It has been another dramatic week – all starting with, and precipitated by, the announced new social distancing measures/restrictions announced by the Government, that the Prime Minister explained would likely be in place for the next 6 months.
On Wednesday, the Chancellor announced that the Budget would be delayed due to the need to focus on business support measures to tackle the impact of the COVID-19 crisis.
Yesterday, Rishi Sunak explained a raft of new business support measures in a desperate attempt to mitigate the further economic impact of the crisis.
Whilst these events are by no-means unexpected, we did expect to be providing updates at this time in relation to sizeable tax changes as more rumours were leaked about the content of the Budget. We are, however, back to the urgent updates on new coronavirus business support measures!
As has been the case throughout this crisis, we wanted to provide a considered update as soon as possible.
Jobs Support Scheme
As we know that the existing Coronavirus Job Retention Scheme (JRS) will finish at the end of October 2020.
There has been political pressure on the Government to continue measures to mitigate job losses associated with the crisis, which has resulted in a new support measure being announced, the Jobs Support Scheme (JSS).
The JSS will start on 1 November 2020 and be in place for 6 months (to April 2021).
The summary of the Scheme provided by the Government is that:
“The company will continue to pay its employee for time worked, but the cost of hours not worked will be split between the employer, the Government (through wage support) and the employee (through a wage reduction), and the employee will keep their job.
The Government will pay a third of hours not worked up to a cap, with the employer also contributing a third. This will ensure employees earn a minimum of 77% of their normal wages, where the Government contribution has not been capped.”
Employees who are working at least 1/3 of their normal hours will have their pay topped up by contributions from both the Government and their employer. The top up will ensure that the remainder of the employee’s wages are paid to them, but subject to a cap.
The Government contribution will be capped at £697.92 per month.
The Government contribution will not include covering class 1 NIC liabilities or pension contributions – both will still be payable by the employer.
The definitions of “usual wages” and “usual hours” will follow the definitions and associated guidance used for the ‘flexible furlough’ scheme under the JRS.
Key facts relating to employees are:
- “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.
- In order to support viable jobs, for the first three months of the scheme the employee must work at least 33% of their usual hours. After 3 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.
- 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.”
Large businesses were subject to a financial assessment test, meaning that they will only be eligible if they can demonstrate that the business’ turnover has decreased as a result of the crisis. There will be no such test for small and medium businesses (SMEs).
The limited detail also implies that large businesses that are eligible, will be restricted as to amounts that can be paid out to shareholders in the form of dividends etc while benefiting from the Scheme.
The scheme will run for 6 months from the beginning of November.
Neither the employee nor employer needs to have previously benefitted from the JRS to be eligible for the JSS.
Grant payments under the Scheme will be made in arrears on a monthly basis, and claims will be made online from December 2020.
The limited information that has been released by the Government can be found here.
Self Employed Income Support Scheme (SEISS)
In line with the announcement of the JSS, the SEISS is being extended.
The detail released by the Government so far can be found here.
To be eligible for the extension self-employed individuals must:
- “currently be eligible for the Self-Employment Income Support Scheme (although they do not have to have claimed the previous grants);
- declare that they are currently actively trading and intend to continue to trade;
- declare that they are impacted by reduced demand due to coronavirus in the qualifying period (the qualifying period for the grant extension is between 1 November and the date of claim).”
The point that the eligible individuals must currently be eligible for the SEISS is important. The same eligibility criteria applies.
The extension to the Scheme will be in the form of 2 lump sum grants paid for two 3 month periods (November 2020 to end of January 2021, and February 2021 to end of April 2021) – covering a 6 month period from November 2020 to April 2021.
The guidance states that for the 1st grant (for the period 1 November 2020 – 31 January 2021) “HMRC will provide a taxable grant covering 20 per cent of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £1,875 in total.”
For the 2nd grant, the guidance states that “HMRC will review the level of the second grant and set this in due course.”
As before, grants received under the Scheme will be subject to income tax and NIC.
The guidance states that more detail on the claims procedure will be released in due course.
Self-assessment tax payment further deferral
Under the previously announced business support measures, self-assessment tax payers were able to delay paying their 2nd payments on account of their 2019/20 income tax and class 4 NIC liability due on 31 July 2020 to January 2021.
Under the new announcements, those taxpayers who are due to make a tax payment of up to £30,000 by 31 January 2021 will be able to settle the liability over an additional 12 month period using a ‘time to pay’ arrangement with HMRC.
There is limited detail on this measure, however, we assume that there will be a form of simplified process for applying for a ‘time to pay’ arrangement here, as this can usually be an involved process.
VAT payment deferral
In a similar vein to the above, under previous measures businesses with a VAT payment to make between 10 March 2020 – 30 June 2020 could defer these payments until 31 March 2021, when they would have needed to be paid in full.
As part of yesterday’s announcements, such deferred VAT payments can now be settled by way of 11 interest-free instalments over the following financial year.
Reduced VAT rate extension
The previously announced temporarily reduced VAT rate for the tourism and hospitality sectors that was set to end on 12 January 2021, will be extended to 31 March 2021.
Coronavirus Business Interruption Loans (CBILS) and Bounce-Back Loans
The end dates for both schemes (as well as the Future Fund) have been extended to 30 November 2020.
It was also announced that the repayment periods would be extended as follows:
- Bounce-Back Loans – from 6 years to 10 years;
- CBILS – the ability to extend the loan from the previous 6 year maximum length of the loan to 10 years.
It was also announced that interest-only periods of up to six months and payment holidays will also be available to businesses who had taken out the Bounce-Back Loans.
As we have previously advised, the next Budget will very likely see significant changes to the current capital gains tax, inheritance tax and corporation tax regimes.
Whilst the Budget has been delayed, this doesn’t change the likelihood of such changes being made.
The delay merely provides more time for those concerned by the rumoured changes to seek experienced advice and implement appropriate mitigation planning.
We have been providing advice throughout most of this year (and longer in some cases) anticipating these changes.
If you (or your clients) would like advice as to how the anticipated changes may impact you, please feel free to contact us.
If we can help and advise you in any way, please get in touch with your usual RRL contact, we continue to largely work remotely. We will respond to emails as usual. We are conducting meetings virtually (using Microsoft Teams) albeit face-to-face meetings can be arranged by pre-appointment conditional upon our meeting policies being agreed and adhered to.
We will provide further updates, as and when further announcements are made and detail/guidance released.