Chancellor’s Winter Economy Plan welcome – rural businesses will face challenges

Further to his announcement that the Autumn Budget will be cancelled, the Chancellor of the Exchequer has this week announced details of his Winter Economy Plan, with further measures to support businesses and the self-employed through the winter months and continuing pressure from the necessary restrictions imposed due to the COVID-19 crisis.

Martyn Dobinson, Partner, Saffery, and a member of the firm’s Landed Estates and Rural Business Group, says:

“Businesses in the rural sector will welcome this package of measures, which will push that cliff edge a little further away for many. But the measures announced won’t save all businesses or all jobs – COVID-19 has changed markets, blocked many opportunities, and disrupted the status quo – the environment in which many businesses operated and traded 12 months ago simply does not exist today. Inevitably there will still be hardship and casualties, despite the very welcome additional support announced by the Chancellor.”

The latest support package includes:

Reduced VAT extension

The temporary reduction of VAT from 20% to 5% for hospitality businesses will continue until the end March 2021. Martyn Dobinson says:

“For those rural businesses with a hospitality offering this is great news. However, for those where a curtailed season has already ended, the benefit from this measure may be inconsequential.”

New Job Support Scheme

A wage subsidy scheme will be introduced from 1 November for viable jobs and will run for six months. Employees must work at least one third of their normal hours and the employer must pay for those hours worked. In respect of the hours not worked, the Government will pay for one third, and the employer must pay for a further third, meaning that employees may be paid for two thirds of the time that they do not work. The grant element, based on the employee’s usual salary, will be capped at £697.92 per month. Employers do not need to have used the existing Coronavirus Job Retention Scheme (CJRS) to benefit. Martyn Dobinson says:

“This is less generous than the CJRS and is clearly a measure to retain a greater number in employment on a part-time basis, rather than a smaller number employed full-time. With the prospect of spiralling unemployment, any measure to keep a greater number working is welcome.”

Self Employed Income Support Scheme (SEISS) extension

This will continue for a further three months. A payment will be made, covering the three months from 1 November to 31 January 2021, of 20% of average monthly profits, and up to a maximum of £1,875. A second grant will be available for the three months from 1 February 2021, but will be reviewed in light of the circumstances at that time. Martyn Dobinson says:

“It’s important that self-employed support continues. It’s likely, however, that more people will be forced into self-employment through redundancy and will be ineligible for support through the SEISS under the current rules. The Chancellor should consider this going forward.”

Extension of loan scheme terms

For those who took out loans under one of the several schemes, there will be longer to repay, with the maximum six year terms extended to 10 years. The application deadline for the Bounce Back and Business Interruption Loan Schemes has also been extended to the end November 2020. A new government-backed loan scheme is expected to be announced in January. Martyn Dobinson says:

“Some businesses have delayed the decision to take up loan support, preferring to see if the storm could be weathered. The continuation of the crisis, and its impact on trading, may mean that loan support is now required. The extended deadline is therefore good news, and the prospect of an extended payback period may make the schemes more attractive.”

Spreading of deferred VAT payments

Deferred VAT no longer has to be paid in full by 31 March 2021, but can be spread over 11 instalments, without interest. Martyn Dobinson says:

“We would still encourage tax payers to pay outstanding tax liabilities where they can. These liabilities won’t go away and may become a bigger problem further down the line.”