The Coronavirus Job Support Scheme

With the Coronavirus Job Retention Scheme (or furlough scheme) now winding down to a close on the 31st of October 2020, the government has announced a new measure called the Job Support Scheme to encourage employers to retain their staff.

The new scheme aims to top up wages to ensure the employees can earn a minimum of 77% of their normal wage and is expected to launch on the
1st of November 2020. There are some eligibility criteria that employers must meet:

  • Must have a UK bank account and UK PAYE Scheme
  • Employees on the scheme were employed on or before the 23rd September 2020
  • Large organizations (but not SMEs) may face a financial assessment test

The Job Support Scheme will operate in a different way to the furlough scheme, with the employee expected to work and be remunerated for at least 33% of their normal working hours in order for the employer to make a claim. For every hour the employee does not work, the government will contribute a third of their usual hourly wage up to a cap of £697.92 per month, with the employer expected to pay another third.

This does sound a bit confusing at first, so let’s take a look at a short example to see how this is going to work:

  • Beth normally works 5 days a week and earns £350 a week. Her company is suffering reduced sales due to coronavirus. Rather than making Beth redundant, the company puts Beth on the Job Support Scheme, working 2 days a week (40% of her usual hours).
  • Her employer pays Beth £140 for the days she works.
  • For the time she is not working (3 days or 60%, worth £210), she will also earn 2/3, or £140, bringing her total earnings to £280, 80% of her normal wage.
  • The Government will give a grant worth £70 (1/3 of hours not worked, equivalent to 20% of her normal wages) to Beth’s employer to support them in keeping Beth’s job, with the employer contributing the other £70.

The amount available from the government will vary depending on how many of the normal working hours the employee will work. The more hours worked by the employee, the smaller the overall percentage both the government and the employer need contribute for hours not worked.

Please note that the sum that the government contributes will be paid in arrears, and it will not cover Class 1 NIC or pension contributions - the employer is expected to pay these as normal. We are also waiting on news as to how the government expect ‘normal working hours’ to be calculated. We hope to provide an update on this soon.

Tax Updates

In regard to taxes, the government has decided to grant self-assessment taxpayers an extra 12-month extension of ‘Time to Pay’. This means that payments deferred from 31st July 2020, initially due 31st January 2021, will now be allowed to be deferred until 31st January 2022.

Further, any businesses that chose to defer their VAT bills during the April to June period will be able to use a new payment scheme, allowing them to pay their outstanding VAT bills in 11 monthly interest-free payments during the 2021-2022 tax year. The hospitality sector will also see an extension of the 15% VAT cut until 31st of March 2021 in an effort to bolster this sector.

Another round of SEISS

Following on from the announcement of the Job Support Scheme, the government has also extended the SEISS scheme for the self-employed. The new grant will cover 20% of average monthly profits covering the period 1st November 2020 to 31st of January 2021. If required, the government is also considering extending this further to cover February to April 2021.

Bounce Back Loan extension

Coronavirus Bounce Back Loans are to be extended from the initial 6-year period to 10 years - this means that monthly repayments could be cut by up to 50%. The government has also given the option to lenders to extend the Business Interruption Loan Scheme to 10 years and all coronavirus loan scheme applications are to be extended until 30th November 2020.