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The Chancellor of the Exchequer, Rishi Sunak, has delivered his Winter Economy Plan to support economic recovery in response to the current COVID-19 landscape. These measures include:
– A new Job Support Scheme;
– The extension of Self Employment Income Support Scheme;
– The extension of the 5% reduced VAT rate for the hospitality and tourism sectors to 31st March 2021;
– The extension of the application deadline for the various loan schemes to 30th November 2020;
– The introduction of Pay as You Grow flexible repayments under the Bounce Back Loan Scheme;
– The option to pay VAT deferred from the March to June 2020 by instalments across the 2021-22 tax year; and
– The option to pay 2019-20 personal tax liabilities by instalments between January 2021 and January 2022.
The new Job Support Scheme will be introduced from 1st November and will run for six months and is designed to help protect viable jobs in businesses who are facing lower demand over the winter months due to COVID-19.
The Government will contribute towards the wages of employees who are working a minimum of 33% of their normal hours due to decreased demand. The Government will review the minimum working requirement after three months.
The employer pays the wages for the hours worked by the employee but, for the hours not worked, the Government and the employer will each pay one third of their equivalent salary up to a cap of £697.92 per month.
For example, under the scheme, an employee with a monthly gross salary of £1,800.00 who can work for a third of their time would be paid £600.00 for the time worked. For the time not worked, the employer would pay £400.00 and the Government would pay £400.00. As a result, the employee would receive £1,400.00 gross pay.
However, it does mean that the employer effectively pays 55% of the salary for 33% of the work and, as we understand it, will also have to pay Employers’ National Insurance on the £1,400.00.
The decision to consider only businesses where employees can work as viable, leaves many businesses in the events sector, such as nightclubs that are required to be closed, without any support from the end of October.
The scheme is open to all employers with a UK bank account and a UK PAYE scheme but large businesses will be required to demonstrate that their business has been adversely affected by COVID-19.
Importantly, the Job Support Scheme will be open to businesses even if they have not previously used the furlough scheme and the Government will publish further guidance being in due course.
The Self-Employment Income Support Scheme will be extended through to April 2021 for those currently eligible and who are actively trading but are facing reduced demand due to COVID-19.
There will be two grants. The first will cover the three-month period from November to January and will cover 20% of average monthly trading profits paid out in a single instalment and capped at £1,875 in total. The second will cover the three-month period from February to April. The Government will set the level of this grant in due course.
The reduced 5% VAT rate for the hospitality and tourism sectors will be extended to 31st 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.
The Government is extending the new application deadline to 30th November 2020 for the following loan schemes:
– Bounce Back Loan Scheme
– Coronavirus Business Interruption Loan Scheme
– Coronavirus Large Business Interruption Loan Scheme
– Future Fund
All businesses that borrowed under the Bounce Back Loan Scheme will have the option to repay their loan over a period of up to ten years rather than the current six years under the new Pay as You Grow flexible repayment system. In addition, there will the option to move to interest-only payments for periods of up to six months with this option able to be used up to three times over the course of the loan. Alternatively, payments can be paused entirely for up to six months and, to qualify, a business will need to have made a minimum of six full monthly payments.
The Government also intends to allow Coronavirus Business Interruption Loan Scheme lenders to extend the term of a loan up to ten years.
Businesses that deferred VAT due in the March to June 2020 period will have the option to spread their payments over eleven equal interest-free instalments across the 2021-22 tax year. All businesses which took advantage of the VAT deferral will be able to use this New Payment Scheme by opting in. HMRC will put in place an opt-in process in early 2021.
The self-employed and other taxpayers will Self-Assessment liabilities of up to £30,000 in the 2019-20 tax year will be given more time to pay these taxes that would normally be due in January 2021. HMRC will launch a self-service Time to Pay facility to enable a payment instalment plan to be implemented on the proviso that the tax is paid in full by the end of January 2022.