The speech delivered in the House of Commons today was built on the need to create new job opportunities and support viable jobs, rather than commit more money to the existing scheme which may be continuing to support jobs which are no longer viable. As we head into the winter period and businesses face reduced demand in many instances, the support is refocused accordingly.
The key measure introduced today is the Job Support Scheme which will support the wages of those who are in work on shorter hours, and will be built on three principles:
- To qualify, employees must be working for at least a third of their normal hours and be fully paid by employers for those hours. The scheme will cover the balance up to the normal contracted hours
- All small and medium sized businesses will be eligible, larger businesses will only be eligible where their turnover has fallen through the crisis – there will clearly be some more detail about how this will be measured.
- The scheme will be available to employers across UK, even if they have not previously used the current furlough scheme. Furthermore, use of the new scheme will not disqualify businesses from participating in the Job Retention Bonus for employees remaining employed after 31 January 2021.
In addition to the above, further good news is that the current Self-employed Income Support Scheme will also continue on “similar terms” to the new Job Support Scheme.
The other area of additional support is helping businesses with their cash flow. With this in mind there are four further measures being introduced:
- Bounce Back Loans have provided support to over a million businesses. To help them to budget for repaying these loans a new “Pay as you grow” scheme will mean that these loans can be extended to up to 10 years, nearly halving the repayments due. Businesses can also choose to make interest only payments for a time, and up to 6 months’ payment holidays will be available in certain circumstances. We are also assured that use of these measures will have no negative effect on a business’ credit rating.
- Over 60,000 Coronavirus Business Interruption Scheme (CBILS) loans have been made, and the government guarantee on these loans has been extended to up to ten years. The deadline for applying for CBILS loans has also been extended to the end of 2020, and we are told that the government is starting work on a successor loan guarantee programme for 2021.
- Nearly 500,000 businesses have deferred around £30 billion of VAT, which is currently due to be paid in full at the end of March 2021. These businesses will now be allowed to spread the deferred VAT payment over 11 smaller payments, with no interest. Similarly, individual Self Assessment tax payers who have deferred their July 2020 tax payments will also be able to spread the deferred liability over 12 months from January 2021.
- The temporary VAT cut to 5% for the Hospitality & Tourism sector was due to return to 20% on 13 January 2021. This planned increase will be delayed, so the reduced VAT rate will continue to apply up to 31 March 2021.
As ever, there will be a lot more detail behind these headline proposals which we will analyse over the next few days. If you are a client, please speak to your usual Randall & Payne contact to discuss your position and how these new announcements might affect you or your business.
James Geary is head of Corporate Tax and is happy to help with any questions or concerns you may have at this time – you can contact James on james.geary@randall-payne.co.uk or 01242 776000 to arrange a call back.
