Winter Economic Plan
So earlier on today the Chancellor outlined the next stage of the economic support offered to small businesses and self-employed individuals affected by the ongoing COVID-19 pandemic - Winter Economy Plan. This replaces the Autumn budget, which shall no longer take place this year.
Overall a welcome package, but inevitably it won’t please everyone, and hospitality, leisure and entertainment still very hard hit.
Below we have summarised his five measures. As more details are published we at Locumkit Accountants will keep you updated
Self-Employed Income Support Scheme (SEIS) extended
Whilst this is promising news, this extension does not include any locums who missed out previously due to having started locuming post March 2019. You were excluded first time round and unfortunately are still excluded.
The grant will be limited to self-employed individuals who are currently eligible for the SEISS and are actively continuing to trade but are facing reduced demand due to COVID-19. For the Self-employed locums who were eligible, the good news is that now the scheme is extended to 30th April 2021. This will again be split into two parts (Nov-Jan and then February to April). Yes, it seems like they have forgotten about the months of September and October. In the initial period you will be entitled to a maximum grant of 20% of ‘average monthly profits’ capped at £1,875 for each three-month period (not per month). It is not clear when applications will open or close for this grant.
The amount of support for the second part has not yet been clarified – all we know is that the grant may be adjusted if economic circumstances change.
Summary of SEIS grants to date:
- 1st SEISS grant was 80%, capped at £7,500.
- 2nd SEISS grant was 70%, capped at £6,570.
- 3rd SEISS grant is 20%, capped at £1,875.
- 4th SEISS grant is ??%, capped at £?
We have had some update on the eligibility criteria for next set of grants, some of which I believe we as locum Optoms need to take into consideration.
We at Locumkit Accountants have been informed that to be eligible for the next set for SEIS grants you must:
- have been in receipt and/or be eligible for the first set two SEISS grants (please review our previous blogs for a reminder of the eligibility criteria’s);
- be impacted by ‘reduced demand’ due to COVID-19 in the qualifying period; and
- be ‘actively trading’ and have full intention to continue to trade: This means actively working as a locum, irrespective of reduced workload.
It is the third category, which I feel some of us locums might find ourselves maybe foul of. I myself, as a locum started working as a NHS Test & Trace Contact Tracer during the lockdown and ceased all locum work for the interim. Some of our clients like me who locum have mentioned that they are not looking to return to locuming anytime soon, whether it be due to safety concerns, rate, or any other reasons. This produces the the risk of us not being eligible for the grant – as we won’t be ‘actively trading’. Now if we return to work for say one day, will that suffice as ‘actively trading’; this is something we are trying to find out.
Previously the second phase of the SEIS grant was conditional on your trade being ‘adversely affected’, which is fairly easy to substantiate for us locums. However now HMRC have tightened this condition by saying it must have been impacted by ‘reduced demand’. Again, what ‘reduced demand’ means is ambiguous and is something we are actively trying to find further information on.
We have also been informed that the reason for no specific mention of reduction in earnings in any of the criteria’s to be eligible for the grant is intentional. Hence, we would strongly advise you not to confuse ‘adversely affected’ or ‘actively trading’ with your level of earnings (albeit they are interlinked). What we understand is that not accepting locum work due to reduced rates, despite work being available is not enough to meet ‘reduced training’.
We also queried about the periods which seem to have been overlooked for grants to which we have been informed that the SEISS grants do not relate to any particular periods or do not seek to replace lost income over a particular period. Therefore, SEISS is not intended to provide a month-by-month replacement of income.
For all locums who have not applied for your second SEIS grant, please do before the 19 October 2020, when application will close.
A question that a few of our clients have asked us it that is this grant taxable?
Yes, these grants are taxable (income tax, NI in the 2020/21 tax year). We understand that a specific section will be brought in for the 20/21 self-assessment tax return for the reporting of SEISS grants. If you need help with your self-assessment tax returns, please do contact us and we can discuss with you how we at Locumkit can assist you.
Job Support Scheme
The current furlough scheme will end on 31 October, and as a replacement the Chancellor announced the introduction of the new Job Support Scheme, which comes into effect 1 November.
