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Government Winter Economy Plan

Posted: 28th Sep 2020 by Clair Watmore Business Advice General, Coronavirus, Corporate Finance, self employed, Taxation

On Thursday 24 September the Chancellor delivered his “Winter Economy Plan”, in lieu of the Autumn Budget which has been cancelled. This is not surprising, given that it is difficult for anyone, individuals, businesses, or countries to budget at the moment. His plan was very much business focused, and the main announcements are detailed below:

Job Support Scheme

This is a new 6-month scheme starting from 1 November 2020, which has been designed to support viable jobs.

  • Employees must work at least one-third of their hours, paid as normal, in order to qualify for the scheme. The government and employer will then each cover one-third of any remaining hours the employee is not working.
  • Employees will therefore forego one-third of their pay for the hours that they have not been working. This means that employees working the minimum one-third of their hours will still receive at least 77% of their pay.
  • The level of the grant will be calculated based on an employee’s usual salary but subject to a cap.
  • The Chancellor said that the scheme will be open to all small and medium-sized businesses, but larger businesses will only qualify when their turnover has fallen as a result of the pandemic.
  • You can still use this scheme even if you have not previously participated in the Coronavirus Job Retention Scheme.
  • The previously announced Job Retention Bonus, allowing qualifying businesses to claim a £1,000 for each CJRS participating employee, will remain. Employers can claim both the Job Retention Bonus and funding through the Job Support Scheme.
  • All Small and Medium-Sized Enterprises (SMEs) will be eligible; large businesses will be required to demonstrate that their business has been adversely affected by COVID-19, and the government expects that large employers will not be making capital distributions (such as dividends), while using the scheme.

Further information can be found here.

Self-Employment Income Support Scheme Extension

The Chancellor announced additional help for the self-employed based on similar terms and conditions as the new Jobs Support Scheme.

  • The extended scheme will apply for 6 months from 1 November 2020 with an initial taxable grant made available to those who continue to trade and are currently eligible for SEISS.
  • The initial lump sum will cover three months of profits from 1 November 2020 calculated as 20% of average monthly profits, up to a total of £1,875.
  • An additional second grant will be available from 1 February 2021 to 30 April 2021, but the level of this second grant amount is subject to review.

Further information can be found here.

Loan Deadlines Extended

Businesses that have taken out a Bounce Back Loan will be able to benefit from a new Pay As You Grow flexible repayment system.

  • This will include an extension in the loan term from six to ten years. There will also be new options for interest-only repayments for up to six months as well as payment holidays.
  • The Coronavirus Business Interruption Loans will also have their Government guarantee extended to ten years.
  • The deadline for applying for all the Government’s coronavirus loan schemes will be standardised and pushed back until 30 November 2020.
  • A new successor loan guarantee programme is also expected to be introduced early next year.

New VAT Payment Scheme

Businesses had the option to defer the payment of any VAT liabilities due between 20 March 2020 and 30 June 2020. The deferred payment was due to be paid in full to HMRC by 31 March 2021. The Chancellor has now confirmed that businesses will instead be able to make 11 smaller interest-free payments during the 2021-22 financial year.

Further information can be found here.

Self-Assessment Payment Deadlines

Taxpayers that were due to make their second payment on account for the 2019-20 tax year had the option to have the payment due date deferred until 31 January 2021. It will now be possible to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility for this payment and also for payments due in January 2021 extending the deadline until January 2022.

VAT Reduction for Hospitality and Tourism Sector

The VAT reduction that was announced as part of the Summer Economic update was scheduled to end on 12th January 2021. The end date for the VAT cut has now been extended until 31 March 2021 to give the affected sectors more time to adjust to the difficult trading conditions. This means that VAT charged on food, accommodation and attractions (such as eat-in or takeaway food in restaurants, cafes and pubs, cinemas, theme parks and zoos) will see VAT reduced from 20% to 5% until the end of March 2021.

Conclusion

The new incentives announced should be welcomed as the government continues to try and cope with this unprecedented pandemic. Managing the economic ramifications are causing great difficulties for many people and businesses across the country. These steps, at least, give affected businesses and individuals a degree of certainty as to the level of government assistance available to them throughout the coming months.

Read the full Winter Economy Plan

As more details surrounding the different support schemes are announced we will share the information with you.

Look out for our updates but in the meantime if you require further information contact enquiries@hghyork.co.uk or call us on 01904 655202.