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Winter Economy Plan summary for business owners
24 September 2020
The Chancellor, Rishi Sunak, today unveiled further support measures for employees, the self-employed and businesses in order to help prepare the economy, to further cope with the pandemic over the coming months. Billed as his ‘Winter Economy Plan’, the centrepiece of the scheme was the creation of a ‘Job Support Scheme’ (JSS) to replace the Job Retention Scheme (JRS) from November 2020.
But, did today’s announcement give enough continued support for businesses over the next disconcerting 12 months and has enough been done for business owners to be able to retain and recruit people in their business?
Here’s a brief overview to put you in the picture…
job support scheme (jss)
Designed to directly support people in work on shorter hours, the government will ensure workers are paid for an element of their lost pay.
To qualify, the employee must work and be paid for a minimum of a third of their normal hours. For every hour not worked, the employer and the government will each pay one third of the employee’s remaining pay, with the government’s contribution being capped at £697.92 per month.
Doing the maths, this essentially means employees working one third of their hours will receive at least 77% of their pay (where the government contribution’s not capped). The employer will be reimbursed in arrears.
All SMEs will be eligible for this, with restrictions placed on large companies. Businesses that take advantage of this scheme won’t be able to make redundancy notices to the employees on the scheme.
It will run for 6 months starting from 1st November 2020. For many employees who are still furloughed, these measures will be warmly welcomed and should go some way towards avoiding the redundancy ‘cliff edge’ business leaders were predicting, when the JRS ends next month.
This scheme though, is more of a lifeboat than a bridge and there certainly won’t be room for everyone – employees in the hardest hit sectors will undoubtedly be wondering if this is enough to protect their jobs.
Self Employed Income Support Scheme (SEISS)
The Chancellor also announced an extension of the SEISS grant which will be limited to the self-employed who are currently eligible for the SEISS and are actively continuing to trade, but are facing reduced demand due to COVID-19.
The extension will be in the form of two taxable grants, which will cover the period between November 2020 and April 2021.
Initially, the grant will cover 20% of the average trading profits and be capped at £1,875 in total. The government will review the level of the second grant.
Whilst these measures will be welcomed, there’s still a considerable amount of concern that many self-employed individuals ‘fell through the gaps’ of initial financial help, so won’t benefit from these additional measures either. Expect further noise in this area for sure.
Bounce Back Loan Scheme (BBLS)
Another big challenge the Chancellor acknowledged, quite rightly, was helping businesses with their cash flow and there was a ‘raft’ of measures announced to support businesses in this area.
The BBLS has already given a £38bn boost to one million businesses and now they’ll have more time and flexibility to repay loans, including a ‘pay as you grow’ option.
Businesses can now extend repayment terms from 6 to 10 years, which should halve their average monthly repayments. They can also choose to move to interest only payments and have repayment windows, both for up to 6 months.
Coronavirus Business Interruption Loan Scheme (CBILS)
The government will now allow lenders to extend the term of a CBILS loan to 10 years, making it easier for lenders to give businesses more time to repay.
The application period for loans under BBLS and CBILS, as well as the Future Fund have been extended to 30th November.
There will also be a succession loan scheme announced in January.
VAT deferral schemes
Another measure to help businesses with their cash flow, will be allowing them more time to pay any VAT deferred from earlier this year. This tax was due to repaid in full, in March 2021, whereas businesses will now be able to spread payments over 11 equal installments.
Self-employed time to pay
The self-employed and other taxpayers will also have extra time to repay any deferred taxes over an additional 12 months.
This means self-assessment liabilities of up to £30,000, which were due in July 2020, will now not need to be repaid in full, until January 2022. This should significantly benefit the self-employed.
Extend temporary VAT cut
Two of the most affected sectors due to the pandemic are hospitality and tourism. The current reduction in VAT to 5% will now be extended to 31st March 2021 (originally, this was due to end 13th January 2021).
Whilst the Chancellor claimed this would help protect some 150,000 businesses and 2.4 million jobs through the winter months in these sectors, the fear now is that these estimates are optimistic.
Maybe there could have been more specific additional funding for these sectors as the benefit of the VAT cut may be limited – only time will tell.
The Chancellor also starkly acknowledged that not every business, or every job could be saved, so these measures were never going to be a risk-free solution that would satify all.
That said, our Fortus team’s concern has been around future cash pinch points for our clients over the next 6 months and beyond. So, the measures announced today in respect of the JSS and various extensions to repayment terms will be a huge relief for many businesses in this area.