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Winter Economy Plan 2020-21

Covid 19 maco1Highlights from the UK Chancellor's winter economy plan, announced on 24th September 2020, to help combat the impacts of Covid-19 on businesses and self-employed individuals include:

A new Job Support Scheme, primarily targeted at small and medium employers, will be introduced covering employees who work at least one third of their normal hours >read more

The Chancellor confirmed that the furlough scheme will end on 31 October.

The Self-Employment Income Support Scheme (SEISS) will be extended to April 2021, with a revised basis >read more

The closure date for the four existing business loan schemes will be extended to the end of November.

Repayment terms for the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loans (BBLS) will be relaxed, with the maximum term extended to 10 years >read more

The reduction in VAT to 5% for the hospitality and tourism industries will be extended to 31 March 2021 >read more

The deferred VAT and self-assessment payments due early next year can be repayable in instalments rather than as a lump sum >read more

 

Economic impacts of Covid-19

Today’s ‘Economic Update’ by the Chancellor, Rishi Sunak, arrived six months and a day after the Prime Minister announced the start of lockdown on 23 March. Twelve days earlier the Chancellor had made his Budget debut, announcing a “temporary, timely and targeted” package of measures to “deal with the coronavirus”. Their estimated total cost was £12 billion.

That figure now looks like small change in terms of the cost of the pandemic so far. This week’s HMRC statistics on the response to Covid-19 show that to 20 September:

The total value of claims made under the Coronavirus Job Retention Scheme (CJRS) was £39.3 billion, covering 1.2 million employers and 9.6 million jobs. The CJRS will finish at the end of next month. From the start of October employers will have to meet an additional 10% of the CJRS payments, as well as NIC and pension liabilities.

The Self-Employment Income Support Scheme (SEISS) received 4.9 million claims across its two payment periods, totalling £13.4 billion. 

Over £58 billion of finance had been approved under the government’s four loan schemes. Almost two-thirds of this was represented by the Bounce Back Loan Scheme (BBLS) under which the government provides 100% guarantees for lenders to more than 1.25 million small borrowers.

These figures tell only part of the story.

There is also the cost of one year’s business rates relief, grant funding and enhancements to social security benefits. The latest (August) central scenario projection from the Office for Budget Responsibility is for government borrowing to reach £372.2 billion in 2020/21 against the £54.8 billion estimate it made at the time of the Spring Budget.

The latest statement from the Chancellor will increase this year’s borrowing further. However, the consensus among economists is that for now, life support for UK plc trumps any consideration of public debt levels. Today Mr Sunak has divided that support into three main areas:Covid 19 maco2

1. Employment

2. Coronavirus Loan arrangements

3. Taxation

 

Employment

Job Support Scheme

The Chancellor made clear that the CJRS will end on 31 October, as planned. Its replacement will be the Job Support Scheme (JSS), which will run for six months from 1 November until 30 April 2021. Details of the JSS in a policy statement updated 22 October 2020.

The Job Support Scheme provides different types of support to these businesses so they can get the assistance according to their situation. Businessess that are open but facing decreased demand can get support for wages through "JSS Open". Businesses that are legally required to close their premises as a result of coronavirus restrictions set by one or more of the four governments of the UK can get the support through "JSS Closed". 

The Government will review the terms of the scheme in January 2021. Employers will be able make their first claim from 8 December 2020 on GOV.UK, covering salary for pay periods ending and paid in November. Subsequent months will follow a similar pattern, with the final claims for April being made from early May.

Agents who are authorised to do PAYE online for employers will be able to claim on their behalf.

An employer can claim the JSS Open and JSS Closed grant at the same time for different employees, however, an employer cannot claim for a single employee under both schemes at the same time.

Employers are eligible to claim the JSS Open if:

  • an employer with 250 or more employees on 23 September 2020 has undertaken a Financial Impact Test demonstrating their turnover has remained equal or fallen to show they have been adversely affected due to coronavirus; and
  • an employer with less than 250 employees on 23 September 2020 is not required to satisfy the test.
  • some, or all, of their employees are working reduced hours - employees must still be working for at least 20% of their usual hours.

Eligible employers will be able to claim the JSS Closed grant for employees:

  • whose primary workplace is at the premises that have been legally required to close as a direct result of coronavirus restrictions set by one or more of the four governments of the UK.
  • that the employer has instructed to and who cease work for a minimum period of at least 7 consecutive calendar days. 

