Living organisms have a remarkable ability to adapt and evolve to be successful in the environment in which they find themselves and humans are perhaps the most remarkable of all species on the planet in their ability to adapt rapidly.
We are currently living through the most turbulent period of my lifetime in terms of economic stability and the country is having to adapt to new ways of living on an almost weekly basis. This means that the usual annual pantomime of a Chancellor’s Budget speech in November has had to be cancelled in favour of a more sombre presentation to Parliament described as the Winter Economy Plan, delivered when we are only just beginning to move our thoughts from summer on to autumn.
After a period of respite, Covid-19 is surging again, and with the availability of a safe vaccine still some way off, we are having to take more care in our interactions with others. This inevitably has a knock-on impact on the economy, particularly the hospitality, leisure and entertainment sectors. Hence, the Chancellor had to step forward again to announce a series of measures to help support “viable” jobs and struggling businesses.
It is very important to emphasise that we are not in another national lockdown – children are in school, shops are open, and cafés, pubs and restaurants are able to operate at least to some capacity. Hence, we should not get carried away with the doom and gloom. However, we do have to adapt again and so the Chancellor has had to adapt too.
There was a raft of measures announced yesterday and there will, of course, be many who think the Chancellor hasn’t gone far enough and some who think he’s giving away too much. Eventually, the country is going to have to pay the money back, after all. Hence, the Government is treading a fine line.
Whether the Chancellor is getting it right or wrong will only become apparent with the benefit of hindsight, so what he has to do at the moment is to attempt to create an environment within which as many of us as possible can thrive, or at least survive. It is then up to us to work out how we can achieve that.
I have every faith in the human capacity for ingenuity and ability to deal with whatever is placed in front of us. Therefore, I am sure we will get through this.
A brief guide to the announcements
- The introduction of a new ‘Job Support Scheme’ which will commence on 1 November. As long as the employee is working at least 33% of their normal hours, the Government will pay one third of the employee’s unworked hours at their normal salary rate, provided the employer also pays one third of the unworked hours. The Government’s contribution will be capped at £697.92 per month (a seemingly arbitrary number, but if you do the maths, it can be related back to the £2,500 cap employed in the CJRS grant scheme). Subject to the cap, this support will mean that any employee working at least 33% of their hours will receive a minimum of 77% of their normal pay.
This scheme will run for six months until 30 April 2021. It will apply to all SMEs, as well as any large businesses that can demonstrate they have been adversely affected by Covid-19. Note that employees must not be on notice of redundancy.
This scheme is inspired by the German ‘Kurzarbeit’, which enables employers to keep their employees in a job on shorter hours during periods of reduced demand.
Note that this is a new scheme that applies to anyone employed as of 23 September. A claim does not need to have been made under the CJRS grant scheme in order to be eligible.
- An extension to the SEISS grant scheme for six months from 1 November, but reduced to 20% of average monthly trading profits, payable in two lump sums and capped at £1,875 per 3 months (percentage and cap for second 3 months subject to review).
- Temporary reduced VAT rate (5%) for the hospitality and leisure sectors to be extended from 12 January to 31 March 2021.
- New applications under the government backed loan schemes to be extended to a closing date of 30 November, rather than 30 September.
- Introduction of more flexibility for borrowers under the Bounce Back Loan Scheme. The repayment period can now be extended from 6 years to 10 years; there will be the option to take a capital repayment holiday for up to 6 months on up to 3 different occasions; and it will be possible to suspend repayments completely for up to 6 months once during the loan period, as long as at least 6 payments have already been made.
- Borrowers under the Coronavirus Business Interruption Loan Scheme (CBILS) to be allowed to extend their repayment term from 6 years to 10 years.
- VAT deferred during the initial lockdown period no longer required to be paid by 31 March 2021. There will be an opt-in mechanism to allow all businesses that have deferred VAT to spread the repayment over 11 instalments during tax year 2021/22.
- Improved time to pay arrangements for self-assessment taxpayers in respect of the January 2021 liability (including any tax deferred from July 2020). There will be a self-service Time to Pay facility available on HMRC’s website that will enable anyone with a liability up to £30,000 to spread the payment over the next 12 months. Anyone unable to use this facility will still be able to use HMRC’s Time to Pay helpline to agree a payment plan.
If you have any questions or need any advice, please contact Brian Jukes.