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Rishi Sunak’s ‘pay as you grow’ plan to help businesses survive yet MORE months of misery

Rishi Sunak’s ‘pay as you grow’ plan to help businesses survive yet MORE months of misery by extending loan payments to a DECADE and extending VAT cut for hospitality and tourism

  • Bounce back Loans can be paid back more slowly, helping with cash flow
  • Terms of 10 years up from previous six-year term, plus payment holidays 
  • VAT cut from 20 to 5 per cent for hospitality and tourism extended to March

Rishi Sunak’s new help for business and jobs at a glace 

  • Furlough scheme will  be replaced with a Job Support Scheme (JSS) to ‘directly support’ wages of staff working at least a third of regular hours.
  • Firms will pay workers for hours they work. For regular hours they cannot work, employer and Treasury will both pay a third of their wages, so they get two-thirds of pay for missed hours.
  • JSS open to firms who have not used furlough. 
  • Self Employment Income Support Scheme Grant (SEISS) is extended, with a lump some to cover November to January next year
  • It will be worth 20 per cent of average monthly profits, capped at £1,875. 
  • Second grant available for February to April 2021 
  • Bounceback Loan guarantee term extended to 10 years from the current six.
  • Interest-only periods of six months and payment holidays also now available. 
  • VAT cut from 20 to 5 per cent for firms in hospitality and tourism sectors is extended to March 2021.
  • Other firms who have deferred VAT bills under New Payment Scheme will be allowed to pay it off in 11 interest-free payments in 2021-22 financial year instead of one full payment in March 2021.
  • ‘Time to Pay’ self-assessment tax system extended to January 2022. 


Businesses will get more time to pay back emergency loans and tax bills under plans unveiled today by the Chancellor for them to ‘pay as you grow’.

More than a million companies which took out Bounce Back Loans will be allowed to pay them back over 10 years instead of six, Rishi Sunak in the Commons.

He told MPs that this would almost halve the monthly repayments facing businesses, amid fears that economic damage may last monger than first thought. 

It brings the Bounce back Loans scheme into line with Germany’s Schnellkredit – which allows repayments over a decade but charges higher interest.

Firms will also be able to take advantage of interest-only repayments for up to six months and be able to take payment holidays for the same period of time, once they have made six repayments.

Mr Sunak said: ‘If we want to protect jobs this winter, the second major challenge is helping businesses with cash flow.

‘Right now, businesses need every extra pound to protect jobs, rather than repaying loans and tax deferrals.’ 

Almost 1.3 million companies have borrowed more than £38 billion through the bounce back loan scheme since it launched on May 4, giving some a vital lifeline as business dried up during the pandemic.

These firms will now be given up to 10 years to pay off the loans of up to £50,000, an increase from the former six-year repayment terms.

It will nearly halve the monthly payments that companies must make.

Bounce back borrowers will also be given the option to pause all payments for up to six months if they are struggling, or choose to pay only the 2.5 per cent interest on the loans.

The Chancellor also promised a Government guarantee for coronavirus business interruption loans (CBILS) will be extended to 10 years, giving businesses more time to repay.

Around £15.45 billion has been lent under CBILS.

He also extended the application deadline for the bounce back loans, the CBILS and CLBILS – which is for larger businesses – until the end of November, and teased a ‘successor loan guarantee programme’ which will come in the new year.

More than a million companies which took out Bounce Back Loans will be allowed to pay them back over 10 years instead of six, Rishi Sunak in the Commons.

How ‘pay as you grow’ works 

A business which took out a £30,000 Bounce Back Loan – the average loan size –  would see their mean monthly repayments fall from £532 to £309, a 42 per cent reduction, if they repaid the loan over 10 years rather than six.

The Treasury believes this will boost their cashflow, enabling them to support and protect more jobs.

The same business could temporarily reduce their monthly repayments to just £63 if they switched to interest-only payments – helpful if they find themselves in a seriously tough spot. 

Finally, utilising a capital and repayment holiday would reduce monthly repayments to £0, allowing the business a six-month period to get back on their feet before resuming repayments.

The bounce back loan deadline was previously November 4, CBILS applications were due by September 30, and CLBILS applications were due on or before October 20.

In addition a new payment scheme will give more breathing space for more than £30 billion of deferred VAT payments, allowing companies and VAT-registered sole traders to make 11 interest-free payments in 2021-22 rather than a lump sum at the end of March.

The temporary 15 per cent VAT cut for tourism and hospitality that took the rate from 20 per cent to 5 per cent will be extended until the end of March.

Mr Sunak said the extension of the VAT cut would add around £800 million to the existing £2.5 billion cost of the measure. 

CBI director-general Dame Carolyn Fairbairn welcomed the ‘bold steps’ from the Treasury and said: ‘Wage support, tax deferrals and help for the self-employed will reduce the scarring effect of unnecessary job losses as the UK tackles the virus.’

But she added: ‘Further business rates relief should remain on the table.’

And not all firms believe it will work.

Jon Kay, director of Bury St Edmunds-based Camp Tails Doggy Daycare, said: ‘Pay-as-you-grow, interest-only terms, additional payment holidays, it’s ultimately putting lipstick on a pig. 

‘Debt is debt and for many small businesses struggling to bounce back in a brutal environment it will be the final nail in the coffin. The Chancellor needs to announce protection for employers as much as employees. The latter don’t exist without the former, after all.’


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