Covid-19: Improving Cashflow measures


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Jon Hickman - Corporate Tax Partner

Jon has many years of experience dealing with both OMB’s and large international business.

 

 


Glyn Woodhouse - Indirect Tax Partner

Glyn is a VAT Partner with more than 25 years of experience in providing VAT advisory services.

 

 

Ross McDonald - Corporate Finance Partner

Ross has established one of the leading Debt Advisory businesses focused on the UK mid-market.

 

 


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VAT support

Business loan schemes repayment changes

Enhanced Time to Pay for Self-Assessment taxpayers

Self-employed income support extended but reduced
 

VAT support

Deferred VAT – New Payment Scheme

The government will give taxpayers which deferred VAT payments between 20 March 2020 and 30 June 2020 the option to spread their payments over 11 interest free payments in the financial year 2021-2022. This means that VAT liabilities due between 20 March and 30 June 2020 will now need to be paid by 31 March 2022. All taxpayers which took advantage of the VAT deferral are eligible to use the New Payment Scheme but taxpayers will need to opt in. HMRC has announced they will put in place an opt-in process in early 2021.

Tourism and Hospitality

The government has announced it is extending the temporary reduced rate of VAT (5%) to 31 March 2021 for this sector. The VAT reduction was originally due to be in place for a fixed period of 15 July 2020 to 12 January 2021. The VAT reduction will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, caf├ęs and similar premises, supplies of accommodation and admission to attractions across the UK.  

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Business loan schemes repayment changes

The Chancellor announced changes to the Bounce Back Loan and Coronavirus Business Interruption Loan schemes, including extended repayment terms and application deadlines, and an ability to move to interest-only payments or suspend repayments for up to six months.

Bounce Back Loans

Under a new ‘Pay As You Grow’ flexible repayment system, businesses will be able to:

  • Extend the maximum repayment period from six years to up to 10 years
  • Opt for interest-only repayments for up to six months (for up to three times); and
  • Suspend repayments for up to six months, after having made at least six repayments.

Coronavirus Business Interruption Loans

The government guarantee for qualifying loans will be extended from six years to up to 10 years.

The deadline for applying for the Coronavirus Business Interruption Loan Scheme, Coronavirus Large Business Interruption Loan Scheme, Bounce Back Loan Scheme and Future Fund will be extended to the end of November 2020. Full details of all the changes will be announced in due course.

A new guaranteed loan programme will be launched in January 2021.

The COVID-19 Corporate Financing Facility will remain open until 22 March 2021. Where a company has exhausted all other options, and is of strategic importance to the UK, the government may also consider providing bespoke financial support.

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Enhanced Time to Pay for Self-Assessment taxpayers

In response to the COVID-19 outbreak, HMRC previously announced that taxpayers could opt to defer their second self-assessment payment on account for the 2019/20 tax year if they were finding it difficult to make their second payment on account by the 31 July 2020 deadline. In such situations, HMRC will not charge interest or penalties on any part of the deferred payment on account, provided it is paid on or before 31 January 2021.

On 24 September 2020, the government announced that it will extend this 31 January 2021 deadline for taxpayers with up to £30,000 of Self-Assessment liabilities. Such taxpayers will be able to agree a plan to pay their tax liabilities over an additional 12 months, ie up to 31 January 2022, although interest will be charged from February 2021 onwards. This does not affect the ability of any Self-Assessment taxpayer who is unable to pay any tax bill on time to negotiate a Time to Pay agreement with HMRC.

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Self-employed income support extended but reduced

For self-employed individuals who are still suffering from a loss of business as a result of Covid-19, there will be another two rounds of grants under the SEISS scheme. To qualify, individuals (including members of partnerships) must:

  • Currently be eligible for the SEISS (although they do not have to have claimed the previous grants)
  • Declare that they are currently actively trading and intend to continue to trade
  • Declare that they are impacted by reduced demand due to COVID-19 in the qualifying period, which for the first grant is between 1 November 2020 and the date of claim.

The first new round of grant will cover the three months from 1 November 2020 to 31 January 2021, and the maximum lump sum payment will be limited to 40% (increased from 20% in the 22 October announcement) of the individual’s average monthly trading profits for the period, up to a maximum of £3,750 (increased from £1,875). The level of support and cap for the next round has not yet been set.

As the support payments have always been described as covering a set number of months, it is not clear why there appears to be no grant covering the month of October 2020. It is expected that claims for the new rounds of grant will be made through the same HMRC portal as previous grants but HMRC will provide full details about claiming and applications in due course.

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