The Chancellor’s Winter Economy Plan
Here are the headlines from the Chancellors statement in Parliament today where a series of measures to help jobs and businesses were announced.
New Job Support Scheme announced
Today Chancellor Rishi Sunak announced a new job scheme starting on 1 November 2020 to replace the current Job Retention Scheme (“furlough”) which ends on 31 October 2020.
All small and medium-sized businesses are eligible for the new scheme; 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 up to 30 April 2021.
To be eligible employees will need to be working a minimum of 33% of their normal hours. For the remaining normal hours not worked the Government and employer will pay one third of those wages each. This means that employers will continue to pay the wages of staff for the hours they actually work – but for the hours not worked, the government and the employer will each pay one third of their equivalent salary. 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%).
The level of government grant will be calculated based on the employee’s usual salary; for each employee, the grant will be capped at £697.92 per month.
Self Employed Income Support Scheme
The existing self-employed grant (SEISS) will also be extended.
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 1 November 2020 to the 31 January 2021. This is worth 20% of average monthly profits; the grant will be capped at £1,875.
An additional second grant will be available for self-employed individuals to cover the period from 1 February 2021 to the 30 April 2021. The Government has not yet set the level of this grant.
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 bills
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 back in smaller instalments. Rather than paying a lump sum in full at the end of March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
Self Assessment taxpayers – Time to Pay extension
Self-assessment taxpayers with liabilities up to £30,000 will be able to benefit from a separate additional 12-month payment plan from HMRC using a “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 in full until January 2022.
Bounce Back Loans – flexibility given to pay back amounts borrowed
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.
Further guidance on all these measures will be issued in due course. For the present, see https://www.gov.uk/government/news/chancellor-outlines-winter-economy-plan