extended from 12 January to 31 March 2021. This will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, supplies of accommodation and admission to attractions across the UK.
What is the eligibility criteria for the self-employment income support scheme (SEISS) Grant Extension?
(this applies to self- employed individuals such as sole traders and partnerships only)
The grant will be limited to self-employed individuals who are currently eligible for the SEISS and are actively continuing to trade but are facing reduced demand due to COVID-19.
The scheme will last for 6 months, from November 2020 to April 2021. The extension will be in the form of two taxable grants. The first grant will cover a three-month period from the start of November until the end of January. This initial grant will cover 20% of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £1,875 in total.
The second grant will cover a three-month period from the start of February until the end of April. The government will review the level of the second grant and set this in due course.