Further financial support revealed for small businesses

Further financial support revealed for small businesses

The Chancellor, Rishi Sunak, has revealed a range of new measures designed to support self-employed people, employers and employees over the next six months. Here’s a roundup of the key initiatives outlined in the government’s Winter Economy Plan.

Self-Employment Income Support Scheme extended

The Self-Employment Income Support Scheme has been extended to offer two additional grant payments to self-employed people over the next six months. These grants will be available for those who qualify for the scheme and are “actively continuing to trade but are facing reduced demand due to Covid-19”.

For these businesses, the government will provide an initial taxable grant to cover 20% of the business’s average monthly profits in November, December and January, up to a total of £1,875. A second grant - which will be reviewed and set by the government “in due course” - will be made available to cover the months of February, March and April 2021.

Job Support Scheme announced

With the Coronavirus Job Retention Scheme (also known as the ‘furlough scheme’) set to end on 31st October, the Job Support Scheme, which will begin on 1st November, is designed to “support viable UK employers who face lower demand due to Covid-19”.

Under the scheme, the government will pay up to one-third of the wages of employees whose working hours have been reduced as a result of decreased demand. This will apply to employees who are still working at least 33% of their normal hours. The employer will pay for the hours the employee works and, for every hour that the employee doesn’t work, the employer and the government will each pay a third of the employee’s hourly rate. The government’s contribution will be capped at £697.92 per month.

The Job Support Scheme will run for six months and will be available to all small and medium-sized businesses, including those who did not take advantage of the furlough scheme. Businesses that qualify for the Job Retention Bonus will be able to take advantage of the Job Support Scheme as well.

Further information about the scheme is expected in the coming weeks.

Flexibility for business loan schemes

Business owners who took out a loan through the Bounce Back Loan Scheme will be offered flexibility through a new government repayment system. ‘Pay as You Grow’ will give borrowers the opportunity to extend the length of their loan period from six years to ten in order to reduce their monthly repayments. The system will also introduce the options of interest-only periods of six months and payment holidays for borrowers.

In addition, the government has introduced more flexibility to the Coronavirus Business Interruption Loan Scheme, allowing lenders to extend the length of the loan period from six years to ten. The scheme itself has been extended and applications can now be made until the end of November.

Deferrals for VAT and Self Assessment payments announced

Businesses that have chosen to defer the payment of their VAT bill to 31st March 2021 will have the option to pay their bill in 11 interest-free instalments during the 2021-22 financial year, rather than in a single payment.

Those who chose to defer their Self Assessment ‘payment on account’ payment from 31st July to 31st January 2021 will have the option to make the deferred payment in up to 12 monthly instalments, as long as their Self Assessment liabilities are under £30,000. Business owners who want to take advantage of this option will need to arrange this with HMRC through the Time to Pay scheme.

For businesses that will have a Self Assessment tax bill to pay on 31st January 2020, the government will offer the option of a 12-month payment extension through HMRC’s Time to Pay scheme. Bear in mind that the deadline for submitting your 2019/20 Self Assessment tax return to HMRC hasn’t changed and your return will still be expected by the usual date of 31st January 2021.

Reduced VAT rate for hospitality and tourism sectors extended

Finally, the temporary reduction of the VAT rate to 5% for businesses in the hospitality and tourism sectors, which had been due to end on 13th January 2021, will now remain in place until 31st March 2021.

To stay up to date with the latest news about the coronavirus crisis and its impact on small businesses, take a look at our small business coronavirus hub.

Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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