The temporary VAT cut for the hospitality industry will be extended until March 2021 and a new scheme that will top-up the pay of people working at least a third of their normal hours have been announced in Parliament today.
Chancellor Rishi Sunak outlined his Winter Economy Plan, which also includes pushing back the deadline for the business loan support schemes and an extension of the Self Employment Income Support Scheme, in a bid to protect jobs and support businesses over the coming months.
The new Job Support Scheme, which will be introduced from 1st November and will run for six months, will see employers continue to pay the wages of staff for the hours they work - but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.
This means employees who can only go back to work on shorter time will still be paid two thirds of the hours for those hours they can’t work.
In order to support only viable jobs, employees must be working at least 33% of their usual hours. The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
The Job Support Scheme will be open to businesses across the UK even if they have not previously used the furlough scheme, with further guidance being published in due course.
It is designed to sit alongside the Jobs Retention Bonus and could be worth over 60% of average wages of workers 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 Government also announced it would continue its support for millions of self-employed individuals by extending the Self Employment Income Support Scheme Grant (SEISS).
An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. 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.
An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.
As part of the package, the government also announced it will extend the temporary 15% VAT cut for the tourism and hospitality sectors to the end of March next year. This, it says, will give businesses in the sector the confidence to maintain staff as they adapt to a new trading environment.
In addition, up to half a million business who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
On top of this, around 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
Those that took out a Bounce Back Loan will also benefit from a new Pay as You Grow flexible repayment system which will see the length of the loan extended from six years to ten, cutting monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses.
Coronavirus Business Interruption Loan Scheme lenders will also be given the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.
In addition, the Chancellor also announced he would be extending applications for the government’s coronavirus loan schemes that are helping over a million businesses until the end of November. As a result, more businesses will now be able to benefit from the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund. This change aligns all the end dates of these schemes, ensuring that there is further support in place for those firms who need it.