The Treasury has scrapped plans for an Autumn Budget this year because of the coronavirus pandemic. In its place, Chancellor Rishi Sunak has today announced a Winter Economy Plan aimed at minimising further unemployment as stricter Covid-19 restrictions come into force.
As with previous announcements, I awaited with baited breath Rishi’s comments made to the House this morning regarding future business and employee support. My particular interest was the impact any decisions were likely to have on our payroll clients, given the work and reporting already made under the existing Furlough Scheme.
The new measures in summary:
- The furlough scheme (CJRS) will end on 31 October 2020 as originally suggested.
- On 1 November 2020 the Jobs Support Scheme (JSS) will be introduced for a period of six months. This scheme aims to support viable jobs only and not to unnecessarily pay employees to be paid to remain at home. The JSS basically works as follows:
- Employees have to work a minimum of 33% of their normal working hours these will be paid as normal by the employer
- The remaining 67% of the working hours will be paid 1/3 by the Government 1/3 by the Employer.
- This means that the employee would receive 77% of their normal pay. (For example an employee working 35 hours a week will receive pay equivalent to 27 hours work)
- Small / medium companies automatically qualify and large companies will have to prove their income has been seriously affected.
- The JSS is open to all UK Companies including those that did not previously undertake the Furlough Scheme (CJRS).
- Self Employed will be subject to a similar arrangement as that for the JSS, exact details not released with the statement.
As with the Furlough Scheme, the devil is often in the detail and with a focus on viability – I am sure there will be further eligibility criteria released prior to the commencement of the scheme.
Rishi then went on to discuss cashflow support for businesses going forward as it was recognised that in order to support jobs and make the necessary payments needed under the JSS, that business need to protect the cashflow in the business to enable this to happen. Announcements in this respect were made as follows:
- Bounce Back Loans (BBL), the repayment period will be able to be increased from 6 years to 10 years, therefore potentially halving the repayments needed. There will be the option for interest only repayments and in severe situations, repayments can be suspended for up to 6 months. There will be no detrimental credit implications for businesses utilising any of these amendments.
- In respect of the big brother to BBL, CBILS, the guarantee period and repayment period can be increased up to 10 years.
At the moment, details have not been provided as to what mechanism will be in place to adopt these – although this will not be an immediate issue for businesses as repayments not likely to commence until May/June next year. The application process has been extended until the end of the year for both loan support programs.
- Deferred VAT payments – the repayment of VAT that was correctly deferred during March to June will be able to be repaid over 11 months to help with cashflow. No interest or penalties will arise on this delayed payment.
- July Self Assessment Tax payments that were deferred until 31 January 2021 will be able to be repaid over 12 months to help with individuals cashflow. No interest or penalties will be applied to this delayed payment.
I suspect that the taxpayer is very likely to have to apply to HMRC in order to request monthly repayments rather than this being put in place automatically.
- Finally, for the hospitality and tourism industry the VAT reduced rate of 5% has been extended to 31 March 2021.
The tone of the Chancellor’s announcement has changed to a more realistic, long-term solution in a move where the emphasis is now on protecting ‘viable’ jobs.
We will be reviewing the detail and will be in touch with any clients who will be affected in due course. If you would like to discuss this in the meantime, please get in touch with your usual Lambert Chapman contact.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.