Winter Economy Plan – support for UK businesses and workers through COVID-19 resurgence

Sep 25, 2020

On Thursday, Chancellor of the Exchequer Rishi Sunak, announced the UK Government’s package of targeted measures to provide support and certainty to businesses and workers facing into a challenging Winter. The Winter Economy Plan includes further support for employment, gives the self-employed more time to pay taxes due in January 2021, introduced a deferred VAT payment option and extends the five percent VAT rate for the hospitality sector until March 2021.

New Job Support Scheme – With the Coronavirus Job Retention Scheme (CJSR) due to come to a close over the Autumn, the new Job Support Scheme will be introduced from 1 November 2020, supporting viable UK employers facing depressed demand and asking employees to work reduced hours. There are three key principles attaching to the new Job Support Scheme:

  • Viable jobs – employees must work at least a third of normal working hours and be paid in full for this by the employer;
  • Hours not worked – for every hour not worked the employer and the Government will each pay one third of the employee’s usual pay, with the Government contribution capped at £697.92 per month;
  • Targeted support – Large businesses will need to meet a financial assessment test to show their business has been adversely affected by COVID-19, while all SMEs (no definition provided) will be eligible.

The new Job Support Scheme will ensure that employees will earn a minimum of 77 percent of their normal wages, where the Government contribution has not been capped. Employers can claim the new scheme in addition to the Job Retention Bonus. The new scheme will run for 6 months, until April 2021.

The Job Support Scheme Factsheet provides greater detail on the new scheme. Further guidance will be published shortly.

SEISS Grant Extension – In recognition of the continued impact that COVID-19 has had on the self-employed, the SEISS Grant will be extended. The extended scheme will run from November 2020 to April 2021. Those who are currently eligible for the SEISS and are actively continuing to trade but are facing reduced demand due to COVID-19 will be eligible for the grant extension.

The grant extension will be in the form of two taxable grants:

  • The first grant will cover the three-month period beginning November to the end of January and cover 20 percent of average monthly trading profits, paid out in a single instalment, and capped at £1,875 in total.
  • The second grant will cover the three-month period beginning February to the end of April. The level of the second grand will be reviewed by the Government in due course. 

The SEISS Grant Extension Factsheet provides more information on the scheme.

Easing the burdens on business

Several measures, including tax cuts and deferrals, as well as giving flexibility to pay back loans have been included in the Winter Economy Plan, to ease the burdens on business.

Extending the temporary VAT rate reduction for hospitality and tourism

The temporary reduced rate of VAT (5 percent) will be extended from 12 January to 31 March 2021.

Extension of access to finance schemes

The UK Government is extending the below list of temporary loan schemes to 30 November 2020 for new applications;

Support continues through the COVID-19 Corporate Financing Facility, which remains open until 22 March 2021.

Pay as you grow

Businesses that borrowed under the BBLS will be given the option to repay their loan over a period of up to 10 years. Businesses will also have the option to temporarily move to interest-only payments for periods of up to six months or to pause their repayments entirely for up to six months.

CBILD loan extension

Additional flexibility for SMEs will also be available as CBILS lenders are intended to be able to extend the terms of a loan up to ten years.

VAT deferral ‘New Payment Scheme’

Businesses who deferred VAT due in March to June 2020 will be given an option to spread their payments over the financial year 2021 – 2022. The New Payment Scheme is available to all business who deferred VAT through an opt-in process, which HMRC will put in place in early 2021.

Enhanced time to pay for self-assessment taxpayers

More time will be given to self-employed and other taxpayers to pay taxes due in January 2021. Taxpayers with up to £30,000 of self-assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. Accordingly, self-assessment liabilities due in July 2020 will not need to be paid in full until January 2022.

Support for public services

The Chancellor pledged to provide the NHS and other public services the support they need to respond to COVID-19. Delivering on this pledge, HM Treasury has so far approved £68.7 billion of additional expenditure on public services for the immediate response to COVID-19, including £24.3 billion since the Plan for Jobs in July.

You can read the Winter Economy Plan for further details on the measures announced, as well as the press release from HM Treasury and the Rt Hon Rishi Sunak MP.