Chancellor Delivers Winter Economy Plan

The Chancellor of the Exchequer has outlined further support to provide certainty to businesses and workers impacted by coronavirus across the UK. Delivering a speech in Parliament, Rishi Sunak announced a range of measures intended to continue protecting jobs and helping businesses through the months ahead as the country braces itself for the further spread of COVID-19.

The Government has already confirmed that there will be no new Budget by the end of this year, stating that now is not the right time to outline long-term plans. However, it has previously stated it would keep its business support mechanisms under review in order to protect jobs and the economy, with adaptations being made to reflect the evolving circumstances. The Winter Economy Plan is a new package for all regions and nations of the UK, and it includes a range of measures, as outlined here.

From 1 November a new Job Support Scheme will be introduced to protect viable jobs in small and medium businesses adversely affected by COVID-19 over the winter. The scheme will run for six months, helping to keep employees in the workforce. The Government will contribute towards the wages of staff working fewer than normal hours due to decreased demand. Employers will continue to pay the wages of staff for the hours they work – but for the hours not worked, the Government and the employer will each pay one third of their equivalent salary. This means employees who can only return to work on shorter time will still be paid two thirds of the hours for those hours they cannot work. In order to support only viable jobs, employees must be working at least 33% of their usual hours. The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month. The scheme will be open to businesses across the UK even if they have not previously used the Coronavirus Jobs Retention Scheme (CJRS).

The Job Support Scheme will sit alongside the Jobs Retention Bonus and could be worth over 60% of the average wages of workers who have been furloughed – and are kept on until the start of February 2021. Businesses can benefit from both schemes in order to help protect jobs.

Elsewhere, the Government is continuing its support for self-employed individuals by extending the Self Employment Income Support Scheme Grant (SEISS). A taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875.

An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April – ensuring support continues into 2021.

Focusing on tax relief, a ‘New Payment Scheme’ is being introduced to provide up to half a million businesses that deferred their VAT bills the option to pay back in smaller 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. Additionally, 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.

Government-backed loans will become more flexible for those businesses that have accepted a Bounce Back Loan, through a new ‘Pay as You Grow’ flexible repayment system. The plans include extending the length of the loan from six years to ten, reducing monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses.

The Chancellor also announced the extension of applications for all of the Government’s coronavirus loan schemes until the end of November. 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 aligns the end dates of all of these schemes.

Finally, as part of the package, the Government has announced it will extend the temporary 15% VAT cut for the tourism and hospitality sectors, retaining the lower rate of 5% VAT until the end of March 2021. The aim is to give businesses in the sector the confidence to maintain staff as they adapt to a new trading environment.

Announcing the Plan, the Chancellor said:

‘Our approach to the next phase of support must be different to that which came before.

‘The primary goal of our economic policy remains unchanged – to support people’s jobs – but the way we achieve that must evolve.’

The Winter Economy Plan full document can be accessed here

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