Chancellor unveils emergency rescue plan to protect jobs
Chancellor unveils emergency rescue plan to project jobs
The Chancellor, Rishi Sunak, has unveiled his emergency COVID rescue plan to protect jobs and the UK economy.
After announcing the cancellation of this year’s autumn Budget, the Chancellor has delivered his speech in parliament outlining a package of measures, aimed to protect jobs and help businesses through the uncertain months ahead - as part of the government’s ‘Winter Economy Plan’.
The package includes a new Jobs Support Scheme, to help protect millions of returning workers, extension of the Self Employment Income Support Scheme (SEISS), extension of VAT cuts for the hospitality and tourism sectors, and help for businesses in repaying government-backed loans.
Jobs Support Scheme
The Chancellor confirmed that the Jobs Support Scheme (JSS) will replace the furlough scheme when it ends on 31 October 2020.
From 1 November 2020, the introduction of the JSS will see the government contribute towards the wages of employees who are working fewer than normal hours.
Under the scheme, employers will be expected to continue to pay employee wages for the hours they actually work. However, for the hours they do not work, both the government and the employer will each pay one third of their equivalent salary for the remaining hours.
To be eligible under the scheme, employees will have to work for at least a third of their normal hours to qualify and the level of the grant will be calculated based on an employee’s usual salary (capped at £697.92 per month).
The scheme is expected to run for six months until 30 April 2021 and is available to all small and medium businesses across the UK, even if they have not previously used the furlough scheme. Larger businesses will be eligible only when their turnover has fallen due to the coronavirus crisis.
The scheme will also run alongside the Jobs Retention Bonus scheme, for returning furloughed workers kept on until February 2021.
Further guidance is expected to be published by the government in due course and we will keep you informed of any updates through our website.
Self Employment Income Support Scheme (SEISS)
The Chancellor also announced the extension of the Self Employment Income Support Scheme (SEISS).
The SEISS was originally due to end on 19 October 2020 but will now continue until April 2021. Two additional grants will be provided to the self-employed, who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus.
An initial grant, covering three months’ worth of trading profits from November 2020 to the end of January 2021, will be paid based on 20% of the average monthly trading profits for a period of three months, up to a maximum of £1,875.
An additional second grant, will be available to the self-employed covering trading profits from February 2021 to the end of April 2021. This is subject to government review and may be adjusted to respond to changing circumstances.
VAT Cut Extension and Payment Deferral
As part of the governments initial business support, VAT for the tourism and hospitality sectors was temporarily reduced from 20% to 5% until 13 January 2021. As part of the package, it was announced that this will now be extended until 31 March 2021.
In addition, businesses who have deferred their VAT bill due for the period March 2020 to June 2020 will be able to enter a ‘New Payment Scheme’, which gives them the option to pay back the VAT bill interest free over 11 instalments in the 2021/22 financial year – in place of one lump sum in March 2021.
Self-Assessment Payment Deferral
Self-Assessment taxpayers with tax bills (up to £30,000) falling due in January 2021 will be able to benefit from a separate 12 month extension from HM Revenue & Customs (HMRC) through their online self-service “Time to Pay” facility. This means that tax payments deferred from July 2020, and those due in January 2021, will now not need to be paid in full until January 2022.
Any Self-Assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.
Pay as you Grow
Over a million small businesses have borrowed a total of £38 billion under the Bounce Back Loan Scheme (BBLS). To give those businesses more time and greater flexibility to repay their loans, the government are introducing ‘Pay As You Grow’.
- Loans can now be extended from six to ten years, nearly halving the average monthly repayment;
- UK businesses who are struggling to repay their loan will have the option to temporarily move to an interest-only payment plan for up to six months; or
- Can choose to pause their repayments entirely, again for up to a six month period.
No business taking up Pay As You Grow will see their credit rating affected as a result of these arrangements.
Finally, it was announced that the government is extending four temporary loan schemes available to businesses to 30 November 2020, for new application:
- Bounce Back Loan Scheme (BBLS)
- Coronavirus Business Interruption Loan Scheme (CBILS)
- Coronavirus Large Business Interruption Loan Scheme (CLBILS)
- Future Fund
The government also intends to allow CBILS lenders to extend the term of a loan by up to ten years, similar to those proposed under BBLS.
Finally, the government have started working on a new, successor loan programme, set to begin in January 2021.
In summary, on the back of Tuesday’s COVID-19 business restrictions, the support package announced will be welcome news for many businesses who cannot afford to bring their staff back full-time, protecting jobs through the difficult winter months, and for those with cash flow difficulties.
Looking into next year, and past the coronavirus crisis, I expect the focus on policy will change with the aim to rebuild and grow our economy. With that in mind, we now know that there will not be a Budget Statement from the Chancellor until 2021. However, we do expect the next Budget to include significant changes across a variety of measures.
If you have any questions, please do contact us.