24th September 2020
In his announcement to Parliament today (24 September), the Chancellor Rishi Sunak set out details of the Winter Economy Plan, outlining how the government will continue to support businesses affected by Covid-19 over the coming months.

As part of the Winter Economy Plan, the Chancellor announced the following:

  • support for businesses to bring people back to work and save jobs with a new Job Support Scheme and an extension to the Self-Employed Income Support Scheme (SEISS);
  • help for the hospitality and tourism sectors through a continuation of the reduction in VAT;
  • support for over 1 million businesses to relieve pressure on their finances and cashflow through an extension to the application period for four government-backed loans schemes, and changes to the terms of repayment for Bounce Back Loans (BBLS) and Coronavirus Business Interruption Loans (CBILS); and
  • new payment schemes to ease the burden of paying deferred VAT and Self-Assessment tax liabilities.

Full details of all measures have yet to be announced but we expect more detailed guidance to be issued shortly, although no date has been given on when to expect this yet.

In the meantime we have summarised those measures already announced below and will continue to update these as we receive more detailed guidance.

Coronavirus Job Support Scheme (JSS) – What we know so far

1. Why has the JSS been introduced?
To support viable UK employers who face lower demand due to COVID-19, and to keep their employees attached to the workforce, the government will be introducing a new Job Support Scheme from 1 November 2020.

2. Is there a minimum period of work for employees to qualify for the scheme?
Employees will need to work a minimum of 33% of their usual hours.

3. What will be the government’s contribution towards the costs?
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.

4. What will employees receive? 
Employees using the scheme will receive at least 77% of their pay, where the government contribution has not been capped.

If an employee works reduced hours the employer pays for that. In addition, the employer and government pay one-third of the lost pay each (up to the cap).

So for someone on £2,000 a month working half their hours, they’d get £1,000 normal pay plus £333 extra from their employer and £333 from the government.

5. How will employers be reimbursed for the salary costs?
Employers will be reimbursed in arrears for the government contribution.

6. Can employees who are on redundancy notice be included?
No. The employee must not be on a redundancy notice.

7. How long will the scheme run for?
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.

8. What about if employers are already in the Job Retention Scheme and want to claim the Job Retention Bonus in January 2021?
Employers can claim both the jobs support scheme and the jobs retention bonus.

9. Which employers qualify for the 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.

Tax cuts and deferrals

In July the Chancellor introduced a temporary reduction of VAT to 5% for most supplies carried out within the tourism and hospitality sector, and intending to operate from 15 July to 12 January 2021. Today’s announcement sees this being extended by a further 11 weeks to 31 March 2021 and will no doubt be welcomed by businesses and consumers.

Also announced was the opportunity to further delay certain VAT payments originally payable during the earlier stage of the pandemic. The earlier VAT Deferral covered routine VAT payments falling due between 20 March and 30 June 2020, and the opportunity of deferring payment of those liabilities until 31 March 2021, and without any application having to be made to HMRC. The new deferral opportunity announced today, which continues to be interest free, will allow businesses to pay the deferred amount by monthly instalments between March/April 2021 and March 2022. Businesses will need to “opt in” if they wish to take advantage of this new facility, known as the “New Payment Scheme”.

In a similar vein to the deferral of VAT payments the Chancellor has also gone further with the payment of tax falling due under Self-Assessment. The payment date for the tax instalment which was due 31 July 2020 had previously been extended to 31 January 2021 for all taxpayers paying tax by Self-Assessment, and today’s announcement offers the opportunity for certain taxpayers of a further deferral of the July 2020 instalment (together with the forthcoming January 2021 liability) and allowing for these to be by monthly instalments from February 2021 to January 2022. Certain taxpayers is reference to those with Self-Assessment tax liabilities not exceeding £30,000.

‘Pay As You Grow’ loan payback scheme

The Chancellor has announced a series of measures under a ‘Pay As You Grow’ initiative to provide flexibility for businesses who have taken out (or will take out) government backed loans amid the Coronavirus crisis.

The deadlines to apply for a Coronavirus Business Interruption Loan, a Coronavirus Large Business Interruption Loan, Bounce Back Loan or Future Fund support have all been extended to the end of November 2020. This is welcome news as it will allow more businesses the opportunity to assess the potential impact Covid-19 will have on trading (particularly in light of recent events) and access the support that may be needed.

In addition to this extended window to apply, the maximum loan term for CBILS and Bounce Back loans has been extended from six years to ten. It is at the moment unclear how much discretion lenders will have over the term that is actually offered to businesses (particularly under CBILS), but if agreed with lenders, monthly repayments on CBILS and Bounce Back loans could be significantly reduced. However, as loans are only interest free for 12 months, clearly a longer term would incur higher levels of interest cost. Furthermore, struggling businesses with Bounce Back loans will be allowed to make interest-only payments or suspend payments entirely for up to six months.

We also look forward to seeing details of a new successor business loan scheme which the Chancellor will soon announce for launch in January.

If you have any immediate questions about any of the information above, please do not hesitate to get in touch:

Lee Muter
Employment Taxes Partner
E: leemuter@unw.co.uk
T: 07810 852 362

Mark Hetherington
VAT Partner
E: markhetherington@unw.co.uk
T: 07715 704 739

John Healey
Corporate Finance Partner
E: johnhealey@unw.co.uk
T: 07949 235 813

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