The Government’s Winter Economy Plan
Job Support Scheme (JSS)
Rather than continue with The Coronavirus Job Retention Scheme (CJRS), the Chancellor has announced an entirely new scheme to subsidise employees continuing to work part of their normal hours: The Job Support Scheme (JSS). This scheme will operate for six months from 1 November to 30 April 2021.
Who is eligible?
The JSS will be open to all employers with a UK PAYE scheme and back account but, to be eligible, large companies must be able to prove that they are still suffering a significant drop in turnover as a result of the pandemic. The scheme is intended “To support viable UK employers” but it is not currently clear whether there will be specific qualify criteria linked to this. It is confirmed that this is a stand-alone scheme – there is no requirement for the employer or employee to have participated in the CJRS before 1 November and employers can claim under both the JSS and the Job Retention Bonus Scheme.
What effect does this have on employers?
Employers can claim the JSS subsidy for all employees that work at least 33% of their normal contractual hours during the claim period. The subsidy from the government will be up to 33% of the employee’s normal pay (up to a maximum of £697.92 per month) for the contractual hours not worked during the claim period: employers will be required to match this payment in percentage terms. In total, this will guarantee employees a minimum income of 77% of their normal earnings during the claim period.
What are the restrictions?
There will be several restrictions placed on employers who use the JSS. Employers making claims under the scheme will be prevented from making certain payments (such as dividends to shareholders or capital distributions) while the scheme continues. Similarly, an employer cannot claim for an employee who is on notice of redundancy.
How can you claim it?
It is expected that a new claims portal will open during November, but employers should note that the JSS subsidy will be paid in arrears. Therefore, employers will only be able to claim reimbursement after they have made payments to employees. This is less helpful for an employer’s cash flow than the current CJRS but should help to reduce the likelihood of incorrect claims being made.
VAT Support for Businesses
Deferred VAT – New Payment Scheme
The government will give taxpayers which deferred VAT payments between 20 March 2020 and 30 June 2020 the option to spread their payments over 11 interest-free payments in the financial year 2021-2022. It is assumed that this is the period 1 April 2021 to 31 March 2022, although the details have not yet been published. All taxpayers which took advantage of the VAT deferral are eligible to use the New Payment Scheme, but taxpayers will need to opt-in. HMRC has announced it will put in place an opt-in process in early 2021.
Tourism and Hospitality
The government has announced it is extending the temporarily reduced rate of VAT (5%) to 31 March 2021 for this sector. The VAT reduction was originally due to be in place for a fixed period of 15 July 2020 to 12 January 2021. The VAT reduction will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, supplies of accommodation and admission to attractions across the UK.
Business Loan Schemes: Repayment Changes
The Chancellor announced changes to the Bounce Back Loan and Coronavirus Business Interruption Loan schemes, including extended repayment terms and application deadlines, and an ability to move to interest-only payments or suspend repayments for up to six months.
Bounce Back Loans – Under a new ‘Pay as You Grow’ flexible repayment system, businesses will be able to:
- Extend the maximum repayment period from six years to up to 10 years
- Opt for interest-only repayments for up to six months (for up to three times)
- Suspend repayments for up to six months, after having made at least six repayments
Coronavirus Business Interruption Loans
The government guarantee for qualifying loans will be extended from six years to up to 10 years. The deadline for applying for the Coronavirus Business Interruption Loan Scheme, Coronavirus Large Business Interruption Loan Scheme, Bounce Back Loan Scheme and Future Fund will be extended to the end of November 2020. Full details of all the changes will be announced in due course. A new guaranteed loan programme will be launched in January 2021. The COVID-19 Corporate Financing Facility will remain open until 22 March 2021. Where a company has exhausted all other options and is of strategic importance to the UK, the government may also consider providing bespoke financial support.
For more information or advice on any of the above economic update, please get in touch.