The Chancellor has outlined his Winter Economy Plan to support jobs and businesses over the coming months.
The main headlines from the announcement include:
• A new Job Support Scheme
• An extension of the Self Employment Income Support Scheme
• 15% VAT cut for the hospitality and tourism sectors
• VAT Deferral Scheme payment flexibility
• Flexibility for businesses to help repay government backed loans
• Extension for applications to government coronavirus loan schemes to the end of November
Job Support Scheme
A new Job Support Scheme will be introduced from 1st 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 and help keep employees attached to the workforce, 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 government and the employer will each pay one third of their equivalent salary.
This means 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.
In order to support only viable jobs, employees must be working at least 33% of their usual hours. The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
The Job Support Scheme will be open to businesses across the UK even if they have not previously used the furlough scheme, with further guidance being published in due course.
It is designed to sit alongside the Jobs Retention Bonus and could be worth over 60% of average wages of workers who have been furloughed – and are kept on until the start of February 2021. Businesses can benefit from both schemes in order to help protect jobs.
Continuation of Support for Self Employed
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.
Tax Cuts
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 next year. This is designed to give businesses in the sector the confidence to maintain staff as they adapt to a new trading environment.
VAT Deferral Scheme and Time to Pay
Businesses who deferred their VAT bills will be given longer to pay 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.
On top of this, 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.
Flexibility to Pay Back Loans
Increased flexibility has been announced for those businesses who took out a Bounce Back Loan through a new Pay as You Grow flexible repayment system. This will provide flexibility for firms repaying a Bounce Back Loan.
This includes:
• Extending the length of the loan from six years to ten
• This will cut monthly repayments by nearly half
• Interest-only periods of up to six months and payment holidays will also be available to businesses
It is also intended 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.
Extension for Coronavirus Loan Scheme Applications
In addition, the Chancellor also announced he would be extending applications for the government’s coronavirus loan schemes that are helping over a million businesses until the end of November, including:
• Coronavirus Business Interruption Loan Scheme (CBILS)
• Coronavirus Large Business Interruption Loan Scheme (CLBILS)
• Bounce Back Loan Scheme; and
• The Future Fund.
This change aligns all the end dates of these schemes to 30th November 2020.
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