Chancellor’s ‘Winter Economy Plan’ Unveiled

This lunchtime, the Chancellor, Rishi Sunak, unveiled his ‘Winter Economy Plan’ to the House of Commons. The headline announcement is a new Job Support Scheme, which sees the government and employers subsidise a percentage of wages for employees who are on reduced hours.

Other announcements include an extension of the 5% VAT rate, a ‘Pay as you Grow’ scheme to make business loan repayments easier and, as we anticipated last month, there will be no autumn Budget for the second year in succession.

We’ve pulled together a brief summary of the measures revealed today, and how they might affect you.

Job Support Scheme

With the Coronavirus Job Retention Scheme coming to a close at the end of next month, the Chancellor today announced a brand new Job Support Scheme to take its place. The scheme will see employees who are working a minimum of one-third of their normal working hours, receive over three-quarters of their salaries for six months from November. The government will be sharing subsidy of the employee’s remaining (unworked) contracted hours with the employer.

So, the lowest amount an employee on the scheme will receive is 77% of their normal monthly wages. That breaks down to roughly: 33% worked (paid by the employer, as normal); 22% topped up by the employer; and 22% paid by the government (capped at £697.92). Crucially, it means the employee will keep their job for the duration of the scheme.

Who’s eligible for the Job Support Scheme?

The scheme is endorsed by the CBI and the TUC, and will begin on November 1st. That’s the day after the Coronavirus Job Retention Scheme closes. The Chancellor hopes it will provide sufficient, targeted support for the firms who need it most. So, unlike the ‘blanket approach’ applied to the furlough scheme, eligibility criteria for the Job Support Scheme will be slightly tighter.

Whilst all Small and Medium Sized businesses are eligible for the scheme, only larger businesses whose turnover has fallen during the course of the pandemic can apply. Other guidelines will also be imposed on larger companies who make use of the scheme, such as restrictions on capital distributions (i.e. dividends) paid out to company directors and shareholders. We’ll bring you more on this in the coming weeks, prior to November.

However, eligible businesses will still be able to claim the Job Retention Bonus – announced during the summer – and businesses do not have to have used the Job Retention Scheme to make use of the new support scheme.

What’s more, for the entirety of the scheme’s duration, businesses will not be permitted to issue redundancy notices to ANY employees who are on the Job Support Scheme.

Business

The Chancellor hopes a new Pay as you Grow scheme will provide relief for businesses that took out government guaranteed, ‘Bounce Back’ loans earlier in the year. Those loans are to be extended from six to ten years, almost halving average monthly repayments.

Lenders using the Coronavirus Business Interruption Loan Scheme will also be able to extend their loan length from six years to ten years.

Businesses involved will also have the option to move to ‘interest only payments’ or, if necessary, suspend payments for up to six months. Whichever option they choose, no business’ credit rating will suffer as a result.

A new successor loan guarantee programme will also be announced in January, according to the Chancellor.

Self-Employed

The Self-Employment Income Support Scheme grant (SEISS) has been extended on terms similar to that of the Job Retention Scheme. The extension is available in two taxable grants. The first grant covers the three month period between November and January, with a further grant available from February to April.

That initial grant will be paid in a single instalment and covers 20% of an individual’s average monthly trading profits (capped at £1,875). The government will review the level of the second grant in due course.

Additional support has also been announced for self-employed people in relation to tax, with more time to pay taxes due in January. Self-assessment income tax payers will be able to defer payments until January 2022. Furthermore, anyone with a self-assessment tax debt of up to £30,000 will be able to use HMRC’s Time to Pay to secure a payment plan over 12 months.

VAT

Following a 15% reduction in certain sectors – such as tourism and hospitality – earlier in the summer, the Chancellor also revealed that the new 5% VAT rate will be extended for affected industries until the end of March 2021. This includes the “supply of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, supplies of accommodation and admission to attractions”.

Furthermore, those companies who deferred their VAT repayments from March to June have the option to split their repayments into 11 smaller, interest free instalments over the course of 2021-22. Businesses will need to opt into this New Payment Scheme, but all are eligible, and it should help up to half a million businesses.

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