Lockdown 3 – continued support from the Government

Published on January 6, 2021 by Nick Donohue - Head of Tax

As we enter a New Year there will have been renewed hope that 2021 would see the country return to normal.  Whilst there is still hope that the end is in sight with the roll out of the vaccines, Monday evening’s announcement that England will be entering into a third lockdown, whilst not unexpected, will have been unwelcome news for both businesses and individuals.

The position outlined by the Prime Minister on Monday is provisionally in place until mid-February but noises being made by Ministers imply we may be in lockdown until March at the earliest. Continued support is therefore vital to help businesses survive this latest period of uncertainty.

As well as considering yesterday’s announcements by Rishi Sunak, Chancellor of the Exchequer, relating to grants made available for businesses forced to close during Lockdown 3, we have also summarised the previously announced support that remains available.

The Chancellor yesterday announced £4.6bn in new lockdown grants to support businesses and protect jobs during this lockdown in terms of:

  • One-off top up grants for retail, hospitality and leisure businesses worth up to £9,000 per property
  • £594 million of discretionary funding available to support other impacted businesses.

The retail, hospitality and leisure top up grants will be provided on a per-property basis to support businesses through the latest restrictions.

The new one-off grants come in addition to existing business support, including grants worth up to £3,000 for closed businesses, and up to £2,100 per month for impacted businesses once they reopen.

The government has also provided 100% business rates relief for retail, hospitality and leisure businesses, £1.1 billion existing discretionary funding for Local Authorities, the furlough scheme now extended to April and 100% government backed loans, extended until March.

The one-off top-ups will be granted to closed businesses as follows:

  • £4,000 for businesses with a rateable value of £15,000 or under
  • £6,000 for businesses with a rateable value between £15,000 and £51,000
  • £9,000 for businesses with a rateable value of over £51,000

A further £594 million is also being made available for Local Authorities and the Devolved Administrations to support other businesses not eligible for the grants that might be affected by the restrictions. Businesses should apply to their Local Authorities.

Extension to the Coronavirus Job Retention Scheme (“CJRS”)

The CJRS (often referred to as the furlough scheme) will now remain open until 30 April 2021. Employees will receive 80% of their usual salary for hours not worked, up to a maximum of £2,500 per month. The £2,500 cap is proportional to the hours not worked.

VAT Deferral – Action required before 31st March 2021

Businesses that deferred their VAT liability that fell due between 20 March and 30 June 2020 can apply for this VAT to be paid over an 11 month period, interest free, Instead of paying the full amount by the end of March 2021. All instalments must be paid by the end of March 2022.

To use this scheme you must:

  • still have deferred VAT to pay
  • be up to date with your VAT returns
  • opt in before the end of March 2021
  • pay the first instalment before the end of March 2021
  • be able to pay the deferred VAT by Direct Debit

Whilst you must opt in before the end of March 2021 the scheme has not yet been made live but is expected to become available within the next few weeks.

Extension to the Self Employed Income Support Scheme – Action required before 29th January 2021

The Self-Employment Income Support Scheme grant extension provides support to the self-employed in the form of 2 further grants, each available for 3 month periods covering November 2020 to January 2021 and February 2021 to April 2021.

The first of these new grants will cover the 3 month period from 1 November 2020 until 29 January 2021. The Government will provide a taxable grant calculated at 80% of 3 months average monthly trading profits, paid out in a single instalment and capped at £7,500 in total. This is an increase from the previously announced amount of 55%. Eligible employees will have been notified by HMRC that they can make a claim. The deadline for making the claim for the January 2021 period is 29th January 2021.

The Government has already announced that there will be an additional grant covering February 2021 to April 2021. The Government will set out further details, including the level of this grant in due course.

The grants are taxable income and also subject to National Insurance contributions.

Government backed loans – applications open until 31 March 2021

 

Bounce Back Loan Scheme

The scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000.

The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.

The scheme is open to applications until 31 March 2021.

If you already have a Bounce Back Loan but borrowed less than you were entitled to, you can top up your existing loan to your maximum amount. You must request the top-up by 31 January 2021

The Coronavirus Business Interruption Loan Scheme (CBILS)

The scheme helps small and medium-sized businesses to access loans and other kinds of finance up to £5 million.

The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months.

The scheme is open until 31 March 2021.

You can apply for a loan if your business:

  • is based in the UK
  • has an annual turnover of up to £45 million

You need to show that your business:

  • would be viable were it not for the pandemic
  • has been adversely impacted by coronavirus

If you want to borrow £30,000 or more, you also need to confirm that your business wasn’t classed as a business on difficulty on 31 December 2019.

Coronavirus Large Business Interruption Loan Scheme

The scheme helps medium and large sized businesses to access loans and other kinds of finance up to £200 million.

The government guarantees 80% of the finance to the lender.

The scheme is open to applications until 31 March 2021.

You can apply for a loan if your business:

  • is based in the UK
  • has an annual turnover of over £45 million
  • has not received support under the Bank of England’s COVID-19 corporate financing facility.

If you require any additional information on any of the available support packages please do not hesitate to contact your usual RPG contact.

Nick’s experience covers all major areas of taxation and during 2020 /21 Nick has led RPG’s response to the Covid-19 pandemic with interpretation and follow up of the various support packages provided by the Chancellor of the Exchequer, during what has been a very stressful time for many clients. Nick has also been instrumental in guiding clients through the conclusion of the UK’s Brexit deal, advising clients on the general tax and VAT implications of the final deal. Contact: NDonohue@rpg.co.uk

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