Today the Chancellor announced a number of updates and new measures aimed at supporting businesses during what is set to be a difficult winter for many.
Below we have outlined these measures and provided some thoughts on how this could impact you and your business.
- Job Support Scheme
- Government Funding
- Self-Employment Income Support Scheme Grant (SEISS)
- VAT deferral New Payment Scheme
- Support for Hospitality and Leisure Businesses
- Self-assessment Payment of Tax for Individuals
JOB SUPPORT SCHEME
From 1 November, a new Job Support Scheme will be implemented, protecting viable jobs in businesses that are facing depressed demand, over the winter months, due to the ongoing pandemic.
Under the scheme, which will run for six months, employees who are working fewer hours than normal will receive support in the form of a contribution towards their wages from the Government.
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 amount of usual salary.
The scheme in more details:
The employee must be in a viable job
Employees must work at least 33% of their usual hours (this 33% requirement will be reviewed after three months)
The level of the grant from the Government will be calculated based on the employees’ usual salary, capped at £697.92 each month
The Government will open an online portal for employers to make claims in arrears on a monthly basis
All Small and Medium sized businesses (SME) will be eligible for this support scheme and it is anticipated that this will follow the EU definition of a SME (having fewer than 250 employees / a turnover of up to EUR 50 million) but further clarity on this is expected as no definition has been included in the high level Government guidance set out to date.
Larger businesses will only be able to use the Job Support Scheme once they have completed an assessment to demonstrate their turnover has fallen due to Covid-19 will be restrictions placed on the payments of dividends and other capital distributions too in order to qualify for using the Job Support Scheme.
Businesses do not need to have used the CJRS, but those who have will still be eligible to claim the CJRS bonus in January (payable in February 2021) if the previously furloughed employee’s role is being supported by the Job Support Scheme.
What does the announcement mean for you as an employer?
It is probably best putting this into numbers as analysing your costs will be key to helping you take action between now and April 2021 in making your business as robust as possible.
The below highlights a few scenarios and the cost to the employer overall. In each case, the employee earns £2,000 per month and we anticipate that the whole payment, including the portion paid by the Government to the employer will be subject to Class 1 NIC and pensionable, using the automatic enrolment definition.
Furthermore, and playing devil’s advocate:
If the employee works for 32% of their working time, the cost to the employer would be £643.60 per month (£2,000 x 32% = £640 + Employer Pension contribution of £3.60). This is cheaper for the employer, the Government but leaves the employee is a perilous position. One would question whether morally and reputationally, this would be the right thing to do, unless it protected a job that would otherwise be made redundant. The cost of that extra 1% for the employer is therefore £611.15 per month (or £444.48 if able to claim the CJRS Bonus).
Looking at it from a different perspective if that employee worked 100 per month – what would be the additional cost of them working 33 hours as opposed to 32 hours? Based on our analysis:
32 hours would cost the employer £643.60 (32 x £20 per hour, plus employer pension costs). The employee would only receive £640 in pay.
33 hours would cost the employer £1,253.99 (an extra cost of £610.39 per month for that hour) and the employee would receive £1,557.80 for the month, giving them an extra £917.80 per month to get through a challenging winter period.
Overall, and if the employee is an eligible furloughed worker for the CJRS Bonus, the overall additional employer cost for those 6 months would be £2,662.34 (£3,662.34 – £1,000).
On the basis of the above, employers are going to have to plan carefully if they wish to use the scheme. With the Government capping their contribution to a maximum of £697.92 per month and more cost being placed on to the employer than there was during CJRS, employers will need to seriously consider how to protect jobs, manage costs and how to adapt the business accordingly, as well as balance productivity and activity generally.
After helping many employers throughout the UK during Covid-19, we have now developed both a calculator and best practice approach that is helping support businesses with reviewing their costs and options in relation to the above, CJRS and broader aspects that need consideration including the Government’s Kickstart and Apprenticeship packages.
Click here to read our full article on the Job Support Scheme
Today, the Chancellor announced that businesses which have borrowed money through loan schemes will be given more time to repay and apply for loans.
Repayment time extensions – The recently announced extensions to repayments terms will be applied to the below loans:
The Bounce Back Loan Scheme (BBLS) – Over one million businesses have benefitted from a £38 billion boost through this scheme to date and the further changes will give businesses more time and greater flexibility to repay.
A Pay as You Grow flexible repayment system will be introduced, where loans will now be repayable over 10 years instead of the original six years stated, with interest only payments and six-month payments holidays also made available. These measures can cut monthly repayments by half and they will not affect business credit ratings.
The Coronavirus Business Interruption Loan Scheme (CBILs) – There have been over 60,000 CBILs loans provided to date. Those small and medium sized businesses who have received these loans will now also have up to 10 years to repay the money.
Application time extensions
Application time for the above loan schemes as well as the Coronavirus Large Business Interruption Loan scheme and the Future Fund will be extended until the end of November.
