New COVID-19 assistance programmes
By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)
29 September 2020
Justine Riccomini explains the key points from the Chancellor’s Winter Economy Plan announcement of 24 September 2020.
On 24 September 2020, 6 months after the original announcements were made by the Chancellor and the Prime Minister in relation to the assistance programmes available to employers and businesses when the pandemic took hold in the UK, the Chancellor has announced the further measures which the government intends to roll out for the six months from November 2020.
Job Support Scheme
From 1 November 2020, the Job Support Scheme (JSS) will be available.
The change of name to the JSS is clear messaging that the Job Retention Scheme is definitely ending on 31 October, and a new scheme with revised objectives and form of support is beginning. The JSS is a form of short time working which aims to prevent redundancies in so-called ‘viable’ jobs; a definition of ‘viable’ is still pending.
The lost wages are effectively being shared by the Government, the employer and employee. The short time working aspect is already a well-used concept in UK employment legislation for businesses in difficulty and, crucially, facilitates entitlement to the employee to still claim a redundancy payment and other key payments if the working hours are cut to less than 50% of their normal wages.
As with any changes to employment contracts, employers should take legal advice or consult ACAS prior to making the changes to accommodate theJSS.
Key points about the JSS
- All UK employers are eligible but there is a specific turnover reduction condition for larger employers.
- The employer need not have used the Job Retention Scheme.
- Employees must be working a minimum 33% of their usual contracted hours and be paid at their normal contract rate for those hours.
- The government and the employer will share the cost of the remaining hours not worked – which translates into an employee receiving 77% of pay if they work 33% of hours.
- The government grant is capped at £697.92 per month.
- Employers can also claim the Job Retention Bonus.
- Further information is awaited on the calculations for casual or so-called ‘zero-hours’ contracts or variable hours contracts.
- It is not yet clear when more comprehensive guidance will be issued beyond the fact sheet and links in this article.
Redundancies
The measure may well be too late for many employers who have already had to make redundancies. However, those employers who may have started redundancy consultations with a view to no further assistance being available after the end of October 2020 may be able to unpick this and think again about their options. As ever, any dismissal, even by way of redundancy, must be fair and it is important that employers take advice in this regard from professional advisers, ACAS or similar channels.
Self Employed Income Support Scheme extension
The Self Employed Income Support Scheme (SEISS) will also be extended to support so-called ‘viable’ traders who are ’facing reduced demand over the winter months’. The scheme extension aims to pay taxable grants covering 20% of average monthly trading profits.
Whilst the starting point looks like an extension of SEISS 1 and 2, SEISS 3 and 4 have changes to the scheme, notably in the qualifying conditions – the claimant needs to be ‘currently actively trading’ but affected by ‘reduced demand’, which is different from the previous test of ‘adversely affected’. The government’s aim with SEISS 3 and 4 is to change the support towards providing a top up for those who are trading, and continuing to do so, i.e. to support viable businesses but which are facing reduced demand. Guidance is expected and in the meanwhile should you have queries or comments that you would like ICAS reps to take back to HMRC, please let us know.
Key points about the SEISS extension
- The business must be eligible for the SEISS under current qualifying criteria – although they need not have claimed any grants in stages 1 and 2.
- The claimant must declare they are ‘actively trading’ and impacted by ‘reduced demand’ in the qualifying period; definitions are yet to be supplied for these terms.
- The assistance will again be paid in two lump sums, as before.
- The first will be calculated using the period from 1 November 2020 to 31 January 2021 and is capped at £1,875.
- The second will be calculated using the period from 1 February 2021 to 30 April 2021.
- The level of the second grant has not yet been set.
- It is not yet clear when the claims portal will open.
- It is not yet clear when more comprehensive guidance will be issued beyond the fact sheet and links in this article.
VAT
Two important measures have also been brought in covering VAT.
- The VAT cut to 5% made available to the tourism and hospitality sectors is being extended to 31 March 2021.
- Those businesses that deferred their VAT bills are being offered a revised payments scheme, through which they will repay the VAT which would otherwise have become due by 31 March 2021 in eleven smaller interest-free payments throughout the 2021-22 financial year. It is thought that this measure will provide welcome cashflow relief for around half a million businesses.
Income Tax Self-Assessment
Jim Harra, Chief Executive and Permanent Secretary, HMRC, says: 'If you or your clients deferred paying your July 2020 Payment on Account, you will need to pay the deferred amount, in addition to any balancing payment and first 2020/21 Payment on Account, by 31 January 2021. This may be a larger payment than you or your clients usually pay in January.
'If you or your clients are unable to pay your Self-Assessment (SA) bill in full by 31 January 2021, you can set up a Time to Pay payment plan of up to 12 months online without speaking to us. If employers have SA tax debts of up to £30,000, they will be able to access this Time to Pay facility through GOV.UK and will get automatic and immediate approval. If their SA debts are over £30,000, or they need longer than 12 months to repay their debt in full, they will still be able to use our Time to Pay arrangement by calling HMRC.'
Lending
Further lending support has also been announced and is summarised below.
- Lenders can now offer coronavirus business interruption loan scheme (CBILS) borrowers more time to repay, by making interest-only payments, or suspend payments completely for six months.
- So-called ‘Bounceback’ loans can now be repaid under a ‘pay as you grow’ scheme, extending repayment terms from six to ten years. Additionally, interest-only periods of up to six months as well as payment holidays will also be available.
- The application deadline for all COVID-19 loan schemes – including the Future Fund – has been extended to 30 November 2020.
Further reading – for now
The JSS fact sheet and the SEISS grant extension fact sheet were issued following the announcements. HMRC has also issued the following links on GOV.UK.