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The Chancellor’s Winter Economy Plan 2020

The Chancellor’s Winter Economy Plan 2020

The Chancellor’s Winter Economy Plan 2020

September 25, 2020

With the ongoing uncertain climate that is the Covid-19 pandemic, the Chancellor has announced that the Autumn Budget which outlines new tax changes will be cancelled this year. Instead, new measures have been introduced which are focused on the immediate and present matter of supporting businesses and individuals through the winter.

The Job Support Scheme

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This Job Support Scheme (JSS) is designed to specifically protect existing viable jobs that may be at risk of lower demand during the winter months. To help keep as many workers in employment as possible the Government are to put in place a new wage support package.

Employees will continue to be paid for the hours they have worked by their employers. For unworked hours, the Government will pay for a third of this time up to a maximum of £697.92 per month. The employer is also required to contribute wages for a third of the time unworked. In total this means that an employee will be able to receive 77% of their normal salary.

For employers to be eligible, they must have a UK bank account and be running a UK PAYE scheme. They do not need to have previously been claiming the Coronavirus Job Retention Scheme. All SME businesses (those with less than 250 employees, turnover of under €50 million, or a balance sheet total of less than €43 million) will be eligible, however larger businesses will be required to meet a financial assessment test and will be expected to not be making capital distributions.

For employees to be eligible, they must have been registered on the employer’s PAYE payroll by 23 September 2020 and will need to be working at least a third of their normal hours for the first three months of the scheme (the Government may make changes after the first three months requiring additional hours to be worked).

The scheme is due to launch on 1 November 2020 and will run for 6 months until April 2021. Employers will be able to claim for the grants online from December 2020 and will be paid on a monthly basis in arrears. The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.

Bounce Back Loans

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For any businesses who took out a Bounce Back Loan, the Government have introduced a ‘Pay As You Grow’ scheme. It offers businesses the option to extend their repayment time to 10 years as opposed to the original 6 years which would almost halve the average monthly repayment. Other options available include making interest-only repayments for up to six months, or for businesses worst-affected, are able to defer repayments altogether for up to six months.

VAT freeze and repayment extension

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VAT rate for tourism and hospitality industries was cut to 5% in July 2020. It was due to end and return to 20% come 12 January 2021; however this has now been extended to 31 March 2021.

The automatic VAT repayment deferral that was issued to all UK VAT-registered businesses has also been extended. It was originally due to be paid by 31 March 2021, however, it can now be paid in 11 smaller interest-free instalments throughout the 2021/22 tax year instead of in one lump sum.

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