The Chancellor has announced a new package of measures to support businesses through to March 2021 following the introduction of further restrictions and rising COVID-19 infection rates.
Summary of measures
The measures announced include:
A new Job Support Scheme
Pay As You Grow for loan repayments
An extension to the Self-Employment Income Support Scheme
Deferred tax bills
VAT reduction for hospitality and tourism sector
These are all outlined below. For the full GOV.UK release on the Winter Economy Plan, click here.
New Job Support Scheme
The furlough scheme will end on 31 October and will be replaced with financial support for businesses with staff working reduced hours. The Job Support Scheme will start on 1 November 2020 and operate for six months.
The scheme has been designed to support viable jobs and employees must work at least one-third of their hours, paid as normal, in order to qualify for the scheme. The government and employer will then each cover one-third of any remaining hours the employee is not working.
Employees will therefore forego one-third of their pay for the hours that they have not been working. This means that employees working the minimum one-third of their hours will still receive at least 77% of their pay.
The level of the grant will be calculated based on an employee’s usual salary but subject to a cap.
The scheme is open to all SMEs and to larger businesses who can show a fall in turnover. Companies can still use this scheme even if you have not previously participated in the Coronavirus Job Retention Scheme.
The previously announced Job Retention Bonus, allowing qualifying businesses to claim a £1,000 for each CJRS participating employee, will remain. Employers can claim both the Job Retention Bonus and funding through the Job Support Scheme.
Pay As You Grow for loan repayments
The government has made bounce back loans available to SMEs with repayment terms of up to six years with an interest rate of just 2.5%. Now, repayment terms of those loans can be extended to up to 10 years. Businesses facing cash flow challenges can opt to repay just the interest or defer repayment altogether for up to six months.
Businesses that have taken advantage of CBILs will now also have up to 10 years to repay these loans.
Bounce back loans and CBILs applications will now remain open until the end of the year, and will be replaced with a new ‘successor loan scheme’ from January 2021.
Extension to the Self-Employment Income Support Scheme
The Chancellor announced additional help for the self-employed based on similar terms and conditions as the new Jobs Support Scheme.
The extended scheme will apply for 6 months from 1 November 2020 with an initial taxable grant made available to those who continue to trade and are currently eligible for SEISS.
The initial lump sum will cover three months of profits from 1 November 2020 calculated as 20% of average monthly profits, up to a total of £1,875.
An additional second grant will be available from 1 February 2021 to 30 April 2021, but the level of this second grant amount is subject to review.
Deferred tax bills
The Chancellor has announced that VAT payments can be spread over 11 smaller instalments with no interest penalties; businesses had the option to defer the payment of any VAT liabilities due between 20 March 2020 and 30 June 2020 to 31 March 2021. The Chancellor has now confirmed that businesses will instead be able to make 11 smaller interest-free payments during the 2021-22 financial year.
Self-assessment income taxpayers have also been given the opportunity to spread payments over a 12-month window from January 2021.
VAT reduction for hospitality and tourism sector
The Government has extended the 15% VAT cut for the tourism and hospitality sectors to the end of March next year.
Budget
It has also been confirmed that the Budget that was expected to be delivered in the autumn will now take place next year. The measures announced today are more clearly focused on keeping the economy ticking over during the coming weeks and months.
Contact Us
Please contact us to find out how the above applies in your circumstances, how you can reduce your tax liabilities and maximise your tax efficiency.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
