On 24th September 2020, the chancellor Rishi Sunak announced his Winter Economy Plan, and it contains some updates to tax which might affect your business.
The plan is unlike anything most of us have seen before but is designed primarily to support businesses and jobs over what is likely to be a difficult winter period following the COVID-19 outbreak and subsequent restrictions.
As always, we’ve devoured Rishi’s voluminous report and picked out the most important bits for you. Let’s dive in.
An update on grants and incentives for businesses
There is still a type of VAT deferral in place. The VAT deferral is for the payments that have already been deferred to 31st March 2021, which can now be paid over the 11 months to 31st March 2022. VAT due now can’t be deferred.
Just bear in mind that if you are deferring a payment, you’ll need to pay both that one and those that need to be paid within the 21/22 year, too.
There’s also a much-needed 5% decrease in VAT for tourism and hospitality for hotels, bars, and restaurants to take advantage of. Some will undoubtedly pass the savings onto customers, but it might be worth holding onto the extra cash if you’re struggling to make ends meet.
The HMRC Business Payment Support scheme has also been bolstered with additional support, so remember to call them if you’re really having cash flow issues at the moment.
What about self-assessment?
Earlier this year, self-assessment payments on account which were due by July were deferred to January next year. This has now been extended further by twelve months to January 2022. Self-assessment deferral is not only for the July payment but also anything that would be due by 31st January 2021 can now also be deferred to 31st January 2022.
However, some caution is needed. If you do defer your payment, bear in mind that you will still need to pay it at some stage, and you’ll have two years’ tax to pay in one go.
Deferring payments of this kind will probably be most useful for those in the entertainment and events industry, because their tax bill is likely (unfortunately) to be lower.
Support for the self-employed
The next grants available will be paid in November and represent 20% of your average monthly profit from the tax years ended 16/17, 17/18, and 18/19, so it’s on the same basis as the previous 80% and 70% grant.
Another 20% for the following three months will follow, although we think this is likely to be reviewed, given the amount of focus currently being placed on support for the self-employed.
Just remember: if you don’t need this support, please don’t claim it. Keep any cash you have to one side; if you claim a grant and it isn’t required, you may be asked to pay it back at some stage.
Is furlough still a thing?
Yes. However, it finishes in its current format on 31st October 2020 and then is replaced by the Job Support Scheme.
Please note, the final day to make a furlough claim to 31st October is the 30th November 2020. After that date, you will no longer be able to make a claim. Make sure you do not miss out!
The new Job Support Scheme, which starts on 1st November 2020 and will run for 6 months, is slightly different to the furlough scheme, with some changes to eligibility and being slightly more flexible. Back in March, people missed out on furlough if that is when they started their jobs, but they can now be added into the scheme.
The Job Support Scheme is designed to support viable UK employers who face lower demand due to COVID-19, and to keep their employees attached to the workforce. 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 employee must not be on a redundancy notice.
Another key change to furlough is that if you claim it monthly, you won’t be able to do so until you’ve paid your employees by submitting their information to HMRC.
Keep in mind, however, that while you can reduce your employees’ hours and claim, it may not be much help to you. If, for instance:
- they usually work 30 hours a week
- you reduce their hours to 10 per week
- the government and company pay a third of their remaining 20 hours
That means you’re essentially paying them more for doing less! Always ask yourself if it’s worth reducing hours or changing the way you work. Would it make more sense to reduce their hours permanently?
In addition, the Job Support Scheme has been expanded to give additional support to those businesses that are forced to close their premises due to coronavirus restrictions. if your business is forced to close during the 6-month period due to government restrictions you will be effectively able to claim for 2/3 of the wages or 67%, up to a maximum of £2,100.00.
The Bounce Back Loan
Originally, the Bounce Back Loan (BBL) sat at 25% of your turnover, up to a maximum of £50,000 with one year of zero interest and there are no repayments for the first year.
Now, the payments have been moved from six years to ten years. That means the government has essentially halved the payments you need to make and there’s no early repayment charge. Just bear in mind that the longer the loan, the more you’ll pay overall.
If you think you need a BBL, check your eligibility – you might be surprised to find out how easy it is. However, you can only claim once, so if you’ve already done so, you can’t do it a second time.
It all comes down to planning ahead. Sure, you may not need a BBL now, but what if things get worse over the winter? These loans stop on November 30th, therefore now is the time to claim if you think it might be needed. (Don’t worry – they’ll accept predicted turnover if that’s all you have to hand.)
There are still some grants available, but you will need to put a strong case forward as to why your business needs them.
However, you can claim for the ‘COVID secure’ additions you’ve had to implement recently – for instance if you’ve had to put in place an eCommerce store. Just bear in mind that the grants are council-specific and yours may take a stricter view.
The government have issued even more funding to the local councils, so there will be additional local funding available in the coming weeks, so keep an eye on your local council website.
Additional grant funding of up to £3,000 per month will be made available to any business forced to close due to coronavirus restrictions.
Those who fell through the gaps
There’s a fair bit to unpack above, but what if you fall through the gaps? What if you’re newly self-employed, a company director, have only just started your new job, or perhaps the self-employed grants just aren’t enough to get you through a potentially tough winter?
We recommend starting with universal credit if you need help. The criteria for this remain far less stringent and it’s therefore easier to apply.
Alternatively, if you have any questions on how Rishi’s announcements impact your business, the Trinity team is always here to help.