Today, the Chancellor announced further measures to support businesses in preparation for the likelihood that lockdown measures could be with us in some form or another until March 2021.
Today’s announcements focussed on protecting jobs and the cash flow of businesses. The measures cover three main areas:
Here’s what we know so far….
This new scheme means that for six months from November the government will top up the wages of those workers on reduced hours. The intention is to protect jobs in businesses who are facing lower demand over the winter months due to COVID-19.
Here are the conditions of the scheme:
Additionally, employees on the new job support scheme will not be able to have their jobs put at risk of redundancy.
The calculations for the new Job Support Scheme are not easy to grasp.
In order to support viable jobs, employees must be working at least 33% of their usual hours. The level of grant will be calculated based on the employee’s usual salary, capped at £697.92 per month.
For the hours the employee doesn’t work, the government and the employer will each pay one-third of their equivalent salary. The amount the government will end up paying is calculated on a sliding scale.
|Hours employee worked||33%||40%||50%||60%||70%|
|Hours employee hasn’t worked||67%||60%||50%||40%||30%|
|Employee earnings (% of normal)||78%||80%||83%||87%||90%|
|Government grant (% of normal wages)||22%||20%||17%||13%||10%|
|Employer cost (% of normal wages)||55%||60%||67%||73%||80%|
For example, if someone works a third of their standard hours, the government’s contribution would be two-ninths – or approximately 22%.
The employer would pay the first third, like normal, and another two-ninths on top (a third of the hours not worked by the employee). The employee would get nearly 78% of their salary.
The 22% government contribution is a maximum. For someone working 50% of their hours, the government contribution is 17%.
The Job Support Scheme is designed to sit alongside the Jobs Retention Bonus. Combined it could be worth over 60% of the average wages of employees who have been furloughed – and are kept on until the start of February 2021. Businesses can benefit from both schemes in order to help protect jobs.
The existing grant for self-employed people is being extended on similar terms to the Jobs Support Scheme – albeit on much less generous terms than before. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875 (compared to 80% at the start).
The Chancellor announced that repayment terms on Bounce Back and CBILS loans can now be extended from six to ten years – which could significantly reduce the monthly repayment.
There is also the option to switch to interest-only payments or suspend payments if businesses are “in real trouble” for up to six months. This will not affect your credit rating.
The current loan schemes will now remain open until the 30th November, with a new loan scheme introduced in January.
VAT bills that were deferred to 31st March 2021 will no longer need to be paid in full on that date. Repayments can be made over 11 months to aid cash flow. It’s important to remember that these payments will still need to be made in the end.
You may also be able to delay your income tax bill – but it too will still need to be paid.
If you have a tax debt of up to £30,000 you will be able to set up a payment plan over 12 months to January 2022.
The snag with this is that you will also need to get through to HMRC on the phone to set up the plan, which isn’t without its challenges. Our advice on setting up a payment plan is here.
Finally, the planned increase of VAT from 5% to 20% for hospitality and tourism businesses, which was due to come into effect in January has been delayed until 31 March next year.
The government has also launched this tool to identify if there are any coronavirus support measures you’re not taking advantage of.
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