I eagerly watched the Chancellor’s Winter Economy Plan announcement to see how much help will be extended for small and medium businesses. This is particularly important as we approach the end of the furlough scheme with the uncertainty we all face given the increasing daily cases of COVID-19.
I am pleased that there is a new Job Support Scheme coming into effect from 1st November for 6 months. It provides some support whereby employees must work a minimum of 33% of their normal hours which is paid by the employer. The remaining 67% is covered 1/3 by the Employer, 1/3 by the Government and 1/3 by the employee. Effectively employees that remain in employment on this scheme will receive 77% of their pay and it will help businesses retain talent they desperately want to keep but are unable to afford at 100% wages.
Importantly this new scheme is open to small and medium companies even if they did not utilise the furlough scheme previously.
Whilst I welcome this step, this may not be enough for those businesses that have been adversely affected. Those business that really have minimal trade at the moment but when social gatherings are allowed in the future, will have an immediate pipeline of work. Quite possibly in these situations at the point their trade comes back, they will have no staff to undertake the work as they have unfortunately had to make the redundancies!
The self-employed will also benefit from a similar arrangement to the Job Support Scheme.
Help has been announced for tax deferrals to aid cash flow with VAT that has already been deferred until March 2021 now payable over 11 instalments and no interest. In addition, those tax payers who deferred their July self-assessment payment on account until January 2021 will have 12 months to pay with no interest.
Bounce back loans may have their repayment period extended from 6 to 10 years and the CBILS loans will have their guarantee period extended to 10 years to allow the banks to also extend the repayment period.
Finally, those in the hospitality sector see the 5% VAT rate extended until 31 March 2021 although this is a complex area and not all supplies are covered by the 5% rate such as alcohol which remains at 20%.
As always – the devil is in the detail, but this announcement will certainly help many small businesses to get back on their feet. I do however, urge businesses to plan their cash flow and remember that these tax deferrals and loans are simply that and they are repayable.
If you would like to discuss this in more detail, please contact Sean Wiegand or your usual Lambert Chapman contact.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.