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Winter Economy Plan (REVISED)

We have updated the guidance below, following the Chancellor’s announcement yesterday (22nd October 2020).

On 24th September 2020, the Chancellor, Rishi Sunak, unveiled the Government’s plan to protect jobs and support businesses over the coming months. Rishi Sunak revised his plan on 22nd October 2020. We have summarised the latest plans below.

We still don’t believe that the Government have gone far enough, which will have a detrimental impact on our clients, their staff, small and medium enterprises (SME’s) and the self-employed.

This year’s Autumn Budget has been scrapped. The budget usually outlines the state of the country’s finances and crucially proposed tax changes. We expect there to be a budget in the Spring, although this is yet to be officially confirmed.

A package of measures were announced which we have detailed below:

Job Support Scheme

The current furlough scheme will end on 31st October 2020 and will be replaced with a new Job Support Scheme, which is aimed to protect viable jobs in businesses who are facing lower demand over the winter months due to coronavirus.

Details of the current Coronavirus Job Retention Scheme (CJRS) can be found here.

The Job Support scheme will run for six months from 1st November 2020, until April 2021.

The scheme will apply to eligible businesses in all alert levels, including those that are not closed but face higher restrictions.

Under the revised scheme, the employer’s contribution to those unworked hours will be 5% (previously 33%), whilst the Government’s contribution will increase to 61.67% (previously 33%) of the hours unworked, up to £1,541.75 per month.

The cap is set above median earning for employees in August at a reference salary of £3,125 per month.

Workers will be required to work at least 20% of their normal hours to qualify. Employers will be required to pay staff for the hours they work plus 5% of the lost pay (equivalent to 4% of the employee’s regular salary).

This will mean that an employee who is working 20% of their usual hours will be paid up to 73.34% of their usual salary.

The Job Support Scheme will not cover Class 1 employer national insurance or pension contributions. These contributions will remain payable by the employer.

Under the scheme, employees can work more than 20% of their usual hours. The table below shows how the scheme would work if the employee worked more hours:

 

Hours Employee Worked  20.00% 33.33% 40.00% 50.00% 60.00% 70.00%
Hours Employee Not Working  80.00% 66.67% 60.00% 50.00% 40.00% 30.00%
Employee Earnings (% of normal)  73.34% 77.78% 80.00% 83.34% 86.67% 90.00%
Gov’t Grant (% of normal wages)  49.34% 41.11% 37.00% 30.84% 24.67% 18.50%
Employer Cost  4.00% 3.33% 3.00% 2.50% 2.00% 1.50%
Example

Let’s say Mohammad is paid £2,000 per month and his company is asking him to work reduced hours in November due to a restriction on opening hours. Mohammad is working 40% of his usual hours.

Mohammad’s pay for November will be as follows:

  • Paid by the Employer: Actual Hours Employer pays Mohammad £800 (£2,000 x 40%) for the days he works. This is £1,200 less than what Mohammad would have received if he worked for a full month.
  • Paid by the Employer: Hours not worked – His employer will have to pay Mohammad £60 (5% of £1,200)
  • Paid by the Government: Hours not worked – The Government will top-up Mohammad’s salary by one-third of the unpaid amount being £740 (61.67% of £1,200)

Mohammad would receive £1,600 (£800 + £60 + £740) of his usual salary.

The Government will be reviewing the scheme in the new year and may consider increasing the minimum hours threshold.

Who is eligible

Employees must be on the employer’s PAYE payroll on or before 23rd September 2020 and the employee must have been included within an RTI submission to HMRC on or before this date.

There will be no financial assessment test for small and medium enterprises (SMEs).

Large businesses will have to meet a financial assessment test, so the scheme is only available to those whose turnover is lower now than before experiencing difficulties from Covid-19. It is expected that large employers using the scheme will not be making capital distributions, such as dividend payments.

How to claim

Grant payments will be made in arrears, reimbursing the employer for the Government’s contribution.

The claim can only be submitted in respect of a given pay period, after payment to the employee has been made and that payment has been reported to HMRC via an RTI return.

Employers will be able to make a claim online through Gov.uk from 8th December 2020. They will be paid on a monthly basis.

Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.

Job retention bonus

Employers using the Job Support Scheme will also be able to claim the Job Retention Bonus of £1,000 for each employee that was furloughed if they meet the eligibility criteria.

