Just as we have gone into a mini version of March’s lockdown, we now have a mini version of the raft of measures Government are making available to businesses. The plans being put in place however are not as far reaching as the schemes unleashed in March.

There is no longer going to be an autumn budget, therefore no big changes to the underlying tax system for now, but another bout of spending which will all end up having to be paid for somehow. It also means that we have greater uncertainty about what the tax system will look like for next tax year (from April 2021), but these concerns will have to wait for another day.

We have summarised below the main items announced today by the Chancellor of the Exchequer and our thoughts.

Job Support Scheme

  • Intended to support the wages of employees in work who are having to work shorter hours due to reduced demand / workload of the business
  • Only covers employees who are working a minimum 1/3 of their normal hours which are paid at normal rates. – i.e. you have to pay the same hourly rate to the employee; they will just work less hours than normal
  • The government will cover one third of the lost pay
  • The employee will therefore be worse off by a third compared to full employment
  • The government will reimburse employers for the funded 1/3 after the employer has processed the payroll – so effectively the employee works 33% their normal hours, the employer pays them 66% and the government then pay the employer their 33% grant back.
  • There has been no confirmation of if Employers National Insurance and Employers Pension contributions will be included in the grant but as this is following on from a period where furlough doesn’t cover these costs, we would anticipate these costs are for the employer to pay
  • All small and medium businesses with staff have support from this scheme
  • Will run for 6 months starting from 1 November 2020
  • A staff member on Job Support Scheme will still get the employer entitlement for the February Furlough Bonus

More guidance and details will be published “shortly” and we will update you.

Our concerns with the new scheme:

It is not clear from this how the scheme interacts with redundancy in two ways:

  1. Will an employer still be able to make a member of staff redundant while on the Job Support Scheme – therefore having some of the notice period paid up?
  2. As we discussed in our article reducing your employee’s hours, employees on short hours that are less than 50% their normal hours have the right to redundancy if this continues for a period of four weeks in a row or for six out of thirteen weeks.We feel government and ACAS need to give guidance on this. However from how things have been this year I assume the rules will not change, remaining in favour of the employee, which will mean that putting staff on one third their normal hours could result in them claiming redundancy from you as the employer if they are so inclined.

Extended Self-Employment Grant

The extended Self-Employment Grant is intended to match the Job Support Scheme and is a direct continuation of the previous 2 grants for the self-employed but now at much lower rates:

  • Available to those that were eligible for the SEISS grants previously
  • Open to sole traders and partnerships that are facing reduced demand due to Covid-19
  • Will last 6 months – for the period from 1 November 2020 to 30 April 2021, but will be made as two payments, covering 3 months each
  • The first of these payments will be 20% of average monthly earnings (it was 80% for the first payment, 70% for the second – so much lower this time)
  • It is capped at a total payment of £1,875 per 3-month period
  • The guidance states that the government will review the level of the second payment “in due course”

Time to Pay available for Deferred Taxes

VAT

  • For VAT deferred in March to June due to be repaid in full by 31 March 2021, business can opt into a “New Payment Scheme” to spread this cost
  • Business can choose to pay the deferred VAT over 11 equal payments throughout the 2021-22 financial year
  • No interest due on these deferred VAT liabilities
  • The “opt in” process will be announced in early January – it is something businesses will have to apply for to use

Personal Tax

  • Payment plan available for personal tax due 31 January 2021 that are under £30,000
  • Payments can be spread over 12 monthly payments
  • No announcement as to what this would mean for the 31 July 2021 payment on account but if your income is much lower in 2020/21 then getting your tax details to us soon after April 2021 will allow us to work out revised payments on account for you
  • It wasn’t confirmed that no interest would be due on this payment plan, but one would assume this is the case just like the VAT payment plan

Government backed loans

  • Payment terms for Bounce Back and CBILS loans will be extended
    • Bounce Back Loans can be extended to a 10-year term (previously it was only a 6 years) meaning you can reduce the repayments when they kick in – Pay as your grow
    • CBILS will also extended be to 10 years
    • 6-month payment holiday available for business struggling to pay them back, but you have to have paid 6 months instalments before using this option
  • Rishi Sunak’s statement declared that the deadline for applying for CBILS and Bounce Back extended to 31 December 2020 (deadlines had been 4 November for Bounce Back Loans and 30 September for CBILS).
  • A new loan scheme will be available in January, to replace the Bounce Back and CBILS arrangements, details are yet to be finalised on this

Extension on Tax Cuts

  • The VAT reduction for hospitality which was set to end in 13th January 2021 but will now be extended to 31 March 2021

 

As usual, we’re kept in the dark with a lot of the details. Once we know more on when you can apply for the Self-Employment grant, the criteria for the Job Support Scheme and how to apply for the various time to pay options for deferred tax, we will let you know.

Slight sense of deja vu anyone?

Contact me today!

Josh Curties

BA (Hons) ACA

Partner & Principal Adviser

01474 853856

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