Winter Economy Plan Support for Jobs and Businesses

September 24, 2020

Chancellor announces support for businesses during winter

The Chancellor, Rishi Sunak, announced his Winter Economy Plan to support businesses and jobs on 24 September 2020.

UPDATE: THE GOVERNMENT’S ANNOUCEMENTS ON 22 OCTOBER 2020 HAVE MADE CHANGES TO THIS SCHEME. PLEASE SEE OUR LATEST NEWS FOR MORE INFORMATION 

Job Support Scheme

The new Job Support Scheme will begin on 1 November and replace the “furlough” scheme.  To be eligible for the scheme employees must work a minimum of 33% of their hours. The government and the employer will then each pay a 1/3rd of the hours not worked. So an employee working 33% of their hours would receive 77% of their pay with the government contributing 22% of their pay and their employer the remaining 55%.

It should be noted that 22% is the maximum amount that the government will pay and the percentage will depend on the percentage of an employees hours that are worked.  For example if the employee works 50% of their hours then the level of government support is reduced to only 17%.  The level of Government contribution is capped at £697.92 a month.

It should also be noted that the Government contribution will also not cover class 1 employer’s national insurance or employer’s pension contribution but these amounts will continue to be payable by the employer.

Employees will be able to “cycle on and off” the scheme and they do not need to work the same pattern each month. Any short time working arrangement, however, must cover a period of at least 7 days.

The new scheme will run for 6 months but the government have said that they will review in 3 months time the threshold of 33% of hours. The grants like the “furlough” grants will be paid in arrears.

There are a number of criteria to the scheme. To be eligible for the scheme, employers must have a UK bank account and operate a UK PAYE scheme. Larger businesses will also need to meet a financial assessment test. The scheme is designed for viable jobs and therefore employees can not be made redundant or put on redundancy notice during the period within which the employer is claiming the grant for that employee.

Similar to the furlough scheme, employers using this scheme should agree short-time working arrangements with staff, make any contract changes by agreement and notify the employee in writing. HMRC have said that they will carry out checks on claims and agreements with staff will require to be available to HMRC on request.

 

Self Employed

To assist the self employed, the Self Employment Income Support Scheme Grant (SEISS) will also be extended for 6 months. A grant will be payable, in arrears, for the period 1 November 2020 to 31 January 2021 for those currently eligible for SEISS and who are continuing to trade but face reduced demand due to Covid-19.

This grant will cover 20% of the average monthly profits of the individual but will be capped at £1,875. There will be a second grant for the period February to April but the level of this grant still has to be announced. As with the previous scheme, the grants will be subject to tax and national insurance.

Self assessed taxpayers will also be given more time to pay, with deferred payments from July 2020 and those due in January 2021, not now being due until January 2022.

Loans

The Chancellor announced that he will be extending applications for the Government’s Coronavirus Business Interruption Loan scheme, the Coronavirus Large Business Interruption Loan scheme, the Bounce Back Loan scheme and the Future Fund.

Sunak also announced a “pay as you grow” scheme for business which will allow them to extend their bounce back loans from 6 to 10 years. The extension should significantly cut loan repayments and help cashflow. There will also be interest only periods of up to 6 months and payment holiday measures available for these loans.

The Government guarantee on Coronavirus Business Interruption Loans will also be extended to 10 years. There will also be a new successor loan guarantee programme to be announced in January 2021.

VAT

The temporary cut in VAT to 5% for the tourism and hospitality sectors will now remain in place until 31 March 2021. There will also be  a new scheme to allow businesses who deferred their VAT bills until March 2021 to make 11 smaller interest free payments during 2021/22 instead of having to make the full payment in March.

Further Information

More details can be found at https://www.gov.uk/government/news/chancellor-outlines-winter-economy-plan but it should be noted that there are still further details to be announced.

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PRA Letter to Credit Unions 2020

September 11, 2020

The PRA have issued their annual review of the sector letters

The PRA have issued their annual review of the sector letters to category 5 Credit Unions. There are two versions of the letter. One for Credit Unions with less than £15m in assets and fewer than 10,000 members and one for larger category 5 Credit Unions. We would also recommend that category 4 Credit Unions review the letters as a number of the issues will be relevant to them. Some of the key messages with the letters are set out below:

Single Customer View

The importance of Single Customer View was stressed. They reminded Credit Unions of the obligation to inform the regulator when you change the system you use to produce SCV files. It should be noted that the PRA are priortising testing SCV of Credit Unions where they have doubts over the future viability of the Credit Union. Credit Unions can also now test SCV data directly on the FSCS self-verification portal and we would recommend that Credit Unions look to build this into their testing of SCV.

