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Rishi Sunak cancelled his Autumn Budget. The host of measures (including tax increases) to recoup the large investment made in supporting the UK economy are on hold, for now at least.
Instead the Chancellor unveiled a range of emergency initiatives today, as part of his Winter Economy Plan. These are intended to offer a replacement to the furlough scheme and help UK businesses and taxpayers through what will inevitably be a very challenging next 6 months. The government is being very vocal about only being able to support businesses that are able to survive, hence the emphasis on contributing to wage top ups rather than a full subsidy like the furlough scheme.
Here are the key measures announced, with details of how and when to access them where applicable.
Designed to avoid mass redundancies and unemployment when the furlough scheme ends, the new Job Support Scheme will involve the government supporting the wages of people working part-time from November.
It means that full time workers can go back to their workplaces on a part-time basis and, provided they are working for at least a third of their normal hours and being paid accordingly, the government will make a contribution to top-up their lost earnings.
For any regular hours that cannot be worked due to a decline in demand, the government and the employer will jointly pay a third each of the usual wage for that employee. The government contribution will be capped at £697.92 a month. In effect employers will need to be paying two thirds of their employees’ wages, one third of which can be in return for work actually completed, to qualify for the remaining third to be topped up by the Treasury.
The new Job Support Scheme will run for six months and is open to all small and medium sized businesses (SMEs) and their employees, regardless of whether they used the furlough scheme or not. The initial phase of the scheme will run from November 2020 to January 2021, with a second phase from February 2021 to April 2021.
Large businesses may be eligible to benefit too, provided their revenues have fallen below a minimum threshold.
The Job Support Scheme will commence from November. The current CJRS (furlough scheme will end on 31 October 2020). Full details will be made available once more information is released.
Here is a helpful resource published by the government, explaining how the scheme will operate: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/921389/Job_Support_Scheme_Factsheet.pdf
Self-employed workers will also have access to the Job Support Scheme and can claim for lost earnings too. The scheme will operate slightly differently, they will be able to claim a grant for up to 20% of average monthly profits, to a maximum of £1,875. These grants will also be available for November 2020 to January 2021 and from February 2021 to April 2021. Again, the emphasis is on supporting viable businesses who are simply struggling due to the circumstances, rather than propping up those that are unsustainable.
Bounce Back Loan Scheme
The Bounce Back Loan Scheme was due to end on 4 November 2020 for new applications and this is being extended until 30 November 2020. It allows any business to apply for an immediate £50,000 cash payment with very favourable interest rates. As part of the emergency measures announced by Rishi Sunak, repayment terms have also been extended to 10 years from the original 6 years. This means that any businesses with an existing Covid-related business support loan will have almost twice as long to repay their debt. If a business is struggling longer term, they will also have the right to opt for interest-only payments or suspend their repayments entirely for up to six months. These loan term enhancements were unveiled as part of a Pay as you Grow initiative at the start of September.
So far, over one million small businesses have received a total of £38bn from the Treasury through this loan scheme and the Chancellor has promised none of them will see their credit ratings adversely affected. Read more about the Bounce Back Loans and how to get them here: Link to article which has been updated to reflect the new terms
Other loan schemes
The Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme and the Future Fund are also being extended and these loans are also now repayable over 10 years.
A new loan support scheme is expected to succeed the Bounce Back Loan Schemes and is expected to launch from January 2021.
The VAT cut introduced for the hospitality and tourism sector is being extended until 31 March 2021, maintaining the new 5% rate. This was due to be finishing on 31 January 2021.
Additional VAT support
At the start of the lockdown, the government allowed all businesses to defer VAT payments until 31 March 2021. This has now been extended and rather than having to repay everything outstanding in one go, they will have the right to pay over 11 interest-free instalments. Whilst the VAT cut is for hospitality and tourism, this payment extension is for all VAT registered businesses.
If we can help with these or any other matters, please contact partners@rjp.co.uk.
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