The Chancellor of the Exchequer, Rishi Sunak, has outlined additional government support for businesses and workers impacted by COVID-19, as part of its ‘Winter Economy Plan.’
The Chancellor announced a package of measures designed to protect jobs and help businesses through the months ahead. The package includes a new Jobs Support Scheme, extending the Self Employment Income Support Scheme, and help for businesses in repaying government-backed loans.
Rishi Sunak said: “The resurgence of the virus, and the measures we need to take in response, pose a threat to our fragile economic recovery… Our approach to the next phase of support must be different to that which came before.
“The primary goal of our economic policy remains unchanged – to support people’s jobs – but the way we achieve that must evolve.”
Job Support Scheme
A new Job Support Scheme will be introduced from 1 November to protect viable jobs in businesses, which are facing lower demand over the winter months due to the coronavirus.
Under the Job Support Scheme, which will run for six months and help keep employees attached to the workforce, the government will contribute towards the wages of employees who are working fewer than normal hours, due to decreased demand.
Employers will continue to pay the wages of staff for the hours they work – but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.
This means that employees who can only go back to work on shorter time will still be paid two thirds of the hours for those hours they can’t work.
In order to support only viable jobs, employees must be working at least 33% of their usual hours. The level of grant will be calculated based on the employee’s usual salary, capped at £697.92 per month.
The Job Support Scheme will be open to businesses across the UK even if they have not previously used the Job Retention Scheme, with further guidance being published in due course.
It is designed to sit alongside the Jobs Retention Bonus and could be worth over 60% of average wages of workers who have been furloughed – and are kept on until the start of February 2021. Businesses can benefit from both schemes in order to help protect jobs.
Self Employment Income Support Grant
In addition, the government is extending the Self Employment Income Support Scheme Grant (SEISS). 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 the coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875.
An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.
Tax cuts and deferrals
As part of the package, the government also announced it will extend the temporary 15% VAT cut for the tourism and hospitality sectors to the end of March next year. This will give businesses in the sector the confidence to maintain staff as they adapt to a new trading environment.
In addition, up to half a million business who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments.
Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
On top of this, around 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
Flexibility to pay back loans
The burden will be lifted on more than a million businesses who took out a Bounce Back Loan through a new Pay as You Grow flexible repayment system. This will provide flexibility for firms repaying a Bounce Back Loan.
This includes extending the length of the loan from six years to 10, 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. These measures will further protect jobs by helping businesses recover from the pandemic.
The government also intends to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to 10 years, if it will help businesses to repay the loan.
Industry reaction to government announcement
Mike Cherry OBE, Federation of Small Businesses National Chair, said: “The UK’s small businesses are facing an incredibly difficult winter. The support package is the flipside of the coin to Tuesday’s [22 September] COVID-19 business restrictions.
“It is a swift and significant intervention, extending emergency SME loans, creating new wage support for small employers and the self-employed, and providing cashflow help on VAT deferrals and new Time To Pay for any tax bills to HMRC.
“We welcome that the Chancellor is ensuring that decisions to protect public health are informed by the need to protect the economy, people’s jobs and prospects for young people in our schools and workplaces.”
James Talman, chief executive officer of the National Federation of Roofing Contractors, said: “Today’s [22 September] announcement that businesses will be able pay their deferred VAT payments over 11 payments will be welcome relief to construction firms who faced a double whammy with Reverse Charge VAT due to come in the same month.”
He added: “However, the government do need to reconsider if Reverse Charge VAT is still an proportionate policy to place on the industry at such a time. Especially with IR35 coming a month later. It’s not too late for the Treasury to reconsider, and we would be willing to work with them to consider alternative ways of tackling VAT fraud that aren’t so detrimental to cashflow.”
You can read the full details about the Winter Economy Plan at: www.gov.uk/government/news/chancellor-outlines-winter-economy-plan.
