With the pre-empted ‘second wave’ seemingly upon us, Rishi Sunak today announced the governments ‘Winter Economy Plan’ to help businesses cope with the new restrictions, as the recovery is put on hold for the winter it would seem. Who knows what further restrictions we will face, so this proactive approach should hopefully help businesses through this tough period.
The key take homes from this plan were the following:
- The new Job Support Scheme to replace the existing ‘furlough’ scheme
- Extension to the Self Employed Income Support Scheme
- Extension in the 5% VAT for the hospitality and tourism sectors
- Extension to the application period for Bounce Back Loans and CBILs loans, as well as changes to the repayment terms
- New payment schemes for deferred VAT and Self-Assessment income tax
Job Support Scheme
To support UK employers who face lower demand due to COVID-19, and to keep employees in work, the government will be introducing a new Job Support Scheme from 1 November 2020. Employees will need to work a minimum of 33% of their usual hours. For every hour not worked the employer and the government will each pay one third of the employee’s usual pay, and the government contribution will be capped at £697.92 per month.
Employees using the scheme will receive at least 77% of their pay, where the government contribution has not been capped. The employer will be reimbursed in arrears for the government contribution. The employee must not be on a redundancy notice. The scheme will run for six months from 1 November 2020 and is open to all employers with a UK bank account and a UK PAYE scheme. All Small and Medium-Sized Enterprises (SMEs) will be eligible.
Self Employed Grant Extension
The SEISS Grant Extension provides critical support to the self-employed. The grant 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 scheme will last for 6 months, from November 2020 to April 2021.
The extension will be in the form of two taxable grants. The first grant will cover a three-month period from the start of November until the end of January. This initial grant will cover 20% of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £1,875 in total. The second grant will cover a three-month period from the start of February until the end of April. The government will review the level of the second grant and set this in due course.
5% VAT Extension for Hospitality & Tourism
The government is extending the temporary reduced rate of VAT (5%) from 12 January to 31 March 2021.
This will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, supplies of accommodation and admission to attractions across the UK.
Changes to Loan Schemes
The Bounce Back Loan Scheme, CBILS, CLBILS and the Future Fund have all been extended so new applications can be accepted up until 30 November 2020.
Both the BBLS and the CBILS have had their repayment terms adjusted under the ‘Pay as you Grow’ incentive. This will give businesses the option of repaying either of these loans over a period of up to 10 years, extended from the previous 6. This will reduce the average monthly repayments on the loan by almost half.
On the BBLS there is also the option to move to interest only payment period of 6 months at a time, with each business able to action this up to 3 times over the course of the loan, or even pause repayments entirely for up to 6 months, however this is only an option having made 6 full repayments and can only be used once.
New Tax Payment Schemes
VAT deferral ‘New Payment Scheme’ – The government will give businesses which deferred VAT due in March to June 2020 the option to spread their payments over the financial year 2021-2022. Rather than paying in full at the end of March 2021, businesses will be able to choose to make 11 equal instalments over 2021-22. All businesses which took advantage of the VAT deferral can use the New Payment Scheme. Businesses will need to opt in, but all are eligible. HMRC will put in place an opt-in process in early 2021.
Enhanced Time to Pay for Self-Assessment taxpayers – The government will give the self-employed and other taxpayers more time to pay taxes due in January 2021. 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-Assessment liabilities due in July 2020 will not need to be paid in full until January 2022. 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 a payment plan.
We have learned from the previous schemes that often after a week or so, more detail on the newly released schemes becomes available, and we will be keeping a close eye on this to ensure we are up to speed on everything and able to pass that information on to our clients to enable you to make the most of this support.