Following the recent tightening of the COVID-19 restrictions, the Chancellor delivered his ‘Winter Economy Plan’ which consisted of further measures designed to help businesses survive whilst the current COVID-19 restrictions remain in place. The measures are intended to support businesses, prevent skills from fading, maintain strong employment relationships and support the self-employed.Here is a summary of the main measures:
Job Support Scheme
To support UK employers who face lower demand due to COVID-19, and to keep their employees within the workforce, the government will be introducing a new Job Support Scheme from 1 November 2020 – essentially replacing the furlough scheme currently in place which ends on 30 October 2020.
To qualify, employees will need to work a minimum of 33% of their usual hours. Where the employee is working less than their normal hours, for every hour not worked the employer and the government will each pay one third of the employee’s usual pay with the government contribution being capped at £697.92 per month. The maximum government support under these arrangements is 22% of an employee’s normal pay, not including national insurance or pension costs.
Employees must be on an employer’s PAYE payroll on or before 23 September 2020. This means that a Real Time Information (RTI) submission notifying payment to HMRC must have been made on or before 23 September 2020.
The employer will be reimbursed in arrears for the government contribution and 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; large businesses will be required to demonstrate that their business has been adversely affected by COVID-19, and the government expects that large employers will not be making capital distributions (such as dividends), while using the scheme.
These measures will provide many employees with a level of continuing financial support where their hours have been reduced.
Self-Employed Income Support Scheme (SEISS)
The government recognises the continued impact that COVID-19 has had on the self-employed and will extend the support already offered. 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, running 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.
The timeframe for making this application has yet to be announced.
VAT reduced rate for hospitality and 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.
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.
Bounce Back Loan Scheme (BBLS)
The government will give all businesses that borrowed under the BBLS the option to repay their loan over a period of up to ten years. This will reduce their average monthly repayments on the loan by almost half. UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times), or to pause their repayments entirely for up to six months (an option they can use once and only after having made six payments).
The government have extended the BBLS application deadline to 30 November 2020.
Coronavirus Business Interruption Loan Scheme (CBILS)
The government intends to allow CBILS lenders to extend the term of a loan up to ten years, providing additional flexibility for UK-based SMEs who may otherwise be unable to repay their loans.
The government have extended the CBILS application deadline to 30 November 2020.
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, building on the Self-Assessment deferral provided 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-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.
More details regarding the operation of these provisions will become available over the next week or so and further updates from us will follow.