On Thursday 24th September, Chancellor Rishi Sunak announced his Winter Economy Plan, outlining a package of new measures aimed at providing support to businesses and employees as we approach the winter months, and face a period of extended restrictions which will undoubtedly have a significant impact on the economy.

New measures include a new Job Support Scheme, an extension to the VAT cut for the hospitality and tourism sectors, and flexible repayments on bounce back loans.

Here we summarise the initial detail of these new measures:

Employment Tax

Job Support Scheme

A new six-month Job Support Scheme will be introduced on 1st November, as the Coronavirus Job Retention Scheme comes to an end on 31st October.

The Job Support Scheme will protect viable jobs in businesses who are facing lower demand over the winter months as a result of COVID-19 restrictions, in an attempt to avoid redundancies, and allow employers to keep employees in jobs on shorter hours.

To ensure the scheme is supporting viable jobs, employees will need to work a minimum of 33% of their usual hours. For every hour not worked the employer and the government will each pay one third of the employee’s usual pay. The Government’s one third contribution of non-working time wages will be capped at £697.92 per month.

The Government contribution can be claimed by the employer retrospectively, after the RTI returns have been submitted for the relevant month. Employers will be able to make a claim online through Gov.uk from December 2020. They will be paid on a monthly basis. The employer cannot claim for any associated NIC and pension costs.

Employees working a minimum of 33% of their usual hours will receive at least 77% of their usual pay. The working hours must be agreed in writing with the employee, for a minimum of 7 days at a time.

Employees cannot be placed on a redundancy notice whilst on the scheme.

All small and medium sized businesses are eligible to apply. In order to ensure the scheme is targeted at those that really need the support, large businesses will be required to demonstrate that their business has been adversely affected by COVID-19 in order to be eligible. The Government has also stated that they expect large employers eligible to access the Job Support Scheme will not be making capital distributions, such as dividend payments or share buybacks, whilst accessing the grant.

Employers can use the Job Support Scheme even if the employees have not previously been on the Furlough Scheme. Employers can access the scheme for any employee employed and included on an RTI return submitted to HMRC before 23 September 2020.

Employers using the Job Support Scheme will also be able to claim the Job Retention Bonus in February if they meet the eligibility criteria.

More details will be published by the Government in due course.


VAT cut for hospitality and tourism extended

In July the rate of VAT for the hospitality sector was temporarily cut from 20% to 5%, and was initially planned to last until January 2021.

To support two of the most affected sectors, the 5% VAT rate will now remain in place until 31 March 2021.

Further details of the implications of this change are available here. Please do not hesitate to speak to our VAT team on this.

VAT deferral – ‘New Payment Scheme’

All businesses which took the opportunity to defer VAT due in the March to June 2020 VAT returns, will have the option to spread their payments over 11 equal instalments over the financial year 21-22, rather than paying in full at the end of March 21. Whilst all businesses are eligible, they will need to opt-in to pay in instalments. The opt-in process will be put in place in early 2021.


Self Employed Income Support Scheme (SEISS) extended

An extension to the SEISS from November 2020 to April 2021 will provide self-employed individuals with further support. The grant will be available to those who are currently eligible for the SEISS and are actively continuing to trade, but are facing reduced demand due to COVID-19.

Two taxable grants will be available:

The first grant will cover a three-month period from the start of November until the end of January. This initial grant will cover 20% of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £1,875 in total.

The second grant will cover a three-month period from the start of February until the end of April. The level of the grant is yet to be decided on.

Time to Pay extension

A 12-month extension via HMRC’s self service Time to Pay facility means that many taxpayers under self-assessment will have the option to set up a Time to Pay Arrangement in respect of tax payments due in January 2021.

This means that payments deferred from July 2020, and those due in January 2021, totalling up to £30,000 (previously £10,000), could now be spread over 12 months to be settled under a payment plan over the period until January 2022, using the self-service facility which taxpayers will need to access through their personal tax account.

Taxpayers with liabilities over £30,000, or those who cannot use the online facility, who cannot pay their tax liabilities on time will need to contact the HMRC Coronavirus Time to Pay helpline by telephone to arrange time to pay arrangements. This will involve a detailed discussion with HMRC regarding your financial position and the amounts you are able to pay.

All time to pay arrangements should be agreed before the payment due date of 31 January 2021, otherwise late payment penalties may still be incurred. Provided arrangements are agreed before the due date, late payment penalties will be avoided but it is expected that interest will still accrue.

Loan Schemes

Pay as You Grow scheme

The Pay as You Grow scheme will give businesses more time and flexibility to pay back Bounce Back Loans.  Loans can be extended from six to ten years which will halve the average monthly repayment. This extension will also be applicable to the Coronavirus Business Interruption Loan Scheme.

Businesses which are struggling can choose to make interest-only payments, which can be used up to three times. There will also be an option to suspend payments for up to six months, which can only be used once, and only after having made six repayments.

Extension of loan schemes

Applications for the following loan schemes have been extended until the 30th November:

  • Coronavirus Business Interruption Loan Scheme
  • Coronavirus Large Business Interruption Loan Scheme
  • Bounce Back Loan Scheme
  • Future Fund

The COVID-19 Corporate Financing Facility will also remain open until 22 March 2021.

Further detailed information on the above loan schemes, and the support available for you and your business as previously announced by the Government is available on our COVID-19 support hub.

HMRC will continue to publish further guidance on these new measures in the coming days and weeks, but in the meantime if you have any questions or would like further advice, please do not hesitate to get in touch and we will be happy to help.