The Chancellor, Rishi Sunak, has announced a new job protection scheme and a range of new business support measures to take the UK through the Winter months.
Unveiling his ‘Winter Economy Plan’ at a hastily arranged statement in the House of Commons, Mr Sunak said: “Our task now is to move to the next stage of our economic plan, nurturing recovery by protecting jobs through the difficult winter months.”
The announcement came the day after plans to hold an Autumn Statement were scrapped; as confirmed cases of Coronavirus continue to rise and as a range of new restrictions have been imposed across the UK, the Treasury no longer considered it fitting to make enduring plans.
Against this background of increasing case numbers and fears of further new restrictions on the horizon, employers’ groups and trade unions alike had been pushing for new measures to replace the Coronavirus Job Retention Scheme (CJRS), which ends in just five weeks’ time on 31 October 2020.
The rhetoric being used in recent weeks has reignited pervasive fears about the economic impact of the pandemic and the very real possibility of a wave of redundancies being announced in the lead up to the end of the existing furlough scheme.
Employers making between 20 and 100 redundancies must begin consulting at least 30 days in advance, meaning the last day they could begin the process, before being required to bring staff back on full pay at the beginning of November, is 1 October 2020.
Around three million of the 9.6 million workers ever furloughed are thought still to be so, with the scheme having cost roughly £39.3 billion up to 20 September 2020.
As he rose to deliver his statement, just two months after the Summer Economic Statement, the pressure was on the Chancellor to deliver the “creative and imaginative” solutions to protect jobs and businesses that the Prime Minister had promised just 24 hours earlier.
Self-Employment Income Support Scheme
Bounce Back Loans & the Pay as You Grow Scheme
Extensions to other loan schemes
Extended VAT cut for Tourism & Hospitality
Job Support Scheme
Declaring that it is “fundamentally wrong to hold people in jobs that only exist inside the furlough”, the Chancellor announced the launch of a new Job Support Scheme (JSS).
The scheme will come into effect on 1 November 2020 for six months and, to be eligible, employees must work a minimum of 33 per cent of their usual hours. The Government and the employer will then each pay one-third of the wages for the remaining hours not worked, with the Government contribution being capped at £697.92 per month.
The employee will go without the pay that they would have received for the remaining one-third of their usual hours not worked.
The scheme means that employees working one-third of their usual hours and not affected by the cap will receive at least 77 per cent of their usual wages, according to the Treasury.
What this means for somebody who usually works five days a week, but only works two days from 1 November, is that they will receive full pay for both days worked, their employer will then pay them for one day not worked and the Government will pay them for one day not worked. The employee will receive no pay for the final day not worked.
The Chancellor confirmed that the JSS is open to all small and medium-sized enterprises and to larger businesses that have been “adversely affected by COVID-19”, subject to certain conditions such as not making capital distributions, including dividends, while using the scheme.
The scheme will be open to employers, irrespective of whether they previously used the CJRS. However, the employees they claim for cannot be on a redundancy notice.
Additionally, the Chancellor confirmed that employers will be able to use both the JSS and Coronavirus Job Retention Bonus at the same time. Announced earlier this year, the bonus scheme will provide employers with a one-off £1,000 grant for each employee they bring back from furlough and pay an average of £520 a month to between 1 November 2020 and 31 January 2021.
The JSS bares a strong resemblance to the German ‘Kurzarbeit’ (short-time) scheme, which was first introduced after the 2008 financial crisis and reinstated earlier this year. The scheme, which is in some ways less generous than the CJRS, is credited with effectively saving jobs at a much lower cost to the taxpayer. Both the CBI and TUC had advocated variations of the German scheme.
To help businesses understand the new scheme and plan for its implementation, the Government has published new guidance, which can be accessed here:
Self-Employment Income Support Scheme
The Chancellor moved on to announce a six-month extension to the Self-Employment Income Support Scheme (SEISS) for those self-employed individuals currently eligible.
A third grant will cover the three months from November 2020 to the end of January 2021, paying 20 per cent of average monthly profits, capped at £1,875.
Meanwhile, a fourth grant will cover the period from February 2021 to the end of April 2021, with the payment level set to be determined at a later date.
