On Thursday 24th September 2020 the Chancellor outlined the Government’s Winter Economy Plan, which outlines the latest updates to the Treasury’s response to the Coronavirus pandemic.
In the Winter Economy Plan, the chancellor announced updates to existing support measures and the introduction of a new ‘Job Support Scheme’, which will start on the 1st November after the Job Retention Scheme comes to a close.
To read our blog on the Winter Economy Plan click here
NEW SCHEME: Job Support Scheme
The government has introduced a new scheme to protect viable jobs in businesses who are facing lower demand over the winter months due to COVID-19 impacts.
This scheme will run for 6 months, starting from the 1st November 2020 through to the end of April 2021.
The Job Support Scheme will see Government pay grants to contribute to the wage costs of employees who are working at least a third of their normal hours. The UK Government will pay a third of hours not worked up to a cap, with the employer also contributing a third, ensuring employees earn a minimum of 77% of their normal wages (assuming the Government contribution has not been capped).
To be eligible for the scheme, businesses and their employees must meet the following criteria:
- Employees for whom grants are being claimed must be on an employer’s PAYE payroll on or before 23 September 2020.
- The employee must work at least 33% of their usual hours for the first 3 months of the scheme. After this period, the Government will consider whether to increase this minimum threshold.
- Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.
- All SMEs will be eligible for the scheme. Larger businesses will also be able to access this support if they meet a financial assessment test.
- Employees do not have to have been furloughed under the previous Job Retention Scheme to be supported by the Job Support Scheme. For employees who meet the criteria of the Job Retention Bonus, the employer can still claim the job retention bonus if they use the Job Support Scheme
How the scheme will operate:
- Employees will need to work at least a third of their normal hours, for which they must receive their normal contracted wage
- For every hour not worked by the employee, both the Government and employer will pay a third each of the usual hourly wage for that employee. The Government contribution will be capped at £697.92 a month.
- The grant will not cover Class 1 employer NICs or pension contributions. Employers must still cover the costs of these contribution.
- Employers must agree these new arrangements with their staff, make any changes to the employment contract by agreement, and notify the employee in writing.
- Grants will be paid monthly from December 2020. Employers will be able to make a claim online from December 2020.
More detail can be found on the Job Support Scheme here.
Self Employed Support
The Government will look to support the self-employed through negative financial impacts due to COVID-19 through the Self-Employed Income Support Scheme Grant Extension.
The SEISS Grant Extension will be limited to self-employed individuals who are currently eligible for the SEISS and are actively continuing to trade, but are facing reduced demand due to COVID-19.
The SEISS Grant Extension will provide two grants and will last for 6 months, from 1st November to April 2020. The two lump sum instalments will each cover a 3-month period, with the first grant covering 3 months from November to January, and the second from the start of February to the end of April.
The first grant will be taxable (so subject to Income Tax and NICs) and will cover 20% of average monthly trading profits, up to a cap of £1875. The Government has said this will provide broadly the same support as seen through the Job Support Scheme, and the Government will set the support for the second grant in due course.
Additional support the self-employed will also be offered through measures to allow any self-assessed income taxpayers to extend their outstanding tax bill over 12 months from January 2020.
VAT Cut for hospitality & tourism
The temporary application of reduced rate of VAT for goods and services provided in the Hospitality and Tourism sectors has been extended. This temporary application of the reduced rate, which is set at 5%, was scheduled to expire in January 2021, but has now been extended to March 31st 2021.
Extension of access to finance schemes
The deadline for new applications to four existing temporary finance schemes has been extended to the 30th November 2020. The schemes to which the new deadline will apply are as follows – Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Future Fund.
The Treasury has also announced changes to the Bounce Back
Bounce Back Loans
To ease the repayment burden for businesses accessing Bounce Back loans, the Treasury has announced changes to loan terms in measures they are calling “pay as you grow” ease the repayment burdens for the loans through measures called “pay as you grow”.
“Pay as you grow” will ensure that all businesses who have borrowed under the BBLS scheme will have the option to repay their loan over a period of up to 10 years, an extension to the previous maximum of 6 years. For businesses who choose to extend repayments over 10 years – their monthly repayment will almost half.
For businesses struggling to make repayments, “interest only” payments will be made available for periods of up to six months, which can be used up to a maximum of three times.
For businesses who are struggling to make any form of repayments, they can apply to have the repayments suspended altogether for up to 6 months, if they have previously made at least six payments. This option can only be used by a business once.
No business taking up “pay as you grow” will see their credit rating affected.
The chancellor announced that the government will allow CBILS lenders to extend the term of a loan to up to 10 years, ensuring that the Government Guarantee will remain effective for this time. A new successor loan scheme is expected to be made available in January 2021.
VAT deferral “New Payment Scheme”
Under existing support measures announced at the outset of the COVID-19 pandemic in the UK, businesses were able to defer VAT payments due for March to June 2020 until March 2021. HM Treasury has updated that businesses who have deferred VAT payments will now be able to spread the deferred bill over 11 equal smaller repayments, with zero interest charged.
Businesses will need to opt-in, with HMRC putting in place the process to do so in early 2021. All businesses who deferred VAT payment will be eligible.