What Government Support is available in January 2021?
A new year has, as many expected, brought the third lockdown. With Boris Johnson placing the entire country under Tier 4 restrictions and closing schools, January 2021 feels a lot like March 2020. Inevitably, these new restrictions come with a new package of Government support announced by Chancellor Rishi Sunak. Here’s what they include.
Any company working in leisure or hospitality will benefit from one-off grants of up to £9,000. As with all previous awards, businesses will qualify for different amounts based on the value of their properties.
- £15,000 or less: £4,000
- £15,000 to £51,000: £6,000.
- £51,000 and over: £9,000.
These will be made available on a per property basis, which means any business with multiple outlets will receive support for each one.
On top of this, the Government has made £594 million available to local authorities to help those businesses which do not qualify for those grants.
The Chancellor is also providing additional funding for devolved administrations Scotland, Wales and Northern Ireland which will operate their own versions of the grants. In total, the new measures will cost approximately £4.6bn and the Government expects more than 600,000 businesses to benefit.
The existing furlough measures we described at the end of last year, have been extended until April. It’s a sign that this is likely to be a relatively long lockdown with Michael Gove predicting it could last at least until March.
The Government will continue to pay 80% of all wages overturning their previous plans to reduce payments from January.
The eligibility for the jobs retention scheme will remain unchanged. This allows companies to scale down the number of hours employees work with the Government paying some of their remaining wages.
As an employer, you will have to pay wages, National Insurance Contributions (NICS) and pensions for hours worked, and NICs and pensions for hours not worked.
Business interruption loan
Business interruption loans will now remain open until March.
- Bounce back loan scheme
- Coronavirus business interruption loan scheme.
- Coronavirus large business interruption loan scheme.
All of these had been due to close at the end of January.
The support packages for self employed people remains unchanged. It was extended at the end of the last year with the third round of grants worth up to £7,500. Individuals will have until 29th January to claim this support and a fourth round will be available later.
However, once again many people slip through the cracks such as those who pay themselves through a limited company. It’s an entirely legal form of setting up tax but the Government has tried to crack down on it in recent years. Once again it will offer no support, but you may be able to take advantage of furlough and use the bounce back loan to pay your own salary.
Those with profits of more than £50,000 are also still out in the cold. For many of these self-employed people, the lack of support adds to all the usual stress which comes with meeting the tax deadline of January 31st.
Time to pay measures are already in place for anyone with tax liabilities up to £30,000. This will enable them to pay by instalments to spread the cost of their tax burden.
Self-assessment customers can pay their deferred payment on account bill from July 2020 and any outstanding tax owed for 2019 and 2020 in monthly instalments up to 12 months. Any customer who needs more than 12 months can contact HMRC in the usual way.
The Government has also warned people of scams claiming to be from HMRC offering a way to set up their payment plans. The Government has put in place guidance about how to recognise genuine HMRC contact.
To be really safe it’s also a good idea to only visit the HMRC site directly rather than clicking on an email link.
Eye to the future
The Chancellor hopes these new measures will cushion the inevitable economic fall out of another lockdown. The UK saw record levels of redundancies last year. Unemployment currently stands at 4.9%, but the Office for National Statistics expects this to reach around 7.5% in the middle of 2021.
It also says that the economy will be 11.3% smaller in 2020, the biggest fall in 300 years and one of the biggest drops of any developed country.
Business leaders gave the measures a cautious thumbs up.
“This new grant package is welcome and will go some way to reassuring the worst affected businesses,” said Roger Barker, director of policy at the Institute of Directors business lobby group.
However, he warned the chancellor to ‘remain wary’ of ending much of this support in the Spring without more information on the Government’s roll out.
Will there be more?
The prospect of a vaccine is one of the only bright spots in an otherwise gloomy landscape for the Government. However, uncertainty remains over the speed and spread of the rollout with many people already seeing a delay in their second vaccinations.
The Government hopes that once the most vulnerable have been vaccinated it will be able to start reopening the economy. However, the point at which this is expected to happen keeps being pushed back.
At present, the most optimistic scenarios see this lockdown continuing into late spring. The extension of financial support packages to March and beyond is a recognition that this is, at best, a relatively long-term journey.
Further changes to support measures seem almost certain. Given the history of previous announcements, these are likely to be kept under wraps until the last moment. Planning ahead will be difficult, so businesses will need to be agile enough to respond to whatever happens.
Even with this support, this new national lockdown will create challenges for businesses. A prolonged and more severe downturn is even more likely which will put pressure on cash flows.
Firms will need to become increasingly focused on effective financial management and ensure they understand what support is available. For some this will mean updating accounting technology; for others, it will mean seeking external support or expanding their internal capacity. In 2021, more than ever, the accountancy function will take central stage.