Coronavirus Job Support Scheme

woman at laptop

Earlier today the Chancellor has announced a much welcome new ‘Job Support Scheme’ to replace the current furlough scheme, also known as the Job Retention Scheme (JRS), that is due to end on 31 October 2020.

As at 16 August 2020 the cost of the UK JRS was £35.4bn and supported 9.6m jobs, mainly in the hospitality sector. With the current scheme due to end on 31 October, many were worried about the possibility of mass redundancies following this date.

The original furlough scheme helped people stay at home, therefore this new scheme will move away from this and encourage people to get back to work on a gradual/part-time basis. It is targeted support to keep people returning to work in key UK sectors to help boost the UK economy (i.e. hospitality and manufacturing).

The New Job Support Scheme (JSS) will support those returning to work based upon 3 conditions:

1. To support viable jobs

Employees must work one third of their usual hours. For the remaining hours not worked, the Government and employer will top up their pay by one third of the difference each, so employees will receive 77% of their pay. The government contribution will be capped at £697.92 per month per employee.

2. Targeted at firms that need it the most

The focus will be for all small and medium businesses.Larger businesses can only claim where it can be demonstrated that turnover has fallen by over a third during the crisis

3. Even if an employer has not claimed under the old JRS previously, they can claim under the new JSS.

It is important to note that businesses will not be able to issue redundancy notices to those workers who are on this scheme throughout its duration.

There will also be restrictions on larger businesses, in terms of their ability to make capital distributions to shareholders while they are in receipt of money for their workers on this scheme.

The new JSS will run for 6 months starting in November 2020 and a claim can be made under both the new JSS and Job Retention Bonus scheme.

 

Other measures announced

Self-employed grant

To be extended, also on same terms as new JSS.

Income tax deferral

Millions of self-employed people or those who have more than one source of income have to complete a self-assessment tax form every year. The chancellor said that those with tax debt of up to £30,000 will be able to set up a payment plan over 12 months to January 2022.

Bounce back loans

Applicants will be given more time to repay under a new ‘pay as you grow’ scheme. Loans can be extended from 6 to 10 years, halving monthly repayments, have the option to make interest only payments, or finally, (for those businesses in real trouble) apply to suspend payments for 6 months. These new measures will have no credit rating impact and new facilities will be available until the end of the year.

Coronavirus Business Interruption loans

Government guarantee is to be extended for up to 10 years to allow more time to repay to lenders. Again, new facilities will still be available until the end of the year.

A new government backed loan scheme

This will be launched in January with further details to be announced.

VAT for the Hospitality/Tourism sectors

From 13 Jan 2021 VAT rates were set to increase from the 5% level, but the Chancellor has cancelled the planned increase and VAT will remain at 5% until 31 March 2021.

VAT deferral

Where businesses had already deferred their payment of VAT to 31 March 2021, there will be the ability to spread this bill over eleven smaller repayments with no interest to pay.

Thoughts on the winners and losers of the new furlough scheme

  • The hospitality sector has been hit by tightening of the Covid rules regarding the announcement of a 10pm curfew and table service only, so they will benefit from this new scheme and the VAT reduction extension.
  • The tourism sector will also benefit from the VAT reduction, but whether they can meet the minimum working time for the new JSS to apply with the current travel restrictions is yet to be seen.
  • The new scheme will be targeted in term of a focus on small/medium firms and those larger businesses who can demonstrate they have been impacted negatively during the pandemic.
  • The current part-time furlough arrangements have already led to calculation errors and all employers will now have the inevitable compliance and administration burden of getting up to speed with a yet another new system. A simple extension to furlough may have been a more helpful boost to businesses, but was not likely given Rishi Sunak’s comments that it isn’t right to protect jobs which no longer exist. The fate of furlough was likely sealed by recent reports of high cases of fraud.
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