Self-employed individuals and members of partnerships, to whom all of the following apply, are currently eligible for grants under the SEISS:
- Carry on a trade that has been adversely affected by Coronavirus;
- Traded in the tax year 2018-2019 and submitted a Self-Assessment tax return on or before 23 April 2020 for that year;
- Traded in the tax year 2019-2020;
- Intended to continue to trade in the tax year 2020-2021;
- Have trading profits of less than £50,000 and more than half of their total income comes from self-employment. This can be with reference to at least one of the following conditions:
- Trading profits and total income in 2018-2019
- Average trading profits and total income across up to the three years between 2016-2017, 2017-2018, and 2018-2019.
The scheme is not available to people operating through their own limited companies.
Bounce Back Loans and Pay as you Grow
Moving away from direct support for employment and self-employment, the Chancellor acknowledged the effect of the crisis on businesses’ cash flow.
He announced the extension of the Bounce Back Loan Scheme (BBLS) through Pay as you Grow (PAYG), which will give all businesses in receipt of BBLS loans the opportunity to repay over a period of up to 10 years, potentially halving their monthly payments in real-terms.
There will also be an option for businesses to make interest-only repayments for up to three six-month periods or to take one six-month payment holiday, though the six-month payment holiday will only be available to businesses that have already settled six payments.
The BBLS provides loans of between £2,000 and £50,000, up to a cap of 25 per cent of turnover. The loans are backed by a 100 per cent Government guarantee to the lender and interest payments for the first 12 months of the loan are covered by the Government, with the borrower only required to make repayments after that period.
The deadline for businesses to apply for loans under the BBLS has also been extended until 30 November 2020.
Other loan schemes
Addressing the other business loan schemes announced since the beginning of the crisis, the Chancellor confirmed that repayments under the Coronavirus Business Interruption Loan Scheme (CBILS) can be extended to a term of up to 10 years.
CBILS is available to UK-based businesses with turnovers of up to £45 million, offering loans of up to £5 million, backed by an 80 per cent Government guarantee to the lender, with the Government also covering interest and fees for the first 12 months.
As with BBLS, the Chancellor confirmed the deadline for applying for CBILS will be extended to 30 November 2020, as will the deadlines for the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Future Fund.
He said that the Treasury is working on “a new, successor loan programme, set to begin in January.”
Meanwhile, he said that the Bank of England’s COVID-19 Corporate Financing Facility will remain open until 22 March 2021.
Extended tax deferrals
The Chancellor turned next to address outstanding taxes owed by businesses and individuals to HM Revenue & Customs (HMRC), following deferments earlier in the year.
He announced a ‘New Payment Scheme’, which will allow businesses that deferred VAT payments between March and June 2020 to settle their liability in 11 equal instalments over the 2021-2022 financial year, should they wish to do so. The payments had originally been due, in full, by the end of March 2021.
The scheme will be open to all businesses that took up the offer of a deferral, but they will need to opt-in to benefit from the extended repayment period. HMRC is expected to put this process in place early on in the new year.
The Chancellor also announced that measures are being introduced to enable tax due to be paid on 31 January 2021 to be deferred for 12 months. Eligibility criteria is yet to be determined.
It is worth bearing in mind that, as it stands, Self-Assessment Tax Returns for the 2019/20 tax year must still be submitted by Midnight on 31 January 2021.
Extended VAT cut for Tourism & Hospitality
Finally, the Chancellor confirmed an extension to the temporary five per cent rate of VAT for certain goods and services in the tourism and hospitality sectors from 13 January 2021, to 31 March 2021. After this date, the rate will revert to the standard 20 per cent.
Conclusion
The extent of the Chancellor’s announcements will have taken many people by surprise, having far exceeded, once again, the measures that were trailed in advance of his speech.
However, it remains to be seen whether these measures will be sufficient to match the scale of the economic challenge we inevitably will face in the months ahead.
Many business-owners have already come forward to express their disappointment in the JSS – citing that, in many cases, it fails to make financial sense and that in the hospitality and tourism sectors, for example, it will make little difference to the difficult decisions employers are already having to make.
How can George Hay help?
As trusted chartered accountants, tax and business advisers, we have been on hand to support our clients UK-wide – businesses and individuals alike – throughout the Coronavirus crisis and we are still here as you consider how the remainder of 2020 could play out.
We can help you to assess the impact of the pandemic on your business and finances, at every turn, and to identify which of the support measures you can rely upon if necessary.
We know that, for many, the importance of proactive planning and implementing tighter controls within the business has only been compounded by the predicament the country finds itself in presently, and these too are both things we can assist you with.
To discuss your circumstances in more detail, or if you have concerns about what the latest raft of changes mean for you, contact one of our friendly professionals today.
Link: Winter Economy Plan
