Winter Economy Plan
As the country continues to struggle with the social and financial effects of Covid-19, Rishi Sunak has today announced further measures to help those most affected.
Job Support Scheme
The Chancellor confirmed that the current furlough scheme is to end on 31 October. This is being replaced by a Job Support Scheme, which is aimed at protecting viable jobs in businesses who are facing lower demand over the winter months.
Under the scheme, which will run for six months and help keep employees attached to the workforce, the government will contribute towards the wages of employees who are working fewer than normal hours due to decrease in demand. Employers will continue to pay their employees for the hours worked, but for the hours not worked, the government and the employer will each pay one third of the equivalent salary.
Eligible employees must be working at least 33% of their usual hours, with the level of grant being calculated based on the employee’s usual salary, capped at £697.92 per month.
All small and medium sized businesses can apply for the scheme, even if they have not previously used the furlough scheme it replaces. However, large businesses must show that their turnover has fallen during the crisis to make a claim.
This scheme will run for six months from the 1st November.
Self Employed Income Support Scheme
The Self Employed Income Support scheme, which is currently in its second phase, will be extended to cover income lost between November and January 2021. The initial lump sum will cover three months’ worth of profit, and is worth 20% of average monthly profits, up to a total of £1,875.
An additional grant, which may be adjusted to respond to the changing circumstances, will be available for self employed individuals to cover the period from February to the end of April.
Tax cuts and deferrals
The 15% reduction in the VAT rate for tourism and hospitality sectors is to continue to the end of March next year, meaning businesses in the sector will only need to charge 5% VAT. This will give businesses in the sector, which has been the most severely impacted by the pandemic, the opportunity to retain staff as they adapt to new trading environments and laws.
In addition, businesses who deferred their VAT payments will be able to take advantage of the New Payment Scheme, which gives them the option to pay the liability back over smaller instalments. Rather than paying a lump sum at the end of March next year, businesses will be able to make 11 small interest free payments during the 2021/22 financial year.
For self assessment taxpayers, they will be able to benefit from a 12 month extension on a ‘Time to Pay’ facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until 2022. Although this might provide some much needed cashflow relief, please bear in mind that this may leave you with a large payment to make in January 2022, so if you have the cash available now, it may be worth making the payments as planned.
Government backed loans
A new ‘Pay as You Grow’ repayment scheme was announced for those businesses who took out a Business Bounce Back loan, whereby the term of the loan is extended from six to ten years, which will cut the months repayments by nearly half. Interest only periods, of up to six months, are also available, as well as repayment holidays.
The term of the Business Interruption Loan has also been extended from six to ten years.
These loan schemes, as well as those for larger businesses, have been vital in keeping business afloat during the pandemic, and therefore the application deadlines have now been extended until the end of November, ensuring businesses who are seasonally effected can still apply.
For further information on any of the above, please visit the government website below:
As we continue to face challenging times, and it is now more important than ever to take stock and ensure that you are well placed to tackle the winter months during such an uncertain time. If we can be of assistance in any way, then please do not hesitate to contact us.
All information is correct at 24 September 2020.
The content of this article is for general information only and does not constitute tax advice. It should not be relied upon and action which could affect your business should not be taken without appropriate professional advice.
Ellie Hammett ACCA
Ellie started with Evolution ABS in April 2010 and became a fully qualified as a Chartered Certified accountant in December 2015. Ellie manages a portfolio of agricultural clients and oversees the marketing committee.
Ellie grew up on her parents’ dairy farm in Dorset before her family moved to Devon in 1998. She now lives with her husband and little boy on the family beef, arable and sheep farm in East Devon.
In her spare time, Ellie enjoys helping out on the farm (although not so much the night-time lambing), spending time with her friends and the odd bit of retail therapy.
Since having her little boy, Ellie is in the office on Monday through to Thursday.