There will also be a successor loan guarantee programme coming into place from January 2021. More details will be provided when these are announced.
SELF-EMPLOYMENT INCOME SUPPORT SCHEME GRANT (SEISS)
The Government is continuing to support the millions of self-employed individuals by extending the Self Employment Income Support Scheme Grant (SEISS).
The SEISS Grant Extension provides critical support to the self-employed. The grant will be limited to self-employed individuals who are currently eligible for the SEISS and are actively continuing to trade but are facing reduced demand due to COVID-19.
This will only be open to people with trading profits of up to £50,000.
The majority of income must be from self-employment.
It is only available to those who have submitted tax returns with self-employment income for 2019. The Chancellor has given those who have not filed 2019 tax returns four weeks to submit these to qualify.
Additional eligibility includes those who:
Declare that they are currently actively trading and intend to continue to trade.
Declare that they are impacted by reduced demand due to Covid-19 in the qualifying period. The qualifying period for the first grant is between 1 November and the date of claim.
The extension will provide two grants and will last for six months from November 2020 to April 2021.
The initial lump sum will cover three months’ worth of profits for the period from November to the end of January 2021. This is worth 20% of average monthly profits, up to a total of £1,875.
An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February to the end of April 2021 – ensuring support continues right through to next year.
VAT DEFERRAL NEW PAYMENTS SCHEME
Following on from the Government’s announcement earlier in the year, the Chancellor has today announced a further time to pay certain VAT deferred by businesses. The VAT deferral applied to VAT payments due to HMRC from 20 March to 30 June 2020.
The deferral was in relation to both VAT return payments and the monthly payments on account (where a business is due to make payments on account). The use of the VAT deferral was optional with the VAT due to be settled with HMRC by 31 March 2021. This was a welcome cashflow relief for businesses at the time whilst some businesses chose to settle the VAT due.
The further time to settle the VAT debts has now been extended post 31 March 2021 as the Chancellor has confirmed today that the period to settle the deferred VAT will be extended to allow the outstanding payment to spread the payment over 11 months interest free.
Alternative repayment terms have been set up for VAT debt accrued under the COVID deferral scheme. The ‘New Payment Scheme’ allows all VAT registered taxpayers – who opt in – to make 11 equal instalments over 2021-22 instead of paying a lump sum by 31 March 2021; the opt-in procedure is expected to be in place in early 2021.
This is welcome news for business at this time without the worry of a potential large VAT bill at the end of March 2021 together with the relevant VAT for the VAT period in early 2021. We are awaiting further details on the exact dates and arrangements.
SUPPORT FOR HOSPITALITY AND LEISURE BUSINESSES
As part of the Winter Package, the Government has announced it will extend the temporary 15% VAT cut for the tourism and hospitality sectors to the end of March next year. This should continue to attract customers to take advantage and boost this sector, whilst retaining the many jobs that have been impacted.
SELF-ASSESSMENT PAYMENT OF TAX FOR INDIVIDUALS
Self-assessment payments on account due on 31 July 2020 were deferred until 31 January 2021. In addition to this, the Government will give the self-employed and other taxpayers more time 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. This means that Self-Assessment liabilities due in July 2020 will not need to be paid in full until January 2022. Any Self-Assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.
An increase to the Universal Credit standard allowance by £1,000 a year for the next 12 months, by £1,000 a year.
The Working Tax Credit basic element is also increasing by the same amount.
Self-employed people will be able to access, in full, Universal Credit at a rate equivalent to Statutory Sick Pay for employees.
WHAT SHOULD EMPLOYERS DO NEXT?
We recommend the following:
Don’t panic by making redundancies without careful consideration. Consider your approach to organisational design and personnel requirements – if you had drawn up redundancy plans on the basis of Government support being removed from 31 October, this new announcement may help you protect more jobs, think about utilising apprenticeships and the Kickstart scheme, as well as considering how the business can be structured to keep more people in employment, even where it is for less hours than they previously worked. Alongside this, businesses need to adapt for the new environment being created by Covid-19 so that they can continue to succeed and grow despite the challenges Covid-19 presents.
Think about cost reduction and retaining cash – over the last few months we have helped many employers to save money (as well as protect/enhance net pay) by implementing Pension Salary Sacrifice, reviewing company car/travel allowances, Apprenticeship Levy, assessing the interaction between tax and benefits in kind (see article here), advising on the use of Time To Pay arrangements and helping employers prepare their R&D claims given the need to be innovative and change processes and practices.
Manage risk – HMRC is in the process of reviewing CJRS claims made to date and will start charging penalties from 20 October. Additionally, there is also wider governance to manage that can impact on Senior Accounting Officer, Corporate Criminal Offence, National Minimum Wage obligations and leave Directors/organisations liable for CJRS debts, as well as potential criminal prosecution. Make sure you can demonstrate appropriate governance and considered assessment.