Rishi Sunak’s Winter Economy Plan

Budget, Coronavirus, Finance, Payroll, Personal Tax, Sole Trader,

Rishi Sunak’s ‘Winter Economy Plan’, announced today, was extremely important to the economy and the future of businesses throughout the country.

  • The Furlough scheme is coming to an end in just a few weeks. It has cost the Government a huge amount, and to extend it would keep people in jobs that essentially no longer exist.
  • To do nothing would see a dramatic increase in unemployment numbers.
  • The increasing number of new cases and the scientific information shared earlier in the week suggests that we are nowhere near over the worst of the pandemic.

The announcement yesterday that there would be no Autumn Budget suggested today’s statement would be an important one, and it certainly included some significant points.

As with the new guidance that came out earlier in the year, details are yet to be clarified on many of the points covered, but to follow is a summary:

CHALLENGE ONE – JOBS

The NEW Job Support Scheme 

Rishi Sunak restated that the Government cannot save every business and cannot save every job. He said that it would be wrong to protect jobs that don’t actually exist through an extension of the furlough scheme, and instead he wanted to help businesses that suffer from reduced demand over what will be a difficult Winter.

The new Job Support Scheme will therefore directly support wages for employees in viable jobs.

There are three main points:

  1. The Job Support Scheme will cover two thirds of the salary lost by employees if they are not required to work full time but their job remains viable. Employees must work a minimum of one third of their normal hours each week, the salary for which must be paid in full by the employer. For every hour not worked the employer and the Government will each pay one third of the employee’s usual pay. The Government contribution will be capped at £697.92 per month. Employees will receive at least 77% of their pay, where the cap does not apply.Payment of the Government contribution will be in arrears. The employee must not be on a redundancy notice.
  2. Support will be targeted to the areas where it is needed most. ALL businesses will be eligible. Larger businesses (employing more than 250) will need to show that their turnover has fallen as a result of Coronavirus to qualify. They should not pay Dividends during this time.
  3. Any business can claim under the scheme, even if they did not claim through the Furlough Scheme.

The Job Support Scheme will start in November and run for six months.

It is possible to claim both through the Job Support Scheme and the Job Retention Bonus which was announced previously.

Self Employed Income Support Scheme

This grant, which has so far paid out twice to the Self Employed, will be extended from November 2020 to April 2021, to ensure the Self Employed are supported at a similar level to employees through the Job Support Scheme.

This extension will be in the form of two taxable grants.

The first will be for three months from November 2020 to the end of January 2021. The first grant will cover 20% of the average monthly trading profits, capped at £1,875 in total.

The second grant will cover the three months period from the start of February to the end of April. The level of this second grant will be decided at a later date.

 

CHALLENGE TWO – CASHFLOW

The Chancellor outlined the benefits businesses have gained from the previous support around tax deferrals and loans. It is important that businesses are able to manage their cash as carefully as possible. To make this possible, he outlined the following:

Bounce Back Loans (BBLS)

  • These loans can be extended from a six year term to a ten year term. This would enable businesses to effectively almost halve their monthly repayments.
  • Repayment flexibility will be possible, allowing interest only repayments for up to six months and payment holidays of up to six months, without any effect on the credit rating of the business. The interest only option can be used for six months on three occasions, whilst the payment holiday option can be used once, as long as a minimum of six repayments have already been made.
  • The application deadline for the scheme will now be 30th November 2020.

Coronavirus Business Interruption Loans (CBILS)

  • The Government Guarantee period will now be extended to ten years.
  • The application deadline for the scheme will now be 30th November 2020.

A successor loan guarantee scheme will be announced for January 2021.

Deferred Tax Bills

VAT – Businesses were able to defer their VAT payment due between 20th March and 30th June 2020, which became due for payment by 31st March 2021. Instead, this can now be paid in eleven smaller payments, without incurring interest charges.

Payments on Account – Personal Tax. Taxpayers could defer the Payment on Account that had been due on the 31st July 2020, which became due for payment by 31st January 2021. Instead, this can now be paid in instalments by 31st January 2022.

At this stage, it is unclear whether this instalment option will include the Payment on Account and any Balancing Payment that would also be due on the 31st January 2021. It appears that this may be limited to a total tax amount due of £30,000.

CHALLENGE THREE – HOSPITALITY AND TOURISM

These industries have been hardest hit by Coronavirus, and are those that will also be feeling the most pain from the recent increase in restrictions.

To ease the pressure on the 150,000 businesses in this sector, the planned reduction of the applicable VAT rate from 20% to 5% will now be extended to 31st March 2021.

This had been due to take place on the 13th January 2021.

 

As I mentioned above, the detail on the above is not yet available. It’s not yet clear how the process behind claiming though the Job Support Scheme will work yet, nor do we know how the extension to the term of a BBLS will work, or even how to agree instalment payments for a Payment On Account, (though the latter is probably going to involve a long time on hold to HMRC’s very busy phone lines!)

We’ll be looking into all of that though over the coming days as the details emerge, and will pass the information on just as soon as we can.

As ever, if you have any particular questions, please fire us back an email and we’ll do our best to prioritise that question!