Welcome to the October 2021 'Need to Know' update. You'll find the latest key information on VAT, the end of the furlough scheme, plans for business rates, energy price rises, and insolvency rule changes.
VAT rate increases for hospitality and tourism sector
Businesses in the hospitality and tourism sector are facing an increase in the VAT rate from 5% rising to 12.5% from October 1.
The VAT rate for hospitality was temporarily cut to 5% last year, with the reduction extended earlier this year.
From October 1 the rate is rising to 12.5%, before returning to 20% on April 1, 2022.
You can read more about the VAT reduction scheme and its phasing out here: https://bit.ly/2YdA8J9
Furlough scheme ends from October 1
The furlough scheme is now closed, creating uncertainty ahead for people who have not yet fully returned to work.
Claims for September must be submitted to HMRC by 14 October 2021 and any amendments must be made by 28 October 2021.
Nearly one million workers were expected to be on the scheme at the end of September.
The Coronavirus Job Retention Scheme provided 60% of the wages of furloughed staff up until the end of September, with around a fifth of employees in businesses with two to four employees still on full or partial furlough in early September, according to HMRC.
Small businesses have been far heavier users of furlough than large firms, reflecting the disproportionate impact of the pandemic and restrictions on smaller firms – and the gap has grown as the scheme has neared its end.
Since the start of the pandemic, it has helped pay the wages of 11.6 million workers.
For more information and to make claims for September, go to: https://bit.ly/3AYySYq
Labour plans for business rates reform
The Labour party has announced that it would scrap business rates and undertake the “biggest overhaul of business taxation in a generation,” in the event of being elected to Government in the next election.
The Labour shadow chancellor made the announcement at the Labour Party Conference at the end of September.
The policy, which would effect England only, would see a freeze in business rates until the next revaluation, benefiting sectors like retail and hospitality, and increase the threshold for small business rates relief that would give such companies a discount, before undertaking more fundamental reform.
“It’s good to see that the Opposition has adopted our proposal to increase the ceiling for small business rates relief to £25,000, which we submitted to the Government’s fundamental review. The gauntlet has been thrown down by the Opposition, and we hope Government Ministers are listening. This is what a pro-small business tax policy looks like.
“Business rates is a regressive tax that hits firms before they’ve made a pound in turnover, let alone profit, whilst disincentivising sustainable investment. This proposal marks a welcome call to action that would take more small businesses out of the regressive rates system and rightly looks ahead to more fundamental reform.”
Concerns for businesses as energy prices rise
Whether you’re a small business owner running your business from home or you have a commercial property on a business tariff, you’re likely to be affected by higher energy bills in the coming months.
Ofgem has announced a price cap will come into effect on 1 October, which means there’s a limit to how much your energy company can charge you.
The standard variable rate will be capped at £1,277 – but that’s an increase of 12 per cent. It’s worth noting that this is based on a typical household usage so, if you use more energy, your bill will be higher.
The price cap is reviewed twice a year, so the rate could increase yet again on 1 April 2022 if wholesale prices continue to climb.
However, the price cap applies only to domestic tariffs, and there are concerns that firms on a business tariff could face eye watering increases if their supplier goes bust and they are moved to a new company.
You can find energy advice for businesses from Ofgem here: https://bit.ly/39SJGvq
End of temporary insolvency measures
Temporary measures brought in to support businesses from insolvency during the pandemic will be phased out from 1 October.
Companies in financial distress as a result of the pandemic have been protected from creditor action since June last year, through the Corporate Insolvency and Governance Act 2020.
This was to ensure that viable businesses affected by the restrictions on trading during the lockdown periods were not forced into insolvency unnecessarily. As the economy returns to normal trading conditions, the restrictions on creditor actions will be lifted.
New measures will be brought in to help smaller companies get back on their feet to give them more time to trade their way back to financial health before creditors can take action to wind them up.
The threshold for the debt that a company must owe to its creditors before a WUP can be issued against it has been raised to £10,000, from its pre-pandemic level of £750, until 31 March 2022. Creditors will also be required to give debtor companies 21 days to respond to a WUP with payment proposals during this period.
FSB Chairman Mike Cherry said: “The easing of restrictions on winding-up petitions is thankfully unlikely to lead to a flood of corporate insolvencies, due to the mitigation policies in place until next March. However, it is still a potential wake-up call to businesses struggling with debts, and we hope that creditors of all kinds will show forbearance wherever possible.
You can read more here: https://bit.ly/3F8NnLJ
The Coronavirus Statutory Sick Pay Rebate Scheme is closed
The Coronavirus Statutory Sick Pay Rebate Scheme has been ceased by the Government, effective from October 1.
The scheme was for employers who could claim back up to two weeks of SSP if:
1. they had already paid your employee’s sick pay (use the SSP calculator to work out how much to pay)
2. claimed for an employee who’s eligible for sick pay due to coronavirus
3. had a PAYE payroll scheme that was created and started on or before 28 February 2020
4. had fewer than 250 employees on 28 February 2020 across all your PAYE payroll schemes
Alongside testing and vaccinations, the SSP rebate gave confidence that employers could afford the bill when staff fell sick or were told to self-isolate. That support is now no longer there.
You can find our more about SSP here: https://bit.ly/3iljOwI
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