With the cancellation of the Autumn Budget all eyes were on the Chancellor to see what measures he would announce to help businesses through the winter. In his speech on Thursday 24 September, Rishi Sunak outlined a Winter Economy Plan, announcing five broad areas to help businesses through the winter: a new job support scheme, further deferrals of tax payments, a continuation of the 5% VAT for the hospitality sector, more SEISS grants and improved loan terms.
Whether these will provide the support that many business badly need remains to be seen, as does how the costs of these measures will be paid for.
Chancellor’s Winter Economy Plan
Job support scheme
The current furlough scheme ends on 31 October, and the job support scheme comes into effect on 1 November. The aim is to keep employees working in real jobs.
The job support scheme can apply to any employee who was on the payroll on 23 September 2020 and is not restricted to those previously furloughed.
To qualify the employee must work for at least one-third of their usual hours and the employer must pay for all those hours.
Of the employee’s “resting” hours the Government and employer must each pay one-third of the employee’s usual wage rate. This works out that the employer pays 55% of the employee’s wages for one-third of their normal working time.
The government’s contribution is capped at 22% of usual wages and £697.22 per month.
The employer will bear the cost of the employer’s NI and pension contributions on all of the employee’s pay.
There will be no restrictions for small and medium-sized businesses who want to use the job support scheme. However, large employers (as yet undefined), will have to show that their business has been adversely affected, before they can use the job support scheme. Larger employers will also be banned from paying dividends to shareholders, or using share buy-back schemes, while they are using the job support scheme.
Employers who use the job support scheme will also be able to claim the £1,000 coronavirus job retention bonus scheme for employees who qualify.
HMRC had already announced the deferral of the payment on account (POA) of income tax due on 31 July 2020
Now the Chancellor is giving individual taxpayers even longer to pay all of the taxes due by 31 January 2021, which is made up of these amounts:
- Second POA 2019/20
- Balancing payment 2019/20
- Capital gains tax 2019/20 (if not paid under 30-day rule)
- First POA 2020/21
Unlike the deferral in place on 31 July 2020, the taxpayer will have to apply for time to pay, to spread the tax due over 12 monthly instalments to January 2022. Where the total tax due does not exceed £30,000, the application for time to pay will be agreed automatically when the taxpayer applies, using an online form.
If the tax due exceeds £30,000 or the taxpayer needs longer to pay, the telephone service will still be available to agree a bespoke payment plan.
Again, as previously announced VAT payments due in period from 20 March to 30 June 2020 were also automatically deferred until 31 March 2021.
Businesses who took advantage of that deferral will now be able to spread that deferred VAT payment over 11 equal instalments payable between April 2021 and March 2022. The business will have to apply online for this further deferral.
In addition, the reduced rate of VAT for the hospitality and tourism sector, which was due to revert to 20% on 13 January 2021, will now apply until 31 March 2021.
Further SEISS grants
The second SEISS grant, which closes for applications on 19 October, was supposed to be the final grant for the self-employed.
But the Chancellor made it clear that a third SEISS grant will be available to cover 20% of average monthly profits for three months, for those who were eligible for the first and second SEISS grants. This will be capped at £1,875 per taxpayer.
In addition, a fourth SEISS grant will be made available, to cover February to April 2021.
More details are not known at this time.
Bounce Back Loan Scheme upgraded to Pay as You Grow
All the existing coronavirus loan schemes have been extended. Applications for the small and large versions of the Coronavirus Business Interruption Loan Scheme (CBILS), the Bounce Back Loan Scheme (BBLS) and the Future Fund will be open until 30 November, with 31 December set as the new deadline for approvals.
Both CBILS and BBLS loans will be extended to 10-year repayment terms. The £50,000 BBLS package is being rebranded as “Pay as You Grow” and will offer borrowers more flexible repayment schedules, starting with interest-only repayments for up to six months. Struggling businesses will also be able to request six-month repayment holidays.