Winter Economy Plan

The Chancellor has announced his ‘Winter Economy Plan’ which contains a package of measures to help businesses and employees through the current Covid19 pandemic.

The main elements to the plan are:

  1. A new Job Support Scheme to replace the Coronavirus Job Retention Scheme.
  2. An extension to the Self-Employment Income Support Scheme.
  3. Increased flexibility on support loans.
  4. VAT cut extension.
  5. VAT and Income Tax deferral.

Job Support Scheme

The scheme will be introduced from 1 November and will run for 6 months. It is intended to protect viable jobs in businesses where there is currently lower demand due to Covid19.

To be eligible, an employee must work at least one third of their usual hours. The employer will pay them in full for hours worked. With the remaining ‘usual hours’ that are not worked, the employer will pay one third of them at normal rates of pay and the Government will match this, subject to a cap of £697.92 per month. The employee will therefore receive payment in full for the hours worked and payment for two thirds of the hours not worked.

The Job Support Scheme will be open to businesses across the UK even if the employees have not previously been furloughed.

Self-Employment Income Support Scheme (SEISS)

The existing SEISS is being extended. It will be open to those who are eligible for the current SEISS and are continuing to trade but face reduced demand due to Covid19.

An initial taxable grant will be paid to cover November, December and January. This will be calculated at 20% of average monthly profits up to a total of £1,875.

A second grant, which may be adjusted to reflect changing circumstances, will also be available to cover February to April 2021.

The method of calculation, timing etc. have yet to be published.

Loans

Businesses that took advantage of Bounce Back loans will now have additional flexibility through a new Pay as You Grow repayment system. This will allow:

  • The repayment period to be extended from a maximum of six years to ten years.
  • Businesses to swap to interest only payments for up to six months (an option which can be used up to 3 times).
  • Businesses to pause payments for up to six months (this option can only be used once and at least 6 payments have to be made first).

The maximum loan period for CBILs loans will also be extended to ten years.

The application period for Bounce Back Loans and CBILs has been extended until the end of November.

VAT

The temporary cut in VAT from 20% to 5% for the tourism and hospitality sectors has been extended to the end of March 2021.

VAT and Income Tax Deferral

VAT due for the quarters ended 29 February, 31 March and 30 April 2020 were originally deferred until 31 March 2021. This has now been extended and the deferred VAT can be paid by 11 interest-free payments during the 2021/22 financial year.

The second self-assessment income tax payment on account due 31 July 2020 was originally deferred until 31 January 2021. In addition to this deferred payment on account, the 19/20 balancing payment and 20/21 first payment on account also fall due by 31 January 2021. All of these payments (the deferred payment from 31 July 2020 and the two further payments due 31 January 2021) have now been deferred by a further 12 months and are not due until 31 January 2022.