While he referenced three consecutive months of growth in the economy, he was careful to highlight the fragility of the economy as we move forward into the coming winter months, noting that his primary goal for economic policy remains unchanged; to support people’s jobs.
Our summary of the key announcements:
Below we provide our summary of today’s key announcements, which we currently only have in outline, and we will provide further detail as soon as we receive it.
A new Job Support Scheme
Following the cessation of the Coronavirus Job Retention Scheme (CJRS) at the end of October 2020, the Chancellor has announced the launch of a new Job Support Scheme (JSS). The objective of the scheme is to support the wages of people in work, giving businesses who face depressed demand the option of keeping employees in a job on shorter hours, rather than making them redundant.
The scheme will begin on 1 November 2020 and will run for a period of six months, based on the following three key principles:
- It will support viable jobs – employees will be able to be retained working at least 33% of their normal working hours, which their employer will need to pay, and the government and employer will then top-up the salary by up to 66% of remaining normal pay, with up to 33% paid by each equally (see example below). This means an employee would receive a minimum of 77% of their normal wage under the scheme. There was no announcement of any cap on salary at this stage, but more details will become available shortly, at which point we will share an update with you.
- Support is targeted at firms who need it the most – all SMEs are eligible for the scheme but larger businesses, who can demonstrate that their turnover has fallen as a result of the crisis, may also qualify.
- Open to all employers across the UK, even if you have not previously used the furlough scheme – you do not need to have utilised the furlough scheme to access the JSS and, in addition, the Job Retention Bonus still remains available to employers claiming through the JSS.
As an example of how the JSS will work, for an employee working 40% of normal hours, they will be paid 40% of normal salary by their employer. The employer and the government will then pay two-thirds of the balance of the normal salary (2/3 x 60%) = 40%, split equally between them, ie. 20% of normal salary each. Accordingly, the employee in this example would receive 80% of normal salary (40% + 20% + 20%).
Support for the self-employed
The Chancellor also committed to extending the existing grants for the self-employed for a further six months from 1 November 2020, on “similar terms to the Job Support Scheme”. We will share further details as soon as we have them.
Helping with cashflow
Sunak also went on to announce four further areas of support for businesses to assist with the critical issue of ongoing cashflow, in relation to the loans and tax deferrals already announced by the government, as follows:
- Bounce Back Loans (BBLs) – a new ’Pay as you grow’ scheme will be introduced meaning that the term of any existing BBL can be extended from the current 6 year term to 10 years. Businesses who are continuing to struggle as a result of the crisis can also choose to repay these loans on an interest only basis, with anyone in real trouble being able to apply to suspend the repayments altogether for up to 6 months. Sunak confirmed that doing so would have no impact on credit ratings.
- Coronavirus Business Interruption Loan Scheme (CBILS) – the government have also committed to extending their guarantee on any CBILS loans for up to 10 years, which they hope will give any lenders the ability to allow businesses more time to repay their loans.
- More time and flexibility with deferred tax bills – under current plans, the payments for deferred VAT bills would fall due in March 2021, however, the announcement today has extended the scheme, allowing businesses to spread their VAT bill over 11 smaller repayments and with no interest to pay. Sunak confirmed that any self-assessment income tax payers can also extend their outstanding tax bill over 12 months from January 2021.
- Support for the hospitality and tourism sectors – these sectors were supported at the start of the crisis with a cut in VAT rates to 5%, which was due to return to the standard 20% on 13 January 2021. Sunak announced the cancellation of this planned increase and confirmed that the lower rate of 5% will continue until 31 March 2021.
There was also reference to a new successor loan guarantee programme, which is currently being developed and is set to launch in January.
Further detail on all of these announcements will be issued shortly, and we will provide an update as soon as we can.
If you have any questions in the meantime, however, please contact your usual UHY adviser or contact us here.
