Chancellor sets out radical employment support package to protect jobs
20 Mar 2020
The Chancellor Rishi Sunak has set out a multibillion pound package to protect jobs with a government commitment to pay 80% of salaries for private sector employees who are furloughed during the coronavirus crisis, a three-month deferral of VAT payments until the end of June and self employed will be eligible for statutory sick pay (SSP). Sara White reports
20 Mar 2020
For the first time ever, the government is going to step in and help pay wages through a coronavirus job retention scheme open to all private employers regardless of size. Initially this will be in place for three months.
Government grants will cover 80% of the salary of retained workers up to a total of £2,500 a month. The scheme will be backdated to 1 March 2020.
HMRC is working on changing IT systems to set up the scheme. This will take until April to complete as it will require complex changes to PAYE reporting.
IT software providers will also have to update their PAYE software as well before businesses will be able to automatically add furloughed workers to their payroll systems.
‘I can assure you that HMRC are working night and day to get the scheme up and running and we expect the first grants to be paid within weeks – and we’re aiming to get it done before the end of April,’ the Chancellor Rishi Sunak said.
‘The first part of our plan is to protect people’s jobs. For employees that are furloughed but not working the government will pay 80% of salaries and this will be open for three months initially and it will be kept under review - I will extend the scheme for longer if necessary,’ said Chancellor Rishi Sunak.
‘Any employer in the country – small or large, charitable or non-profit - will be eligible for the scheme.
‘Employers will be able to contact HMRC for a grant to cover most of the wages of people who are not working but are furloughed and kept on payroll, rather than being laid off.’
He said the employment package was ‘unprecedented in scope and scale. We’re doing everything we can to support business’.
HMRC is working on changing IT systems to set up the coronavirus job retention scheme. This will take until April to complete as it will require complex changes to PAYE reporting.
IT software providers will have to update their PAYE software as well before businesses will be able to automatically add furloughed workers to their payroll systems.
‘I can assure you that HMRC are working night and day to get the scheme up and running and we expect the first grants to be paid within weeks – and we’re aiming to get it done before the end of April,’ Sunak said.
Details of the Coronavirus Business Interuption Scheme provided by British Business Bank was also updated from earlier today, with the decision to extend the interest free period to 12 months.
There were a couple of measures targeted at the self employed; self-assessment tax payments will be deferred until January 2021.
The self employed will be able to access statutory sick pay through the benefit system at the same rate as that paid to employees. There was no mention of whether SSP would be extended to the lowest earners who do not qualify.
For benefit claimants, Sunak announced a £7bn package to ‘support the safety system’, increasing Universal Credit standard allowance and working tax credit by £1,000 for one year, a move that will reach four million.
Earlier this week, the government deferred plans to introduce IR35 off payroll working rules for contractors in the private sector from April 2020, giving some respite with the effective date shifted to April 2021.
VAT payments will be deferred until the end of June; companies will be given an extension to December 2020 to settle VAT bills outstanding as a result of the three-month waiver period.
VAT deferral is a direct injection of £30bn of cash to employers, equivalent to 1.5% of GDP
That is a direct injection of £30bn of cash to employers, equivalent to 1.5% of GDP.
Again, HMRC and software providers will need to update Making Tax Digital for VAT software programmes so there is a new dual system for those who do not use the waiver.
The VAT decision was welcomed as it provides an immediate cash benefit to businesses, but it is difficult to properly assess the mechanics until the HMRC technical guidance is issued.
All cafes, bars, pubs and restaurants across the UK will close tonight, although legislation will be amended to allow them to provide takeout services outside the current framework. The hospitality sector has been hard hit with widespread closures; in London, many pubs and restaurants began to close earlier in the week and others were open for shorter hours. Many staff working in the hospitality sector are on zero hour contracts and have seen their hours sharply reduced in recent weeks.
Theatres and cinemas are also closing, although London theatres shut last week; gyms will also close as of today.
The PM said the closures would be reviewed on a monthly basis.
In a sobering press conference, Boris Johnson allowed himself one moment of levity, when he said, ‘I realise we are taking away an ancient, inalienable right of British people to go to the pub, but we have to do this’.
The social distancing policy is now being implemented countrywide although it is not mandatory as yet but is seen as the only way to deal with the virus and attempt to reduce the intense pressure on the NHS.
Technical guidance on the measures was published on Friday evening - full analysis to follow on Monday 23 March.- Accountancy Daily Coronavirus page
Detailed technical guidance was not available at the time of publication of this report - [20:20pm, 20/3/2020]
By Sara White
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Useful reading - published 18 March 2020