The Chancellor has today announced his Winter Economy Plan. This consists of a series of measures designed to combat the damage caused to the economy by the pandemic and replaces his usual winter budget.
Coronavirus Job Retention Scheme (“CJRS”)
The Coronavirus Job Retention Scheme will end as planned on 31 October 2020.
Job Support Scheme (“JSS”)
From 1 November 2010, the new JSS will be launched which will provide a government contribution towards wages costs. Key elements of the scheme are as follows:
- The scheme will run until 30 April in order to protect jobs over the six month winter period.
- An employee will need to work a minimum of 33% of their usual hours, which he/she would be paid as usual by the company. For each hour not worked, the company and the government will each pay 1/3 of the employees’ usual rate, up to a maximum of £697.72 per month. Overall, an employee would receive 77% of their pay if they do not earn beyond the government cap.
- All small and medium-sized companies with a UK PAYE scheme will be eligible.
- Large companies would need to demonstrate that the business has been adversely affected by the pandemic in order to participate. There would also be an “expectation” that the company would not be paying dividends whilst participating in the scheme.
- An important part of the scheme is that those employees participating in the JSS will not be on notice of redundancy. Presumably, there will be some mechanism to take employees out of the scheme and then issue notice – no doubt the lawyers will be mulling this over! This is undoubtedly to deter redundancies but also perhaps to avoid companies benefiting from government support during employee notice periods, as had been the case with the current CJRS.
Self-Employed Income Support Scheme (“SEISS”)
The SEISS is being extended to provide up to two additional taxable grants to the self-employed who have been negatively affected by the pandemic. Similar to the new JSS, it aims to provide support over the six month winter period.
- The first grant will cover the period 1 November 2020 to 31 January 2021. The grant will be based upon 20% of average monthly trading profits for the 3 month period and will be capped at £1,875.
- The second grant will cover the period 1 February to 30 April 2021. Details are yet to be released as to how this will be calculated.
Self-Assessment Time To Pay Scheme
The government has previously deferred self-assessment payments due on 31 July 2020 to 21 January 20212. There have now gone one step further to allow the self-employed and other tax payers the option to defer payment for a further 12 months. The new self-service ‘Time To Pay’ scheme will apply to self-assessment tax payers who owe less than £30,000 and can be accessed online in due course.
VAT reduction extended for Hospitality and Tourism
The VAT reduction from 20% to 5% for the hospitality and tourism sectors was due to end on 12 January 2021 and has now been extended to 31 March 2021.
This VAT reduction will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, supplies of accommodation and admission to attractions across the UK.
New Payment Scheme – VAT Deferral
Previously the government had given VAT registered businesses the option to delay payment for the March and June 2020 VAT quarters, on the basis that the debt was paid in full by 31 March 2021. This has now been amended further and the New Payment Scheme launched. This enables payment to be spread across the 2021/22 financial year in equal instalments. Businesses that took advantage of the VAT deferral are eligible to “opt-in” to the New Payment Scheme.
Extension of Deadline for Loans
The government has previously introduced four separate loan schemes to support businesses. The application deadline for this support has now been extended to 30 November. A recap of the available schemes are as follows:
- Bounce Back Loan Scheme (“BBLS”) – Aimed at smaller businesses, the BBLS consists of loans between £2,000 and £50,000. Loans are based upon 25% of turnover and lenders and borrowers benefit from a 100% government guarantee. The borrower does not need to make repayments for the first 12 months and the government is covering the first 12 months’ interest.
- Coronavirus Business Interruption Loan Scheme (“CBILS”) – Aimed at large businesses with turnover under £45m and provides loans of us to £5m. The loans are subject to an 80% government guarantee and the government is also covering the first 12 months interest.
- Coronavirus Large Business Interruption Loan Scheme (“CLBILS”) – Aimed at large businesses with turnover over £45m and provides loans of up to £200m. The loans are subject to an 80% government guarantee.
- Future Fund – Aimed at innovative and fast-growing UK-based businesses. Loans range from £125,000 to £5 million and must be matched equally by a private investor.
Pay as you Grow Scheme for BBLS
A new repayment plan has been launched for borrowers under the BBLS, the key points are as follows:
- BBLS borrowers can now repay their loan for a period of up to 10 years.
- There is an option to move to interest-only payments for up to six months, an option that can be exercised up to three times during the life of the loan.
- After making at least six payments in full, the borrower has the option to pause payments completely for up to six months. This option can only be exercised once.
These measures are clearly designed to ease the burden on business cashflow as needed, and also perhaps improve the odds of the loans being repaid.
Loan Extension for CBILS Lenders
The government will allow flexibility to CBILS lenders to extend the term of the loan by up to 10 years. This will in turn encourage support from lenders to SMEs who may be struggling with repayments.
The overall message from the plan is that these measures will help businesses survive the winter period and in turn provide job security for employees. But is it a case of too little too late? Many people have already been made redundant and are facing the bleakest job market of their lifetime. They are benefiting from £10 a day in jobseekers’ allowance, for only a maximum period of 6 months, and wrestling with Universal Credit applications. Their income is substantially reduced and nothing seems to be being done to help these individuals?
Despite the government support, businesses are being asked to contribute significantly to employee costs, at a time when many industries face an uncertain future. The future of many businesses such as Aviation, Retail, Hospitability, Travel and Events rely upon government lockdown restrictions being lifted, which looks very unlikely to happen in the near future.
Are these measures therefore just delaying the inevitable?