Chancellor announces new economic support measures

Friday 25 September, 2020

On 24^th September the chancellor Rishi Sunak outlined additional government support measures for businesses, workers and the self-employed, who continue to be impacted by the coronavirus pandemic.

Employees

• For the six months from 1 November, the new Job Support Scheme (JSS) will protect viable jobs in businesses who are facing lower demand over the winter months due to COVID-19. 
   
• Employees for whom JSS claims are made will need to work a minimum of 33% of their usual hours. 
   
• For every hour not worked the employer and the government will each pay one third of the employee’s usual pay, and the government contribution will be capped at £697.92 per month.
   
• This means that employees for whom JSS claims are made will receive at least 77% of their full time pay where the government contribution has not been capped. 
   
• The employee’s pay will be taxed as it was under the previous Coronavirus Job Retention Scheme and the payments will be deductible for the employer. Amounts claimed by the employer under the JSS will be taxable, but the deductibility of payments out will mean that overall, the scheme delivers tax “neutrality”. 
   
• The employer will be reimbursed in arrears for the government contribution. The employee must not be on a redundancy notice. The scheme will be open to all employers with a UK bank account and a UK PAYE 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.
   

Self-Employed

• The Self-Employment Income Support Scheme (SEISS) will be extended for six months from 1 November and will support  viable traders who are currently eligible for the SEISS and are actively continuing to trade but are facing reduced demand over the winter months. 

The extension will be in the form of two taxable grants:

• The first grant will cover a three-month period from the start of November until the end of January. This initial grant will cover 20% of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £1,875 in total.
   
• The second grant will cover a three-month period from the start of February until the end of April 2021.  The government will review the level of the second grant and set this in due course.
   

Taxation

Three key measures were announced:

• VAT cut: The 15% VAT cut (to 5%) for the tourism and hospitality sectors has been extended to the end of March next year.
   
• Deferred VAT payments: Businesses who deferred their VAT will no longer have to pay a lump sum at the end of March next year. They will have the option of splitting it into smaller, interest free payments over the course of 11 months.
   
• Enhanced Time to Pay for Self-Assessment taxpayers: The self-employed and other taxpayers will be given more time to pay taxes due in January 2021, building on the Self-Assessment deferral provided in July 2020. Taxpayers with up to £30,000 of Self-Assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. 
   
• This means that Self-Assessment liabilities due in July 2020 will not need to be paid in full until January 2022. Any Self-Assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.
   

Business Finance

Further measures were also announced to help businesses with their cashflow with access to business loans with a new "Pay as you Grow" scheme. This works in conjunction with the "Bounce-Back Loan Scheme" (BBLS) and essentially works along these lines:

• BBLS borrowers will all be offered the choice of more time and greater flexibility for their repayments. All businesses that borrowed under the BBLS will have the option to repay their loan over a period of up to ten years (the current maximum is six). 
   
• This will reduce their average monthly repayments on the loan by almost half. UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times), or to pause their repayments entirely for up to six months (an option they can use once and only after having made six payments). 

The various devolved governments may introduce their own specific measures as we saw earlier this year but it is worth noting that HM Treasury made an unprecedented upfront commitment to the devolved administrations, guaranteeing they would receive at least £12.7 billion in additional funding this year on top of their Budget 2020 funding. This comprises £6.5 billion for the Scottish Government, £4 billion for the Welsh Government, and £2.2 billion for the Northern Ireland Executive. This gives Scotland, Wales and Northern Ireland the budget certainty for their coronavirus response in the months ahead

Details of the full range of measures can be found at: https://www.gov.uk/government/publications/winter-economy-plan/winter-economy-plan

Lastly, this website from the CIPD provides a useful source of information.

https://www.cipd.co.uk/news-views/coronavirus/faqs

Contact our financial planning teams for independent financial advice

If you have any questions on how the new measures will affect you or your business please contact one of our independent financial advisers in St Albans, Barnet, Harpenden, Ringwood, Stafford, Ware or Leeds/Bradford.  

Remember if you require personal or corporate financial planning advice, please complete our booking consultation form and your local financial adviser will contact you.  Alternatively, please email enquiries@lonsdaleservices.co.uk or call us on 01727 845500. 

 

 

 

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