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Winter economy plan 2020

The Chancellor’s winter economy plan unveiled further measures to protect jobs in the wake of the COVID-19 pandemic. Stressing that the UK is in a better position than it was in March, the Chancellor also recognised the need for further intervention.

Last updated: 24 September 2020

In his speech, Chancellor Rishi Sunak announced the new “job support scheme”, “pay as you grow” business loans, the extension of the temporary lower VAT rate for the hospitality sector, and further time to pay deferred VAT. 

The Chancellor’s statement opened by addressing the fact that the economy is “now likely to undergo a more permanent economic adjustment”. With millions of people having moved off furlough and back to work as the economy reopens, the resurgence of the virus, and the measures needed in response, pose a threat to a fragile economic recovery.

When the furlough scheme ends at the end of October, the new Job Support Scheme will start and run for six months, aiming to subsidise the wages of people in work. In another bid to support businesses, Sunak’s “pay as you grow” scheme aims to support companies in paying back state-backed business loans. Loans can be extended from six to ten years, almost halving repayments. Interest-only payments can be made, and firms in “real trouble” can suspend their repayments.

The reduced 5% rate of VAT for hospitality and admissions to attractions announced in the Chancellor’s summer economic update was due to end on 12 January 2021, and will now remain until 31 March 2021.

Finally, VAT registered businesses which took up the option to defer VAT payments due between 20 March and 30 June 2020 will be given further time to pay. Rather than paying all deferred VAT as a lump sum by 31 March 2021, they will be given the option to split the amount due into 11 smaller, interest-free payments during the 2021/22 year. Further detail on how this will work in practice to follow. 

Sunak stressed that “life means more than simply existing”. The questions are now whether these measures are sufficient and what the UK’s “more permanent economic adjustment” will look like for us all.

About the author

Alastair McQuater

+44 (0)20 7556 1427
mcquatera@buzzacott.co.uk

Last updated: 24 September 2020

In his speech, Chancellor Rishi Sunak announced the new “job support scheme”, “pay as you grow” business loans, the extension of the temporary lower VAT rate for the hospitality sector, and further time to pay deferred VAT. 

The Chancellor’s statement opened by addressing the fact that the economy is “now likely to undergo a more permanent economic adjustment”. With millions of people having moved off furlough and back to work as the economy reopens, the resurgence of the virus, and the measures needed in response, pose a threat to a fragile economic recovery.

When the furlough scheme ends at the end of October, the new Job Support Scheme will start and run for six months, aiming to subsidise the wages of people in work. In another bid to support businesses, Sunak’s “pay as you grow” scheme aims to support companies in paying back state-backed business loans. Loans can be extended from six to ten years, almost halving repayments. Interest-only payments can be made, and firms in “real trouble” can suspend their repayments.

The reduced 5% rate of VAT for hospitality and admissions to attractions announced in the Chancellor’s summer economic update was due to end on 12 January 2021, and will now remain until 31 March 2021.

Finally, VAT registered businesses which took up the option to defer VAT payments due between 20 March and 30 June 2020 will be given further time to pay. Rather than paying all deferred VAT as a lump sum by 31 March 2021, they will be given the option to split the amount due into 11 smaller, interest-free payments during the 2021/22 year. Further detail on how this will work in practice to follow. 

Sunak stressed that “life means more than simply existing”. The questions are now whether these measures are sufficient and what the UK’s “more permanent economic adjustment” will look like for us all.

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