Winter economy plan
On Thursday 24th September 2020 the Chancellor, Rishi Sunak, made a statement in Parliament where he announced a series of measures to help jobs and businesses.
In this blog we are highlighting the key announcements. Please note that we will be issuing further blogs in due course with more details as they become known.
New Job Support Scheme announced
The current Job retention (“furlough”) scheme will end on 31st October. In its place the Chancellor announced the new Job Support Scheme starting on 1st November.
All small and medium-sized businesses are eligible, larger businesses must show their turnover has fallen during the pandemic. Employers can use the new scheme even if they have not previously used the furlough scheme.
The new Government scheme will last for six months to 30 April 2021 and to be eligible employees will need to be working a minimum of 33% of their hours. For the remaining hours not worked the Government and employer will pay one third of wages each. This means:
Employers will continue to pay the wages of staff for the hours they work – but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.
Employees who can only go back to work on shorter time will still be paid two thirds of the hours for those hours they can’t work.
The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
By way of an example an employee working 33% of their hours will receive at least 77% of their pay, 22% paid by the Government and 55% paid by their employer (the “worked” 33% plus 22%- being 1/3 of the remaining 67%).
We need to see the finer detail of the scheme but in broad terms for small businesses it seems that there is little to incentivise employers to hold on to their employees. In the example above the employer would pay 55% of an employee’s wages for 33% of their time working. In a few cases we can see that employers may be attracted to the scheme but for the vast majority of employers it seems that with the ongoing uncertainties that redundancies may be inevitable if employees are still unable to properly return to work. If you need advice on the new scheme then please contact us.
Self employed income support scheme
The existing self-employed grant (SEISS) will also be extended on the same basis as the job support scheme.
An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875.
An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.
Please note however to be eligible for the scheme, self-employed individuals, including members of partnerships, must meet the following criteria:
- Currently be eligible for the SEISS (although they do not have to have claimed the previous grants) • Declare that they are currently actively trading and intend to continue to trade
- Declare that they are impacted by reduced demand due to COVID-19 in the qualifying period.
The qualifying period for the first grant is between 1 November and the date of claim
VAT cut for hospitality sector continues
The reduction in VAT to 5% for the hospitality and tourism sector will be extended until 31 March 2021.
Deferral of VAT bills
Up to half a million businesses who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments.
You will need to opt-in to the scheme, and for those who do, this means that your VAT liabilities due between 20 March and 30 June 2020 do not need to be paid in full until the end of March 2022. We understand you will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
Those that can pay their deferred VAT can do so by 31 March 2021.
If you are still unable to pay the VAT due and need more time, you can contact HMRC by phoning: 0300 200 3835.
More information on the scheme will be available in the coming months and we will keep you up to date when changes occur.
The latest VAT guidance issued on 25th September can be accessed here.
Self- assessment taxpayers- time to pay extension
Approximately 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
Bounce back loans- flexibility given to pay back amounts borrowed
More than a million businesses who took out a Bounce Back Loan will get more repayment time through a new Pay as You Grow flexible repayment system.
This includes extending the length of the loan from six years to ten, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses.
The Government also intends to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.
The chancellor also announced an extension in applications for the government’s coronavirus loan schemes until the end of November.
Further guidance will be issued in due course. The full plan as outlined by the Chancellor can be accessed here.
Throughout these unprecedented times we have been here to support our clients with the latest news and updates, preparing furlough claims, preparing forecasts and budgets for clients and assisting with applications for CBILS and bounce back loans. If you need any help please contact us.
The content in this blog is correct as at 27/09/2020. See terms and conditions.