Chancellor’s Economic Statement
By PaperRocket Accounting, Sep 24 2020 12:58PM
On Tuesday evening, it was announced that the coronavirus restrictions were to be tightened, with 10pm pub and restaurant curfews, and the reversal of plans to gradually reintroduce crowds to sporting/theatre events. Since these restrictions were announced, many were asking what the government were going to do to help save businesses and jobs, especially as this comes at the same time as the furlough scheme is being phased out.
Well, today the Chancellor, Rishi Sunak, answered these calls (although, as Shadow Chancellor Anneliese Dodds pointed out, these answers have come too late for many, including employees who were made redundant at the start of the furlough scheme phasing out). Here is what was announced:
The Chancellor’s overarching message was that the goal of the government remains the same, to save jobs and businesses, but that the way this is to be achieved must evolve and adapt to the permanent adjustment that our economy faces thanks to this ‘new normal’.
Furlough will not be extended. According to Sunak, furlough was the right policy at the time, but it’s wrong to hold people in jobs that only exist because of furlough so instead there is now a need to create new opportunities.
Jobs Support Scheme
A new Jobs Support Scheme has been announced for 6 months from November. This is where the government will support the wages of employees who are kept in work, and working (and being paid for) at least a third of their normal hours.
For the remaining hours not worked, the government and the employer will pay 1/3 of their wages each. This will mean that employees working 33% of their hours will receive at least 77% of their pay:
Employer pays for 55% of wages (made up of 33% wages for hours worked, plus 1/3 wages for hours not worked (so 1/3 of 66% = 22%). Government pays for 22% of wages for hours not worked (1/3 of 66% = 22%).
This will allegedly target the firms that need it the most. All small and medium businesses will be eligible to claim, with large businesses only able to if they can prove their turnover has reduced due to CV-19.
The scheme will be open to all businesses even if they did not previously use the furlough scheme. And for those that did use the furlough scheme and then go on to use the JSS, the job retention bonus previously announced will still be payable.
It was also announced that the Self Employment Income Support Scheme that is currently in place will also be extended on similar terms and conditions to those of the JSS.
Helping businesses with cashflow
• Bounce Back Loans to be paid back on a ‘pay as you grow’ basis. This means that loan terms can be extended from 6 to 10 years, recipients can request interest only repayments (or suspend payments altogether for 6 months if required). Businesses’ credit ratings will not be affected.
• Coronavirus business interruption loans for small and medium businesses will also be government guaranteed now for up to 10 years.
• The deadline to apply for all loan schemes has now been extended to the end of the year, with a new loan scheme being introduced in January.
• As part of the original CV-19 measures earlier this year, businesses were able to defer certain VAT payments to March 2021. Nearly half a million businesses did this. It was announced today that that VAT bill now can be spread over 11 smaller repayments (interest free) rather than a lump sum payable in March 2021.
• Again, as part of the original measures, individuals were able to defer their second self assessment payments on account from July 2020 to January 2021. It was announced today that tax bills due in January 2021 (up to £30k) can also be spread over 12 monthly payments.
Targeted assistance for hospitality sector
As part of the drive to get the hospitality sector back up and running again, it was announced in July that VAT on certain supplies would be reduced from 20% to 5%. This was due to end in January 2021. However, it was announced today that this will now be kept in place until 31st March 2021.
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