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Chancellor Rishi Sunak announces Winter Economy Plan

Posted by Crunch Accountants on Sep 24th, 2020 | Get paid

Chancellor Rishi Sunak announces Winter Economy Plan | Crunch - image of a business reopening under COVID-19 guidelines

On 24th September 2020, the Chancellor announced the government’s Winter Economy Plan to support businesses over the coming months as the UK deals with the unprecedented economic impact of the coronavirus pandemic.

As with previous government announcements, we await further details on the implementation of the Plan, which includes the following measures, as published on the GOV.UK website:

  • Support for workers and the self-employed
  • Tax cuts and deferral of tax payments
  • Flexibility to pay back government loans.

Support for workers

Central to the new Winter Economy Plan is a new Job Support Scheme, and an extension of the Self Employment Income Support Scheme.

Job Support Scheme

The Coronavirus Job Retention Scheme (CJRS) will end as planned on 31st October 2020 and will be replaced with a new Job Support Scheme. The new Scheme will be open to businesses across the UK even if they have not previously used the furlough scheme. All small and medium-sized businesses are eligible, larger businesses must show their turnover has fallen during the pandemic. The previously announced Job Retention Bonus remains available to businesses.

The new Job Support Scheme is designed to protect viable jobs in businesses who are facing lower demand over the winter months due to the coronavirus pandemic. The new scheme is only available to support workers who are continuing in their jobs, who must be working at least a third of their normal hours and be paid for that work by their employer.

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.

The level of grant will be calculated based on the employee’s usual salary, capped at £697.92 per month.

The scheme means an employee working 33% of their hours will receive at least 77% of their pay, 22% paid by the Government and 55% paid by their employer (the ‘worked’ 33% plus 22% to match the government grant).

We’ve published a Job Support Scheme article and will keep it up to date as the government releases further details on how the scheme will operate and how employers can apply.

Self Employment Income Support Scheme

The government is extending the Self Employment Income Support Scheme Grant (SEISS). An initial 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 the coronavirus pandemic. The initial lump sum will cover three months’ worth of profits for the period from November 2020 to the end of January 2021. 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 2021.

Tax cuts and deferral of tax payments

Extension of VAT cut for the tourism and hospitality sector

The reduced rate of VAT (5%) for the tourism and hospitality sectors will continue to the end of March 2021.

Deferral of VAT bills

Those businesses who deferred their VAT bills to the end of March 2021 will be given more time to pay any outstanding amounts through a New Payment Scheme, which offers the option to pay back in smaller installments. Rather than paying a lump sum in full at the end of March next year, businesses will be able to make 11 smaller interest-free payments during the 2021/22 financial year.

Self Assessment taxpayers – Time to Pay extension

Self Assessment taxpayers who decided to defer their payments on account for the 2020/21 tax year to 31st January 2021 have an additional 12-month extension from HMRC on the Time to Pay self-service facility. This means payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.

Flexibility to pay back government loans

Businesses who took out a Bounce Back Loan can access a new Pay as You Grow flexible repayment system, providing flexibility to repay a Bounce Back Loan. This includes extending the length of the loan from six years to 10 years. Interest-only periods of up to six months and payment holidays will also be available to businesses.

Coronavirus Business Interruption Loan Scheme (CBILS) lenders can extend the length of loans from the previous maximum of six years to ten years if it will help businesses to repay the loan.

The Chancellor also announced the extension of applications for all of the government’s coronavirus loan schemes (Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund) until the end of November 2020.

Further guidance will be issued by the government shortly and we’ll be updating all our Crunch guides with the new information as soon as it’s available.

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