Winter is coming

25th September 2020

One day after the announcement that there will be no Autumn Budget this year, Chancellor Rishi Sunak outlined his Winter Economy Plan which is designed to protect jobs and support businesses over the coming months.

After furlough, the new Job Support Scheme

Many have been anxiously waiting for news of what is to follow the end of the Coronavirus Job Retention Scheme (CJRS) at the end of October. Earlier in the year it was clear that the government had no plans to extend the scheme but the recent news of a second wave of coronavirus has meant they had to reconsider.

The Job Support Scheme will replace the CJRS, starting on 1 November 2020. All small and medium-sized businesses are eligible; larger businesses must 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 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 each pay one third of the employee’s wages. This means that employees who can only go back to work on shorter hours will still be paid two thirds of their salary for those hours they can’t work.

Broadly, this means that 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%). However, the level of government contribution, which will be calculated based on an employee’s usual salary, will be capped at £697.92 per month.

Self-Employment Income Support Scheme (SEISS)

The SEISS will also be extended on similar terms to 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 2020 to the end of January 2021. This will be 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 2021.

VAT cut for hospitality sector continues

The reduction in VAT to 5% for the hospitality and tourism sector will be extended until 31 March 2021.

Deferral of VAT payments

Businesses who have deferred their VAT bills will be given more time to pay through the New Payment Scheme, which gives them the option to pay the deferred amount 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.

“Time to Pay” extension for self-assessment

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.

Extension of Bounce Back Loans

The repayment terms of Bounce Back loans will be extended from six years to ten years, which will cut monthly repayments by almost half.

Businesses who are struggling can also choose to make interest only payments for six months with some businesses able to ask to suspend repayments altogether for six months.

The Chancellor also announced an extension to applications for the government’s coronavirus loan schemes until the end of November.

Watch this space

As ever with the Chancellor’s announcements, it is not until the detailed guidance is released and debated that we fully understand exactly how things will work in practice. But these new initiatives must be welcome news to many businesses.

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