As we head into October, businesses face changes and need to understand what Rishi Sunak’s Winter Economy Plan means to them.
The biggest change is in the reduction in government contributions for those companies using the Coronavirus Job Retention Scheme (CJRS). And when the month ends CJRS, which has become known as the furlough scheme, will be replaced.
Winter Economy Plan: Jobs Support Scheme
From 1 October, the Treasury will pay 60% of usual wages up to £1,875 per month for the hours furloughed employees don’t work. Employers must pay at least 20% so that the employee’s salary reaches 80% of the wages normally paid.
The ‘furlough scheme’ will then be replaced with the Jobs Support Scheme (JSS) to ‘directly support’ wages of staff working at least one-third of their regular hours.
Companies will pay workers for hours they work and for regular hours they cannot work. As well as their wages for hours worked, employees are expected to pay another third on top.
The government will pay the final third of the salary, capped at £697.92 per month.
This is how it will look…
- Employers pay 33% of salary for hours worked
- They also pay 22% of the usual wage
- The government pays 22% of wage, capped at £697.92 per month
- Employee has 23% of their wage unpaid
The scheme will start on 1 November, the day after the successful furlough scheme ends. It’s open to all small and medium sized businesses, even if you haven’t use the furlough scheme before.
The JSS is only available to those on the PAYE payroll with companies.
Self-Employed Income Support Scheme
A taxable grant is being provided to those who are currently eligible for SEISS.
You need to prove you are continuing to work and are facing reduced demand due to coronavirus.
The lump sum will cover 3 months’ worth of profits from November to the end of January 2021. Grants will be worth 20% of average monthly profits, up to a total of £1,875.
A second grant is also going to be made available for the self-employed to cover the period from February to April 2021.
Full details of these grants (such as eligible dates, etc.) will be issued neare the time.
Job Retention Bonus
Firms can still claim the existing £1,000 job retention bonus in the new year if they keep on staff.
Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant. The government hopes this means people stay in their jobs for longer if they are at risk of being made redundant.
Bounce Back Loan to change
The Bounce Back Loan guarantee term has been extended to 10 years from the current 6. This is part of a ‘pay as you grow’ repayment system that provides flexibility for companies repaying Bounce Back Loans.
The idea is that by extending the payment guarantee, monthly payments will be cut to help businesses. Interest-only payments of up to six months as well as payment holidays are also available to help business finances.
Coronavirus Business Interruption Loan Scheme
Lenders are being given the flexibility to extend CBILS repayments from 6 to 10 years if it helps businesses repay the loans. While a welcome measure, it will be up to the banks and other lenders to decide whether the extension will help repay the loan!
The Chancellor also announced that he would be extending applications for government loan schemes.
Tax cuts and deferred payments
The hospitality industry continues to benefit from a temporary 15% tax cut , which is being extended until March 2021.
Businesses that deferred their VAT bills will also benefit from more time to pay through the New Payment Scheme. Rather than pay a lump sum in full in March 2021, they will be able to make 11 smaller interest-free payments during the 2011-2012 financial year.
Self-assessment tax payers will be able to take advantage of a 12-month extension to the Time to Pay facility. So anyone who deferred payment in July 2020 now has until January 2022 to pay.
Our advice with any deferred payment is to try and reduce the outstanding amount if possible. Even small payments means you won’t face a larger outstanding bill later.
These measures may help some businesses but many may still struggle. For many, just getting to grips with the new measures may take a lot of time and effort. If you need any help, you can contact us today
While we have some staff based in our Newcastle office, our accountants are able to speak to you via phone or through video conference software if you prefer.