AAT calls for debt write-off for small businesses

Government measures to allow businesses more time to repay emergency loans do not go far enough, according to AAT.

The initiative – known as the Pay As You Grow scheme – was one of several packages announced by the Chancellor to alleviate the effects of the pandemic, but which have left the accountancy sector unconvinced.

So far, the Bounce Back Loan Scheme (BBLS) has channelled £38 billion of funding to UK-based small businesses. As part of the Winter Economic Plan, the Chancellor announced BBLS could be repaid over ten years, rather than six, to protect jobs.

Phil Hall, AAT Head of Public Affairs & Public Policy, said:

“Extending the repayment period doesn’t solve anything, it just defers the problem.

“In contrast, writing the debt off for small businesses would provide a much-needed boost for the SME sector, enable a speedier recovery, more growth, more investment and in the long term benefit the taxpayer overall.

“AAT recognises that such a move would not prove popular with everyone, but economic reality needs to take precedence in situations like this.”

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Accountants’ reservations

Meanwhile, some accountants have criticised the new Job Support Scheme, under which the Government top up the salaries of staff working at least one-third of their normal hours.

Andrew Wallis, Corporate Tax Partner at Kreston Reeves said: “The job support scheme looks to ensure that staff working one-third of their normal hours will receive 77% of their salary, with the government providing 22% and the employer 55%.

“The question that companies must answer is whether they are prepared to pay a premium for an employee to work reduced hours in order to avoid the cost of making more long-term structural redundancies. The scheme will only be of benefit to employers where there is a genuine expectation that the roles will be required from May 2021.”

Implications for part-time staff

Wallis also points out that a drawback of the scheme is that it is much more expensive to retain part-time workers.

He uses the Government’s own illustration of ‘Beth’ to make the point. Beth works five days a week for £350; if Beth’s employer employed Beth and two colleagues, each working one-third of the working week each, it would cost the employer £581 under the new scheme. This is £231 more than the £350 which the employer would pay Beth to work fulltime. 

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David Nunn is Content Manager at AAT.

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