Latest COVID-19 Support From ZigZag Chartered Accountants

Additional government support has been announced this week for businesses and employees impacted by coronavirus (COVID-19) across the UK.
This includes:

  • A new Job Support Scheme to protect the jobs of millions of people returning to work,.
  • Extending the Self-Employment Income Support Scheme.
  • Extending the VAT cut (from 20% to 5%) for the hospitality and tourism sectors.
  • Help for businesses in repaying government-backed loans.

Job support scheme

From the rules announced so far, our understanding is that the Job Support Scheme (JSS) will apply as follows below. The JSS will open on 1 November 2020 and run for six months, until April 2021.

The JSS will give support to those businesses which, while having enough work to continue to employ their workers, are facing reduced demand likely to continue into the winter months. The employer must continue to pay workers for hours worked, but support through
the new JSS is available for the cost of the hours not worked.

The government will make a grant to the employer equal to the cost of one third of hours not worked up to a cap of £697.92 per month.
The employer will bear the cost of a further one third of hours not worked.

It seems likely from the above that the employee is unlikely to receive anything further for the remaining one third of hours not worked although further detailed guidance and legislation is expected to give more clarity about whether the employer could top up the salary further.

Neither the employer nor the employee needs to have previously used the Coronavirus Job Retention Scheme (CJRS), although much of the practical detail is very reminiscent of the CJRS.

JSS grants do not cover employers’ National Insurance Contributions or pension contributions. Employers’ must pay these costs as usual.

The claims portal on gov.uk will open in December 2020.

Eligible employees must have been on payroll and have been included in a full payment submission made on or before 23 September 2020.

During the first three months of the scheme, 1 November 2020 to 31 January 2021, employees must work at least 33% of their usual hours. The government will consider increasing this minimum threshold for the following period.

For time not worked, employees 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.

Illustration

Sue works five days a week and earns £400. Following discussion, she agrees to accept short-time working of two days per week (40%) and her employment contract is revised to reflect this. Her employer is using the JSS.

Sue is paid £320 in accordance with her employment contract through the payroll and reported through RTI in the usual way.

This comprises:

Cost borne by employer for time worked:
40% x £400 = £160

Cost borne by employer:
1/3 of the normal wages for time not worked: 1/3 x 60% x £400 = £80

Government grant:
1/3 of the normal wages for time not worked: 1/3 x 60% x £400 = £80

Total pay to Sue = £320

In this illustration, the employee is earning 80% of her normal wage. The 1/3 contribution rule ensures that employees on this scheme continue to earn a minimum of just over 77% of their normal wages (unless the government contribution has been capped, see above).

SEISS extension

The Self-Employment Income Support Scheme will also be extended from November 2020 to April 2021.

The extension will be in the form of two taxable grants. The first grant covers businesses affected after 1 November 2020, covering 20% of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits and capped at £1,875. More details on the second grant will follow.

VAT Deferral New Payment Scheme

If you deferred payments that were due between 20 March and 30 June 2020, then these payments need to be made to HMRC by 31‌‌ March 2021. You can use the New Payment Scheme to spread these payments over equal instalments up to 31‌‌ March 2022. Alternatively, you can make payments as normal by 31‌‌ March 2021 or make Time To Pay arrangements with HMRC if you need more tailored support.

New Self Assessment Self-Serve Time To Pay Scheme

If you deferred paying your July 2020 Payment on Account, you will need to pay the deferred amount, in addition to any balancing payment and first 2020/21 Payment on Account, by 3‌1‌‌ ‌‌January 2021. This may be a larger payment than you usually pay in January.

If you’re unable to pay your Self-Assessment (SA) bill in full by 31‌‌ January 2021, you can set up a Time to Pay payment plan of up to 12 months online without speaking to us. If you have SA tax debts of up to £30,000, you'll able to access this Time to Pay facility through GOV‌.UK and will get automatic and immediate approval. If your SA debts are over £30,000, or you need longer than 12 months to repay your debt in full, you will still be able to use our Time to Pay arrangement by calling HMRC.

Loan extensions

The deadline for new applications to the government’s state-backed loan schemes will be extended until 30 November 2020, and the government is starting work on a new guarantee loan programme to begin in January.

The government will give all businesses that borrowed under the Bounce Back Loan Scheme the option to repay their loan over a period of up to ten years, reducing their average monthly repayments on the loan by almost half.

UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times), or to pause their repayments entirely for up to six months (an option they can use once and only after having made six payments).

The government will also allow Coronavirus Business Interruption Loan Scheme lenders to extend the term of a loan up to ten years.

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