QUESTION: Last week, the UK government announced its winter economy plan. What support and tax measures were announced that can help my business during the winter months and the first quarter of 2021?
ANSWER: Last week, the UK Government announced its winter economy plan – a series of employment and business support and tax measures intended to support the economy as the Covid pandemic continues to impact economic output. These latest support measures mark a shift in focus to keeping the economy open whilst providing support to businesses as reduced demand continues to impact many businesses during the winter months.
The government has announced the Jobs Support Scheme (JSS) as the successor to the Coronavirus Job Retention Scheme (CJRS), starting November 1 for a period of six months.
Unlike the CJRS, which was designed to support employees unable to work as a result of the requirement to stay at home, the aim of the JSS is to protect viable jobs by supporting the wages of those in work, providing employers with the option to retain employees on shorter hours rather than making them redundant. While employers participate in the JSS, they are not able to issue redundancy notices to employees on the JSS scheme.
To be eligible for the JSS, employees must be working at least 33 per cent of their usual hours and be paid for those hours by their employer as normal. For the remaining hours not worked, the employer and the UK Government will each pay one third of the employee’s wages, resulting in the employee receiving at least 77 per cent of their total wages (the employer paying 55 per cent and the UK Government paying 22 per cent). The level of the grant will be calculated based on an employee’s usual salary, capped at £697.92 per month.
The JSS is open to employers with a UK bank account and UK PAYE scheme and is not limited to those employers who made use of the CJRS; all small and medium sized businesses may apply and larger businesses may apply if their turnover has been reduced as a result of the pandemic. Employers may also claim for JSS in addition to claiming the job retention bonus announced earlier in the year.
The UK Government has stated that it expects that large employers using the JSS will not be making capital distributions, such as dividend payments or share buybacks, whilst accessing the JSS. Further guidance on the JSS is expected to be issued in due course and we will update our clients once this has been announced.
The UK government has also announced the extension of the Self Employment Income 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 the pandemic.
The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year, capped at £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.
In relation to tax measures, the temporary cut in VAT from 20 per cent to 5 per cent for the tourism and hospitality sectors that was due to expire in January 2021 has been extended through to March 31 next year.
In addition, businesses that deferred their VAT payments due in March to June will be given the option to pay their VAT in smaller instalments. Instead of paying a lump sum in full at the end March 2021, these businesses will be able to make 11 equal instalments over 2021-2022. It has been announced that businesses will need to opt into this VAT deferral mechanism and that HM Revenue & Customs will put in place an opt-in process in “early 2021”.
Enhanced Time to Pay is available for self-employed taxpayers (with up to £30,000 of self-assessment liabilities due) who deferred their second payment on account for the 2019-20 tax year, originally due by July 31. Any deferred amount was due to be paid on or before January 31 next.
Under Enhanced Time to Pay, self-employed taxpayers who exercised the option to defer their second payment on account will, subject to agreeing a payment schedule with HMRC’s self-service Time to Pay facility, be allowed to pay the tax due over an additional 12 month period with deferred amounts not due to be paid in full until the end of January 2021.
Although it is not clear whether the ‘Enhanced Time to Pay’ will also be available for any balancing payment that would otherwise have been due for payment for 2019-20 on January 31, the winter economy plan report suggests that it applies only to the deferred July 2020 amount. It is almost certain the first payment on account due for the 2020-21 tax year, also due on January 31, will be due as normal.
