On 24 September 2020, following the Prime Minister’s expansion of Covid-19 preventative measures, the Chancellor announced in Parliament additional government support to be introduced in the UK to protect businesses and workers who have been, and will again be, impacted by the effects of Covid-19. The Chancellor stated that “the primary goal of our economic policy remains unchanged – to support people’s jobs – but the way that we achieve that must evolve.”
Previously, businesses in UK could benefit from the government furlough scheme, a scheme that provided immediate, short-term protection for millions by paying the wages of employees that were unable to work during lockdown. However, the furlough scheme is due to end on 31 October 2020 and many people are concerned about what will happen next to vulnerable businesses and employees.
The Chancellor will introduce a new winter economy plan, comprising of measures to protect jobs and help vulnerable businesses through the uncertain months ahead. The new plan will include a Jobs Support Scheme aimed at protecting millions of returning workers, extending the Self-Employment Income Support Scheme and the 15% VAT cut for hospitality and tourism sectors, and provide help for businesses in repaying their government-backed loans.
Job Support Scheme
A Job Support Scheme will be introduced in the UK on 1 November 2020 and will last for 6 months. The new Scheme aims to protect viable jobs in businesses that are facing lower demand over the winter months as an effect of Covid-19.
The Scheme will help employers pay the wages of staff who are required to work reduced hours due to Covid-19. The way that the Scheme will work is that the employer will continue to pay the wages for the hours that their employee works, but for the hours not worked, the government and the employer will each pay one third of their equivalent salary. This will result in employees receiving pay for 2/3rds of the hours that they are not working below full employment.
Buckworths considers this a move in the right direction, one that allows viable jobs to be preserved, giving businesses the best chance of a full and fast recovery when Covid-19 restrictions eventually end. The scheme will reduce the need for many unnecessary job losses, and support skilled workers and their livelihood in this difficult time.
The eligibility criteria for the Scheme will be as follows:
- the employee must be working at least 33% of their usual hours;
- the level of grant will be calculated based on the employee’s usual salary, capped at £697.92 per month;
- small and medium sized businesses are eligible; and
- larger businesses are eligible, only if they can prove that their turnover has fallen during lockdown; and
- businesses do not need to have been signed up to the furlough scheme to benefit from the Job Support Scheme.
Employers who are retaining furloughed staff on shorter hours can claim and benefit from both the Jobs Support Scheme and the Jobs Retention Bonus.
The Jobs Retention Bonus provides additional support to employers who keep on their furloughed employees in meaningful employment after the government’s furlough scheme ends on 31 October 2020. The Job Retention Bonus is a one-off payment to employers of £1,000 for every employee who they previously claimed for under the scheme, and who remains continuously employed through to 31 January 2021. Eligible employees must earn at least £520 a month on average between the 1 November 2020 and 31 January 2021.
Self-Employment Income Support Scheme (SEISS)
As part of the winter economy plan, the government will also be extending the Self-Employment Income Support Scheme (SEISS).
As part of the extension of the SEISS, an initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade, but whose businesses face reduced demand due to the effect of Covid-19. The initial lump sum will cover three months’ worth of profits for the period from 1 November 2020 to the end of January 2021, and is worth 20% of average monthly profits, up to a total of £1,875.
An additional second grant, which may be adjusted in response to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April 2021.
Tax Cuts and Deferrals
As part of the plan, the government also announced that it will extend the temporary 15% VAT cut for the hospitality and tourism sectors, meaning that these sectors will continue to pay the lower 5% VAT rate up until the end of March 2021. This is aimed at giving businesses in a sector that has been severely impacted by the pandemic the confidence to maintain staff as they adapt to a new trading environment.
In addition, up to half a million business who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which will give them the option to pay back their VAT bill in smaller instalments rather than paying a lump sum in full at the end March 2021. Through the New Payment Scheme they will be able to make 11 smaller interest-free payments during the 2021/22 financial year.
On top of this, around 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
Help for Businesses in Repaying Government-Backed Loans
Bounce Back Loans have given over a million small businesses a £38 billion boost to survive the pandemic. The weight will be lifted off more than a million businesses who took out a Bounce Back Loan through a new Pay as You Grow flexible repayment system.
This will provide more time and flexibility for firms repaying a Bounce Back Loan and includes:
- extending the length of the loan from six years to ten years, which will cut monthly repayments by nearly half;
- allowing businesses who are struggling to pay interest-only payment periods; and
- giving payment holidays of up to six months to some businesses that are in severe trouble.
This measure will further protect jobs by allowing businesses more time to recover from the pandemic.
More than 60,000 small and medium sized businesses have taken out Coronavirus Business Interruption Loans. The government intends to give Coronavirus Business Interruption Loan Scheme (CBILS) lenders the ability to extend the length of loans from a maximum of six years to ten years, if it will help businesses to repay their loan.
In addition, the Chancellor announced he would be extending applications for the government’s coronavirus loan schemes that are helping over a million businesses until the end of November 2020. As a result, more businesses will now be able to benefit from the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund. This change will align all the end dates of these schemes.
Buckworths are pleased with the immediate efforts announced by the Chancellor to protect small and medium businesses and employees suffering hardships at this difficult time. However, as we look past the immediate challenge and to the future, we know that more will need to be done to renew and grow our economy.
Michael Buckworth, founder of Buckworths commented that the extension of the Future Fund for a further two months is very welcome. Within our client base, the 95% of applicants have been successful in securing funding from the Future Fund. Start-ups who meet the requirements and are struggling to raise investment by other means, should consider contacting us for help applying for the Future Fund.