The Chancellor Rishi Sunak has today delivered a number of key measures designed to help the UK economy as best possible over the coming months. Below is a recap from our team in relation to some of the key updates and the detail we have at this moment in time:
1. Changes and extension to BBL and CBILS (‘pay as you grow’)
One area covered by the Chancellor was in relation to the existing loan support schemes in place for businesses, covering the Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS) that were both due to come to an end this month. Not only have these been extended, but the government has also announced further measures to enhance these schemes. This includes extending the period these can be repaid from 6 to 10 years, and the implementation of ‘pay as you grow’ to allow more flexible repayments. Further details are yet to be announced, and we will review and update you when available in order to understand these changes further.
2. Extension of reduced VAT and VAT payment deferral
The announcements concerning VAT fall into two sections:
1. The reduced rate of 5% for the hospitality and leisure sector, which came into effect on 15 July was initially to end on 12 January 2021. This reduction will now extend until 31 March 2021.
2. Where a VAT registered business took advantage of the VAT payment deferral for VAT payments due on returns up to the end of May 2020, the initial view was that this deferred payment had to be made in full to HMRC by 31 March 2021. It has been announced today that these business will be able to apply for a repayment schedule of this VAT, spread out over up to 11 months. Details of how to apply for the “New Payment Scheme” will be issued early in the New Year.
3. Income Tax Deferral
Earlier this year, HMRC announced that they would permit the deferral of the July 2020 payment on account for self-assessment taxpayers to January 2021 without late-payment interest or penalty. The Chancellor has now announced a further 12-month extension to this deadline. Self-assessment taxpayers will be able to defer their July 2020 payment on account as well as payments due in January 2021 until January 2022. This is expected to ease the pressure on around 11 million taxpayers who may have been affected by the COVID-19 pandemic.
4. The Job Support Scheme
Rishi Sunak also announced a new Job Support Scheme that will run from 1 November to April 2021, designed to help keep employees attached to the workforce during winter months as a result of Covid-19.
Companies will continue to pay its employee for time worked, but the burden of hours not worked will be split between the employer, the Government, and the employee (through a wage reduction) – with the employee keeping their job.
The Government will pay 1/3 of the hours not worked up to a cap of £697.92 per month, ensuring employees earn a minimum of 77% of their normal wages, where the Government contribution has not been capped. Employers using the Job Support Scheme will also be able to claim the Job Retention Bonus if they meet the eligibility criteria and receive £1,000 after February 2020.
Who is eligible?
1. All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the Coronavirus Job Retention Scheme.
2. Large businesses will have to meet a financial assessment test, so the scheme is only available to those whose turnover is lower now than before they experienced difficulties due to Covid-19. There will be no financial assessment test for small and medium enterprises (SMEs).
3. Our expectation is that large employers using the Job Support Scheme will not be making capital distributions, such as dividend payments or share buybacks, whilst accessing the grant. Further details will be set out in guidance.
4. Employees must be on an employer’s PAYE payroll on or before 23 September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made on or before 23 September 2020.
5. In order to support viable jobs, for the first three months of the scheme the employee must work at least 33% of their usual hours. After 3 months, the Government will consider whether to increase this minimum hour’s threshold.
6. Employees will be able to cycle on and off the scheme and do not have to be working the same pattern each month, but each short-time working arrangement must cover a minimum period of seven days.
What does the grant cover?
1. For every hour not worked by the employee, both the Government and employer will pay 1/3 each of the usual hourly wage. The Government contribution will be capped at £697.92 a month.
2. “Usual wages” will follow a similar methodology as the Coronavirus Job Retention scheme.
3. Employers must pay employees their contracted wages for hours worked, and the Government and employer contributions for hours not worked. Our expectation is that employers cannot top up their employees’ wages above the two-thirds contribution to hours not worked at their own expense.
Our team are of course here to help if you wish to discuss any of today’s announcements in more detail. We remain committed to our clients to provide support to get you through the difficult climate we currently find ourselves in, so please do not hesitate to contact your normal Rickard Luckin contact.