Summary of extra government support (24 Sep 20)
Updated: 3 days ago
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 for employees and employers, extending the Self-Employment Income Support Scheme, extending the VAT cut (from 20% to 5%) for the hospitality and tourism sectors, and helping businesses repaying their government-backed loans.
The old furlough scheme was to cease on 31 October 2020. A new Job Support Scheme was to be introduced on 1 November 2020. It is now delayed until April 2021 as the furlough scheme will continue until 31 March 2021.
Under the scheme, which will run for six months, the government will contribute 61.67% towards the usual hours not worked with the employer also paying 5% of hours not worked. Employees will therefore receive at least 73.3% of their normal pay i.e. 20% of hours worked plus 66.67% of 80% (from government and employer) for hours not worked. However, employees must work at least 20% of their usual hours.
It was initially announced in September 2020 that employees must work at least 33% of their usual hours. Furthermore, the government will contribute 33% towards the usual hours not worked with the employer also paying 33% of hours not worked. Employees would therefore receive at least 77% of their normal pay i.e. 33% worked plus 66% (from government and employer) of 66% worked.
The government will consider whether to increase the minimum 20% hours’ threshold after the first three months of the scheme. The scheme will operate in addition to the £1,000 Job Retention Bonus (which is now postponed until further notice).
The Kickstart Scheme was set up by the government to help create work placements for at least 6 month’s work in a business designed at providing jobs skills for 16 to 24 year olds who are on Universal Credit and deemed to be at risk of long term unemployment.
Employers will receive government funding for each job will cover the National Minimum Wage, employer's national insurance and work place pension contribution.
There is an extra £1,500 available to help cover setup costs, support and training.
New jobs must be created under the scheme rather than replace existing jobs or causing current jobs to be lost or hours reduced.
Extension to the reduced rate of VAT for Hospitality and Tourism
The government will extend the temporary reduced rate of VAT (5%) to tourist attractions and goods and services supplied by the hospitality sector. The temporary 5% VAT rate applies to the supplies that would normally be subject to the 20% standard rate of VAT. This relief came into effect on 15 July 2020 and will now end on 31 March 2021 across the UK.
The 5% VAT rate applies to the following main supplies:
Food and drinks (hot or cold) served on the premises (excluding alcoholic drinks) and hot take away food and hot take away drinks (excluding alcoholic drinks). Cold takeaway food is generally subject to zero rate and not affected by the concession.
Hotel and holiday accommodation – hotels, caravan sites, guest houses, camp sites.
Admission fees to tourist attractions – such as zoos, theatres, fairs, amusement parks etc.
Takeaway food and drink
Some cold takeaway food and drink, e.g. crisps, bottled drinks and sweets, are always standard-rated. HMRC’s produce a guide for food. If food and drink is delivered and a delivery charge is added then the charge element is always standard-rated (20%) VAT, even if the food is zero rated.
Mixed supplies of food and drink can create difficulties. HMRC consider a gin and tonic sold in pub or restaurant as a single composite alcoholic drink which is subject to 20% VAT. However, a bottle of tonic sold separately is subject to only 5% VAT. On the other hand, a meal deal of a sandwich and an alcoholic drink, sold at a single price, is a mixed supply. This is because the two items can be separated. Each items supplied counts as a separate item for VAT purposes i.e. 5% VAT on the sandwich and 20% VAT on the alcoholic drink.
New VAT Deferral Payment Scheme
The VAT payments deferral scheme ended on 30 June and all VAT customers, including MTD customers, are required to file and pay on time.
Businesses that deferred VAT payments, that were due between 20 March and 30 June 2020, originally could defer the VAT payment to HMRC until 31 March 2021. Under the new VAT Payment Scheme businesses can spread the payments, interest free, over equal instalments up to 31 March 2022.
Businesses will need to opt in, but all are eligible. HMRC will put in place an opt-in process in early 2021.
The VAT Deferral New Payment Scheme will require a Direct Debit to be set up as part of the digital opt-in process and this must be done by the authorised bank account holder. HMRC will communicate the details of the VAT deferral new payment scheme and its operation at the earliest opportunity to businesses both prior to and during the opt-in process.
Businesses that can pay their deferred VAT should still do so by 31 March 2021.
Businesses face a penalty as well as being charged interest on any tax that is due if they do not meet their VAT obligations.
If a business needs more help to pay their VAT, they may be eligible to get support with their tax affairs through HMRC’s Time To Pay (TTP) service. More information can found at https://www.gov.uk/difficulties-paying-hmrc.
New Self Assessment Self-Serve Time to Pay Scheme
If an individual deferred paying their July 2020 payment on account, they would 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 they usually pay in January.
If an individual is unable to pay their Self-Assessment (SA) bill in full by 31 January 2021, they can set up a Time to Pay payment plan for up to 12 months online without speaking to HMRC. If individuals have Self Assessment tax debts of up to £30,000, they will able to access the Time to Pay facility through GOV.UK and will get automatic and immediate approval.
If their Self Assessment tax due is over £30,000, or individuals need longer than 12 months to pay their tax, they will still be able to use the Time to Pay arrangement by calling H M Revenue & Customs on 0300 200 3822 between Monday to Friday 8am to 4pm.
You can also call the helpline number if you have missed your tax payment date or you cannot use the online service. You do not need to contact HMRC if you have set up a payment plan online.
The second Self Assessment payment on account for 2019-20 was due by 31 July 2020. Individuals who thought that they may not be able to pay on time could choose to:
defer payment without penalty to 31 January 2021. Late payment interest would arise on amounts paid after 31 January 2021. Individuals do not need to receive HMRC approval. The system is automatic.
choose to pay the amount due as normal.
As announced on 24 September 2020, individuals can benefit from a separate additional 12-month extension by using the HMRC online Time to Pay self-service facility. This means that payments deferred from 31 July 2020, and those due on 31 January 2021, will now not need to be paid until January 2022. Deferment is not automatic. It must be claimed through the Time to Pay service. However, if taxes are less than £30,000 and up to date then a deferment will be granted up to 31 January 2022.
if you use the self-serve Time to Pay facility then interest will be charged on any tax outstanding after 31 January 2021. Interest will be charged at HMRCs published rates, currently 2.6% per annum, without penalty.
Corporation Tax and PAYE deferrals
There are currently no specific schemes available that are designed to defer payments of Corporation Tax and PAYE. If you are unable to pay these taxes on time then you should contact HMRC and seek a Time To Pay arrangement.
See more UK practical business advice: COVID-19 on our website.
See gov.uk for a collection of 'Financial support for businesses during coronavirus (COVID-19)'