Here we summarise the support measures which will be introduced or updated, for businesses and individuals, along with our commentary on these measures.
Job Support Scheme
The Job Support Scheme will replace the Coronavirus Job Retention Scheme. It will be a 6 month scheme that will begin on 1 November 2020.
What we know so far:
- Under the scheme, the government will subsidise the pay of employees who are working fewer than normal hours due to lower demand.
- Workers must do at least a third of their normal hours.
- Employers will pay staff for the hours they work. Then the government and the employer will pay a third each for the hours they can’t work, with the remaining third unpaid. The government pay/grant will be capped at £697.92 per month.
- All small and medium sized businesses will be eligible for the scheme, but larger business will also be eligible if their turnover has fallen during the crisis.
- It will be open to employers even if they have not previously used the furlough scheme.
- An example: For someone on £2,000 a month working 50% hours, they would get £1,000 normal pay plus £333 extra from their employer and £333 from the government, providing an income of £1,666 (83% of the usual earnings).
- Because the governments contribution is capped at £697.92 per month it means that those earning more than approximately £38,000 per annum will receive a lower percentage when compared to their usual salary.
- We await the full details on this scheme, such as the mechanism and process for making claims and whether employers can top up wages if desired.
Please note: The following table is for illustrative purposes only and figures have been rounded to the nearest whole number. We expect a government calculator or guidance to be made available to assist employers in making their payroll calculations.
|Hours Employee Worked||33%||40%||50%||60%||70%|
|Hours Employee Not Working||67%||60%||50%||40%||30%|
|Employee Earnings (% of normal wages)||78%||80%||83%||87%||90%|
|Government Grant (% of normal wages)||22%||20%||17%||13%||10%|
|Employer Cost (% of normal wages)||55%||60%||67%||73%||80%|
Source: HM Treasury
Our support service
We are expecting to be able to offer a service to our payroll clients to carry out their Job Support Scheme claims. We will be sending communications to our clients shortly.
We say: It is positive news that the government will continue to support workers when the Job Retention Scheme ends. However, the government contribution will fall drastically, whilst employers contributions will increase significantly. For instance, in October, before the Job Retention Scheme ends, employers will pay furloughed workers employer National Insurance and pension contributions plus 20% of their wages to make up 80% of their salary, up to a cap of £2,500. Under the Job Support Scheme, if an employee is working 33% of their usual hours, the employers contributions will be 55% of the worker’s usual salary (which includes 22%, during which no work is being provided). This is understandably a real concern for businesses with reduced (or no) trading and/or limited reserves. We advise that cashflow projections are adjusted accordingly to give a realistic view on profitability and cash positions, so that appropriate action can be taken sooner rather than later. We are able to work with clients who require added support in this area.
Government loan schemes extended
The government is extending Bounce Back Loans (BBLS), Coronavirus Business Interruption Loans (CBILS), Coronavirus Large Business Interruption Loans and the Future Fund until 30 November 2020. Previously, these had been due to close for applications at the end of September.
We say: For businesses who have already accessed finance under these schemes but who require further financing, they may be able to (1) refinance an existing BBLS with a CBILS loan, (2) access further CBILS facilities for individual businesses within a group structure or (3) take additional CBILS loans where there is capacity within the maximum loan amount. The availability of these options may vary by lender, so you should speak to your finance provider.
Government loan repayments extended
Businesses that took out government loans (Coronavirus Business Interruptions Loans or Bounce Back Loans) will have longer to pay them back.
What we know so far:
- Bounce Back Loans repayments (being rebranded as ‘Pay as You Grow’) can be extended from six years to 10, cutting monthly repayments by nearly half.
- Coronavirus Business Interruption Loan Scheme lenders can extend the length of loans from the current maximum of six years to 10 years.
- Businesses struggling can choose to make interest only payments for six months and those “in real trouble” can apply to suspend repayments altogether for six months.
- Businesses will not see their credit rating fall as a result, the chancellor says.
We say: Extending the loan term may help businesses with immediate cash flow issues, however the downside is that there will be a greater charge in total interest costs on the borrowing.
Extended time to repay deferred VAT bills
Businesses who deferred their VAT bills will be able to pay back their taxes in smaller interest-free 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.
Hospitality sector VAT cut extended
The cut in VAT to 5% for the hospitality and tourism sector will be extended until 31 March 2021.
Self-Employment Income Support Scheme extended
The chancellor is extending the Self-Employment Income Support Scheme (SEISS), though, initially at least, at a much lower level than before.
What we know so far:
- A third grant will be available to those eligible for the Self Employment Income Support Scheme Grant
- The taxable grant will cover three months’ worth of profits for the period from November to the end of January
- It will cover 20% of average monthly profits up to a total of £1,875
- Only those eligible for the current SEISS scheme can apply. Therefore, your trading must have been adversely affected, you must have filed a tax return for 2018/19, you must earn more than 50% of your total income from self-employment and your average trading profit must be no more than £50,000/year.
- It will be paid in one single payment, though we don’t yet know when applications will open or when money will be paid out.
- A fourth grant may be available to the self-employed to cover February 2021 to the end of April. The level of the fourth grant has yet to be set by the government.
We say: As with the SEISS scheme currently, the third and fourth grants will be based on your profits calculated over three tax years. This is calculated from an average of the tax returns for 2016/17, 2017/18 and 2018/19. If you did not trade in 2016/17, it’s based on the average of 2017/18 and 2018/19. If you did not trade in 2017/18, the amount is based on 2018/19 only – even if you traded in 2016/17.
Self-assessment taxpayers given more time to pay
Self-assessment taxpayers will be able to benefit from an additional 12-month extension from HMRC on the ‘Time to Pay’ self-service facility. This means that payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022. Deferred tax payments may now include (where applicable) your:
- Second Payment on Account (POA) 2019/20
- Balancing payment 2019/20
- Capital gains tax 2019/20 (if not paid under 30-day rule)
- First POA 2020/21
Unlike the deferral previously in place on 31 July 2020, the taxpayer will have to apply for ‘Time to pay’ to spread the tax due over 12 monthly instalments to January 2022.
Where the total tax due doesn’t exceed £30,000 the application for time to pay will be agreed automatically when the taxpayer applies using an online form. However, if the tax due exceeds £30,000 or the taxpayer needs longer to pay, the telephone service will remain available to agree a bespoke payment plan.
The package of targeted economic support measures announced will offer some short-term relief to many firms facing an uncertain future, however business and consumer confidence remains fragile for many.
Furthermore, as UK-EU trade talks continue, it is important for businesses to prepare for the end of the transition period. You can read our Brexit business action points here.
We expect more detail on today’s announcements to follow and will update our information summary in due course.