First of all, the UK’s Winter Economy Plan is made up of a number of schemes and incentives:
Job Support Scheme
The Chancellor, Rishi Sunak, has announced a new support scheme that will be brought in when the Coronavirus Job Retention Scheme (CJRS) ceases at the end of October.
The new Winter Economy Plan will be implemented to help protect viable jobs in businesses who are facing lower demand over the coming winter months due to Covid-19.
The stated aims of the scheme are to help employees remain in employment and to reduce the amount of possible redundancies due to the current pandemic. Employers are expected to continue to pay employees for their time worked, however the cost of hours not worked will be split between the employer and the Government (via the JSS) and the employee (via a wage reduction for time not worked) resulting in the employee being kept in employment.
Any employers who utilise the JSS will also be able to claim the Job Retention Bonus if they meet the eligibility criteria.
The new JSS will open on 1 November 2020 and will run for six months, closing in April 2021. HMRC has advised that further guidance will be published, however, key details and examples have been released in the form of a Factsheet, which includes:
Who is eligible?
- All employers with a UK bank account and UK PAYE schemes can claim the grant
- The employer does not have to have used the CJRS to be eligible to claim
- Large businesses will have to meet a financial assessment test, so the scheme is only available to those whose turnover is lower now than before, due to experiencing difficulties caused by Covid-19. There will be no financial assessment test for Small and Medium Enterprises (SMEs).
- The expectation is that large employers using the JSS will not be making capital distributions, such as dividend payments or share buybacks, whilst accessing the grant.
- Employees must be on an employer’s PAYE payroll on or before 23 September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made on or before 23 September 2020.
- To support viable jobs, for the first three months of the scheme the employee must work at least 33% of their usual hours. After three months, the Government will consider whether to increase this minimum hours threshold.
- Employees will be able to cycle on and off the scheme and do not have to be working the same pattern each month, but each short time working arrangement must cover a minimum period of seven days.
What does the grant cover?
- For every hour not worked by the employee, both the Government and employer will pay a third each of the usual hourly wage for that employee. The Government contribution will be capped at £697.92 a month.
- Grant payments will be made in arrears, reimbursing the employer for the Government’s contribution. The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.
- “Usual wages” calculations will follow a similar methodology as for the CJRS. Employees who have previously been furloughed will have their underlying usual pay and/or hours used to calculate usual wages, not the amount they were paid whilst on furlough.
- Employers must pay employees their contracted wages for hours worked, and the Government and employer contributions for hours not worked. The expectation is that employers cannot top up their employees’ wages above the two-thirds contribution to hours not worked at their own expense.
What does it mean to be on reduced hours?
- The employee must be working at least 33% of their usual hours
- For the time worked, employees must be paid their normal contracted wage
- For time not worked, the employee will be paid up to two-thirds of their usual wage
- Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee
How can I claim?
- The scheme will be open from 1 November 2020 to the end of April 2021. Employers will be able to make a claim online through Gov.uk from December 2020. They will be paid monthly.
- Grants will be payable in arrears meaning that a claim can only be submitted in respect of a given pay period, after payment to the employee has been made and that payment has been reported to HMRC via an RTI return.
- HMRC will check claims. Payments may be withheld or need to be paid back if a claim is found to be fraudulent or based on incorrect information. Grants can only be used as reimbursement for wage costs actually incurred.
- Employers must agree the new short time working arrangements with their staff, make any changes to the employment contract by agreement, and notify the employee in writing. This agreement must be made available to HMRC on request.
- The intention is that employees will be informed by HMRC directly of full details of the claim
Included in the Factsheet, HMRC provide a detailed example, along with a table which shows percentages in relation to the government funding, based on hours that have been worked.
In addition, the Government is continuing its support for millions of self-employed individuals by extending the Self Employment Income Support 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 coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £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 - ensuring our support continues right through to next year. This is in addition to the more than £13 billion of support already provided for over 2.6 million self-employed individuals through the first two stages of the Self Employment Income Support Scheme – one of the most generous in the world.
Tax cuts and deferrals
As part of the package, the government also announced it will extend the temporary 15% VAT cut for the tourism and hospitality sectors to the end of March next year. This will give businesses in the sector - which has been severely impacted by the pandemic - the confidence to maintain staff as they adapt to a new trading environment.
In addition, up to half a million business who deferred their VAT bills will be given more breathing space through the New Payment Scheme, 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.
On top of this, around 11 million 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.
Giving businesses flexibility to pay back loans
The burden will be lifted on more than a million businesses who took out a Bounce Back Loan through a new Pay as You Grow flexible repayment system. This will provide flexibility for firms repaying a Bounce Back Loan.
This includes extending the length of the loan from six years to ten, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses. These measures will further protect jobs by helping businesses recover from the pandemic.
We also intend to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.
In addition, the Chancellor also announced he would be extending applications for the government’s coronavirus loan schemes that are helping over a million businesses until the end of November. As a result, more businesses will now be able to benefit from the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund. This change aligns all the end dates of these schemes, ensuring that there is further support in place for those firms who need it.
If you require any further assistance in understanding the UK Winter Economy Plan or how this affects your business, activpayroll is here to help. Please contact our dedicated Audit & Compliance Manager Simon Wright via email firstname.lastname@example.org.