Winter Economy Plan: What the experts say

Coronavirus Loan schemes: Those who have taken out a Bounce Back Loan (BBL) now have the availability of flexible repayments thanks to the new Pay as You Grow scheme. The terms of these loans can be extended from 6 to 10 years. Interest-only periods of up to six months and payment holidays will also be available to businesses who are struggling with the repayments.

Mirroring the above the Coronavirus Business Interruption Loan Scheme (CBILS)lenders now have 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 Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS), the Bounce Back Loan Scheme (BBLS) and the Future Fund loan schemes have all been extended until the end of November.

“The extension of the loan schemes is to be welcomed as the extent of the damage to a business’ finances may not yet be fully visible until the other support measures start to fall away. The payment holidays for those struggling with Bounce Back Loan payments also means that some of the pressure businesses may be feeling to make repayments has eased with repayment holidays of up to 6 months allowed, and an extension of payment terms from 6 years to 10 years can halve monthly repayments. However, the same problems still arise with these schemes, firstly they are loans and will need to be repaid, and secondly our client experience in recent months has been that there is a general lack of appetite from banks to provide this type of finance to businesses when compared to the approach taken by the banks at the start of these schemes in the late Spring and early Summer. Time will tell whether these measures do really help, for the moment there is cautious optimism, but a lot will depend on the attitude of those actually supplying the cash – the banks.” comments Dominic Bourquin, Corporate Finance and Tax Partner.

Tax and VAT deferrals: The VAT cut for the hospitality, tourism and leisure industry to 5%, was due to last until January but will now run until the end of March 2021.

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.

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.

Steve Chamberlain, Senior VAT manager comments:

“The Chancellor announced two welcome measures on VAT.

Tourism and hospitality sectors:
The temporary reduction in VAT, due to end on 12 January 2021, has been extended to the end of March next year. This affects supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, supplies of accommodation and admission to attractions across the UK.

Practical tip for those affected:
Ensure you have coded your tills correctly so that you can account for the right amount of VAT. This includes promotions-for example under “buy a main meal and get a free glass of wine” the wine isn’t free for VAT purposes and you should apportion the price between the meal and the alcohol and account for 20% VAT on the latter.

VAT deferred payments:
The half a million businesses that deferred their VAT payments falling due from 20 March 2020 to 30 June 2020 can now apply to pay this back in 11 interest-free payments during the 2021-22 financial year, rather than being required to pay in full at the end of March 2021. Businesses will need to opt in, (the mechanism for doing so hasn’t yet been finalised) but all are eligible.

Practical tip for those affected:
If you suffered bad debts in the affected VAT return periods, even if all the other conditions are met, you will not be able to reclaim bad debt relief for the VAT element until you have paid all the VAT due on the return.”

Support for workers: The Coronavirus Job Retention scheme (CJRS) will end as planned on 31st October and the new Jobs Support Scheme will be introduced from 1st November which involves the government supporting the wages of people in work, giving employers the option to keep people in work on shorter hours, rather than make them redundant.

Employees will have to work at least 33% of their normal hours, and be paid for that by the employer. The government and the employer will each pay one third of the remaining hours not worked.The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.

Juliet Mellues, HR Consultant, comments:

"This news will come as a welcome option for many employers who want to retain their staff but are not able to provide enough work for them yet. It may cause confusion in terms of working hours and what you can claim back, as well as administration headaches for payroll, but with the focus on saving more jobs, or at least delaying redundancies, it does give employers and employees more time to plan for the future."

To discuss the recent announcements any further, please contact your usual Monahans representative or contact your local office.