On Thursday 24 September 2020, Rishi Sunak delivered his Winter Economy Plan, the substitute for this year’s Autumn Budget, to announce further support for businesses struggling due to the current Pandemic.
Jobs Support Scheme
The furlough scheme which ends on 31 October 2020 will be replaced with a new Jobs Support Scheme (JSS) under which the government will partially fund salaries for employees working a minimum of 1/3 of their normal hours.
The employer will pay for the hours actually worked, and the government and the employer will each pay 1/3 of the remaining unworked hours. The government contribution is capped at £697.92 per month. Employees on the scheme will receive at least 77% of their wage.
The scheme will run from 1 November 2020 to 30 April 2021 and will apply to small and medium-sized businesses and some larger businesses whose turnover has seen a significant drop. It is open to employers which have not previously used the furlough scheme. Employees on redundancy notice will not be eligible for this scheme.
The published factsheet on JSS does not mention employer contributions for national insurance and pensions. This indicates that these contributions will continue to be fully paid by the employer as they are currently under the Job Retention Scheme. More details of the scheme will be set out in future guidance. Also, more details will be published on the conditions for large employers to access JSS including restrictions on dividends and share buybacks.
SEISS Grant Scheme
The existing SEISS grant scheme for self-employed people is also being extended, with two further payments planned. The first grant covers November 2020 to January 2021 and will be 20% of average monthly trading profits, capped at £1,875. The rate of the second payment for February to April 2021 is still under review. The scheme is only open to those who are eligible for the current SEISS grant and are actively continuing to trade.
This support broadly equates to the continued support being provided to employees from 1 November 2020 onwards. It also requires continued activity which means that self-employed businesses that still are unable to open due to the pandemic will be unable to obtain this support. The grants are subject to tax and national insurance contributions.
VAT rate reduction
The temporary reduction of the VAT rate from 20% to 5% for the hospitality and tourism sectors has been extended until 31 March 2021.
Businesses who deferred their VAT payments due in March-June 2020 have received an extra lifeline by the announcement of an option to spread the payments over 11 months beginning in March 2021, rather than making a single lump sum payment in March 2021.
The payments by instalments will be interest free.
Extra time to pay for self-assessment
Individuals who complete a self-assessment tax return will receive additional time to pay any tax due in January 2021. This will also include the July 2020 payment on account already deferred to January 2021. Payments may be deferred to 31 January 2022. Taxpayers with liabilities of up to £30k due for payment will be eligible.
It is important to remember that HMRC will not charge interest or penalties on these deferred payments provided they are paid by the due date of 31 January 2022. This will require funds to be set aside to pay these taxes along with the taxes normally due by 31 January 2022. Tax returns will still need to be completed and submitted to HMRC on time.
Extension to the access of finance schemes
‘Pay as you grow’
The government will give all businesses that borrowed under the BBLS the option to repay their loan over a period of up to 10 years. Businesses will also have the option to temporarily move to interest-only payments for a period of up to 6 months or pause their repayments entirely for up to 6 months.
The government has also extended the deadline for the following temporary loan schemes to 30 November 2020 for new applicants:
- Bounce Back Loan (BBLS)
- Coronavirus Business Interruption Loan Scheme (CBILS)
- Coronavirus Large Business Interruption Loan Scheme (CLBILS)
- Future Fund
Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.