Based on early literature we understand:
- Is open to all small and medium-sized businesses – This should cover all Independent Opticians, Owner Managed Buisnesses (Locums trading as Directors)
- Will also support larger firms whose turnover has dramatically fallen in recent months.
- Can be used even IF the employee was previously furloughed as long as they were on the payroll as of 23 September 2020.
- Employees must work at least a third of their contracted working hours.
- Employers must pay for this percentage of their employees’ wages.
- For every remaining contracted hour not worked, the Government and the employer will pay a third of the shortfall in the employee’s usual pay (Governments contribution is capped at £697.92 per month)
This means for an employee working 33% of their hours, will receive at least 77% of their usual salary. We have been informed that this can come across as confusing, it is therefore we have tried to further express this point.
With the employer working at least 1/3 of their hours, they are contractually due payment for that 1/3. That leaves 2/3 of usual/expected pay, of which a 1/3 is paid by the employer and a further 1/3 by the Government as a grant. We understand that the employer will bear the cost of the employer’s NI and pension contributions on all the employee's pay.
Example: Normal salary £2,000 per month
Works a 1/3 of the usual hours so due £660
Then the employer and the Government contribute a further 1/3 of the remaining amount – so £442.20 each. This mean the employee gets a total of £1544,40 (77% of their normal pay).
As soon as there are more details on how the scheme will operate and how employers can apply we at Locumkit Accountants will update you.
The Job Support Scheme is designed to work in tandem with the Jobs Retention Bonus, providing they are kept on until February 2021.
As mentioned in our previous article there were multiple Coronavirus loan schemes that the Government announced to aid businesses with cash flow during these unprecedented times. In today’s announcement the Government has extended its payment terms and the deadline by when Businesses need to apply for these schemes.
Bounce Back Loans (BBL)
The Bounce Back Loans scheme, which provides between £2,000 and £50,000 in funding to businesses, capped at 25% of turnover, has introduced a new ‘Pay As You Grow’ repayments system. In addition, the deadline to apply has been extended to 31 December 2020.
This means that you will now be able to repay your Bounce Bank Loan over ten years instead of six, so fewer monthly repayments.
In addition, if your business is really struggling then you also now have the option
- To pause your repayments entirely for up to six months. This option can only be used once and used after the first repayments have been made; or
- To temporarily only make interest-only payments for periods of up to six months. This option can be used a maximum of three times.
Coronavirus Business Interruption Loan Scheme (CBILS)
The deadline for new applications for the above two schemes has been extended until 30th November 2020.
The Government has extended the guarantee of these loans for up to ten years.
If you were one of the business that opted to defer your VAT bills earlier in the year, then now you can make these repayments over 11 monthly instalments, with no interest to pay.
The Chancellor also spoke up in support of the tourism and hospitality sectors, with the end of its reduced rate of VAT in sight on 13th January 2021. Mr Sunak confirmed that the 5% VAT rate for tourism and hospitality firms would remain in place until 31st March 2021.
It’s not all doom and gloom for the locums who have missed out. The only grace for those locums (including the ones who were not excluded) is that you can delay your tax payments due in January 2021 (in the same way that the July 2020 payment was deferred), if the liability is more than £30,000.
Deferral of your 31st January liability means you can defer your
- Second payment on account (POA) 2019/20
- Balancing payment 2019/20
- First POA 2020/21
No interest will be charged on the late paid tax. Unlike the July deferral, self employed locums will have to apply for this deferral over 12 monthly instalments, up to January 2022.
Note: You can defer your liability, but you still have to submit a tax return by the 31st January 2021 (if filled online). At Locumkit, as fellow locum Optoms, we know how Covid has affected our work and the rates on display. Being Accountnats for Opticians, we at Locumkit Accountants are offering our own COVID relief and have decided to offer all locums 6 months free (50%) off on our Accountancy services based on the fact that our work level has reduced by 50% year on year (I know mine has). Contact us for more information.
If you have any questions in regards to the any of the governments reliefs or any other accounting related queries then feel free to drop me an email and I or someone from the Locumkit team shall get back to you - [email protected]
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