The Winter Economy Plan

The Winter Economy Plan

Summary Of Measures Outlined By The Chancellor

Chancellor, Rishi Sunak, recently announced his “Winter Economy Plan” in response to the ongoing Covid-19 restrictions on the economy, having also announced that an expected November 2020 Budget has been cancelled.  The key announcements from the “Winter Economy Plan” are as follows:

Job Support Scheme

The Coronavirus Job Retention Scheme (CJRS) for furloughed employees is to cease as previously announced on 31 October 2020.

A replacement Job Support Scheme will be introduced from 1 November 2020 for a period of 6 months for small and medium sized businesses (assumed to be the Companies Act definition of size).  Large businesses may also qualify if they can demonstrate that their turnover is still significantly decreased due to the pandemic.  Large employers claiming under this Job Support Scheme are expected not to make certain payments, such as dividends and capital distributions, while the scheme continues. 

Under this scheme the government will contribute towards employees’ salaries who are working fewer hours than normal due to decreased demand.  In order to qualify the employees must work at least 33% of their normal hours during the first 3 months of the scheme.  This requirement is designed to demonstrate that the jobs are viable.  The percentage of normal working hours is to be reviewed for the remaining 3 months of the scheme.  The employees must be on the employer’s PAYE payroll on or before 23 September 2020, however, claims cannot be made for employees who are on notice of redundancy. 

The employer is to pay employees in full for the hours they actually work with the employer and government each paying one third of the employees’ salaries for the hours not worked.  The government’s contribution will be capped at £697.92 per month per employee and will not cover employer’s National Insurance or pension contributions.  The government has stated their “expectation is that employers cannot top up their employees’ wages above the two-thirds contribution to hours not worked at their own expense.”

The previously announced Job Retention Bonus can also be claimed in respect of employees for whom the Job Support Scheme is claimed.  This Job Support Scheme can also be claimed regardless of whether or not claims have been made under the CJRS scheme.

A separate portal will be open for claims in due course and the subsidy will be paid in arrears on a monthly basis.

Further support for self employed taxpayers

The Self Employment Income Support Scheme (SEISS) is to be extended enabling self employed taxpayers who are eligible for the current SEISS, even if no claims have previously been made, to claim 20% of average monthly profits to cover the period from November to the end of January 2021.  The maximum claim is £1,875 and can be claimed provided the taxpayer is actively continuing to trade but is suffering reduced demand due to coronavirus from 1 November 2020 to the date of claim.  A further grant will be available in early 2021 to cover the period from 1 February 2021 to 30 April 2021 and the level of this further grant is currently subject to further review.

Temporary VAT cut

The temporary 15% VAT cut for the tourism and hospitality sectors has been extended further and is now planned to cease on 31 March 2021, rather than mid-January 2021 as previously announced. This extension also applies to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafes etc.

Deferral of tax payments

Businesses were previously permitted to defer payment of VAT liabilities due in the period between 20 March 2020 and 30 June 2020, with payment then being required in full on or before 31 March 2021.  The Chancellor has now announced that, rather than having to settle such deferred VAT liabilities in full by 31 March 2021, businesses can instead opt in to settle the liabilities in 11 interest free payments during the tax year 2021/22.

Individual taxpayers had the option to defer their 31 July 2020 income tax liabilities to 31 January 2021.  No interest or penalties will be charged provided the deferred liabilities are settled in full by 31 January 2021.  The Chancellor has now announced that deferred 31 July 2020 and other income tax liabilities due on 31 January 2021 can be deferred and settled in instalments over a 12 month period to 31 January 2022.  If the total liability deferred is less than £30,000 the application for deferral will be automatically accepted once it is made online.  Deferral of liabilities above £30,000 will need to be agreed with HMRC by telephone.    It is unclear whether HMRC will charge interest on this further 12 month deferral. 

Loan facilities

In addition to extending the closing date to 30 November 2020 for the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund, the terms of certain loan facilities are to be changed as follows:

Bounce back loans – the maximum term of these loans can be extended from 6 years to 10 years and there will be the option to have an interest only payment period of 6 months (up to 3 times) and also the possibility of a payment holiday of 6 months, after having made 6 repayments.

Coronavirus Business Interruption Loan Scheme (CBILS) – the government’s guarantee for qualifying loans will be extended from 6 years to 10 years.

A new guaranteed loan facility is to be introduced in January 2021.

Further detail is yet to be provided concerning these announcements, however, please contact us if you require specific advice and we will endeavour to assist you. 

 

 

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