COVID-19 Winter Economy Plan – incl. Furlough Scheme Replacement and Extension of Self-employed Income Support Scheme.

Wednesday, September 30th, 2020

Once again, the team here at Copia Wealth & Tax, your Wolverhampton accountants, present an update regarding the various ongoing business support packages designed to combat the impact of COVID-19 that are available from the Government. As the new raft of measures covers quite a wide area and please contact us on 01902 783172 if you require any further information whatsoever as we are here to help with all this.

Having initially announced that there would be no Autumn budget this year (to the relief of many as rumours of tax increases were causing major concern), Rishi Sunak has now made a series of statements in Parliament designed to help businesses throughout the onset of a potential second wave of COVID-19 which threatens to further damage the economy.

Introducing a new job support scheme

A new job scheme starting on 1 November 2020 will replace the current Job Retention (“Furlough”) Scheme which ends 31 October 2020.

All small and medium-sized businesses are eligible, whilst larger businesses must show their turnover has fallen during the pandemic. Importantly, employers can use the new scheme even if they have not previously used the furlough scheme.  

The new Government scheme will last for six months to 30 April 2021 and, to be eligible, employees will need to be working a minimum of 33% of their normal hours. For the remaining hours not worked, Government and the employer will pay one third of wages each. This means that employers will continue to pay the wages of staff for the hours they work – but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.

Employees who can only go back to work on shorter time will still be paid two thirds of the hours for those hours they cannot work.

The level of grant will be calculated based on the employee’s usual salary, capped at £697.92 per month.

By way of an example, an employee working 33% of their hours will receive at least 77% of their pay, 22% paid by the Government, and 55% paid by their employer (the “worked” 33% plus the “not worked” 22%).

Further clarification is required as to how the claim system will work but it is expected it will run on similar lines to the Furlough scheme.

Employers will need to decide if they can provide sufficient work to give employees at least one third of their usual hours. If they cannot, then redundancy or lay-off may be the only alternative options available – clearly, this is unhelpful for businesses such as event organisers and night clubs that cannot currently operate due to COVID-19 restrictions.

An extension of the Self-employed Income Support Scheme (SEISS)

The existing self-employed grant will also be extended on the same basis as the job support scheme.   

A further taxable grant will now be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to COVID-19. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875.

Beyond that, an additional second grant (which may be adjusted to respond to changing circumstances) will also be available for self-employed individuals to cover a further period from February to the end of April 2021.

Extension to the VAT cut for hospitality businesses

The reduction in VAT to 5% for the hospitality and tourism sector will now be extended until 31 March 2021.

Further deferral of VAT

It is estimated that over half a million businesses deferred one of their quarterly VAT bills as previously announced. These businesses will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full by the end of March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year. 

It is important to remember the deferred VAT bill still must be paid off eventually and so businesses should be trying to put monies aside to cover this rather than forget about it until it falls due.

Time to Pay extension for self-assessment taxpayers

The UK’s 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the Time to Pay self-service facility, meaning payments originally deferred from July 2020, plus those due in January 2021, will now not need to be paid until January 2022.

Like the deferred VAT, the tax is still eventually due, so it is good practice to keep monies to one side or else there could be a latent cash flow issue come January 2022.

More flexibility in Bounce Back and Coronavirus Business Interruption Loan repayments

Government figures indicate that more than a million businesses took out a Bounce Back Loan. Borrowers will now get more time to repay via a new Pay as You Grow flexible repayment system. 

This includes extending the length of the loan from six years to ten, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses. 

The Government also intends to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.

The Chancellor also announced an extension in applications for the Government’s COVID-19 loan schemes until the end of November.

For those businesses that have had to utilise the monies borrowed, this will be welcome news and will provide some easing of cash flows during 2021 and beyond.

Call Copia Wealth & Tax today to make the best use of what is on offer

If you need assistance with any of the above, or feel it is now time to investigate a COVID-19 related loan, it is well worth considering an application. As one of our clients, we will provide you with all the support you need.

Just call our professional team here at Copia Wealth & Tax Ltd, Wolverhampton on 01902 783172 or alternatively click HERE to complete our enquiry form and one of our friendly business advisers will call you back to arrange a convenient time for a confidential, no obligation chat.

We look forward to hearing from you, but in the meantime, please stay safe.