Chancellor’s Economic Statement

Please see below for a summary of the announcements made by the Chancellor of the Exchequer, Rishi Sunak, today in the House of Commons.

New Job Support Scheme

The furlough scheme will end in October 2020 as planned. However, there will be a new Job support scheme from 1 November 2020 for 6 months. The government will directly support the wages of people working shorter hours, rather than an employer having to make employees redundant.

The government will support viable jobs by topping up the wages of workers. The government and the employer will pay a third of the remaining hours not worked. In basic terms an employee only working a third of their hours will receive 77% of their pay with the government only paying 22% of this. The employer will pay 55% of the employee’s normal wage.  The employee must work at least one third of their usual hours to qualify.

The scheme will be available to all small and medium businesses, and any large business that are seeing a decline in their revenues because of the coronavirus. Employers cannot make redundancy notices to employees on the scheme. There will also be restrictions on larger companies in terms of capital distributions to shareholders while they are in receipt of this grant.

Self-Employed Income Support Scheme 

An extension to the Self-employed income support scheme will also be available on similar terms and conditions as the new job support scheme, to maintain parity between employees and those who are self-employed. This will cover 20% of average monthly trading profits over the winter months.

Loan Schemes

The chancellor advised that the bounce back loan scheme has given over a million small businesses a financial boost. He announced more flexibility to the scheme allowing businesses more time to repay their loans; coining this as ‘pay as you grow’. The loans will be extended from 6 to 10 years and now with the option of making interest only payments and, if required, being able to suspend payments for up to 6 months, with none of these impacting on the businesses credit rating.

Similar to the bounce back loan scheme the Coronavirus business interruption loan scheme (CIBLS) will have the government guarantee extended for up to 10 years, giving more time to repay.

The loan schemes will continue to be available until the 30 November this year, with a new successor loan guarantee scheme beginning in January.

Deferred VAT and tax payments

It was possible to defer your VAT payments falling due between March and June 2020 to March 2021 next year. Businesses that took up this deferral will now be able to spread the payment over 11 months from March 2021 meaning smaller repayments to help with cash flow while businesses are still recovering,

Anyone who deferred their 31 July 2020 payment on account to January 2021 will also be able to spread this payment over the next 12 months from January.

Hospitality and Tourism 

Finally Rishi Sunak announced that they were cancelling the planned increase in VAT rate in January on certain supplies in the hospitality and tourism sector. The lower rate of 5% will continue until 31 March 2021.

As more information is published we will keep you informed of the detail.

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