Chancellor announces new raft of COVID support measures
The Winter Economy Plan includes a new ‘Job Support Scheme’ for employees returning on reduced hours, and an extension to loan scheme repayments
The new ‘Winter Economy Plan’ comes as the Government’s furlough scheme winds down, and follows announcements made by the Prime Minister earlier this week, extending social distancing restrictions for a further six months in an aim to reduce the spread of the virus over the winter.
Announcing the new measures in the House of Commons, the Chancellor pointed to greater public awareness of the virus, increased NHS funding and “millions of people” moved from furlough back into work as “reasons to be cautiously optimistic.”
However, he warned: “The resurgence of the virus, and the measures we need to take in response, pose a threat to our fragile economic recovery.”
While the primary goal of the Government’s economic policy remains “unchanged” from the Spring and focused on supporting people’s jobs, Mr Sunak said, “The way we achieve that must evolve.”
“Now it is clear that for at least the next six months, the virus and restrictions will be a fact of life,” Mr Sunak said, adding that as people and businesses adapt to the new normal, support measures must also evolve.
Included in the package of measures, the Government announced plans to launch a new Job Support Scheme, which will aim to protect “viable jobs” in businesses facing lower demand over the winter months, as a result of COVID-19.
Launching 1 November, the new initiative will follow on from the furlough scheme, which draws to a close at the end of October.
The scheme will support employees who are working reduced hours and will be open to businesses across the UK, even if they have not previously used the furlough scheme.
Employees must be working at least a 33% of their usual hours and employers will continue to pay the wages of staff for the hours they work. For the hours not worked, the Government and employer will each pay one third of their equivalent salary, meaning employees would still be paid two thirds of the hours they can’t work.
The level of grant will be calculated based on an employee’s usual salary, and will be capped at £697.92 per month.
While open to all small and medium businesses, the scheme will only be accessible for larger businesses where they have experienced a drop in turnover. The scheme is also designed to run alongside the Jobs Retention Bonus, and businesses can benefit from both schemes.
Support for the self-employedThe Chancellor also announced an extension of the Self Employment Income Support Scheme Grant (SEISS).
The Government confirmed that an initial taxable grant will be provided for self-employed individuals who are eligible for SEISS and continuing to actively trade, but face reduced demand due to the pandemic. The lump sum will cover three months’ worth of profits for the period from November to the end of January next year – worth 20% of average monthly profits, up to a total of £1875.
An additional second grant will then be available for self-employed individuals for the period from February 2021 to the end of April. Though this may be adjusted to changing circumstances, the Government highlighted.
Introducing greater flexibility into loan and tax payments
The Chancellor confirmed he would be extending the deadlines to apply for the Government’s coronavirus loan schemes until the end of November.
Mr Sunak noted that a second key issue to address for businesses is supporting cashflow, acknowledging that “businesses need every extra pound” to support employment.
For businesses that have benefited from a Bounce Back Loan, the Government has now introduced a new ‘Pay as You Grow’ repayment scheme, designed to offer flexible repayment plans.
This will include extending the length of the loan from six to 10 years, which the Chancellor of the Exchequer suggested will cut monthly repayments by nearly half. Businesses that are struggling will be able to choose to make interest-only payments, or can apply to suspend repayments for up to six months.
Beneficiaries of the Coronavirus Business Interruption Loan Scheme will similarly have the ability to extend the length of loans up to a maximum of 10 years (from six previously).
As part of the package of measures, the Government is introducing a New Payment Scheme to offer businesses the option to pay back their deferred VAT bills in smaller instalments. Instead of paying a lump sum at the end of March 2021, businesses will instead be able to make 11 smaller interest-free payments through the 2021-22 financial year.
Meanwhile, self-assessment taxpayers will be able to access a separate additional 12-month extension from HMRC on the ‘Time to Pay’ self-service facility. This will mean payments deferred from July 2020, and due in January 2021, will not need to be paid until January 2022.
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