The Chancellor, Rishi Sunak, confirmed that there will be no Autumn Budget this year. He also outlined two new measures to support jobs over the coming months. His Winter Economy Plan offers additional support on a number of fronts including the new:
• A Job Support Scheme and
• An extension to the Self- Employed Income Support Scheme.
The Furlough scheme is dying, long live the Job Support Scheme
It is confirmed that the existing furlough scheme will cease, as previously announced, 31 October 2020. The Chancellor has reaffirmed his support for jobs but not funding to pay staff for being at home.
There is no sectoral element to the new JSS, for example, extra support for sectors adversely affected by lockdown, primarily, hospitality trades, and the financial contribution to businesses by the JSS is not as generous as the financial benefit provided by the furlough scheme.
Consequently, employers will need to consider their options.
More about the Job Support Scheme (JSS)
The following list summaries what has been disclosed about this new support scheme:
• It will be available for six months from 1 November 2020 (closing 30 April 2021).
• To qualify, employees must work for at least one-third of their normal hours, paid for by their employer.
• Employers and the government will then contribute a further one-third each for time not worked.
On this basis, employees will not be paid for the remaining one-third of unpaid time and will effectively receive 77% of their normal pay if working one-third of their normal hours.
The amount of JSS paid will be based on an employee’s usual salary but will be capped at £679.92 per month.
The JSS will be open to all small and medium sized businesses but larger concerns will only qualify if they can demonstrate that turnover has dropped as a result of the pandemic.
It is also confirmed that the £1,000 Job Retention bonus will still be open for claims next year.
What about the self-employed?
Self-employed readers will be pleased to know that if they qualify, government is making two more Self-Employed Income Support Scheme (SEISS) payments. They will cover periods from:
• 1 November 2020 to 31 January 2021: the payment will be based on 20% of average profits up to a maximum pay-out of £1,875.
• 1 February 2021 to 30 April 2021: the amount paid for this quarter will be announced at a later date so changing circumstances can be reflected in the amount offered.
To qualify for these payments, you will need to have been eligible for the previous SEISS grants, are continuing to trade and facing reduced demand for your goods or services.
VAT cuts and deferred payments
As a recognition that the tourism and hospitality sectors will continue to suffer disruption in the coming months, the measures already in place to reduce VAT on this sectors’ services from 20% to just 5% is to be extended. The temporary reduction was due to end 31st January 2021 but will now close 31 March 2021.
In another welcome move, the aching cashflows of many VAT registered businesses will be eased by an offer to spread the repayment of any VAT bills that were deferred during the period 20 March to 30 June 2020. Originally, this deferred VAT was due to be settled on or before 31 March 2021. The Chancellor has now agreed that this payment can be made by 11 interest-free instalments during the 2021-22 financial year.
Deferring self-assessment tax
Self-assessment taxpayers that were able to defer tax due 31 July 2020, until 31 January 2021, will benefit from an additional 12-month extension. The extension will also apply to any other tax due 31 January 2021.
In both cases the amounts due 31 January 2021 will now need to be settled by 31 January 2022.
Pay as You Grow – defer loan
Businesses that have taken out a Bounce Back Loan to ease cashflow will be delighted by changes to the terms of these loans to include Pay as You Grow concessions. These include:
• An extension of the term from six to ten years. This will dramatically reduce monthly repayments, and
• New options for interest only repayments for six months and payment holidays.
Coronavirus Business Interruption Loan Scheme lenders can also take advantage of an extension to their loans from a maximum term of six years to ten years.
Additionally, application deadlines for government backed loan schemes are to be extended to 30 November 2020.
Many of the concessions offered today are merely pushing payment deadlines into the future, they do not in most cases reduce costs, but are a welcome easing of cashflow considerations.
Also, business owners who have previously been able to retain staff by accessing the furlough scheme are now aware that the CJRS will not be extended. The more limited JSS scheme is welcome but does not offer the same level of support. Firms will have to give serious consideration to their staffing needs and in many cases make difficult choices.
We face a challenging winter. Continuing COVID disruption, a possible no-deal Brexit with all its supply-chain risks and a possibly deepening recession give little comfort.
We would like to remind readers that we are here to help. Pick up the phone if you need assistance with marshalling your business resources. You may also like more information regarding any of the Chancellor’s announcements outlined above?
Best regards and stay well…