Government’s Winter Economy Plan

by | Oct 12, 2020 | Business Finance, COVID-19, Self-Assessment Tax, VAT

On the 24 September 2020, the Chancellor Rishi Sunak outlined details of the Governments Winter Economy Plan, with a focus on job protection and business support. Two weeks later, further support for businesses was also announced.

We have provided a round-up of the measures and links to more information below, but the main highlights are as follows:

  • Expansion of Job Support Scheme to include Businesses affected by coronavirus restrictions
  • Job Support Scheme – a new scheme aimed (primarily) at SMEs will be introduced to cover employees working at least one third of their normal hours
  • Extension of the Self-Employment Income Support Scheme (SEISS) until April 2021 with revised terms
  • Extension of the CBILS and BBLS business loan schemes to the end of November
  • Relaxed repayment terms for CBILS and BBLS, with the maximum term extended from 6 to 10 years
  • Extension of VAT reduction (to 5%) for the hospitality and tourism industries until 31 March 2021
  • VAT and self-assessment deferral as well as installment payment plans

Job Support Scheme – Expanded to included Businesses 

Two weeks after the initial winter economy plan announcements, it was announced that the Job Support Scheme would be expanded to include support for businesses forced to close as a result of coronavirus restrictions.

Under the scheme, if a business is legally forced to close for a period over the coming months, the Government will pay two thirds of an employee’s salary (or 67%) up to a maximum of £2100 a month. Employers will not be required to contribute towards wages and will only be asked to cover NICS and pension contributions.

Businesses will only be eligible to claim the grant while they are subject to restrictions and employees must be off work for a minimum of seven consecutive days. The scheme will begin on 1st November and will run for a period of 6 months, with a review point in January.

In addition to the above, businesses will also be entitled to increased cash grants to help with fixed costs. These grants will be linked to rateable values, with up to £3,000 per month payable every two weeks, compared to the up to £1,500 every three weeks which was available previously.

Further details on the expansion of the scheme are available on the Government website.

Job Support Scheme

It was confirmed that the existing job support scheme, ‘furlough’ would come to an end as planned on 31st October 2020, and that a new Job Support Scheme would take its place from 1st November 2020.

Under the new scheme the following criteria will apply:

  • Employees will need to work a minimum of 33% of their usual hours
  • For every hour not worked, the employer and Government will each pay 1/3 of the employee’s usual pay
  • Contribution by the Government will be capped at £697.92 per month
  • Employees will receive at least 77% of full pay (subject to the government cap)
  • Employers will pay at least 55% of normal wages and they will be reimbursed in arrears for the government contribution
  • The employee must not be on a redundancy notice
  • The scheme will be open to all employers with a UK bank account and a UK PAYE scheme
  • All small and medium-sized enterprises (SMEs) will be eligible but large businesses will be required to demonstrate that they have been adversely affected by Covid-19
  • Eligibility for payment of the £1,000 Job Retention Bonus announced in July and due from February 2021, will not be affected by claims for the new Job Support Scheme

A Government factsheet which explains the Job Support Scheme in detail is available.

SEISS (Self Employment Income Support Scheme)                

When the current SEISS ends at the end of October, the new scheme, termed ‘Grant Extension for the Winter Economy Plan’ will take its place and will run for another six months from 1 November 2020 until 31 April 2021. The terms will be updated, and the scheme will operate as follows:

It will be available to self-employed individuals currently eligible for the existing scheme who are actively continuing to trade but are facing reduced demand due to Covid-19.

The extension will be in the form of two taxable grants:

  • Grant 1 – November to January. Covering 20% of average monthly trading profits, this grant will be paid in a single instalment covering three months’ worth of profits and capped at £1,875 in total.
  • Grant 2 – February to April. The level of this grant will be reviewed and set by the government in due course.

Latest guidance on SEISS can be found here.

Bounceback Loan Scheme (BBLS)

With loans between £2000 and £50,000 available, the BBLS has provided support to many small businesses. The key amendments announced are the extension of the application deadline until 30 November 2020, and the extension of the maximum loan repayment term from six to ten years.

Other new features of the scheme include the options for business to:

  • move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times);
  • pause their repayments entirely for up to six months (an option they can use once and only after having made six payments).

The scheme continues to be capped at 25% of business turnover, with a 100% government guarantee to the lender. The borrower does not have to make any repayments for the first 12 months, with the government covering the first 12 months’ interest payments.

More information on BBLS can be found here.

Coronavirus Business Interruption Loans Scheme (CBILS)

As with the BBLS, the application deadline for CBILS has also been extended to the 30 November 2020 and lenders will now be able to extend the loan term up to ten years.

The scheme was launched to provide loan facilities to businesses with turnover under £45 million. The scheme provides loans of up to £5 million with an 80% government guarantee to the lender, and the first 12 months of interest payments and fees are covered by the Government.

Further details on the CBILS can be found here.

VAT reduction – Hospitality and Tourism

Having introduced a reduction on the VAT rate (to 5%) for the hospitality and tourism sector, this will be extended until 31 March 2021. The reduced rate applies to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, and to supplies of accommodation and admission to attractions across the UK.

VAT deferral 

For those business that deferred their VAT bills from March 2020 to June 2020, they will be able the to spread their payments as 11 smaller interest free payments over the course of the 2021-22 financial year. All businesses that took advantage of the VAT deferral will be eligible, however, they will need to opt in using a process that HMRC will launch early next year.

Self-Assessment – Enhanced Time to Pay

Self-employed individuals and other taxpayers will be given additional time to pay taxes due in January 2021, building on the self-assessment deferral provided for payments on account in July 2020.

Taxpayers with up to £30,000 of self-assessment liabilities due will be able to use HMRC’s Time to Pay facility to secure a plan to pay over an additional 12 months. Ultimately, self-assessment liabilities originally due in July 2020 will 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 still use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.

More information on Time to Pay can be found here.