To find out more on eligibility criteria and conditions for the whole scheme click here.  

Self-Employment Income Support Scheme Grant Extention 

The Self-Employed Income Support Scheme Grant Extention provides support to the self employed in the form of two grants, each available for three-month periods covering November 2020 to January 2021 and February 2021 to April 2021.

To be eligible for the Grant Extension self-employed individuals, including members of partnerships, must:

  • have been previously eligible for the Self-Employment Income Support Scheme (SEISS) first and second grant (although they do not have to have claimed the previous grants)
  • declare that they intend to continue to trade and either:
  • are currently actively trading but are impacted by reduced demand due to coronavirus
  • were previously trading but are temporarily unable to do so due to coronavirus

The extension will last for six months, from November 2020 to April 2021. Grants will be paid in two lump sum instalments each covering a three-month period. The first grant 3 month period is from 1 November 2020 to 31 January 2021 and the Government will provide a taxable grant covering 40% of average monthly trading profits. This will be paid out in a single instalment, covering 3 months' worth of profit, capped at £3,750 in total. 

The second grant 3 month period is from 1 February 2021 to 30 April 2021 and the Government will review the level of the second grant and set the monetary value available in due course. 

The grants are taxable and subject to national insurance contributions. 

HMRC will provide full details about claiming and applications in guidance on GOV.UK in due course. For more information please click here. 

Coronavirus Loan ArrangementsCovid 19 maco3

The closing application date for the four main loan schemes will be extended to 30 November.

Bounce Back Loan Scheme 

The BBLS provides loans of between £2,000 and £50,000, capped at 25% of turnover, with a 100% government guarantee. Under the original BBLS, the borrower did not have to make any repayments for the first 12 months, with the government covering the first 12 months’ interest payments. The maximum loan repayment term was six years.

Under new ‘Pay as You Grow’ options for BBLS:

  • New and existing borrowers will have the option to repay their loan over a period of up to ten years.
  • UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months. This option can be used up to three times.
  • Alternatively, businesses can pause their repayments entirely for up to six months, although this option is only available after six payments have been made and can be used just once.

 

Coronavirus Business Interruption Loan Scheme

CBILS lenders will be allowed to extend the term of a loan up to ten years, while retaining the benefit of the 80% government guarantee.

Coronavirus Large Business Interruption Loan Scheme 

The Coronavirus Large Business Interruption Loan Scheme (CLBILS) will continue in its current form until the end of November.

Future Fund

The operation of the Future Fund, which provides matching convertible loans to innovative businesses will continue in its current form until the end of November.

Covid-19 Corporate Financing Facility

The Covid-19 Corporate Financing Facility, targeted at large businesses and operated by the Bank of England, will remain open until 22 March 2021. Where a company has exhausted all other options, and is of strategic importance to the UK, the government may also consider providing bespoke financial support.

>Find out more about CBILS and Bounceback loans

Tax19796 MACO FINANCIAL ACUITY NEWSLETTER WEB FILES 16

Temporary VAT cut for hospitality and tourism

The reduced (5%) rate of VAT will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, and to supplies of accommodation and admission to attractions across the UK until 31 March 2021 rather than ending on 12 January 2021. >Applying the temporary VAT cut

VAT deferral

A ‘New Payment Scheme’ for VAT deferral will offer businesses that deferred VAT due in March to June 2020 the option to spread their payments over the financial year 2021/22 in 11 equal instalments. All businesses that took advantage of the VAT deferral are eligible and can use the scheme. However, they will need to opt in using a process HMRC will launch in “early 2021”.

Self-Assessment Tax Deferral – Enhanced Time to Pay

The self-employed and other taxpayers will be given more time to pay taxes due in January 2021, building on the self-assessment deferral provided for payments on account in July 2020.

Taxpayers with up to £30,000 of self-assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. This means that self-assessment liabilities originally due in July 2020 will not need to be paid in full until January 2022.

Any self-assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan. >Find out more about HMRC's Time to Pay Service

Further guidance will be issued in due course by HM Treasury and HMRC and we will publish further updates on these pages when the details become available.

You can read more on the Chancellor's Winter Economy Plan on gov.uk >read more

Please get in touch with your usual adviser at Martin Aitken if you wish to discuss any of the announcements made in the Chancellors Winter Economy Plan, or complete our short enquiry form and we will get back to you >Contact us

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