What were the key announcements from the Winter Economy Plan?
25th September 2020
Rishi Sunak graced TV, computer, and phone screens across the nation at midday yesterday to announce ongoing support measures after calls to extend the furlough scheme. According to the Chancellor, the primary goal is still to support jobs but the way to achieve this must change from the measures we have seen and relied on up until now.
The announcement sees a shift from immediate, short term protection for the majority to longer-term support and security for ‘viable jobs’. On a sobering thought, Sunak reiterated that he cannot save all businesses and all jobs, but the hope is that the new measures will create new opportunities where there is demand and protect jobs in industries that are hit by decreased demand but are still able to trade.
Job Support Scheme
The Chancellor announced the new Job Support Scheme, to support wages of people who are in work, but where businesses face reduced demand.
The key points of the scheme are:
- Employees must work at least a third of normal hours and be paid for these hours by their employer.
- The unworked hours will then be split into three, where the government will pay a third (capped at £697.92 per month), the employer will pay a third and the final third will be lost to reduced pay.
- Employees must not be on a redundancy notice.
- All SMEs are eligible to use the scheme but larger businesses will only be eligible where turnover has dropped due to the pandemic.
- The scheme will be available across the whole of the UK and employers do not have to have used the furlough scheme to be able to use the Job Support Scheme.
Government-Backed Loan Schemes
All of the government-backed loans - Bounce Back, Coronavirus Business Interruption, Coronavirus Large Business Interruption and Future Fund - will be extended until the end of 2020 (application deadline is now 30 November 2020) and a new successor loan programme is expected to come into force from January 2021.
Named ‘Pay as you Grow’, businesses who took out Bounce Back Loans can extend their repayments over ten years instead of six and those really struggling to make repayments can pause repayments or move to interest-only payments without affecting their credit score. Coronavirus Business Interruption Loans lenders have the option to extend the term of CBILS loans to ten years too.
Ongoing support for the Self Employed
In line with the continued support for employees, the Self-Employment Income Support Scheme will also be extended for six months until April 2021 for those that are currently eligible. The support will be in the form of two more taxable grants, one covering November to January and one February to April. The first grant will cover up to 20% of the average monthly profits (capped at £1,875 for the three months) and the level of support of the second grant will be set in due course.
Deadline extension and installment options for deferred VAT and Income Tax
Millions have taken advantage of deferred VAT and Income Tax payments but there was a worry that this deferral would have dire consequences in 2021 when these needed to be paid back whilst cashflow still a real challenge.
Now, rather than paying the VAT in full at the end of March 2021, businesses will be able to choose to make 11 equal installments over the 2021-22 financial year. All businesses which took advantage of the VAT deferral can use this new payment scheme but will need to opt-in. HMRC is expected to put in place an opt-in process in early 2021.
Taxpayers with Self Assessment liabilities of up to £30,000 due in July 2020 will not need to pay these in full until January 2022, again with an option to pay in installments. Any Self-Assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree to a payment plan.
VAT rate in hospitality and tourism
VAT will remain at the lower rate of 5% for the hospitality and leisure sectors until 31 March 2021.
If you have any questions about the new or existing government support measures, please don't hesitate to get in touch with our team on 01926 422292.