Updated to take account of announcements made 22 October 2020.
Following the announcement that there will not be an autumn Budget, the Chancellor, Rishi Sunak has outlined his Winter Economy Plan.
The package includes a new Jobs Support Scheme, extension of the Self Employment Income Support Scheme, a 15% VAT cut for the hospitality and tourism sectors and help for businesses in repaying government-backed loans.
Support for workers
Employees
A new Job Support Scheme will be introduced from 1 November to protect viable jobs in businesses who are facing lower demand over the winter months due to coronavirus.
Under the scheme, which will run for six months, the government will contribute towards the wages of employees who are working fewer than normal hours due to decreased demand.
Employers will continue to pay the wages of staff for the hours they work – but for the hours not worked, the employer will pay up to 5% and the government will provide up to 61.67%.
This means employees who can only go back to work on reduced hours will still be paid two thirds of their salary in respect of those hours they can’t work.
In order to support only viable jobs, employees must be working at least 20% of their usual hours. The level of grant will be calculated based on employee’s usual salary, capped at £1541.75 per month.
The employee must not be on a redundancy notice. The scheme is open to all employers with a UK bank account and a UK PAYE scheme. All Small and Medium-Sized Enterprises (SMEs) will be eligible; large businesses will be required to demonstrate that their business has been adversely affected by COVID-19, and the government expects that large employers will not be making capital distributions (such as dividends), while using the scheme.
The Job Support Scheme will be available to businesses even if they have not previously used the furlough scheme.
The Job Support Scheme is designed to sit alongside the Jobs Retention Bonus announced in July. Businesses can benefit from both schemes.
Self Employed
The Self Employment Income Support Scheme (SEISS) is to be extended. 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 2021. This is worth 40% of average monthly profits, up to a total of £3,750.
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 2021.
Tax cuts and deferrals
VAT
As part of the package, the government also announced it will extend the temporary 15% VAT cut for the tourism and hospitality sectors to the end of March 2021.
In addition, under the New Payment Scheme, up to half a million business who deferred their VAT bills will be given the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
Self Assessment
The government will give the self-employed and other taxpayers more time to pay taxes due in January 2021, building on the Self-Assessment deferral provided in July 2020. Taxpayers with up to £30,000 of Self-Assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. Any Self-Assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.
Flexibility to pay back loans
A new Pay as You Grow flexible repayment system is to be introduced, designed to provide flexibility for firms repaying a Bounce Back Loan.
This includes extending the length of the loan from six years to ten, interest-only periods of up to six months and payment holidays.
The Government also intend 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.
In addition, the Chancellor also announced he would be extending applications for the government’s coronavirus loan schemes until the end of November 2020. As a result, more businesses will now be able to benefit from the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund.
If you would like assistance on the matters discussed above, please contact your usual Ensors contact or send us an online enquiry so that we can direct you to the appropriate person.
