Winter Economy Plan – Summary of Changes.
- A new Job Support Scheme, primarily targeted at small and medium employees, will be introduced covering employees who work at least one third of their normal hours.
- The Chancellor confirmed that the original furlough scheme will end on 31st October
- The Self-Employment Income Support Scheme (SEISS) will be extended to April 2021 but on a revised basis.
- The closure date for the four existing business loan schemes will be extended to the end of November.
- Repayment terms for the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loans (BBLS) will be relaxed, with the maximum term extended to 10 years.
- The reduction in VAT to 5% for the hospitality and tourism industries will be extended to 31st March 2021.
- The deferred VAT and self-assessment payments due early next year can be repayable in instalments rather than as a lump sum.
The coronavirus pandemic has had a devastating effect on the economy in the UK. Six months ago, when Rishi Sunak announced the first “temporary, timely and targeted” package of measures to help individuals and businesses, we could not have estimated the true cost of the virus and subsequent lockdown.
The total value of claims made under the Coronavirus Job Retention Scheme (CJRS) was £39.3 billion, SEISS has totalled £13.4 billion up to now, and over £58 billion has been approved under the government’s four loan schemes.
These figures tell only part of the story. There is also the cost of one years’s business rates relief, grant funding, and enhancements to social security benefits. The latest projection from the Office for Budget Responsibility is for government borrowing to reach £372.2 billion in 2020/21, a long way away from the original £54.8 billion estimate it made at the time of the Spring Budget.
The latest statement from the Chancellor, as documented below, will see the borrowing increase further.
Job Support Scheme
The Chancellor made clear that the CJRS will end on 31 October, as planned. Its replacement will be the Job Support Scheme (JSS), which will run for six months from 1 November. Under the terms of the scheme:
- Employees will need to work a minimum of 33% of their normal hours
- For every hour that is not worked, the employer and the government will each pay one third of the employee’s usual pay, with the government contributions capped at £697.92 a month. Employees working at least one third of their normal hours will receive at least 77% of full pay (subject to government cap).
- The employer will be reimbursed in arrears for the government contribution.
- The employee must not be on a redundancy notice.
- The scheme will be open to all employers with a UK bank and UK PAYE scheme.
- Claims for the JSS will not affect eligibility for payment of the one off £1,000 Job Retention Bonus
Self Employment Income Support Scheme
The SEISS will be extended in a new form for six months from 1 November. The scheme’s new terms are:
- The new SEISS grant will only be available to self-employed individuals currently eligible for the existing scheme who are actively continuing to trade but are facing reduced demand due to COVID-19.
- The extension will be in the form of two taxable grants:
- The next grant will cover a three month period from the start of November until the end of January. This will cover 20% of average monthly trading profits, paid out in a single instalment covering three months worth of profits and capped at £1,875 in total.
- The following grant will cover the following three month period starting in February. The government will review the level of the second grant in due course.
Bounce Back Loan Scheme
The BBLS provides loans of between £2,000 and £50,000, capped at 25% of turnover, with a 100% guarantee. Under the original BBLS, the borrower did not have to make any replayments for the first 12 months, with the government covering the first 12 months’ interest payments. The maximum loan repayment term was six years.
Under the new ‘Pay as you Grow’ options for BBLS:
- New and existing borrowers will have the option to repay their loan over a period of up to 10 years.
UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months. This option can be used up to three times.
Alternatively, businesses can pause their repayments entirely for up to six month, although this option is only available after six payment have been made and can be used just once.
Coronavirus Business Interruption Loan Scheme
CBILS lenders will be allowed to extend the term of a loan up to ten years while retaining the benefit of the 80% government guarantee.
The operation of the Future Fund, which provides matching convertible loans to innovative businesses will continue in its current form until the end of November.
Temporary VAT cut for hospitality and tourism
The reduced (5%) rate of VAT will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafes and similar premises, and to suppliers of accommodation and admission to attractions across the UK until 31st March 2021 rather than ending on 12 January 2021.
A ‘New Payment Scheme’ for VAT deferral will offer businesses that deferred VAT due in March to June 2020 the option to spread their payments over the financial year 2021/22 in 11 equal installments. All businesses that took advantage of the VAT deferral are eligible and can use the scheme. However, they will need to opt-in using a process HMRC will launch in “early 2021”.
Self-Assessment Tax Deferral – Enhanced Time to Pay
The self-employed and other tax payers will be given more time to pay taxes due in January 2021, building on the self-assessment deferral provided for payments on account in July 2020.
Taxpayers with up to £30,000 of self-assessment liabilities due will be able to use HMRC’s self service Time to Pay facility. to secure a plan to pay over an additional 12 months. This means that self-assessments liabilities originally due in July 2020 will not be 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 a payment plan.
If you require any additional support with any of the above and in helping your business survive the situation that we find ourselves in, please don’t hesitate to get in touch.
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