On the 24th of September the chancellor delivered his speech to parliament outlining The Winter Economy Plan. This plan was a follow up to the earlier announcement by the prime minister where we were all told to prepare for a further six months of economic and social restrictions. A lot of changes have been put in place and we will try to keep these as brief and to the point as possible for you:
As a quick reminder we are now entering October and the furlough contribution by the Government will decrease from 70% to 60% with employers still paying 80% to the employee (i.e. effectively standing 20%) and paying all national insurance and pension contributions.
The new job support scheme
This new scheme is to try and help employers keep their employees jobs secure with the option to reduce their hours. The scheme will run from 1st November for 6 months.
This scheme is open to all small and medium sized businesses regardless of whether or not the furlough scheme has previously been used. An employee does not need to have previously been furloughed to qualify. Any large businesses will be subject to a financial test to prove that turnover has been effected by covid to qualify.
The employee must have previously been on the employers payroll and included in an RTI submission before 23 September 2020.
An employee must work at least one third of their usual working hours, the shortened hours must be agreed in writing between employer and employee, this may be required at a later stage by HMRC.
Any hours worked up to and over the first third will be paid for in full by the employer. So the minimum for the scheme to apply is one third of normal hours but you can elect them to work in excess of this.
The remainder of the usual hours which have not been worked will be split three ways. This split will see HMRC pay one third of the usual hours not worked. The employer will have to pay one third of the hours not worked and the employee will lose one third of their total hours not worked.
The employer will also be liable for all NIC and pension contributions.
The government contribution will be capped at £697.92 a month.
This method will ensure that the employee receives 77% of their normal pay, subject to those effected by the government cap.
The payments will be made one month in arrears to the employers, this means that the employee will have to be paid first and this payment reported to HMRC on and RTI submission before the employer can make a claim for the grant.
The usual wages calculations on which these grants will be made will be on a similar basis to the furlough calculations, although full details have yet to be released we do know that for employees previously furloughed their calculations will be based on earnings prior to their furlough period.
Employers who take advantage of the new JSS will still qualify for the job retention awards payable in January 2021 for every employer who has retained employees who were furloughed.
Employers cannot make employees redundant or place them on notice while claiming for them on the Job Support Scheme.
There will be two further payments to the self-employed -the first will be from 1st November and will be 20% of the average monthly profits. We are awaiting further details on the second payment . These payments should only be claimed if your business is still suffering from the effects of the covid crisis.
Covid loan schemes
All current loan schemes are being extended until the end of December with a follow up successor loan scheme in January.
Bounce back loans new loans and existing loans can now be extended from six to ten years which will almost halve the monthly repayments due.
You will be able to opt to make interest only repayments and should you be in real difficulties a 6 month repayment holiday will be an option.
The hospitality and tourism sector is to keep the reduced rate of 5% until 31 March 2021.
For businesses who have deferred their VAT payments during the covid crisis, the repayment of these payments currently due in March 2021 can be spread over 11 months interest free. You will need to opt in but all businesses who took the deferral will be eligible.
For tax payers in the self-assessment system there will be an option to make your tax payment becoming due in January 2021 over 12 months.
We hope that this has been of some help to you, we do appreciate there are a lot of changes and a lot of our clients will be worried about the financial impact these will bring to their businesses, we ask as always that rather than phoning us to raise your queries could you please send them in the form of an email. This makes it easier for us to answer everybody and to ensure that your query is dealt with by the correct person.