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September 24, 2020


Following yesterday’s cancellation of the proposed autumn budget, the Chancellor of the Exchequer Rishi Sunak spoke in Parliament today (24.09.20) to address the next phase of the Government’s economic support during this crisis, dubbed their ‘Winter Economy Plan.’

The chancellor began his speech on a positive note, stressing that the UK is in a better economic position than in March, however he emphasised the need for more financial provisions to accompany the realisation that the virus will remain prevalent for months to come.

The measures outlined today can be summarised as follows:

1. Jobs Support Scheme (JSS)

    • The JSS will replace the furlough scheme (officially known as the Coronavirus Job Retention Scheme) which concludes at the end of October.
    • From the 1 August, employers were able to bring furloughed individuals back to work on a part time basis. There was no specified minimum to the amount of time or shift pattern the employee had to work, however calculation of the furlough payment was adjusted accordingly e.g. if an employee was placed on furlough for 50% of their hours, they were entitled to 50% of the £2,500 cap. The employer would then pay for the hours the employee worked as normal.
    • In contrast to the above, Mr Sunak has now specified that employees must work a minimum of a third of their usual hours, which will be paid by their employer as normal. For every hour that they are not working, the employer and the government will each pay a third of their usual pay. However, the government contribution is now capped at £697.92.
    • Employees can be moved on and off the scheme or work different hours (i.e. more than a third) but each working arrangement must last at least a week.
    • Inclusive of the pay for the hours they are working, this means employees will earn a minimum of 77% of their usual pay (provided the governments contribution is not capped).
    • Under the furlough scheme, the government initially paid 80% of a monthly wage up to £2,500. Therefore, under the new scheme, previously furloughed employees will see at most a 3% cut in their wages, and support from the government for employers will drop to 22%
    • However, an employer does not have to have used the furlough scheme previously to apply for support.
    • Nevertheless there are some eligibility criteria such as the employee must not be on redundancy notice and must have been on the firm’s payroll since at least 23 September (in addition to the aforementioned minimum hours requirement).
    • Conversely, workers cannot be made redundant or put on notice while a Jobs Support Scheme grant is being claimed. This is in contrast to the furlough scheme where employees can be made redundant at any point up until the 31 October (when the scheme ends).
    • The scheme will run for six months starting 1 November, and will be in addition to previous initiatives announced such as the jobs retention bonus.
    • Finally, the government is now prioritising the most vulnerable businesses as all small and medium sized firms are eligible, but for big companies turnover must have fallen by a third.

2. More support for businesses

To counterbalance the heavier reliance of employers in supporting employees, the Government have announced more economic provisions for businesses:

    • The VAT cut for the hospitality and tourism industry has been extended until 31 March 2021. It was originally planned to increase back to 20% on 13 January 2021.
    • To help with cash flow ‘Bounce Back’ loans can now be repaid over ten years instead of six in the new ‘Pay as you Grow’ scheme which provides the practical benefit of cutting payments from £500 to £300.  In addition, interest only payments can be made, and payments can even be suspended altogether for those firms in ‘real trouble.’ There are also plans to do the same for those who used the Coronavirus Business Interruption Loan Scheme.
    • Further case flow assistance comes from the ability to now spread VAT bills over 11 smaller payments during the 2021-22 financial year; a relief to those businesses which deferred their VAT bills. The payments will also be interest free.
    • Moreover, all of the government’s state backed loan schemes will now be extended until the end of November, with promises of a new loan programme to begin in January.

3. The Self-employed and the self-assessors

  • The self-employed grants will be extended on similar terms. This means that a taxable grant will be provided once again to those who are eligible for the Self Employment Income Support Scheme Grant (SEISS) and are continuing to actively trade but with reduced demand due to coronavirus.
  • The initial lump sum will cover profits for the period from November to the end of January next year up to 20% of average monthly profits (capped at £1,875).
  • This means that the Governments support for the self-employed is now far more substantial than the employed.
  • A second grant covering February 2021 to April has also been pledged but ‘may be adjusted to respond to changing circumstances.’
  • In addition, Taxpayers with up to £30,000 of Self-assessment liabilities now due in January 2021 (after deferring their July 2020 payment) will be able to use HMRC’s self service ‘time to pay’ online facility to secure a plan to pay over an additional 12 months, meaning that liabilities originally due in July 2020 will now not need to be settled in full until January 2022.
  • Moreover, the taxpayers with over £30,000 in liabilities or those struggling to use the online system should use the HMRC time to pay helpline (0300 200 3822).

More information on today’s announcement can be found here.

PD Tax comment – The new job support scheme is not as generous as the job retention/furlough scheme and businesses in some industries may struggle with the minimum work requirements.  Nevertheless, the provisions will help many businesses retain employees and should come as welcome news. For help with how any of these updates apply to you/your business, then please contact a member of the team.

Contact us today to discuss your tax requirements.
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