Winter Economy Plan
Following the new COVID-19 restrictions Boris Johnson put in place earlier this week, yesterday, (Thursday 24th September), Rishi Sunak, the UK Chancellor of the Exchequer, cancelled this year’s Budget and announced a number of new financial measures designed to mitigate the impact of the COVID-19 pandemic over the winter period.
The Winter Economy Plan included the following.
- NEW Job Support Scheme
- UPDATED Self Employed Income Support Scheme
- UPDATED VAT Cut For The Hospitality Sector
- UPDATED Deferral Of VAT
- UPDATED Self-Assessment Tax Liability
- UPDATED Bounce Back And Business Interruption Loans
Only summary details are currently available and are included below. We’ll provide further details as they become available. A summary of the announcement can be found here.
Useful links to UK Government guidance and our previous updates can be found at the end of this article.
Job Support Scheme
Chancellor Rishi Sunak announced a new Job Support Scheme starting 1 November 2020 to replace the current Job Retention (‘furlough’) Scheme which ends 31 October 2020.
All small and medium-sized businesses are eligible for the scheme, with larger businesses having to 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 wages of staff for the hours they work.
- 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 part-time will still be paid two thirds of the 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% in addition to that paid by the Government).
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. A further grant, which may be adjusted to respond to changing circumstances, will then be available for self-employed individuals to cover the period from February 2021 to the end of April 2021.
VAT Cut For The Hospitality Sector
The reduction in VAT to 5% for the hospitality and tourism sector will be extended until 31 March 2021.
Deferral Of VAT
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 the deferred VAT in smaller instalments. Rather than paying a lump sum in full at the end March 2021, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
Self-Assessment Tax Liability
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 And Business Interruption Loans
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.
A UK Government general COVID-19 support website can be found here. It contains guidance on all matters pertaining to the Coronavirus.