The employee criteria is as follows:

  • you made an eligible claim for under the Coronavirus Job Retention Scheme
  • you kept continuously employed from the end of the claim period of your last Coronavirus Job Retention Scheme claim for them, until 31 January 2021
  • are not serving a contractual or statutory notice period for you on 31 January 2021 (this includes people serving notice of retirement)
  • the employee is paid a total of at least £1,560 (gross) throughout the tax months of November 2020, December 2020 and January 2021.

You’ll be able to claim the bonus between 15th February 2021 and 31st March 2021. You do not have to pay this money to your employee.

Where businesses are forced to close

If businesses are legally required to close, the Government will pay 66.67% of employees normal salary, where they can’t work for a week or more.

Employers would still be required to pay employer national insurance and pension contributions.

SEISS extension

The Self-Employment Income Support Scheme will be extended from November 2020 to April 2021, meaning that the self employed can receive a further two grants.

These grants are to support those experiencing reduced demand due to COVID-19 but are continuing to trade, or temporarily cannot trade. This is a subtle change to the first two grants whereby you had to declare that your business has been adversely affected by Coronavirus.

The first grant will cover the 3 month period from November 2020 to January 2021. The grant will be 40% of your average monthly trading profits, capped at £3,750.

The second grant will cover the 3 month period from February 2021 to April 2021. The Government will review the level of the second grant in due course.

HMRC will provide full details about claiming and applications in guidance on GOV.UK in due course.

Self Assessment payment deferral

Taxpayers with up to £30,000 of Self-Assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months, meaning that tax liabilities due in July 2020 will not need to be paid in full until January 2022.

Any Self-Assessment taxpayer not able to pay their tax bill on time can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.

VAT

The Chancellor announced that the 5% reduced VAT rate for hospitality and tourism will now run until 31st March 2021.

Businesses that deferred the VAT due relating to VAT return periods between March and June 2020, will now have the option to spread their payments in 11 equal, interest-free instalments over 2021/22. This VAT was previously expected to be paid by 31st March 2021.

Working from home tax relief

HMRC have introduced a brand new micro-service for 2020/21 tax year to simplify the process for claiming working from home tax relief.

It automatically gives relief for the whole tax year if you were required to work from home, even if you were required to work from home for just one day.

If employees were required to work from home, they will be able to claim £312 tax-relief without receipts (If you would like to claim more tax relief, proof would be required).

You can apply to backdate this to 23rd March 2020 (start of lockdown).

HMRC are accepting claims for the full tax year’s expenses, even if you’ve only worked from home for one day as this tax year is different for obvious reasons. HMRC states that it would be difficult to administer the scheme if employees keep flipping between working from home and not.

The tax relief is worth the following:

  • Basic rate 20% taxpayer – £62.40
  • Higher rate 40% taxpayer – £124.80
  • Additional rate 45% taxpayer – £140.40

You will not get a cash refund. However, HMRC will amend your tax code, so that you will pay less tax in the months to come.

To make a claim, please click here.

If you complete a Self-Assessment tax return each year, you can’t use the micro-service, however you can claim for a full year when you complete your 2020/21 tax return.

Loan extensions

There is an extension until 30th November 2020 for new applications for the Bounce Back Loans and Coronavirus Business Interruption Loan Scheme (CBIL’s).

The Government are also working on a new guarantee loan programme to begin in January 2021.

Business Grants

Cash grants of up to £2,100 per month primarily for businesses in the hospitality, accommodation and leisure sectors who may be adversely impacted by the restrictions in high-alert level areas.

Cash grants will be awared as follows:

  • Small venues (rateable value up to £15k) – £934 per month
  • Medium venues (rateable value between £15-51k) – £1,400 per month
  • Large venues (rateable value over £51k) – £2,100 per month

These grants will be available retrospectively for areas who have already been subject to restrictions. Businesses which have been under enhanced restrictions can backdate their grants to August 2020.

This grant comes on top of higher levels of additional business support for Local Authorities moving into Tier 3. Businesses in Very High alert level areas will qualify for greater support up to £3,000 per month.

Extension of insolvency measures

The Government announced an extension to the Corporate insolvency and Governance Act which was due to expire on 30th September 2020.

Statutory demands and winding-up petitions will continue to be restricted until 31st December 2020.

Whilst termination clauses are still prohibited, stopping suppliers from ceasing supplies or asking for additional payments while a company is going through a rescue process will remain exempted from the obligation to supply until 30th March 2021, so they can protect their business if necessary.

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