Rishi Sunak unveils Winter Economy Plan
24 September 2020
The Chancellor of the Exchequer spoke today in Parliament to confirm what the Government’s action plan in relation to jobs is, over what will inevitably be a challenging Winter, due to the imminent threat of a ‘second wave’ of coronavirus.
Rishi Sunak explained that the Government’s plans have changed significantly since March, when the CJRS was announced, and this is to adapt to the changing effect that coronavirus has had on both our lives and the economy. He stated:
“Our approach to the next phase of support must be different to that which came before.
The primary goal of our economic policy remains unchanged - to support people’s jobs - but the way we achieve that must evolve.”
Job Support Scheme
As widely anticipated, the decision to close the Coronavirus Job Retention Scheme (CJRS) at the end of October 2020 remains unchanged, but, for a period of six months, from 1 November 2020, this will be replaced by the Job Support Scheme (JSS). The intention behind designing the new scheme is to protect viable jobs within organisations who are seeing a drop in demand due to the outbreak of coronavirus.
The main principles of the scheme are as follows:
- In order to support only viable jobs, to be eligible for the scheme, employees must be working at least a third of their usual hours. Employers must pay for those hours worked
- For hours not worked, the government and the employer will each pay one third of the employee’s equivalent salary
- The level of the grant from the government will be calculated on the basis of the employee’s standard salary, but capped at £697.92 per month
- The Job Support Scheme is available to many organisations in the UK, and there is no requirement for them to have previously used the CJRS to be deemed eligible
- The scheme is aimed at only businesses that need it the most – all small and medium-sized firms will be eligible, but larger companies can only claim if their turnover has fallen by a third
- Businesses can utilise both the JSS and the Jobs Retention Bonus (JRB) as they have been designed to sit alongside one another
Self-Employment Income Support Scheme
The Government has also confirmed that it will continue to support the self-employed by extending the Self-Employment Income Support Scheme (SEISS).
An additional grant will be given to those currently eligible for SEISS, and are continuing to actively trade, but are seeing less demand due to coronavirus. The first lump sum will relate to November 2020 – January 2021, and will be worth 20% of average monthly profits, up to a maximum of £1,875.
A fourth grant will be made available but will be tailored to respond to the ever-changing situation with coronavirus and will cover the period from February 2021 – April 2021.
Several additional measures were announced in order to help the UK return from the economic turbulence created by coronavirus, and include:
- Pay as You Grow flexible repayment system – This will allow those businesses who took out a Bounce Back Loan a longer period in which to repay their loans. The length of the loan will be extended from six years to ten. Interest-only periods and payment holidays will also be offered to help those businesses that may struggle to repay
- Coronavirus Business Interruption Loan lenders are able to extend the length of loans from a maximum of six years, to ten, to help businesses repay their loans
- Temporary VAT cut extended – Businesses in the tourism and hospitality sectors will see the temporary 15% VAT cut extended until the end of March 2021, as they are the sectors most impacted by coronavirus
- New Payment Scheme – Businesses who deferred their VAT bills are being given the option to repay in smaller instalments. As opposed to paying a lump sum at the end of March 2020, they will be able to make 11 smaller interest-free payments in the financial year 2021-22
- Self-assessment taxpayers will be given a separate additional 12-month extension from HMRC on the “Time to Pay” facility. This means that payments deferred from July 2020, and any due in January 2021, will now not be payable until January 2022
The plan can be read in full here.
Whilst further information has been promised, we have been in touch with HMRC already with a growing list of questions – if you have any more questions or, indeed, any comments on today’s announcements, please contact the Policy team at [email protected].
The information in this article is accurate at the time of publication. For all the latest information, news and resources on how the COVID-19 pandemic is affecting payroll professions, visit our Coronavirus hub.