The "Winter Economy Plan"
On 24 September, the Chancellor of the Exchequer, Rishi Sunak, unveiled a number of measures to help support businesses and the economy throughout the uncertain winter months ahead.
However, as expected, these are less generous than any previous support provided. The key details have been outlined below and you can also click here to see the full guidance.
End of the Furlough Scheme...
new Job Support Scheme to be introduced
While the Furlough Scheme will come to a close on 31 October 2020, a new Job Support Scheme will launch from 1 November 2020 to continue to help businesses through these challenging times.
The Job Support Scheme will last for six months and is aimed at small and medium sized businesses - large business will be required to prove that they have been significantly impacted by COVID-19 before they are able to claim.
Employers will be able to use the new Job Support Scheme even if they did not claim under the Furlough scheme.
To qualify, employees must work a minimum of 33% of their normal working hours.
For the remaining hours not worked (maximum 67%), the Government and the employer will pay one third each (effectively a maximum of 22% each).
This means that employees who can only go back to work on reduced hours (must be a minimum of 33%) will still be paid for two thirds of the hours they can't work - plus the full pay they would receive for the hours they do work.
- 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 (i.e. the “worked” 33% plus 22%).
- An employee working 50% of their hours will receive at least 83% of their pay, 16.5% paid by the Government and 66.5% paid by their employer (i.e. the “worked” 50% plus 16.5%).
The maximum amount the Government will contribute will be capped at £697.92 per month.
There are, however, some restrictions that will apply throughout the scheme's duration to any businesses who choose to use it:
- You will not be able to make any employees redundant who are on the Job Support Scheme
- Any capital distributions to shareholders will be limited
Extension to the Self Employment Income Support Scheme (SEISS)
The existing self-employment grant (SEISS) will 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 the coronavirus. The initial lump sum will cover three months' worth of profits for the period from November 2020 to the end of January 2021. 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 next year.
Delay to the VAT increase
for the Hospitality and Tourism sectors
The earlier VAT cut from 20% to 5% for the hospitality and tourism sectors has been extended until 31 March 2021. This was previously due to return to 20% in January next year.
Time to Pay: Income Tax and VAT
An additional 12-month extension will be introduced from HMRC on their "Time to Pay" self service facility, meaning that payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
If your tax liability is less than £30,000, we understand that HMRC will be providing an online facility where you can request this deferral.
For liabilities in excess of £30,000, you will need to contact HMRC by phone to discuss a suitable arrangement.
We will of course be keeping an eye on developments in this area and will be able to provide assistance where needed. We do not expect to hear anything further much before January 2021 and will update you once we know more.
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. 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.
Bounce Back Loans: flexible repayments
For those 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, including CBILs, Bounce-Back Loans and applications to Future Funds schemes until the end of November (previously 30 September).
We are here to help...
We are here to help in any way we can - please get in touch on 0121 693 5000 (Solihull Office) or 01527 833124 (Bromsgrove Office).