Harts CHARTERED ACCOUNTANTS

Coronavirus support update – NEW Government Winter Economic Plan

29th Sep
Self Employed

Winter Economic Plan

Last week the Chancellor of the Exchequer, Rishi Sunak, announced a number of new business support measures as part of his Winter Economic Plan.

Although Mr Sunak was keen to stress that his primary goal for economic policy remains unchanged; to support people’s jobs, there is a distinct change in emphasis when compared to measures announced in the spring and summer.

The economy remains extremely fragile, but the focus is now on protecting only those jobs and businesses which would be viable were it not for the continuing restrictions. The government has acknowledged that it cannot save every job and in particular the new package does not encourage businesses to retain employees beyond 31 October unless they will be needed in the future

New Job Support Scheme

The headline is that furlough comes to an end, as anticipated, on 31 October and will be replaced by a new job support scheme which will last for 6 months from 1 November 2020 to 30 April 2021.

The Chancellor’s objective in the new scheme is to support the wages of people in work, giving business which faces depressed demand the option of retaining employees on short time rather than making a number of them redundant.

The scheme will be open to all employers and will cover employees who were on payroll (meaning an RTI submission had been made) at 23rd September 2020. This does mean that employees who were recruited in late August and September might not qualify depending on when payrolls were run. However, the scheme will be open to all employers regardless of whether they had previously made a furlough claim.

The use of the new support scheme does not affect eligibility for the return from furlough bonus. This was announced in the summer and can be claimed in February in respect of previously furloughed employees who remain employed throughout November, December and January.

Under the terms of the scheme, the employee must work a minimum of 33% (one-third) of their hours and will be paid in the normal way for those hours. For the hours not worked, the employee will receive two-thirds of their normal pay, with one third coming from each of the employer and the government. Employers will not be able to top up wages for the hours not worked.

Employees will be able to come on and off the scheme, but cannot be made redundant while a claim is being made under the support scheme.

By way of example, this means an employee working 33% of their normal hours (the minimum permitted) will receive 77% of their normal pay. The cost to their employer will be 55% of their normal salary. This is 33% for hours actually worked and 22% as the employer’s contribution under the job support scheme.

Alternatively, an employee working 70% of their normal hours will receive 90% of their normal pay. The cost to their employer will be 80% of their normal salary. This is 70% for the hours actually worked and 10% as the employer’s contribution under the job support scheme.

These examples show that the cost to a business of using the scheme is greater where employees are working a smaller proportion of their normal hours, so 2 employees working 75% hours will be more cost efficient than 3 employees working 50% hours. Whether the business should retain the 3 employees in this case would come down to the business’s level of confidence in whether all three employees could return to their full hours in the future. There will not be a single answer for all businesses.

Also business owners may want to consider carefully whether any family members currently on furlough should continue to do reduced duties after the end of October. The inability to top up will mean that claiming the government subsidy for short time working requires the family member to take a reduction in drawings.

Claims will be made monthly from December.

The government has produced the linked guide and has said that further details will be made available in due course.

Find out more on the Job Support Scheme Factsheet

Support For the Self Employed

The government has announced a further two taxable grants for those who have been eligible for the first two self-employed grants. The grant for November to January will be capped at £1875 or 20% of average monthly trading profits. This is significantly less than the 70% which can currently be claimed. The grant for the quarter from February to April is yet to be determined.

A self employed individual does not have to have claimed either of the previous two grants to be eligible.

Find out more on the Final SE Factsheet

Business Loan Schemes

The application deadlines for the CBILs and Bounceback loan schemes have been extended until 30 November 2020. There have also been changes to both schemes to allow flexibility for loans to be paid back over up to 10 years (rather than the current 6) and to provide for interest only payment and for businesses in serious financial difficulties, short payment holidays.

It is anticipated that a further government loan guarantee scheme will be announced in January, though no further details are yet available.

Tax Deferrals

The government has announced that the spring 2020 quarter’s VAT payment, which had previously been deferred until March 2021 may now be spread interest-free over the period to March 2022. The government has not yet announced whether this further deferral will be automatic or will need to be applied for.

Find out more about Covid-19 Deferral of VAT Payments

The government also announced that self-assessment tax-payers who are unable to pay their income tax in January 2021 (this includes the deferred July 2020 payment on account) will be able to apply for a further deferment of the liability until January 2022. However it is important to note that the government’s press releases indicate that this deferment will need to be applied for; it is not automatic as was the case for the July 2020 payment on account.

Support for Hospitality, Leisure and Tourism Sectors

The reduced VAT rate of 5% in these sectors will now apply until 31 March 2021.

We will continue to update you as further details become available. However, if you have any queries in the meantime, please do not hesitate to contact us.

Harts Webinar Series – Success in a Changing Landscape

We continue our series of seven fortnightly interactive webinars to help keep your business agile, proactive and thriving in uncertain times. Each 45-minute sessions, hosted by Steven Glicher and guests, are designed to provide practical, really useful information and the opportunity to discuss any issues raised.

Today’s fourth seminar ’10 Killer Ideas’ will be available on our YouTube Channel along with the previous webinars in the series.

Cheadle Office is Now Open

Our Cheadle office is now open with restricted hours, please contact us before visiting. However, Macclesfield Office remains open normal hours.

Get in Touch

Call us on 01625 669669 or email info@harts-ltd.com if you have any queries about topics covered above or to find out more about our services at Harts. Please follow us on LinkedIn for up to date information.

Take Care

The team at Harts