After sustained pressure from the private sector, the Government has agreed to change the rules of the Pay as You Grow scheme (PAYG) so that Bounce Back Loan (BBLS) borrowers can delay all repayments for a further 6 months. In effect, this means that businesses can now choose to make no payments on loans until 18 months after the loans were taken out.
The flexibility to tailor loan repayment options to individual circumstances will benefit many businesses whose cash flow has been impacted by Coronavirus restrictions since the start of the pandemic. Business Secretary, Kwasi Kwarteng states that “these flexible repayment options will give businesses the time they need to recover from the pandemic before paying back loans, giving them the breathing space and confidence to build back better.”
Of course, announcements like this often raise more questions than they answer, so we have outlined the main points from the Government’s announcement below.
- The Chancellor has announced a 6-month extension option for all BBLS borrowers – with businesses allowed to tailor payment options based on individual circumstances.
- The option to pause repayments is now available from the first repayment, rather than after the first 6 repayments.
- The revised PAYG rules now enable borrowers to extend loans from 6 to 10 years.
- The Government will cover interest costs for the first year of all BBLS loans.
- The new PAYG flexibilities will be available to 1.4 million businesses who have collectively taken out nearly £45 billion through BBLS.
How does the BBLS repayment extension affect R&D Tax Credit (SME) Claims?
As before, loans taken out under BBLS remain classified as ‘notified state aid’ under the rules outlined by the European Commission. SME R&D tax credit claimants will be unaffected so long as BBLS loans are not used to either fully or partially fund R&D projects.