Winter Economy Plan – September 2020

September 24th, 2020 | Posted in Small Business

We were expecting an Autumn Budget over the next month or two but it has now been confirmed that this won’t take place.  Instead, the Chancellor, Rishi Sunak, made some important announcements for the next phase of economic support in the ‘Winter Economy Plan’. The message in these announcements was very clear: the virus and related restrictions are a ‘fact of life’ for the next six months at least, with some permanent repercussions, and this means the government’s support is evolving to focus on viable businesses and jobs.

Support for Jobs
The Coronavirus Job Retention Scheme (CJRS) for placing employees on furlough will end on 31 October 2020 as Winter Economy Plan | Coral Accountancy Ltd planned.  Instead, the Chancellor announced a new ‘Job Support Scheme’ that will be available from 1 November 2020 for six months.  The criteria for the new Job Support Scheme involves employees working for at least 33% of their usual hours and being paid for those hours by the employer. For every hour not worked the employer and the government will each pay one-third of the employee’s usual pay, with the government contribution capped at £697.92 per month.  Under this scheme, employees will receive at least 77% of their pay, with the employer and government share being 55% and 22%, respectively.  The scheme is not available for employees on redundancy notice.

The scheme is open to all small and medium-sized enterprises (SMEs) but larger businesses are only included if they can demonstrate that their business has been adversely affected by COVID-19.

Employers can claim for both the new Job Support Scheme as well as the previously announced £1,000 Job Retention Bonus.

Self-Employment Income Support Scheme (SEISS)
Although the Chancellor had previously stated that the second grant would be the final grant under the Self-Employment Income Support Scheme (SEISS), it has now been extended with the ‘SEISS Grant Extension’, albeit at a much reduced rate. The extension will be provided in two phases with the first covering the three-month period from November to January at 20% of average monthly trading profits to be paid in a single instalment, capped at a total of £1,875.  The second phase of the extension will be for the three-month period from February to April 2021 but the government has not yet confirmed the amount of this grant.

This next stage of the SEISS grants is available to those who are currently eligible for the SEISS and actively continuing to trade but facing ‘reduced demand’ due to COVID-19.

VAT Deferral – ‘New Payment Scheme’
Businesses that opted to defer VAT payments that were payable between March and 30 June 2020 were originally required to make those payments in full by 31 March 2021.  Those payments can now be spread over 11 interest-free repayments during the 2021-22 tax year.  All businesses are eligible for the scheme but participation is not automatic and those wishing to make use of it will need to opt in, for which HMRC will have a new process in place by early 2021.

Temporary VAT Rate Reduction
The reduction in VAT from 20% to 5% for the hospitality and tourism sector was due to end on 12 January 2021 but has now been extended to 31 March 2021.  This continues to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafes and similar premises as well as supplies of accommodation and admission to attractions across the UK.

January 2021 Self Assessment Payments
Individuals in self assessment with tax of up to £30,000 to pay by 31 January 2021 can now choose to defer those payments over a 12 month period from January.  The deferral isn’t automatic and individuals will need to arrange it via HMRC’s self-service ‘Time to Pay’ facility.

Temporary Business Loans – ‘Pay as you Grow’
The deadline for all previously announced loan schemes, including Bounce Back Loan Scheme (BBLS) and the Coronavirus Business Interruption Loan Scheme (CBILS) is now being extended to 30 November 2020 for new applications.

Businesses that borrowed under BBLS will now have the option to repay their loan over a period of up to ten years, rather than the original six years, reducing the monthly loan repayments by almost half. There will also be an option to temporarily move to interest-only payments for periods of up to six months, an option which can be used up to three times. Alternatively, repayments can be paused entirely for up to six months, an option that can only be used once and only after having made six payments.

The CBILS loan term can now also be extended up to ten years.

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