Chancellor Rishi Sunak has unveiled new economic measures ahead of the closure of the furlough scheme in October, to support jobs and the economy over the coming months. Our blog outlines the critical support packages introduced in the Winter Economy Plan.
The Winter Economy Plan
On Thursday 24th September 2020, Chancellor Rishi Sunak announced a package of measures that will continue to protect jobs, provide certainty to businesses and help individuals impacted by coronavirus across the UK. The new package includes a new Jobs Support Scheme which will replace the furlough scheme, extending the Self Employment Income Support Scheme, a 15% VAT cut for the tourism and hospitality sectors and additional support for businesses repaying government-backed loans.
The Chancellor of the Exchequer Rishi Sunak said:
“The primary goal of our economic policy remains unchanged – to support people’s jobs – but the way we achieve that must evolve. Since the beginning of the pandemic, the government has taken swift action to save lives, limit the spread of the disease and minimise damage to the economy”.
To view the full Winter Economy Plan, please visit the government’s website.
Support for workers
A number of the government’s current interventions such as the Coronavirus Job Retention Scheme (CJRS) and the Self-Employed Income Support Scheme (SEISS) are coming to an end. Updated measures are being introduced to continue to protect jobs and the economy well into next year.
Job Support Scheme
The new Job Support Scheme (JSS) will be introduced from the 1st November 2020 to subsidise the wages of people in work and will replace the furlough scheme when it ends on the 31st of October 2020. The scheme is designed to sit alongside the Jobs Retention Bonus Scheme and is open to all businesses across the UK, even if they have not previously used the furlough scheme.
Employees are required to work a minimum of 33% of their usual hours. For every hour not worked, the employer and the government will each pay one-third of the employee’s standard pay. The government contribution is capped at £697.92. Employers will be reimbursed for their contribution. Employees using the scheme will receive at least 77% of their pay, where the government contribution has not been capped.
The scheme is open to all small and medium-sized employers who have a UK bank account and a UK PAYE scheme. The scheme is also available to large businesses, but they will be required to prove their organisation has been adversely affected by COVID-19.
The Self-Employed Income Support Scheme (SEISS) Extension
The Self-Employed Income Support Scheme (SEISS) extension is open to self-employed individuals who are currently eligible for the SEISS. The grant is available to individuals who are actively continuing to trade but are facing difficulties due to COVID-19. The scheme will last for six months (November 2020 – April 2021) and is formed of two taxable grants.
The first grant covers November 2020 to January 2021 and is equivalent to 20% of the average monthly trading profits. The first grant will be paid in a single instalment and capped at £1,875. The second instalment will cover February 2021 to April 2021 and will be reviewed by the government in due course.
Tax cuts and deferrals
To continue supporting the cash flow and viability of UK businesses, the government is extending the reduced rate of VAT (5%) in the hospitality and tourism sectors from the 12th January 2021 to the 31st March 2021. The VAT cut applies to the sale of food and non-alcoholic drinks.
The government has also introduced a new VAT deferral ‘New Payment Scheme’ to give businesses who deferred VAT due in March to June 2020 the option to spread their payments over the financial year 2021-22. Rather than paying in full at the end of March 2021, businesses can choose to make 11 equal instalments. All businesses who took advantage of the VAT deferral can use the new scheme, but you will need to opt-in.
Giving businesses increased flexibility to pay back loans
The government is extending access to finances which has already helped over a billion businesses in the UK who have been facing difficulties.
Enhanced Time to Pay for Self-Assessment taxpayers
The government has announced it will give self-employed individuals and other taxpayers more time to pay taxes due in January 2021. Taxpayers with up to £30,000 of self-assessment liabilities can use the Time to Pay plan to pay over an additional twelve months.
Bounce Back Loan Scheme
The Bounce Back Loan Scheme (BBLS) has provided much needed financial support to small businesses in the UK. Small companies have been able to borrow between £2,000 and £50,000 to help them during the coronavirus pandemic. However, the amount that can be borrowed has been capped at 25% of the business’s turnover. These loans have been popular amongst small businesses because they are not required to make any repayments within the first 12 months, and the government covers interest payments due in the first year. Under the new Pay as you Grow scheme, borrowers are given more flexibility and time to make repayments.
Coronavirus Business Interruption Loan Scheme (CBILS)
Coronavirus Business Interruption Loan Scheme (CBILS) lenders can extend the term of a loan up to ten years, affording SMEs greater flexibility to repay their loans.
Pay as you Grow
All businesses that borrowed money under the Bounce Back Loan Scheme are given the option to repay their loan over a period of ten years. Companies will also have the chance to temporarily move to interest-only payments for periods of up to six months (this can be done three times), or pause repayments entirely for up to six months (this can be done once after six payments have been made).
Future Fund is an investment scheme for fast-growing and innovative UK businesses and provides loans ranging from £125,000 to £5 million – subject to at least equal matching from private investors.
Coronavirus Business Interruption Loan Scheme
The Coronavirus Business Interruption Loan Scheme (CBILS) has provided over 66,000 loan facilities worth £15.5 billion to eligible businesses with a turnover of under £45 million. The scheme offers loans of up to £5 million with an 80% government guarantee to lenders to instil confidence in providing finance to SMEs. The government does not charge businesses for this guarantee and also covers the first twelve months of interest payments and fees. The Coronavirus Large Business Interruption Loan Scheme provides loans of up to £200 million and is available to businesses with a turnover above £45 million.
Support for public sector
The Chancellor announced today that the Treasury had approved £68.7 billion of additional funding, including £24.3 billion since the Summer Economic Update in July, to support the NHS and public services.
The funding has helped ensure the procurement of personal protective equipment (PPE) for frontline staff, protected the country’s most vulnerable and provided free school meals for children while at home. Also, the £12 billion funding to roll-out the Test and Trace programme has played a vital role in enabling businesses to go back to work and unlocking the economy.
The Treasury has also made an unprecedented upfront commitment and has guaranteed devolved administrations will receive at least £12.7 billion in additional funding. As a result, Scotland, Wales and Northern Ireland will benefit from budget certainty for their coronavirus response in the coming months.
We will continue to keep you up to date
Churchill Knight & Associates Ltd will continue to keep you up to date with the latest government announcements about coronavirus and support for packages for small businesses and the self-employed. Please keep visiting our blog and social media channels to keep up-to-date.
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