Operational Resilience

Operational Resilience continues to be a key topic with the regulator. Similar to previous letters they have stated the importance of taking a service based approach to operational resilience and setting tolerance levels.

The PRA expect Credit Unions to carry out an operational risk assessment prior to carrying out any new activities or services. They have also stated that Credit Unions should be considering the risks of outsourced activities including the requirements of section 14 of the PRA Credit Union Rulebook

They have highlighted the increasing number of cyber incidents and  the need for Credit Unions to have policies and procedures in place to deal with these risks. You should also notify the regulator where there have been any significant operational or cyber incidents or events that may impact on continuity of the Credit Union’s services.

Credit Risk

The PRA have highlighted the need for scenario planning and monitoring to help identify deterioration in credit quality of loans and so that the Credit Union can take timely action in such cases including where necessary the tightening lending criteria.

Capital

For larger Credit Unions with capital ratios under 10% the PRA have highlighted the distribution rules. This is a topic that has caused much confusion with many Credit Unions and was the topic of our recent blog which can be found by clicking here.

For smaller Credit Unions they again emphasised that there will be increased regulatory monitoring for those with a capital ratio between 3 to 5%

In their letter to smaller category 5 Credit Unions they covered the use of revaluation reserves and subordinated loans. They have encountered a number of cases where subordinated loans do not qualify as capital due to the term of the loan or the conditions attached to the loan. They have have offered the Credit Unions the opportunity to discuss with them where they have any debts over whether reserves or loans qualifying as capital.

Succession Planning

Lastly both letters state the importance of succession planning and bringing on directors with relevant skills. The PRA note this can be challenging especially in the current circumstances and if you cant get sufficient Board members then you need to consider the future of the Credit Union.

See below for links to the letters.

Further Information

PRA Letter to large category 5

PRA Letter to smaller category 5

Article on capital transfer requriements

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Kevin Booth

Position: Partner
Email: kevin.booth@alexandersloan.co.uk
Phone: 0141 204 8989

I joined Alexander Sloan in 2013 having been a partner in another mid-tier firm for five years.  My client base is diverse and they operate all over the UK.  My extensive experience allows me to provide business coaching services to my clients and assist them in the strategic planning and development of their business.

I believe it’s important to maintain close contact with my clients throughout the year to ensure my understanding of their issues is continually updated.

I sit on the ACCA Scotland Committee.

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Data Security Threats during Lockdown

April 7, 2020

Lockdown is creating opportunities for fraudsters – make sure you are alert to such threats

At the current time everyone is struggling to cope with the Covid-19 pandemic.  There are limited goods, greater anxiety, restrictions on movement and an increase in home working.  Unfortunately, these conditions also present opportunities to criminals and there has been an increase in cyber attacks and frauds.

Cyber Attacks

Many organisations have had to move to home working very quickly and that means there will be instances where usual security protocols may not have been followed. In addition, with more remote working, there are opportunities for more phishing attacks. Common schemes include receiving bogus emails claiming to include important links to more information on Coronavirus. The National Cyber Security Centre has reported an increase in the number of websites registered relating to the Coronavirus suggesting that criminals are likely to be taking advantage of the pandemic.

There are a number of resources available which are worth considering to help against cyber attacks which include:

The National Cyber Security Centre guide to home working can be found by clicking here

The Centre for Protection of National Infrastructure has produced high level guidance on security practices during pandemics which can be found by clicking here.

The National Cyber Security Centre have a guide on spotting and dealing with phishing emails which can be found by clicking here.

Frauds

There are a large number of frauds taking place which are taking advantage of the current schemes. One example is that Europol are currently investigating a €6.6 million transfer to a company in Singapore in order to purchase alcohol gels and face masks where the goods were never received. There have been a number of cases where criminals have been impersonating government officials, police or medical/health professionals to gain access to properties.

Unfortunately, it is even more important to stay vigilant in an already testing time.

Stay safe

Alexander Sloan

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