As a response to the continued economic crisis the UK faces as a result of the Coronavirus pandemic, the Chancellor of the Exchequer, Rishi Sunak, has today announced the extension and introduction of financial measures to help the self-employed and SMEs survive through the winter and into 2021.
In the Winter Economy Plan – Mr Sunak’s latest financial announcement since his Summer Economic Update in July – the Chancellor shared how the Government will support businesses over the next few months, with an emphasis on retaining employees, as his “number one economic priority is to protect people’s jobs”.
Here, we outline which measures have been extended and the new measures that will be introduced within the next 6 months.
Job Support Scheme
The new Job Support Scheme is a highly anticipated new measure of today’s announcement, which has been designed to replace the Coronavirus Job Retention Scheme that is due to end on 31 October.
With more than 2 million workers still on furlough, and new restrictions put in place this week in the hospitality sector and on events, there is growing concern that a significant number of people will find themselves unemployed once the furlough scheme ends.
To help combat this, the Government will launch the Job Support Scheme from 1 November 2020 for 6 months, which will protect “viable jobs” in small and medium businesses who are facing lower demand over the winter months due to Coronavirus.
To be eligible, employees will need to work at least one-third of their normal hours, to be paid as usual by their employer. For the remaining hours not worked, the Government and the employer will pay one-third of outstanding wages each. However, as stated by the Chancellor, larger businesses will only be eligible “when their turnover has fallen”. Mr Sunak also noted that employers retaining furloughed staff on shorter hours can claim both the Jobs Support Scheme and the Coronavirus Job Retention Bonus, and eligible employees did not need to be on the furlough scheme to apply for the new scheme.
SEISS to be extended
Throughout the pandemic, critics have raised concerns that the self-employed have not received the same level of financial support. Today, the Chancellor revealed that the Self-Employment Income Support Scheme will now be extended until 30 April 2021. This will cover 20% of the average monthly trading profits of an eligible self-employed individual through a Government grant.
More “Time to Pay” for Self-Assessment taxpayers
Following on from the Self-Assessment deferral in July, Self-employed and other taxpayers will be given more time to pay taxes due in January 2021. Taxpayers with up to £30,000 of Self-Assessment liabilities due can pay their amount due over an additional 12 months, meaning that they will not need to be paid in full until January 2022.
Updates to VAT Deferral in the “New Payment Scheme”
In March, the Chancellor announced a VAT payment deferral, where a lump sum would be due by the end of March 2021. According to the Government, over half a million businesses took advantage of this measure. However, to help make this payment more manageable, Mr Sunak has now provided businesses with the option of splitting their due payment into smaller, interest free payments over the course of 11 months. Businesses will need to opt in, but all are eligible. HMRC will put in place an opt-in process in early 2021.
Extension of VAT rate cut for tourism and hospitality
The VAT rate cut to 5% for the tourism and hospitality sectors, which was due to end in January 2021, has now been extended until 31 March 2021, which will help support over 150,000 businesses and protect 2.4 million jobs in more vulnerable positions.
Loan application extensions and the introduction of Pay As You Grow
So far, Bounce Back Loans have provided £38 billion financial support to over a million small businesses during the pandemic. Today, Mr Sunak has provided more support for borrowers by giving them more time to make their repayments if required as part of a new “Pay As You Grow” scheme. Under this scheme, struggling businesses can choose to make interest-only repayments, or suspend repayments altogether for up to 6 months. These loans can now also be extended from 6 to 10 years. Moreover, the application deadline for all loan schemes has been extended to 30 November. A new loan programme is also set to begin in January 2021 with more details to follow soon.
Winter Economy Plan in brief
Undoubtedly, the recent spike in Coronavirus cases in the UK requires a great series of measures to help businesses and individuals survive this extremely challenging time. As with his Summer Economic Update, Mr Sunak focused today’s announcement on protecting jobs and helping to ease the financial burden on businesses over the next six months, especially as many of the initial schemes introduced in March – such as the furlough scheme – are due to end soon. However, he made clear that these schemes are unable to protect every job, so there will be difficult times ahead for SMEs while the economy recovers from the impact of COVID-19. Of course, the devil is in the detail, and we await to see the full details released by the Government in due course.
We will keep you informed of all updates during this time so you can be aware of all the support being made available to you and your business. If you have any questions or enquiries, please get in touch with the team here.