Thought Leadership

UK Winter Economy Plan

Client Updates

On 24 September 2020 the UK Chancellor of the Exchequer set out the UK Winter Economy Plan (“WEP”) to Parliament outlining how the UK Government (the “Government”) will support jobs and the economy over the coming months.  The WEP includes the following measures:

1. Job Support Scheme (“JSS”)

The JSS replaces the furlough scheme (ending on 31 October 2020). The purpose of the JSS is to support viable businesses who face a lower demand due to COVID-19 by enabling those businesses to retain employees who have ‘viable’ roles. 

The JSS can be used by:

a) small and medium sized employers without having to meet any financial tests; and

b) larger employers, provided that ‘turnover is lower now than now than before experiencing difficulties from Covid-19’.

Employers do not need to have used previous schemes to participate in the JSS; however:

a) The employer must have a UK bank account and operate Pay As You Earn (withholding); and

b) employees placed on JSS must have been employed by the employer on or before 23 September 2020 and been included in a ‘real time information’ submission to HMRC (the UK tax authority) on or before 23 September 2020.

Employers who claim JSS will do so online from December 2020. The JSS is currently to scheduled to run for 6 months until the end of April 2021.

For employees to benefit from the JSS, they will need to work at least 1/3 of their contracted working hours (which will be paid by the employer at the employee’s normal pay rate) for the hours actually worked. For the remaining normal working hours which are not worked:

a) the employer will pay 1/3 of the salary which would otherwise have been paid for the unworked hours; and 

b) the Government will pay for 1/3 of the unworked hours (which will be reimbursed to employers), subject to a maximum reimbursable amount of £697.72 per month; and

c) the employee will forgo the remainder of their pay for hours not worked.

The employer will also pay employers’ national insurance (social security) and pension contributions on the total amount paid to the employee. Further details of the JSS are set out here

2. Self-employment Income Support Scheme (SEISS) Grant Extension

The SEISS Grant Extension is an extension of the existing SEISS scheme and will run from November 2020 until April 2021. 

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.

The extension will be separated into two taxable grants, as follows:

a) the first grant will cover a three-month period from November 2020 – January 2021 and will cover 20% of average monthly trading profits, capped at £1,875 in total;

b) the second grant will cover three-month period from February 2021 – April 2021. The level of the grant will be set by the Government in due course. 

3. Temporary VAT Reduction Extension 

The temporary reduced rate of VAT of 5% for certain goods and services in respect of  hospitality; hotel and accommodation and admission to certain attractions was due to expire on 12 January 2021. This has now been extended to 31 March 2021.

4. Extension of access to finance schemes

The Government has extended the application deadline for the following financial support schemes to 31 November 2020:

a) The Bounce Back Loan Scheme (BBLS);

b) The Coronavirus Business Interruption Loan Scheme (CBILS);

c) The Coronavirus Large Business Interruption Loan Scheme (CLBILS); and

d) The Future Fund.

The COVID-19 Financing Facility will also remain open until 22 March 2021. This facility offers bespoke financial support to businesses which are of strategic importance to the UK and which have exhausted all other funding options.

5. Pay as you Grow

All businesses which borrowed under the BBLS will now have the option to repay their loan over a period of up to ten years, which will have the effect of reducing monthly payments by almost half.

Businesses will also have the option to:

a) move to interest only payments for up to three periods of six months; and

b) pause payments entirely for six months (an option which can be used once, and only after six payments have been made). 

The Government also intends to allow CBILS lenders to extend the terms of loans up to ten years. The Government is expected to provide further details on this extension in due course. 

6. VAT Deferral

Any businesses which deferred VAT payments will have the option to spread their VAT payments over 11 equal instalments during the 2021-22 tax year, rather than paying in full at the end of March 2021.

Businesses will need to opt in to the payment instalment plan  HMRC is expected to launch the opt-in process in early 2021.


 

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