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UK announces new scheme to support businesses and jobs

Out-Law News | 25 Sep 2020 | 2:10 pm | 2 min. read

The UK has announced new financial support measures aimed at helping employers to keep staff in work once the Coronavirus Job Retention Scheme (CJRS) comes to an end next month.

A new Job Support Scheme will run for six months from 1 November. Under the scheme, the government will help top up the wages of those with "viable jobs" who are brought back to work on part-time hours. Small and medium sized businesses (SMEs) will be automatically eligible for the scheme, while larger businesses will be able to participate if their turnover has fallen as a result of the Covid-19 pandemic.

The scheme is part of a package of new economic measures announced by the government. Also included are extensions to the Self Employment Income Support Scheme (SEISS) and the VAT cut for the hospitality sector; and giving businesses more time to pay back government loans.

Employment law expert Anne Sammon of Pinsent Masons, the law firm behind Out-Law, said: "Although this announcement is a lifeline for SMEs it is by no means a panacea for the impact of Covid-19".

"Large scale businesses, which play a vital role in the UK economy, remain vulnerable, and unclear about how they can protect employees. The chancellor has referred to these organisations needing to show that their turnover has fallen, but we don't know what time period this relates to, so there are likely to be some businesses unclear on if and how they are covered by this new scheme," she said.

Sammon Anne_26 Feb 2020

Dr Anne Sammon

Partner

Large scale businesses, which play a vital role in the UK economy, remain vulnerable, and unclear about how they can protect employees.

The new scheme will be available in respect of employees working a minimum of 33% of their usual hours, to be paid by the employer as usual. For every hour not worked, both the employer and the government will pay one third of the employee's usual pay, with the government's contribution capped at £697.92 per employee per month. The government will not contribute where the employee is under a redundancy notice, and Class 1 employer National Insurance contributions (NICs) and pension contributions remain fully payable by the employer.

SMEs will be automatically eligible for the new scheme. Large businesses will be required to demonstrate that their businesses has been "adversely affected" by Covid-19, and should not be paying dividends or making other capital distributions while using the scheme. Further guidance will be published before the new scheme begins.

The new scheme will be open to UK employers even if they have not previously used the CJRS 'furlough' scheme. Employers who had previously furloughed staff will also be eligible for the previously-announced £1,000 jobs retention bonus where staff return to full-time work before the end of January 2021.

The SEISS will be extended, albeit on less generous terms. Those who are currently eligible for the scheme, who are continuing to actively trade and who are facing reduced demand due to the pandemic will receive a taxable grant, worth 20% of average monthly profits to a maximum of £1,875, for the period from November 2020 to January 2021. A second grant will be available to cover the period from February to April 2021, although the terms have not yet been announced. Self-assessment taxpayers will be given an additional 12 months to pay back any tax deferred from July 2020.

The government is extending the temporary VAT cut to 5% for the tourism and hospitality sectors to the end of March 2021. This was previously due to end in January. These businesses, which must now close at 10pm, have been severely impacted by the pandemic. Businesses which chose to defer their VAT bills can now opt to make 11 interest-free payments during the 2021-22 financial year, rather than having to pay the full amount at the end of March.

Businesses that took back a government 'bounce back' loan will be given 10, rather than six, years to repay the amount borrowed, without affecting their credit rating. Commercial lenders who offered loans to larger businesses under the Coronavirus Business Interruption Loan Scheme will also be permitted to extent the repayment period where this will help businesses. The government has also extended the application periods for all of its coronavirus business loan schemes until the end of November.