Rishi Sunak sets out replacements to furlough scheme and extends loan facilities, VAT reductions and self employed support
UK Chancellor Rishi Sunak has outlined additional government support for businesses and workers impacted by Covid-19 as he sought to respond to restrictions aimed at fighting a resurgence of the disease.
Jobs Support Scheme
The package includes a new Jobs Support Scheme (JSS) to protect millions of returning workers, extending the Self Employment Income Support Scheme and a continuation of the 5% VAT rate for the hospitality and tourism sectors. Help will also be given to businesses in repaying government-backed loans.
The JSS will be introduced from 1 November to protect viable jobs in businesses that are facing lower demand over the winter months due to coronavirus.
Under the scheme, which will run for six months employers will continue to pay the wages of staff for the hours they work - but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.
Employees must be working at least 33% of their usual hours. The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
It will sit alongside the Jobs Retention Bonus and could be worth over 60% of average wages of workers who have been furloughed and are kept on until the start of February 2021. Businesses can benefit from both schemes in order to help protect jobs.
Self Employment Income Support Scheme
In addition, the government is extending the Self Employment Income Support Scheme (SEISS). An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to Covid-19. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year, worth 20% of average monthly profits, up to a total of £1,875.
A second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.
As part of the package, the government also announced it will extend the temporary 15% VAT cut for the tourism and hospitality sectors to the end of March next year.
In addition, up to half a million business who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
Self Assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
There will be a new Pay as You Grow flexible repayment system for the more than a million businesses that took out a Bounce Back Loan. This 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.
The government also intends to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.
In addition, the Chancellor also announced he would be extending applications for the government’s coronavirus loan schemes until the end of November.
ACCA’s head of UK, Claire Bennison said: ‘ACCA is encouraged the Chancellor has considered small and medium businesses in his statement. We welcome the extra time and flexibility in the way SMEs will be able to pay back their bounce back loans and Coronavirus Business Interruption Loan Scheme, and we hope to see a simple approach for applying for loans or converting existing loans.
‘Alongside this it is important the government promotes a responsible lending ecosystem and supports SMEs to access the necessary professional advice to properly plan for these long-term financial liabilities.
‘The Chancellor has also acknowledged the pressure small firms are under in terms of cash flow and being able to extend payment of VAT bills over 11 months will be a relief to businesses. However, we’d like clarity on a deferral scheme for all tax payments, not just VAT.
‘While it is welcome that Government is seeking to find ways to help SMEs weather the next six months, it is important these new rules are explained to businesses and their advisors in a clear way, so that everyone knows where they stand.
‘The measures outlined today continue to leave out the two million limited companies company directors employing around 7.5m people. We understand that initial measures had to be rolled out quickly, but this new phase of support is a good opportunity to bring self-employed company directors onto an equal footing with those on the Self Employment Income Support Scheme.'
Full details of the announcement can be found at: Winter Economy Plan