“This Friday evening, 20 March, we saw what was, effectively, the third Budget announcement in less than ten days by the Chancellor, Rishi Sunak, in response to the COVID-19 the outbreak. The Chancellor’s aim was to deliver on his promise of 17 March to develop new forms of ‘employment support’ to help protect people's jobs and incomes through this period. He also chose to address some key operational concerns from before.
“The announcements differed from before in that they assistance was for all employers, rather than just those most affected by the social distancing policies. The Chancellor, now famous for doing things in threes, chose to act further in three areas: first to protect the income of employees who would otherwise be laid off, secondly to provide further cash flow support to businesses and thirdly to address concerns that the level of welfare was not fit for the challenges created by COVID-19.
Protecting the income of employees
In the third instalment of the Chancellor’s emergency stimulus support package, in response to the economic impact of COVID-19, additional support for employers was announced by pledging to pay the wages of employees who were not working, but still employed. It appears that, rather than laying off workers, employers will be allowed to furlough their employees, meaning that HMRC would provide 80% of their wages (capped at £2,500 per month) to the employee to pay to the furloughed employee.
Tom Evennett, EY personal tax leader, comments on today’s emergency stimulus measures announced by the Chancellor:
“This will be a welcome move for employers struggling to pay their staff as well as employees who are concerned about their job security, especially as many businesses from the restaurant and leisure sectors will now be forced to close. There remains a number of elements yet to be clarified. For example, it’s not clear whether or how this payment would be subjected to National Insurance Contributions or income tax.”
Delivering cash flow support to businesses
In addition to the measures above, the Chancellor acted to give businesses more cash and let them keep their cash for longer. He extended the interest-free period of the Coronavirus Business Interruption Loan Scheme by a further six months to twelve months, as well as noting that we had improved how large and medium sized businesses could access those funds.
The Chancellor also responded positively to the many calls for making the tax “time to pay” provisions more automatic by deferring the next quarter of VAT payments to the end of the financial year, meaning that no business would pay VAT the end of June. For the self-employed, he deferred the next self-assessment payment, due in July 2020, until January 2021.
Chris Sanger added:
“This will be a welcome cashflow boost for businesses and shows that the Chancellor has listened to the concerns raised about the efforts needed to claim under the previous system. That Time to Pay scheme remains in place for other taxes and businesses may want to apply for deferral of these other taxes as well.”