COVID-19 Update 3
The Chancellor announced on 24 September a whole new raft of measures and support schemes for businesses and individuals during the COVID-19 crisis. Some of this is very welcomed news but some not so much. As with so many things in life we all wish that more could be done by the government (removing the IR35 changes in the private sector expected from April 2021 for a start!) but alas we can only deal with what is in front of us. I have gone through the new measures below. For any questions please get in touch with us via ron@banneracc.com.
VAT Payment Deferral extended
One of the measures introduced earlier was the deferral of VAT accumulated between 20th March 2020 until 30th June 2020 till 31 March 2021. However, now businesses who deferred their VAT will no longer have to pay a lump sum at the end of March next year. They will have the option of splitting it into smaller, interest-free payments over the course of 11 months.
VAT rate for hospitality and tourism sector
For those companies operating in the hospitality and tourism sector, only the VAT rate was reduced to 5%. This was originally due to end in January but this is now being extended to 31 March 2021.
Business Loans
The term of the Bounce Back Loan and Coronavirus Business Interruption Loan Scheme has been extended from six years to 10 years. This would mean monthly repayments are almost halved. Please note that if you intend to close your company all loans must be repaid first.
The deadline for applying for all government coronavirus loan schemes has been extended to the end of 2020.
There will be no adverse effect on credit ratings because of taking the loans.
Self-assessment
Those with self-assessment tax bills who need more time to pay will be given it as per the Chancellor.
Job Support Scheme (JSS)
The main announcement was the Job Support Scheme, the successor to the Job Retention Scheme (commonly known as the furlough scheme). Under this scheme, the government will cover up to 22% of pay for workers in “viable” jobs for the next six months. The government will subsidise the pay of employees who are working fewer hours than normal due to the COVID-19 crisis.
Simply, employees must work at least a third of their normal hours and their employer will pay two-thirds of their salary and the government will pay one third. The grant is capped at £697.92 with all small and medium-sized businesses eligible for the scheme. The scheme is expected to run from 1 November for six months.
In terms of eligibility and detail on the scheme, the government has produced a factsheet. It appears that this is geared towards small, medium-sized enterprises. Some of the main points to note are the following;
- Employees must be on an employer’s PAYE payroll on or before 23 September 2020.
- For the first three months of the scheme, the employee must work at least 33% of their usual hours
- For every hour not worked by the employee, both the Government and employer will pay a third each of the usual hourly wage for that employee.
- The Government contribution will be capped at £697.92 a month.
- Grant payments will be made in arrears, reimbursing the employer for the Government’s contribution.
- The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.
- Employers must agree the new short-time working arrangements with their staff, make any changes to the employment contract by agreement, and notify the employee in writing. This agreement must be made available to HMRC on request.
- “Usual wages” calculations will follow a similar methodology as for the Coronavirus Job Retention Scheme. Full details will be set out in guidance from the government shortly.
Job Retention Bonus
Rishi Sunak also clarified that employers retaining furloughed staff on shorter hours can claim both the Job Support Scheme and the Job Retention Bonus, which will be available in February next year. The bonus will be a one-off payment of £1,000 to UK employers, for every furloughed employee who remains continuously employed through to 31 January 2021. Employees must earn above the National Insurance lower earnings limit (£520 per month) on average between 31 October 2020 when the CJRS ends and the end of January 2021.
The bonus payments will be made from February 2021. Please get in touch with us in February about applying for this.