Here are the main points, where there are specific policies, of the Chancellors Winter Statement made 24th September 2020.
Jobs Support Scheme
This scheme will take over from the job retention (furlough) scheme which finishes on 31st October.
- SME business – simplistically one with turnover under £25.9m and fewer than 250 employees.
- Larger businesses could qualify if turnover has dropped during Covid.
- The employee must work at least 33% of their normal hours.
- The employee must be on the payroll on or before 23rd September 2020. But to prove this an RTI submission must have been made by 23rd September. So for monthly paid employees who started in September will not qualify if the payroll hadn’t been run by the 23rd.
- The employer DOESN’T have had to previously claimed under the furlough scheme.
- The employee must not be on notice or at risk of redundancy.
- How it works:
- The employee is paid as normal for all the hours worked.
- Of the balance of the usual pay due:
- 1/3rd is paid HMRC.
- 1/3rd is paid by the employer.
- 1/3rd is effectively unpaid.
- This means that the employee will get at least 77% of their usual pay.
- The government are paying 22% of the employee’s wage up to a maximum of £697.92 pm.
- Claiming the grant will be the same as the furlough ie by month.
- Will continue until 30th April 2021.
Employers must agree the new short time working arrangements with their employees and amend their contracts as necessary.
HMRC can review the contract on request and their intention is to inform the employees of the details of the claim.
Job Retention Bonus
This measure was announced in the summer and is being kept – to recap:
- £1,000 bonus given to companies who:
- Have furloughed an employee AND
- That employee is still working for the employer on 31st January 2021 AND
- The employee earns at least the lower earnings NI threshold (£520pm) in the period 1st November 2020 to 31st January 2021.
- The bonus will go to the employer. It will be taxable like any normal income.
Self Employed Income Support Scheme
This has been extended to April 2021.
- First grant will be paid at the beginning of November for 3 months to 31st January 2021.
- Second grant will be paid at the beginning of February for 3 months to 30th April 2021
- Covers 20% of average monthly profits.
- Maximum grant will be £1875 per quarter for the first grant. Second grant maximum to be announced later.
- Eligibility as before (see recap below) but if you haven’t claimed previously you can claim for these 2 quarters.
- As with all government grants these will be taxable.
To recap eligibility:
Who can claim?
- You can claim if you’re a self-employed individual or a member of a partnership and you:
- have submitted your Self-Assessment tax return for the tax year 2018 to 2019
- traded in the tax year 2019 to 2020
- are trading when you apply, or would be except for coronavirus
- intend to continue to trade in the tax year 2020 to 2021
- have lost trading profits due to coronavirus
- Your trading profits must also be no more than £50,000 and more than half of your total income for either:
- the tax year 2018 to 2019
- the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019
What will you get?
- You’ll get a taxable grant based on your average trading profit over the 3 tax years:
- 2016 to 2017
- 2017 to 2018
- 2018 to 2019
- If you have been self-employed for less than 3 years, then the average will be taken over the period you have been trading.
VAT for hospitality, accommodation and attractions
Again a measure that was announced in the summer and this time is being extended from 12th January 2021 to 31st March 2021 – to recap:
- From 15th July 2020 to 31st March 2021 VAT on qualifying supplies will be at 5% instead of 20%.
- General Eligibility – the supply of:
- Food and non-alcoholic drinks for on-premises consumption.
- Hot take away food.
- Hot take away non-alcoholic drinks (but not cold take away drinks).
- Sleeping accommodation and associated facilities.
- Pitch fees for caravans and tents and associated facilities.
- If any of the above are eligible for the cultural VAT exemption then the exemption takes precedent.
- It is anticipated that the businesses will keep the reduction in VAT rather than reduce the prices to the consumer.
- Complexities to consider:
- Flat Rate Scheme – percentages will change TBA (speak to us or monitor HMRC website as no details at the moment).
- Tour Operators Margin Scheme – impact TBA (speak to us or monitor HMRC website as no details at the moment).
- Supplies that straddle the temporary reduction eg Season tickets to attractions – (speak to us).
Bounceback and CBILS Loan Schemes
These two schemes were to have closed on 30th September 2020 – the application period has been extended to 31st December 2020.
To recap with some new bits:
Bounce Back loans
- Businesses will be able to borrow between £2,000 and £50,000.
- Loans will be interest free for the first 12 months.
- The loan is 100% guaranteed by the government.
- All firms trading as of March 1.
- Not in ‘difficulty’ (no definition) on 31 December 2019.
- Negatively affected by Covid19.
- Borrowers will fill in a two-page on-line application form in which they will certify that they have a viable business, lifting obligations on lenders to carry out their own checks.
- Loan terms are up to 10 years – previously this was 6 years.
- Banks will no longer require forward financials or business plans.
- You can’t apply if you’ve already had a coronavirus business interruption loan but you can port your existing loan of up to £50,000 across.
- Loans are limited to 25% of turnover
The new bits:
- Repayment terms can be up to 10 years.
- Businesses struggling (no definition yet) can pay interest only.
- Business really struggling can get a 6 month repayment holiday.
Coronavirus Business Interruption loans (CBILS)
- Aimed at small and medium businesses.
- Your business must generate more than 50% of its turnover from trading activity.
- UK based businesses with up to £45m turnover.
- Used for business purposes and the business must have been adversely impacted by the Covid19.
- Not have been classed as a “business in difficulty” on 31 December 2019.
- Process as per usual bank loan application.
- Borrow up to £5m.
- 6 years for loans or asset finance
- 3 years for overdrafts and invoice finance.
- Bank will request security.
- If you have no security the government will guarantee 80% with the bank risking 20% – that is why the banks prefer full security from the business. So the process is risk averse and consequently many applications are rejected.
The new bits:
- Repayment terms can be up to 10 years.
- Any business who took advantage of the payment deferral for the March, April and May 2020 VAT returns were due to pay that VAT on 31st March 2021.
- The 2020 VAT deferred can now be paid over 11 payments ending by 31st March 2022.
Income tax deferral
- Many tax payers deferred their July 2020 payment on account, until 31 January 2021. As these tax payers will need to pay the deferred amount, plus any balancing payment and first 2020/21 payment on account, by 31 January 2021, their January tax bill may be larger than usual.
- Any tax payer who are unable to make these payments in full by January 2021 can set up a Time to Pay payment plan of up to 12 months online without needing to phone HMRC.
- Those with self-assessment debts over £30,000, or who need longer than 12 months to repay their debt in full, will still be able to set up a Time to Pay arrangement but they will need to contact HMRC to set it up.