Coronavirus Update – Business Support
In addition to his announcement on the Job Support Scheme and the imminent deadline of the CBILS scheme, the Chancellor Rishi Sunak has today announced a new package of support for Businesses. Although we await a lot of the detail, it seems to be all about preserving and managing cashflow through these difficult times.
Borrowing and Cashflow Support for Businesses
Bounce Back Loans (“BBLs”) - “Pay as you Grow” Scheme
A “pay as you grow” scheme was announced for businesses, allowing them to extend their BBLs from 6 to 10 years, reducing their repayments by up to 50%. Businesses can also move to interest-only payments or suspend repayments for six months if they are "in real trouble". Credit ratings for the business concerned will be unaffected.
Coronavirus Business Interruption Loans (“CBILS”)
The looming deadline of 30th September has been extended until December, and a new successor loan scheme will be announced in January. This is some comfort to businesses whose need for borrowing may still be unclear. The Government guarantee on Coronavirus Business Interruption Loans will be extended to 10 years to allow more flexible borrowing terms, reducing impact on cashflow and allowing lenders to be more flexible in their approach.
Reduction of VAT Extension – Hospitality and Tourism
The temporary reduction of VAT from 20% to 5% for the hospitality and tourism sectors will remain in place until 31 March 2021.
VAT Payment Deferral
In addition, up to half a million business who deferred their VAT bills 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 at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
Assistance for the Self-Employed
Self-Assessment Tax Deferral
Extra support has been announced to allow people to delay their income tax bill, although it will still need to be paid. The Chancellor said that those with tax debt of up to £30,000.00 will be able to set up a payment plan over 12 months to January 2022, rather than a lump sum falling due in January.
According to the Government this would mean that approximately 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 deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
Self-Employed Income Support Scheme Grant Measures Extension
The existing grant for self-employed people is being extended on similar terms to the Jobs Support Scheme. The Government is continuing its support for millions of self-employed individuals by extending the Self Employment Income Support Scheme Grant (SEISS). An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. 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. An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.
This note is based on information as at 24 September 2020 and will be updated as and when further information is provided.
For more information please visit Cornavirus Insights and Briefings
Insight from Pamela Muir, Corporate, Insolvency, Restructuring Partner and Chris Allan Corporate Partner at Thorntons. For more information contact Pamela or Chris on 03330 430350, alternatively email pmuir@thorntons-law.co.uk or callan@thorntons-law.co.uk
