Trick or treat? The Winter Economy Plan

Sep 28, 2020

After postponing the Autumn Budget in the face of worsening coronavirus infection rates and increased restrictions, the Chancellor announced his ‘Winter Economy Plan’ last week which we summarised in Friday’s Chartered Accountants Tax News. Was it a trick or a treat? We welcome your feedback on the measures announced. We will also update our COVID-19 hub with more on each of the announcements made by the Chancellor. Many of measures announced by the Chancellor were recommendations of this Institute in its Next Financial Year position paper published in early July.

Job Support Scheme

A new Job Support Scheme is to be introduced from 1 November 2020 after the job retention scheme ends. This will be available to businesses “facing lower demand over the winter months due to coronavirus” – more information is awaited on this aspect of the scheme.

Under the scheme, which will run for six months until 30 April 2021, the Government will contribute towards the wages of employees who are working fewer than normal hours due to decreased demand.

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. This means that employees will be paid at least two thirds of their salary per hour for every hour not worked.

Employees must be working at least 33% of their usual hours and the level of grant will be calculated based on an employee’s usual salary, capped at £697.92 per month.

To be eligible to apply for the grant, employees must: 

  • be registered on PAYE payroll on or before 23 September 2020; and
  • work at least 33% of their usual hours during the first three months.

This level of hours will be reviewed by the Government at a later date for the remaining months of the scheme. 

Employers must pay at least two thirds of employees’ salary for every hour not worked. Employers will need to fund the difference between this and the grant and pay National Insurance and pension contributions from their own funds. 

Claims will open in December and grants will be paid on a monthly basis from this date. 

The scheme is designed to sit alongside the Jobs Retention Bonus. Businesses can benefit from both schemes in order to help protect viable jobs. Some more information is available in a newly published factsheet.

The Job Support Scheme will be open to businesses across the UK even if they have not previously used the Job Retention Scheme. Further guidance is expected soon.

Self-Employment Income Support Scheme (SEISS) - grant extension

Self-employed individuals and members of partnerships who are eligible for the SEISS, and who are actively continuing to trade but are experiencing reduced demand due to COVID-19 (again, more guidance on this is to come), will be eligible for a further SEISS grant.

Grants will be paid in two lump sum instalments each covering three months. The first grant will cover a three-month period from the start of November 2020 until the end of January 2021. This will be a taxable grant to cover 20 per cent of average monthly trading profits, and capped at £1,875 in total.

An additional second grant, which may be adjusted to respond to changing circumstances, will be available to cover the period from February to the end of April. Some more information is available on GOV.UK

VAT cut for tourism and hospitality sector extended

As part of the package, the Government also announced it will extend the 5% VAT rate for the tourism and hospitality sectors which was due to end on 12 January 2021 to 31 March 2021.

Self-Assessment - Time to Pay extension facility

Many taxpayers deferred the payment of their second 2019/2020 payment on account which was due on 31 July 2020 until 31 January 2021. As these taxpayers will need to pay this deferred amount, plus any balancing payment for 2019/20 and the first 2020/21 payment on account all by 31 January 2021, their 31 January 2021 tax bill may be larger than usual. 

Any taxpayer unable to make these payments in full by 31 January 2021 may be able to set up a Time to Pay payment plan of up to 12 months online without needing to contact HMRC.

Taxpayers with self-assessment tax debts up to £30,000 and who need extra time to pay will be able to access this Time to Pay facility and can get automatic and immediate approval.

Those with self-assessment debts over £30,000, or who need longer than 12 months to repay their debt in full, will still be able to set up a Time to Pay arrangement but they will need to contact HMRC to set it up. More information on this is expected soon.

VAT deferral - new payment scheme

VAT due in the period 20 March 2020 to 30 June 2020 was due to be paid by 31 March 2021. Businesses will be able to make 11 interest free smaller repayments in the 12 months to 31 March 2022. Again, we expect more detail on this in the coming weeks.