Winter Economy Plan Support for Jobs and Businesses
September 24, 2020
Chancellor announces support for businesses during winter
The Chancellor, Rishi Sunak, announced his Winter Economy Plan to support businesses and jobs on 24 September 2020.
UPDATE: THE GOVERNMENT’S ANNOUCEMENTS ON 22 OCTOBER 2020 HAVE MADE CHANGES TO THIS SCHEME. PLEASE SEE OUR LATEST NEWS FOR MORE INFORMATION
Job Support Scheme
The new Job Support Scheme will begin on 1 November and replace the “furlough” scheme. To be eligible for the scheme employees must work a minimum of 33% of their hours. The government and the employer will then each pay a 1/3rd of the hours not worked. So an employee working 33% of their hours would receive 77% of their pay with the government contributing 22% of their pay and their employer the remaining 55%.
It should be noted that 22% is the maximum amount that the government will pay and the percentage will depend on the percentage of an employees hours that are worked. For example if the employee works 50% of their hours then the level of government support is reduced to only 17%. The level of Government contribution is capped at £697.92 a month.
It should also be noted that the Government contribution will also not cover class 1 employer’s national insurance or employer’s pension contribution but these amounts will continue to be payable by the employer.
Employees will be able to “cycle on and off” the scheme and they do not need to work the same pattern each month. Any short time working arrangement, however, must cover a period of at least 7 days.
The new scheme will run for 6 months but the government have said that they will review in 3 months time the threshold of 33% of hours. The grants like the “furlough” grants will be paid in arrears.
There are a number of criteria to the scheme. To be eligible for the scheme, employers must have a UK bank account and operate a UK PAYE scheme. Larger businesses will also need to meet a financial assessment test. The scheme is designed for viable jobs and therefore employees can not be made redundant or put on redundancy notice during the period within which the employer is claiming the grant for that employee.
Similar to the furlough scheme, employers using this scheme should agree short-time working arrangements with staff, make any contract changes by agreement and notify the employee in writing. HMRC have said that they will carry out checks on claims and agreements with staff will require to be available to HMRC on request.
To assist the self employed, the Self Employment Income Support Scheme Grant (SEISS) will also be extended for 6 months. A grant will be payable, in arrears, for the period 1 November 2020 to 31 January 2021 for those currently eligible for SEISS and who are continuing to trade but face reduced demand due to Covid-19.
This grant will cover 20% of the average monthly profits of the individual but will be capped at £1,875. There will be a second grant for the period February to April but the level of this grant still has to be announced. As with the previous scheme, the grants will be subject to tax and national insurance.
Self assessed taxpayers will also be given more time to pay, with deferred payments from July 2020 and those due in January 2021, not now being due until January 2022.
The Chancellor announced that he will be extending applications for the Government’s Coronavirus Business Interruption Loan scheme, the Coronavirus Large Business Interruption Loan scheme, the Bounce Back Loan scheme and the Future Fund.
Sunak also announced a “pay as you grow” scheme for business which will allow them to extend their bounce back loans from 6 to 10 years. The extension should significantly cut loan repayments and help cashflow. There will also be interest only periods of up to 6 months and payment holiday measures available for these loans.
The Government guarantee on Coronavirus Business Interruption Loans will also be extended to 10 years. There will also be a new successor loan guarantee programme to be announced in January 2021.
The temporary cut in VAT to 5% for the tourism and hospitality sectors will now remain in place until 31 March 2021. There will also be a new scheme to allow businesses who deferred their VAT bills until March 2021 to make 11 smaller interest free payments during 2021/22 instead of having to make the full payment in March.
More details can be found at https://www.gov.uk/government/news/chancellor-outlines-winter-economy-plan but it should be noted that there are still further details to be announced.