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The Chancellor’s Winter Economy Plan unveiled

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The Chancellor, Rishi Sunak, has unveiled the Government’s additional plans to support the UK’s economy through the coming months, with new schemes to be introduced and flexibility on loan repayments. It is hoped that this will be able to provide some certainty to UK businesses and employees impacted by coronavirus.

Job Support

Introduced from the 1 November, the new Job Support Scheme will be established, to replace the “furlough” scheme. The Government will pay the wages of those staff in ‘viable roles’ who have to work reduced hours due to Covid-19. A minimum of a third of normal hours must be worked and paid for as normal by the employer. The Government and the employer will then each pay one-third of the lost pay.

For SMEs who are seeing decreased demand, and which results in less hours for their employees, this government contribution will be a strong support. The scheme is however limited to those employees who are in ‘viable roles’ and the government contribution will be capped at £697.92 per month.

The scheme is planned to run for six months, and in order to qualify, employees must be working at least 33% of their usual hours. It is designed to sit alongside the Jobs Retention Bonus Scheme.

Extension of CBILS and BBLS

This will see applications for the Coronavirus Business Interruption Loans Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) extended until the 30 November 2020, with loan offers able to be processed until the end of the year. The Chancellor also announced that the Government guarantee on BBLS will be extended to up to ten years and a successor scheme to CBILS, providing further support, is expected to be announced in January 2021.

Pay as you Grow

SMEs utilising the Bounce Back Loan Scheme (BBLS) will now be given ten years to repay (albeit loans will continue to be advanced with 6-year terms) and businesses can request to pay interest only payments or suspend payments for six months. The interest-only payment option can be used three times for up to six months and the payment suspension option can only be used once (only after six payments). It has also been confirmed that use of these options will not impact a borrower’s credit file.

Flexibility on VAT bills

The Chancellor also announced that VAT bills due from businesses in March can now be spread over 11 smaller payments during 2020/21, with no impact on the interest incurred. A planned VAT increase has also been cancelled for the hospitality and tourism sector, so the lower 5 per cent rate will be in place until 31 March 2021.

This should give businesses in this sector, which has been severely impacted by coronavirus, the confidence to maintain their staff as they adapt to the new trading environment.

Further information on the updates can be found here: https://www.gov.uk/government/news/chancellor-outlines-winter-economy-plan