Chancellor extends furlough and widens cash grants access for self-employed

Chancellor extends furlough and widens cash grants access for self-employed

The Chancellor of the Exchequer says the government is “proud of the furlough”

Chancellor extends furlough and widens cash grants access for self-employed

The Chancellor’s decision to extend support programs including the Coronavirus Job Retention Scheme (CJRS) and the Self-Employed Income Support Scheme (SEISS) is essential to keep businesses alive and protect jobs ahead of lockdown restrictions being eased, according to market participants.

“They went a bit further than what was anticipated – that it goes until the end of September rather than the end of June or July,” says Ian Goodwin, partner at Mazars. “This will allow organisations some time to reflect and plan for the future and know that they can protect jobs. They have time now to think about how they can restructure to ultimately reduce cost, but also reward people, as effectively as possible.”

Goodwin adds it will be an “interesting summer,” particularly for the hospitality industry, as coronavirus regulations are unwound.

The furlough scheme will continue to cover 80 percent of the employees’ wages – up to a cap of £2,500 per month.

“This will be extremely welcome to businesses that have been unable to re-start recovery. In particular, this will support the hospitality and retail sectors, providing a lifeline as the country aims for a June re-opening and summer recovery,” added Andy Hamman, employment tax director at Crowe, via email.

The minimum furlough period remains at three consecutive weeks and employees can still be furloughed more than once with a minimum of three consecutive weeks between instances.

The employer will need to continue to cover PAYE, National Insurance and automatic enrolment contributions.

Employers will also be required to pay 10 percent towards the non-working hours of their employees in July, and then 20 percent in August and September following the easing of restrictions in the UK.

Rishi Sunak’s extension of the furlough scheme is expected to close some of the remaining loopholes in which self-employed individuals slipped through the cracks.

Self-employed

To widen support for the self-employed, the Chancellor is offering a fourth grant from the SEISS, opening in April, whereby claimants can request 80 percent of three month’s average trading profits – capped at £7,500.

A fifth grant will be available from May onwards, with systems open for claims until late July.

Sunak claims that these measures are a “major improvement,” in which over 600,000 self-employed individuals will now be eligible for grants.

The Chancellor added that protecting jobs remained his “top priority,” saying that every job loss was “a tragedy”.

But the extension of the CJRS and SEISS is also aimed at mitigating the risk of UK insolvencies.

SMEs account for three-fifths of the employment in the UK and half of turnover in the private sector, according to the Federation of Small Businesses (FSB).

So far, SMEs have been saved from insolvency due to ongoing government assistance, such as the CJRS which provided businesses with artificial life support.

VAT holiday

The temporary business rates holiday for the hospitality, retail, and leisure industry has also been extended until June and will remain discounted up to two-thirds after that deadline, until the end of the fiscal year.

The reduced VAT rate of 5 percent for hospitality and tourism has also been pushed until the end of September, with an interim rate of 12.5 percent for the following six months. Normal VAT rates for these sectors will resume in April next year.

Scott Craig, head of VAT at Azets, is disappointed that the Chancellor has not extended the VAT holiday for a longer period, as benefitting from the tax relief will depend on restrictions being eased as planned.

“Having extended it after September would have been better,” he says. “Those sectors will pick up end of September.”

More clarity is also needed around the extent of the 5 percent VAT tax – such as whether the anti-forestalling measures will be applied or not, according to Craig.

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