Last week’s Winter Economy Plan included several new measures created to help employers, employees and the self-employed who have been impacted by Coronavirus. The Chancellor’s aim is to protect as many viable jobs as possible. Rishi Sunak hinted that whilst the measures below are introduced on a temporary basis, the UK’s economy is likely to undergo “a more permanent adjustment”. The Institute of Chartered Accountants in England and Wales welcomed the measures, offering the following update:
Job Support Scheme
Starting from November, the government’s new Job Support Scheme will cover up to 22% of pay for workers in “viable” jobs for the next six months. The scheme will replace the current Coronavirus Job Retention Scheme due to end on the 31 October. Sunak told MPs the scheme will give businesses that face depressed winter demand the option of keeping employees in a job on shorter hours rather than making them redundant.
The Chancellor stated that workers would need to work at least a third of their normal hours to qualify. Employers will pay staff for the hours they work but for the hours they don’t work, the government and the employer will each cover one-third of the lost pay. The government’s contribution will be capped at £697.92 per month.
Anyone employed as of yesterday (23 September 2020) is eligible, and all small and medium-sized businesses can apply, although larger businesses can only use the scheme if their turnover has fallen during the pandemic. Employers do not have to have used the furlough scheme previously. Large employers are not expected to have been making capital distributions, such as dividend payments or share buybacks while claiming the grant.
Sunak also clarified that employers retaining furloughed staff on shorter hours can claim both the Job Support Scheme and the Job Retention Bonus, which will be available in February next year.
Read/download the Job Support Scheme factsheet.
The Self-Employment Income Support Scheme will also be extended from November 2020 to April 2021.
The extension will be in the form of two taxable grants. The first grant covers businesses affected after 1 November 2020, covering 20% of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits and capped at £1,875. More details on the second grant will follow.
VAT and SA Deferral
To support struggling businesses with cashflow, the Chancellor announced that he will give businesses that deferred VAT due in March to June 2020 the option to spread their payments in 11 equal, interest-free instalments over the financial year 2021/22, rather than pay in full at the end of March 2021.
All businesses that took advantage of the VAT deferral can use the new payment scheme. Businesses will need to opt-in, but all are eligible.
The government will also give the self-employed and other self assessment 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.
The Chancellor also announced that the extension of the temporary VAT reduced rate of 5% for hospitality and tourism will now run until 31 March 2021.
Sunak announced that the deadline for new applications to the government’s state-backed loan schemes will be extended until 30 November 2020, and the government is starting work on a new guarantee loan programme to begin in January.
He also premiered a “pay as you grow” initiative to help companies repay state-backed business loans. The government will give all businesses that borrowed under the Bounce Back Loan Scheme the option to repay their loan over a period of up to ten years, reducing their average monthly repayments on the loan by almost half.
UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times), or to pause their repayments entirely for up to six months (an option they can use once and only after having made six payments).
The government will also allow Coronavirus Business Interruption Loan Scheme lenders to extend the term of a loan up to ten years.
If you any queries about the information above – about eligibility, how to claim or maybe your bigger business picture – please contact us. The Re:Accounts team is here to help you.