Changes to the Government-Backed “Coronavirus Loans” Announced
Key Contact: Christian Farrow
Author: Chris Doherty
Rishi Sunak has today announced changes to the existing Government loan schemes, which have supported businesses struggling with the financial impacts caused by the Coronavirus pandemic. Under the “Pay as you Grow” initiative, loans under the Bounce Back Loan Scheme (which offered loans of up to £50,000 to small and medium sized businesses) can now be repaid over up to ten years. The maximum term for Bounce Back Loans was initially set at six years, and as such this extension could see businesses’ monthly repayments fall by up to 40%. Businesses may also elect to make “interest only” repayments in times of financial hardship, while firms “in real trouble” can apply to suspend repayments for up to six months.
The extension of the maximum loan term to ten years will also be available to small and medium-sized firms who have borrowed under the Coronavirus Business Interruption Loan Scheme (CBILS).
The Government has also announced that the deadline for applying for these schemes will be extended to 30 November 2020, as will the application deadlines for the Coronavirus Large Business Interruption Loan Scheme and the Future Fund.
Changes to VAT cuts and deferrals
The Government has also announced that the reduction of VAT to 5% for the tourism and hospitality industries, which was introduced last July and initially due to end in January 2021, will be extended to 31 March 2021.
Businesses who took advantage of the Government’s VAT deferral scheme (which allowed deferral of VAT payments to 5 April 2021) can also now spread their payment over 11 interest-free monthly instalments, rather than paying their tax liability in a single lump sum.
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