What does the Winter Economy Plan mean for your business?
2nd October 2020
Last month the Chancellor Rishi Sunak outlined a new package of measures designed to support businesses as we enter a second wave of Covid-19. With the Job Retention Scheme ending this month, we know many businesses are concerned about how to retain staff and continue to survive during this challenging and uncertain time. In this guide we’re explaining what the Winter Economy Plan means for your business.
What’s in the Winter Economy Plan?
The Plan covers the following areas:
- New support scheme for workers
- Extensions to the Self Employment Income Support Scheme (SEISS)
- VAT cuts and tax deferrals
- Bounce Back Loan extensions
Is the furlough scheme continuing?
No, the Job Retention (or “furlough”) scheme ends on 31st October and will be replaced with a new programme, the Job Support Scheme.
Unlike the JRS, the Job Support Scheme is specifically designed to protect “viable” jobs in businesses who are facing lower demand over the winter due to Covid-19.
Under the scheme, employers will continue to pay employees for the hours they work, with both the Government and employer paying a portion of their equivalent salary for hours they are unable to work. Under the original version of the scheme, employers were required to contribute at least 33% of wages in lieu of unworked hours, however this has been reduced this to 5%. The Government has also increased its own contribution to 61.67%. So in practice, employees will still receive 73% of their salary, regardless of whether or not the hours are available. The Government contribution is capped at £1,541.75 per month.
The eligibility criteria is much stricter than the previous scheme and is primarily aimed at SMEs. Large businesses will face a test before they can access the grant – this is to ensure that only organisations whose turnover is lower as a result of the pandemic can access the scheme. Large employers will also be expected not to make any capital distributions (e.g. dividend payments) while receiving support.
Employees must also:
- Have been added to an employer’s payroll no later than 23rd September
- Work at least 20% of their usual hours (for at least the first three months of the scheme)
- Be on the scheme for a minimum of seven days at a time, although they can cycle on and off to meet business needs
Employees cannot be made redundant or put on redundancy notice during the period in which the employer is claiming the grant. Eligible employers are also entitled to claim the Job Retention Bonus.
The scheme launches on 1st November and will run for an initial period of six months.
SEISS
The Self Employment Income Support Scheme has been extended. Those who are currently eligible for SEISS and continuing to trade can apply for a taxable grant to cover three months’ worth of profits – for the period from November to the end of January 2021, up to a total of £1,875 per month.
Self-employed individuals can also apply for a second grant to cover February 2021 to the end of April – however the Government has advised this may be adjusted to respond to changing circumstances.
You can read more about SEISS and check your eligibility here.
Tax cuts
The reduced 5% VAT rate for the leisure and hospitality sectors has been extended to the end of March 2021.
Additionally, business who have deferred their VAT bills can access the New Payment Scheme, which will allow them to pay their bills in 11 interest-free payments over the 2021/22 financial year. Previously the bill was due in full in March 2021.
Those who pay via tax via self-assessment can also access a 12-month extension via HMRC’s Time to Pay facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
What does the Winter Economy Plan say about loans?
Bounce Back Loans have been extended from six years to 10, which will reduce monthly repayments. Businesses will also be able to access interest-only periods and repayment holidays of up to six months. Lenders offering Coronavirus Business Interruption Loans will be given flexibility to extend loan lengths to 10 years.
Applications for the Government’s loan schemes have also been extended.
Talk to the experts
We know this is a daunting and confusing time for our customers. Our friendly team are always on hand to offer support and guidance, so don’t hesitate to get in touch if you have any questions about the Winter Economy Plan.
