On 24 September 2020, the Chancellor set out a series of new measures in response to Coronavirus and its continuing impact on the economy. Many of these build on and extend measures announced over spring and summer 2020.

Income Tax Payment on Account Deferral

Under the original coronavirus measures, taxpayers due to make payments on account on 31 July 2020 could defer their payments until 31 January 2021.

Now these can be deferred further by spreading the payments over 12 instalments with the final payment due on 31 January 2022.

Claim to Reduce Payments on Account

Many unincorporated businesses will have suffered a downturn in profitability over the 2020-2021 tax year. These taxpayers should make a claim to HMRC to reduce their payments on account which are due on 31 January 2021 and 31 July 2021.

VAT Payments Deferral

Under the original coronavirus measures, VAT that was due for payment to HMRC between 20 March 2020 and 30 June 2020 could be deferred until 31 March 2021.

Now, these payments can be deferred further by spreading over 11 interest free instalments.

This would be relevant for the following VAT quarters:

q/e 28 February 2020 original payment due on 7 April 2020
q/e 31 March 2020 original payment due on 7 May 2020
q/e 30 April 2020 original payment due on 7 June 2020

5% VAT rate for restaurants and hotels

The VAT rate on food and non-alcoholic drinks bought in restaurants was reduced to 5%. This also applies to takeaways.

The rate was due to go back to 20% in January 2021 but will now continue at 5% until 31 March 2021.

Bounce Back Loan

The Bounce Back Loan is open to new applications until 30 November 2020. Repayments were originally due within 6 years but can now be extended to 10 years.

The Bounce Back Loan Scheme offers loans from £2,000 to £50,000. Although borrowers are liable for the loan, the government acts as a guarantor to the lender for the loan and the interest. The interest rate is fixed at 2.5%.

For the first 12 months, the borrower makes no repayments and the government pays the interest payments.

Borrowers have 3 “interest only” holiday periods where they pay only the interest element for up to 6 months at a time.

They can also pause repayments in full for 6 months as long as they have previously made 6 repayments.

Neither of the above repayment holidays will affect businesses’ credit ratings.

Coronavirus Business Interruption Loan (CBIL)

The scheme will now remain open for new applications until 30 November 2020.

The loans offer up to £5m over a period of 10 years (now extended from the original 6 year term). The government pays the interest and fees for the first 12 months. Although the borrower remains fully liable, the government does act as guarantor for 80% of the loan. The bank cannot ask for personal guarantees where the loan is less than £250,000. Where loans exceed £250,000, any personal guarantees will exclude private principal residences.

A new loan scheme will be launched in January 2021.