Winter Economy Plan: key points
On Tuesday the government imposed a series of tighter restrictions to curb the spread of COVID-19 in the UK. Today, the Chancellor of the Exchequer Rishi Sunak announced new financial measures to support jobs and the economy throughout the next 6 months of restrictions.
The key measures are:
Job Support Scheme
A new Job Support Scheme will replace the CJR Scheme when it ends in November. To be eligible employees must be working at least 33% of their usual hours. For the hours employees can’t work, the government and the employer will each cover one third of the lost pay. Employees will therefore receive their normal pay for the hours they do work and two thirds of normal pay for hours they don’t work. The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
All small and medium-sized businesses are eligible, larger businesses must show their turnover has fallen during the pandemic. Employers can use the new scheme even if they have not previously used the furlough scheme.
9th October update: the government will cover 67% of employee costs, up to a maximum of £2,100 a month, if a business is legally required to closed due to coronavirus restrictions. This is planned to commence 1 November alongside the rest of the scheme.
VAT cut for hospitality sector continues
The previously announced VAT cut to 5% for the hospitality and tourism sector will be extended until 31 March.
Flexibility and extension to loans
A “pay as you grow” scheme will allow businesses to extend their bounce back loans from six to ten years, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses. In critical situations both interest as well as capital payments can be suspended for 6 months.
The government guarantee on CBILS will be extended to 10 years and a new loan guarantee programme will be announced in January.
Self-employed Income Support Scheme
The self-employed grant will be extended on the same basis as the job support scheme. An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. It will cover 20% of average monthly profits (up to £1,875) for the period from November 2020 to the end of January 2021. An additional second grant, which may be adjusted to respond to changing circumstances, will cover February 2021 to the end of April 2021.
Deferral of VAT bills
Companies that deferred their VAT bill will no longer have to pay a lump sum in March. They can instead make 11 smaller interest-free payments during the 2021-22 financial year.
Time to Pay extension for self-assessment taxpayers
An additional 12-month extension from HMRC on the “Time to Pay” self-service facility, means payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
Individuals within Self Assessment can apply online to spread their 2019/20 tax liability, without the need to call HMRC. Unlike the July 2020 payment on account, this is not an automatic deferral of the tax.
Further guidance on the above will be issued by the Government in due course.