Coronavirus: Key Points from the Chancellor's Update

Earlier this week, we received a much anticipated announcement from the Chancellor on the further support that is going to be available to help small businesses navigate the ongoing challenges of coronavirus.

Here is a summary and some thoughts on each.

Job Support Scheme

The existing Job Retention (Furlough) Scheme is coming to an end as of 31 October 2020. That continues to be the case and in its place is the Job Support Scheme, which starts from 1 November and will run for 6 months.

The new scheme will be available to all employers irrespective of if they have used the previous furlough scheme, and for an employee to be eligible they must have been on the payroll before 23 September.

The employee must now work a minimum of 33% of their standard contracted hours, and for any hours worked they will be paid as usual by the business.

For any hours not worked, the government and the employer will each pay one third of their equivalent salary, with the government element capped at ￡698 per month. The final third of their salary is forfeited by the employee.

In practical terms, it means that for an employee working 33% of their hours, the business will pay them 55% of their salary. The government will contribute a further 22%, taking total pay for the employee to 77%.

It's a significant drop from the level of support provided by the existing furlough scheme and the concern is that it's not going to be enough to incentivise employers to keep hold of their staff. I can only see it working for businesses who struggle to recruit and are willing to incur a cost to retain key people.

Government Backed Loans

The existing Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loans (BBL) were previously scheduled to come to an end on 30th September 2020 and 4th November 2020 respectively.

Both now have an extended application deadline of 30 November 2020, and there have been extensions to the repayment terms available too - which are both now up to 10 years, an increase from 6 years previously. Within that there is also more flexibility for both capital and interest repayment holidays if you do hit financial trouble along the way.

I've already seen an increase in appetite from clients based on the extended payment terms and what that means for cash flow. It's worth noting that it's at the lenders discretion what terms they will offer and so not a default. If you already have a BBL or CBILS, do get in touch with the lender to ask about switching to longer repayment terms if you wish.

As I've said previously, now is the time to be considering what cash requirements you may have - whether it is for working capital or more opportunistic use of funds and investing back into the business. When the schemes do come to an end it is unlikely that funding will be available on as favourable terms.

Deferred Tax Payments

The Chancellor also announced more flexible repayment options for both Self Assessment and VAT.

If you have a deferred VAT payment from between March and June 2020, that is due to be repaid by 31 March 2021, this can now be repaid over 11 months from March 2021 onwards.

For any Self Assessment payments up to ￡30k that will be due on 31 January 2021, you will now have the option of spreading these over 12 months from 31 January 2021 onwards.

Further details on making the arrangements will be released near the time, but both the above will be a welcome cash flow boost in the new year when many businesses were foreseeing challenges in keeping up with repayments.

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As always, if you have any questions or there is anything we at MAP can help with, please do get in touch.