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Sunak reveals new Job Support Scheme and confirms VAT cuts

Published:  24 September, 2020

Chancellor Rishi Sunak has confirmed the details of the government’s Winter Economy Plan, including a new Job Support Scheme that will replace furlough when it closes on 31 October, and an extension of the VAT break for hospitality until 31 March 2021. 

Build on three principles, Sunak said the new Job Support Scheme would “support viable jobs to make sure that employees must work, at least a third of their normal hours, and be paid for that work as normal by their employer”.

The government, together with employers will then increase those people's wages, covering two thirds of the pay they have lost by reducing their working hours, he said, enabling the employee to keep their job.

Second, the Chancellor said the government would target support at firms who “need it the most” – all small and medium sized businesses eligible, with larger businesses only when their turnover has fallen through the crisis. 

Third, the scheme will be open to employers, across the UK, even if they have not previously used the furlough scheme. 

Starting in November, the scheme will run for six months, and employers retaining further staff on shorter hours can claim both the job support scheme and the jobs retention bonus.

“Throughout this crisis we have sought parity between employees, and the self employed, providing more than £13bn of support to over 2.6 million self employed small businesses. So I'm extending the existing self employed grant on similar terms and conditions as the new Job Support Scheme,” said Sunak. 

The second major challenge, he added, was helping businesses with cash flow.

To support hospitality and tourism Sunak has extended the VAT break, which was planned to end 13 January (going from 5% back to the standard rate of 20%) to 31 March 2021. 

“We've supported business with £10bns of tax deferrals and generous government backlines those policies have been a lifeline, but right now businesses need every extra pound to protect jobs, rather than repaying loans and tax deferrals, so I'm taking four further steps today, to make that happen,” he said. 

“First, bounce back loans have given to over a million small businesses a £38bn boost to survive this pandemic. To give both businesses more time and greater flexibility to repay their loans, we are introducing Pay as you Grow.”

This means loans can now be extended from six to 10 years. Nearly halving the average monthly repayments. Businesses which are struggling can now choose to make interest only payments, and anyone in “real trouble” can apply to suspend repayments altogether for up to six months, with no business taking up Pay as you Grow will see their credit rating affected as a result. 

Moreover, Sunak said he planned to extend the government guarantee on coronavirus business interruption loans for up to 10 years, while also extending the deadline of all the government loan schemes to the end of this year. 

The government has also started working on a new successor loan guarantee programme set to begin in January, he added.

“I want to give businesses more time and flexibility over their deferred tax bills, nearly half a million businesses default more than £30bn of VAT this year on current plans, those payments are due in March. Instead, I would allow businesses to spread that VAT bill over 11 smaller repayments with no interest to pay,” said Sunak.