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24 September 2020

Treasury publishes the Winter Economy Plan, including new Job Support Scheme, Self-Employment Income Support Scheme extension, VAT cut for hospitality and tourism extension, and more

Summary

The Winter Economy Plan states that as restrictions have changed, government support must evolve. The goal remains 'to protect people’s jobs and livelihoods' but 'government action needs to support jobs and businesses while at the same time allowing the economy to adapt to the new ‘normal'. There is a package of measures to reinforce the government’s ongoing objective – 'to ensure businesses can adapt and evolve to the prolonged challenged of COVID-19'. Measures apply across the UK and include:

  • 'Further support for employment': From 1 November 2020 the Job Support Scheme will be introduced, available for 6 months. To be eligible, employees must work a minimum of 33% of their usual hours. For every hour not worked the employer and the government will each pay one-third of the employee’s usual pay. The government contribution will be capped at £697.92 per month. Employees using the scheme will receive at least 77% of their pay, where the government contribution has not been capped. All employers will be allowed to apply, even if they did not use the furlough scheme. This will only apply to small and medium-sized enterprises. Larger employers will only be covered if their turnover has gone down. The Self-Employment Income Support Scheme (SEISS) will be extended for a further 6 months, from November 2020 to April 2021. The grant will be limited to self-employed individuals who are currently eligible for the scheme. The extension involves two taxable grants, each covering 3 months. The initial grant will cover 20% of average monthly trading profits and be paid out in a single instalment. It will be capped at £1,875 in total. The government will review the level of the second grant.
  • 'Easing the burdens on business': The temporary 15% VAT cut for the tourism and hospitality sectors will be extended. It will remain at the reduced rate of 5% until the end of March 2021. The government is extending four temporary loan schemes to 30 November 2020 for new applications. Businesses that borrowed under the Bounce Back Loan Scheme (BBLS) will be offered the choice of more time and greater flexibility for their repayments. Businesses now have the option to repay their loan over a period of up to 10 years, which will reduce average monthly repayments on the loan by almost half. They also have the option to move temporarily to interest-only payments for periods of up to 6 months, or to pause their repayments entirely for up to 6 months. Lenders of the Coronavirus Business Interruption Loan Scheme (CBILS) can now extend the term of a loan up to 10 years to provide borrowers with additional flexibility to make repayments. Businesses that deferred their VAT will be given the option to split the payments into smaller interest-free payments over 11 months (rather than paying a lump sum at the end of March 2021). Self-employed and other taxpayers will be given more time to pay taxes due in January 2021.
Source(s)

Gov.uk policy paper