UK chancellor Rishi Sunak has announced the next phase of government support to help businesses survive the Covid-19 pandemic. As the Job Retention Scheme (popularly known as furlough) winds down, it will be replaced by the Jobs Support Scheme, which will run for six months from 1 November. 

The JSS is similar in concept to short-time working schemes that have already been rolled out in France and Germany and will top up salaries in firms that can’t take employees back full-time. Employees must be on an employer’s PAYE payroll on or before September 23, 2020. 

The government has emphasised the scheme will only support jobs that are viable. The employee must not be on a redundancy notice. Employees can cycle on and off the scheme and do not have to work the same pattern each month. 

Businesses across the UK can potentially take part, even if they have not previously used the furlough scheme. 

All small and medium-sized enterprises (SMEs) will be eligible. Large businesses will need to demonstrate they have been adversely affected by Covid-19. 

The Government expects that large employers will not be making capital distributions such as dividends while using the scheme. 

To be eligible, employees must work for at least one-third of their normal hours. For the hours not worked, the government and employer will each pay one-third of the remaining wages. This means the employee would get at least 77% of their pay.  

The scheme has a few basic features: 

  • Under the scheme, the government will subsidise the pay of employees who are working fewer than normal hours due to lower demand 
  • It will apply to staff who can work at least a third of their usual hours 
  • Employers will pay staff for the hours they do work  
  • For the hours employees can’t work, the government and the employer will each cover one-third of the lost pay 
  • The grant will be capped at £697.92 per month 
  • All small and medium-sized businesses will be eligible for the scheme 
  • Larger business will be eligible if their turnover has fallen during the crisis 
  • It will be open to employers across the UK even if they have not previously used the furlough scheme 
  • The scheme will run for six months starting in November 

Alongside the JSS, the government has also announced extensions to its package of loans. Businesses can now apply for the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS), Future Fund Scheme, and Bounce Back Loans for a further period, up to an extended deadline of 30th November  

In addition, under the banner Pay as you Grow, the terms of the bounceback loans have changed. Under the new arrangement, bounce back loans: 

  • Can be extended from six to ten years. 
  • Can move to interest-only payments for up to six months and can do this three times 
  • In extreme cases, payments can be suspended for six months, only once and only after making six repayments 
  • No credit ratings will be affected. 

Coronavirus Business Interruption Loans (CBILS) 

  • Can be extended for up to 10 years. 
  • There will be a new loan scheme to replace these announced in January 2021. 

Finally, there are also changes to the VAT regime.  

  • VAT deferred until 31/03/2021 can be paid over 11 months rather than a lump sum in the financial year 2021/2022  
  • All businesses are eligible but must opt-in 
  • The opt-in process to be in place early 2021 
  • The 5% reduced rate of VAT for the hospitality & tourism sectors will be extended to 31/03/2021. 

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