Chancellor Rishi Sunak has announced the government’s plan to protect jobs and support businesses in the coming months. Key parts of the announced Winter Economy Plan include:
- a new Job Support Scheme,
- extension of Self Employment Income Support Scheme,
- an extension of the VAT cut for hospitality and tourism sectors,
- and help for more than 1 million businesses in repaying government-backed loans.
We break it down for you below, but please get in touch if you have any questions.
Job Support Scheme Wage Subsidy
The Job Support scheme will be introduced from 1 November 2020 to protect viable jobs in businesses who are facing lower demand over the winter months due to COVID-19. The aim is to help businesses keep their employees attached, and will run for 6 months.
The company will continue to pay its employee for time worked, but the cost of hours not worked will be split between the employer, the Government (through wage support) and the employee (through a wage reduction), and the employee will keep their job.
The Government will pay a third of hours not worked up to a cap, with the employer also contributing a third. This will ensure employees earn a minimum of 77% of their normal wages, where the Government contribution has not been capped.
Employers using the Job Support Scheme will also be able to claim the Job Retention Bonus if they meet the eligibility criteria.
All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the Coronavirus Job Retention scheme.
Large businesses will have to meet a financial assessment test, so the scheme is only available to those whose turnover is lower now than before experiencing difficulties from COVID-19.
There will be no financial assessment test for small and medium entreprises.
Employees must be on an employer’s PAYE payroll on or before 23 September 2020.
In order to support viable jobs, for the first three months of the scheme the employee must work at least 33% of their usual hours. After 3 months, the Government will consider whether to increase this minimum hours threshold.
Employees will be able to cycle on and off the scheme and do not have to be working the same pattern each month, but each short-time working arrangement must cover a minimum period of seven days.
The Government contribution will be capped at £697.92 a month.
Grant payments will be made in arrears, reimbursing the employer for the Government’s contribution.
“Usual wages” calculations will follow a similar methodology as for the Coronavirus Job Retention Scheme. More details can be found here, but we will update you when more details come to hand.
Extension of the Self-Employment Income Support Scheme
This grant extension is for self-employed individuals who are currently eligible for the Self-Employment Income Support Scheme and are actively continuing to trade, but are facing reduced demand due to coronavirus (COVID-19).
The extension will provide two grants and will last for six months, from November 2020 to April 2021.
You can see more details including eligibility requirements here.
VAT cut extended for Hospitality and Tourism sectors
Part of the Chancellor’s announcement includes an extension of the VAT cut for the hospitality and tourism sectors. The temporary reduction of VAT rates from 20% to 5% will remain in place until 31 March 2021 instead of January.
These sectors have been some of the worst-hit by the pandemic
The cut applies to food and non-alcoholic drinks, accommodation and admission to tourist attractions across the UK.
Giving businesses flexibility to pay back loans
More than a million businesses who took out a Bounce Back Loan will be given flexibility with repayments through a new Pay as You Grow system.
This change includes extending the length of the loan from six years to ten, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses.
In addition, the Chancellor also announced he would be extending applications for the government’s coronavirus loan schemes that are helping over a million businesses until the end of November. As a result, more businesses will now be able to benefit from the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund. This change aligns all the end dates of these schemes, ensuring that there is further support in place for those firms who need it.
Please get in touch if you have any questions. We will keep you updated as we have more details.