Winter Economy Plan – what you need to know
Sep 25, 2020
PAGE UPDATED 01/10/20
Chancellor Rishi Sunak has confirmed that there will be no Autumn Budget this year. Instead he announced his Winter Economy Plan, designed to help businesses that are suffering from the ongoing economic threat of coronavirus. Here’s a summary of the new measures that were announced, some of which have received a mixed response.
Job Support Scheme
The Job Support Scheme (JSS) will replace the Coronavirus Job Retention Scheme (CJRS) which comes to an end on 31 October 2020. The aim is to keep people employed in viable jobs, to try and stem the flow of mass redundancies.
- It starts on 1 November 2020, and will last until 30 April 2021.
- It’s open to all small and medium-sized businesses. Larger businesses must be able to demonstrate that their turnover has fallen during the pandemic. They will also be expected to refrain from paying dividends to shareholders, and must not use share buy-back schemes, while claiming under the JSS.
- It’s available to all employers, even if you have not previously used the furlough scheme.
- Anyone employed as of 23 September 2020 is eligible, but employees must not be on redundancy notice.
- Employees must work at least 33% of their usual hours, and as an employer you must continue to pay your staff their normal wages for the hours they work (not their rate of pay when furloughed). This 33% of working time ratio will apply for November 2020 to January 2021, and the government may then increase this minimum percentage from 1 February onwards.
- For any remaining hours that an employee doesn’t work, the government and the employer must each cover one third of the employee’s usual pay. E.g.:
- Employee works minimum 33% of hours with 66% hours remaining. They receive 77% of pay = 22% from the government and 55% from their employer (33% worked + 22%)
- Employee works 55% of hours with 45% of hours remaining. They receive 85% of pay = 15% from the government and 70% from their employer (55% worked + 15%)
- An employee doesn’t have to work for 33% of every week, or work the same pattern every month. They will be able to chop and change, as long as each short-term working period lasts for a minimum of seven days.
- You must agree any new short-time working arrangements with your staff and notify them in writing. This agreement must be made available to HMRC on request.
- As an employer you will be reimbursed in arrears by HMRC, as you were with the CJRS. You’ll need to pay your employee first, and then make a claim for the JSS through an online portal which will open in December 2020. You will be paid the JSS grant once each month, but only after the RTI return that reports the employee’s wages has been received by HMRC. You will need to bear the cost of Employer’s NI and pension contributions on your employee’s pay.
- The government’s contribution is capped at 22% of usual wages, and at £697.22 per month.
- If you meet the eligibility criteria, you will also be able to claim the Job Retention Bonus for your furloughed employees when using the JSS.
Self Employed Support Scheme
The existing self-employed grant scheme (SEISS) will be extended on the same basis as the Job Support Scheme, as follows:
- Two further SEISS grants will be available. Grant number three will cover the period November 2020 to January 2021, and the fourth SEISS grant will cover February to April 2021.
- These taxable grants are open to anyone who has been eligible for the first and second rounds of SEISS grants, and if you are continuing to actively trade but facing reduced demand due to coronavirus. You don’t need to have claimed the previous grants under the SEISS to claim the third or fourth grant.
- The third grant will be worth 20% of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits and capped at £1,875. It’s not yet clear when applications will open or close for this grant.
- More details about the fourth grant will be confirmed later, as it may be adjusted to respond to changing circumstances.
- The grants are subject to Income Tax and National Insurance.
Self Assessment Tax Deferral
If you’re a self assessment taxpayer the government is giving you longer to pay your taxes, which would normally be due on 31 January 2021. This follows on from a deferral of the payment on account (POA) of income tax, which was due on 31 July 2020.
If you owe up to £30,000 in self assessment taxes, you’ll be able to use HMRC’s online Time to Pay facility, in order to set up a plan to pay your bill in instalments over an additional 12 months. This means that you can spread out both your tax payments deferred from July 2020, and also those due in January 2021, until the end of January 2022.
Be aware that although you won’t need to pay any interest on the deferred payment-on-account between July 2020 and January 2021, you will have to pay interest at 2.6% on all your outstanding tax from 1 February 2021.
If your tax bill exceeds £30,000, or you need longer than 12 months to pay it, you can phone HMRC to agree a bespoke payment plan.
Earlier in the year up to half a million businesses chose to defer paying their VAT bills until the end of March 2021. The Chancellor has announced that in order to give businesses more breathing space, you have now have the option to pay back the VAT you owe in 11 smaller interest-free payments during the 2021-22 financial year, rather than in one lump sum at the end of March 2021. All businesses are eligible for this, but you’ll need to apply online to opt-in.
VAT cut extended
The reduction in VAT from 20% to 5% for the hospitality and tourism sectors was due to end on 12 January 2021. However, this will now remain in place until 31 March 2021.
The Chancellor also announced a new ‘Pay as You Grow’ flexible repayment system for the million-plus businesses who took out a Bounce Back Loan (BBL). This means that you’ll have the option to repay your BBL loan over ten years rather than six years, which will cut your monthly repayments by nearly 50%.
You’ll also have the option to make interest-only payments for periods up to six months (which you can use three times) or you can pause your repayments entirely for up to six months (which you can use once and only after you have already made six payments). This won’t affect your credit rating.
The same loan extension from six years to ten years is also going to be made available for those businesses that have taken out a Coronavirus Business Interruption Loan, in order to help with repayments.
You now have until 30 November 2020 to apply for one of the state-backed loans to help with the financial impact of coronavirus. A new government loan programme will then be made available from January 2021.
More information and guidance about these measures will be issued in due course, and we’ll share these with you as soon as we find out. In the meantime if you have any questions about the Chancellor’s Winter Economy Plan please do let us know and we’ll be happy to help.