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Chancellor's Winter Economy Plan

Chancellor's Winter Economy Plan

On 24 September 2020, after announcing there would be no Autumn Budget this year, the Chancellor published details of his new ‘Winter Economy Plan’.

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On 24 September 2020, after announcing there would be no Autumn Budget this year, the Chancellor published details of his new ‘Winter Economy Plan’. The key measure announced was a new wage subsidy scheme, the Job Support Scheme (JSS) which will replace the Job Retention Scheme (JRS) when the latter ends on 31 October 2020. There were also new payment schemes for the settlement of postponed VAT and income tax liabilities, as well as an extension to the temporary five percent reduced VAT rate for hospitality and tourism and some relaxations around the government-backed loan schemes.

A new Coronavirus Job Support Scheme

A new wage subsidy scheme, the JSS, will replace the JRS when it ends on 31 October 2020. However, there is no requirement to have participated in the JRS in order to receive JSS funding, and employers who receive JSS funding will remain eligible for the Job Retention Bonus. Read details in our separate article.

Self-Employment Income Support Scheme (SEISS) Grant Extension

The Chancellor confirmed that the SEISS would be extended for a six month period to April 2021. The extension will be in the form of two taxable grants for which access will be limited to self-employed individuals who are currently eligible for the SEISS and are actively continuing to trade but are facing reduced demand due to COVID-19. The scheme will last for six months, from November 2020 to April 2021. The first grant will cover a three-month period from the start of November until the end of January. This initial grant will cover 20 percent of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £1,875 in total. The second grant will cover a three-month period from the start of February until the end of April. The Government will review the level of the second grant and set this in due course.

Extension of temporary five percent reduced VAT rate for hospitality and tourism

The temporary five percent reduced rate of VAT for hospitality and tourism, was due to end on 12 January 2021 and will now be extended to 31 March 2021 to help support the viability of over 150,000 UK businesses in these sectors. The reduced rate will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, supplies of accommodation and admission to attractions across the UK.

New Payment Scheme for postponed VAT liabilities

The Government has previously announced that VAT payments (including payments on account) due between 20 March and 30 June 2020 could be deferred, at the option of the taxpayer, with the deferred sums being required to be paid on or before 31 March 2021 with no interest or penalties applicable. Over half a million businesses are reported to have deferred VAT payments amounting to approximately £30 billion. The Chancellor announced an optional New Payment Scheme for these deferred VAT liabilities. Businesses which deferred VAT due in March to June 2020 will have the option to spread the payment of this VAT over 11 equal instalments payable during the financial year 2021-2022, as an alternative to paying in full at the end of March 2021. All businesses which took advantage of the VAT deferral can use the New Payment Scheme. Businesses will need to opt in, but all are eligible. HMRC will put in place an opt-in process in early 2021. The Chancellor confirmed in his speech that no interest charges would apply where businesses opt-in to the New Payment Scheme.

Enhanced Time to Pay for Self-Assessment taxpayers

For Self-Assessment taxpayers who are finding it difficult to pay due to the impact of coronavirus, the Government has stated that it “will give the self-employed and other taxpayers more time to pay taxes due in January 2021, building on the Self-Assessment deferral provided in July 2020”. Taxpayers with:

Extended access to other government backed finance schemes

The Government is extending four temporary loan schemes which have helped over a million businesses to date and starting work on a new, successor loan programme, set to begin in January. The schemes below will remain open to new applicants until 30 November 2020:

  • Bounce Back Loan Scheme (BBLS);
  • Coronavirus Business Interruption Loan Scheme (CBILS);
  • Coronavirus Large Business Interruption Loan Scheme (CLBILS); and
  • Future Fund.

For the two schemes aimed at smaller business (BBLS and CBILS), more flexibility on repayments was also announced.

In addition, support for the largest investment grade businesses continues to be available through the COVID-19 Corporate Financing Facility (CCFF) which will remain open until 22 March 2021. The Winter Economy Plan policy paper also stated that where a company has exhausted all other options, and is of strategic importance to the UK, the Government may also consider providing bespoke financial support.

For further information please contact:

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