The Chancellor, Rishi Sunak, has unveiled the government’s Winter Economy Plan to protect jobs and support businesses over the coming months. The Job Support Scheme is designed to protect viable jobs in businesses which are facing lower demand over the winter months due to Covid-19, to help keep their employees in the workforce.
It follows the closure of the Job Retention Scheme on 31 October this year and will open on 1 November 2020 and run for six months.
The scheme aims to “target support on those businesses that need it most: focusing on those that are being impacted by Coronavirus and who can support their employees doing some work, but that need more time for demand to recover.”
Under the initiative, companies will continue to pay employees for time worked, but the burden of hours not worked will be split between the employer and the Government (through wage support) and the employee (through a wage reduction), allowing the employee to keep their job.
All small and medium-sized businesses are eligible and employers can use it even if they have not previously used the furlough scheme it replaces.
In response to the announced measures, Alistair Scott-Somers, Director, Corporate Law, commented: “For those business owners contemplating the prospect of an extended period of low revenue the cashflow boost from some of the Government’s measures will certainly be welcomed, especially in the hospitality and events sectors. Whilst some jobs may be saved in these sectors, I don’t believe there is enough for businesses in other affected sectors to put planned redundancies on hold.”
Zee Hussain, Associate Director, Corporate Law, said: “The Chancellor has made some difficult decisions in unprecedented times and continues to find creative solutions. As he himself stated, this scheme won’t save all jobs, but the measures should be welcomed and will provide breathing space for some employers. It will mean, whilst redundancies are inevitable, that our clients can preserve the talent and experience of viable roles as we all navigate through the difficult months ahead, preparing for when circumstances improve.”
Rebecca Dixon, Head of HR, said: “This now provides employers with an alternative to consider and whilst it will not be feasible for all, it will hopefully temper the number of redundancies that would have been inevitable at the end of the current furlough scheme.”
Extensions to existing schemes
The Government also announced extensions and amendments to some already-running initiatives.
A Pay As You Grow flexible repayment scheme was announced for businesses, allowing them to extend their Bounce Back loans from six to 10 years, thereby reducing their monthly repayments.
Interest-only periods of up to six months and payment holidays will also be available to businesses if necessary.
Companies who have taken out a Coronavirus Business Interruption Loan Scheme have been given the ability to extend the length of loans from a maximum of six to 10 years.
Tax cuts and deferrals
Additionally, the government announced that the temporary reduction of VAT from 20% to 5% for the tourism and hospitality sectors will remain in place until 31 March 2021.
The Government announced the New Payment Scheme for businesses who deferred their VAT bills, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
Furthermore, self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
More information on the government’s Winter Economy Plan can be found here.
If you or your business would benefit from further support and guidance on any of these issues, please get in touch.