THE CHANCELLOR Rishi Sunak today announced additional government support for businesses and workers impacted by coronavirus across the UK.
The Winter Economy Plan includes a new Jobs Support Scheme, extending the Self Employment Income Support Scheme and 15% VAT cut for the hospitality and tourism sectors, and help for businesses in repaying government-backed loans.
The package of measures, which applies to all regions and nations of the UK, includes:
Job Support Scheme
A Job Support Scheme will be introduced from 1 November to run for six months.
The government will contribute towards the wages of employees who are working fewer than normal hours due to decreased demand.
Employers will continue to pay the wages of staff for the hours they work. For the hours not worked, the government and the employer will each pay one third of their equivalent salary.
This means employees who can only go back to work on shorter time will still be paid two thirds of the hours for those hours they can’t work.
Third of normal hours
In order to support only viable jobs, employees must be working at least 33% of their usual hours. The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
The Job Support Scheme will be open to businesses across the UK even if they have not previously used the furlough scheme, with further guidance being published in due course.
It is designed to sit alongside the Jobs Retention Bonus and could be worth over 60% of average wages of workers who have been furloughed – and are kept on until the start of February 2021. Businesses can benefit from both schemes in order to help protect jobs.
Self Employment Income Support Scheme
The Self Employment Income Support Scheme Grant (SEISS) is being extended. An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus.
The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875.
An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.
Tax cuts and deferrals
The temporary 15% VAT cut for the tourism and hospitality sectors will be extended to the end of March next year.
Businesses which deferred their VAT bills will be allowed to pay back the tax in 11 interest-free payments during the 2021-22 financial year through the New Payment Scheme.
Self-assessment taxpayers will be to use the “Time to Pay” self-service facility to defer again the payments deferred from July 2020, as well as those due in January 2021, to January 2022.
Bounce Back Loans
For businesses who took out a Bounce Back Loan there is a new Pay as You Grow flexible repayment system. This includes extending the length of the loan from 6 years to 10, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses.
Coronavirus Business Interruption Loan Scheme
Government also intends to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of 6 years to 10 years.
The Chancellor also announced he would be extending applications for the government’s coronavirus loan schemes until the end of November. The schemes include: the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund. This change aligns all the end dates of these schemes.
James Talman, CEO of the National Federation of Roofing Contractors (NFRC) said, “Today’s announcement that businesses will be able pay their deferred VAT payments over 11 payments will be welcome relief to construction firms who faced a double whammy with Reverse Charge VAT due to come in the same month”
“However, the government do need to reconsider if Reverse Charge VAT is still an proportionate policy to place on the industry at such a time. Especially with IR35 coming a month later. It’s not too late for the Treasury to reconsider and we would be willing to work with them to consider alternative ways of tackling VAT fraud that aren’t so detrimental to cashflow”
Swift and Significant
Mike Cherry OBE, Federation of Small Businesses National Chair, said: “The UK’s small businesses are facing an incredibly difficult winter. Today’s support package is the flipside of the coin to Tuesday’s COVID-19 business restrictions.
“It is a swift and significant intervention, extending emergency SME loans, creating new wage support for small employers and the self-employed, and providing cashflow help on VAT deferrals and new Time To Pay for any tax bills to HMRC.
“We welcome that the Chancellor is ensuring that decisions to protect public health are informed by the need to protect the economy, people’s jobs and prospects for young people in our schools and workplaces.”
Ben Dyer, CEO of Powered Now, said, “As construction in the UK has continued to rebound and grow post-lockdown, SMEs within the trades have very much been the engine room for this recovery.
“Although many of these businesses are seeing sales increase strongly, many are still dependent on the bounce back loan. The extra cash-flow supports offered by the Chancellor and his Pay As You Grow scheme will help shore up the finances of many SMEs, placing them in a better position to cope with future waves of COVID-19.
“The new Jobs Support Scheme will also help those businesses looking to reintegrate their team as they look to get back to business. This again should provide pivotal assistance to those looking to manage their cash-flow, allowing blessed relief as they look to adapt to a new normal.”
Larger businesses may be disadvantaged
Nigel Morris, tax director at MHA MacIntyre Hudson, says, “The definition and criteria [of the Job Supprt Scheme] will determine the success of the scheme, particularly the extent of a fall in turnover required for a larger business to qualify, and how this will be quantified, audited and proven. It’s not a fool-proof measure.
“We’ve seen some businesses ‘bounce back’ and may find they match last year’s performance or experience just a small drop in turnover. But in such a volatile economic environment this may not last; the next six months could be very different. A measure based on how they’ve weathered the storm so far may exclude many businesses from support, forcing them to make staff cuts if they predict tougher times ahead.
“The Coronavirus Job Retention Scheme has been very complex for businesses to administer, and much of the over claim error rate, understood to be up to 10%, has resulted from these complexities. It’s important the new scheme is simple to administer, but robust enough to avoid fraud and properly target support. Otherwise we will see more fraud, errors and mistakes.
“The ‘guaranteed’ 77% gross pay rate seems generous, especially compared to the Coronavirus Job Retention Scheme, where support is reducing to 60% from 1 October 2020. The Jobs Support Scheme will help employees and businesses to better plan rotas and finances for the next six months, but it will be interesting to see the detail, especially the position on supporting national insurance and pension contributions.
“The scheme should work well where employers can’t provide enough work for employees, but there are sadly many cases where employers can’t provide any work at all. A targeted scheme for employers who can’t provide a ‘base’ level of work should potentially also be considered.”