The Chancellor has announced that he has cancelled his November budget and replaced it with a winter economy plan. Rishi Sunak announced a raft of new measures yesterday which he hopes will both aid economic recovery and support business. The main announcements were as follows:
Job Support Scheme
The furlough scheme as previously announced will cease on 31st October and will be replaced with the new Job Support Scheme from 1st November. The scheme is expected to run for 6 months and will be open to all small and medium sized businesses with a UK bank account and PAYE scheme. Large employers, with more than 250 employees will be expected to demonstrate that they have been adversely affected by COVID-19 and are not making dividend distributions to shareholders either.
The conditions as described on HMRC website are as follows:
- Employees must be on an employer’s PAYE payroll on or before 23 September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made 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 hour’s threshold.
- For every hour not worked by the employee, both the Government and employer will pay a third each of the usual hourly wage for that employee. 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. The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.
- “Usual wages” calculations will follow a similar methodology as for the Coronavirus Job Retention Scheme. Full details will be set out in guidance shortly. Employees who have previously been furloughed, will have their underlying usual pay and/or hours used to calculate usual wages, not the amount they were paid whilst on furlough.
- Employers must pay employees their contracted wages for hours worked, and the Government and employer contributions for hours not worked. Our expectation is that employers cannot top up their employees’ wages above the two-thirds contribution to hours not worked at their own expense.
We expect the claim system to be similar to the current furlough scheme.
An example of how this could work in practice according to the HMRC website is:
Beth normally works 5 days a week and earns £350 a week. Her company is suffering reduced sales due to coronavirus. Rather than making Beth redundant, the company puts Beth on the Job Support Scheme, working 2 days a week (40% of her usual hours).
Her employer pays Beth £140 for the days she works.
And for the time she is not working (3 days or 60%, worth £210), she will also earn 2/3, or £140, bringing her total earnings to £280, 80% of her normal wage.
The Government will give a grant worth £70 (1/3 of hours not worked, equivalent to 20% of her normal wages) to Beth’s employer to support them in keeping Beth’s job.
The table below shows the impact on the funding given by the government as the proportion of hours worked by the employee increases. It does not take into account the cost to the employer of National Insurance or pension contributions.
Self Employed Income Support Scheme (SEISS) Extension
The second and proposed final grant which HMRC previously announced must be claimed by 19th October 2020. It was announced yesterday that this scheme is also to be extended. The grant will be available to the self-employed who were originally eligible for the SEISS and are still actively continuing to trade but with reduced demand. This scheme will also run for 6 months from 1st November and will be payable in the form of two taxable grants.
The first grant will cover the period from November to January 2021 and will be calculated as 20% of average monthly trading profits and capped at a total of £1,875. The second grant will cover the three months from February 2021, but it has not yet been announced how much support will be given. Once we have this information, we will of course send a further update.
We expect this grant to be claimed and paid in the same way as the first two, which unfortunately means we will not be able to claim this as agent. It should be claimed via you own personal Government gateway account.
VAT reduced rate for hospitality industry
The reduction to 5% VAT rates in this sector was due to end on 12 January 2021, but yesterday it was announced that it would be extended to 31 March 2021. The reduced rate covers food and non-alcoholic drinks from restaurants, pubs, cafes and similar premises, supplies of accommodation and admission to attractions. If you are in any doubt whether your business qualifies for this reduced rate, please contact us for advice.
Many of you have applied and successfully claimed funding via this one of the governments backed schemes. If you haven’t yet applied for one of the schemes you have until 30th November 2020 to do so.
The Bounce Back loans (BBLS) are between £2,000 and £50,000 to a maximum of 25% of turnover. There are no repayments in the first 12 months as the interest is covered by the government. Initially, the loan was due to be paid over the five years after this repayment free period. It has now been announced that the term to repay has been further extended so the debt can be repaid over up to ten years. There will also be an option to have an interest only repayment period.
The Coronavirus Business Interruption Loan scheme (CBILS) provides loans of up to £5 Million, 80% of which is backed by a government guarantee. Yesterday’s announcement saw the term of the repayment extended to 10 years.
If you haven’t applied yet but would like more advice on how to do so, please contact us or your bank for more information. The application process is designed to be simple and, in most cases, results in a successful application.
VAT deferral scheme
Those businesses that chose to not pay the VAT for the quarter that ended March to June 2020 were due to pay this back in full by 31 March 2021. It has now been announced that rather than pay in full in March 2021 you can instead split your repayment into 11 equal instalments. We understand you will need to ‘opt in’ to this scheme and it won’t be automatic as it was with the initial deferral.
July Payment on account deferral
HMRC allowed the July 2020 payment on account to be delayed until January 2021. Taxpayers with up to £30,000 of self-assessment due will be able to use the HMRC’s Time to Pay service and repay over up to an additional 12 months. The debt will need to be settled in full by January 2022.
Please contact your normal Wheelers contact if you would like to discuss any of the new measures mentioned above.