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The Winter Economic Plan: The latest changes and how to reflect these in Xero

The furlough scheme ends at the end of this month, to be replaced by a host of new measures to support businesses through the winter months. This support will be critical as restrictions are reinstated across the country. Many will need to make important decisions to ensure their business survives. 

Here’s a closer look at the key winter economic plan announcements and the latest amendments the Chancellor made to these schemes, along with information on how you can reflect some of these in Xero. 

Job Support Scheme (JSS)

To support employers experiencing lower demand, the new government JSS (replacement for furlough) will come into effect from 1 November. The scheme will initially run for six months with a review set for the new year, and will be available for all firms with a UK bank account and on a UK PAYE scheme. 

Businesses will continue to pay their employees for time worked (a minimum of 20%), but the cost of hours not worked will be largely covered by the government (through wage support) and the employee (through a wage reduction). The government will pay up to 61.67% of hours not worked up to a cap, with the employer contributing 5%. This will ensure employees earn a minimum of 73% of their normal wages. 

The scheme will be open to all small businesses and larger businesses that can show an impact on revenues.

For businesses who are legally required to shut, they will receive two-thirds of a capped value of employees salary. Businesses forced to close will also receive an increased cash grant of £3,000 per month. You can find full details on the JSS here.

How to record JSS in Xero Payroll

Self-Employed Income Support Scheme (SEISS) extension

The self-employment grant has been extended from November 2020 to April 2021 for self-employed individuals who are continuing to trade under reduced conditions and were eligible for SEISS initially.

This six month extension will come in the form of two grants. The first grant covers the start of November 2020 to end of January 2021 and will be 40% of average trading profits, but capped at £3,750. The second grant will be for February to the end of April 2021, and the amount is under review. You can find out more via the government website

Hospitality and leisure grants

The Chancellor announced cash grants for businesses primarily in the hospitality, accommodation and leisure sector hit by tier 2 restrictions. These funds will be distributed by local authorities to support struggling firms. The government has pledged enough funds to support businesses who operate in these sectors with £2,100 a month if needed. Businesses who have been in tier 2 regions for the last few months can backdate this claim to August. Applications will be opened by each local authority. 

VAT changes

Firstly, the government is extending the temporary reduced rate of VAT (5%) from the 12 January 2021 to 31 March 2021. This reduced 5% rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. It’s easy to account for this reduced rate in Xero, this blog article has everything you need to know. 

Secondly, any business who deferred VAT that was due in March to June 2020 now have the option to spread their deferred payments over the financial year 2021/22. That’s instead of having to pay in full at the end of March 2021. All businesses are eligible and will need to opt in to spread payments over an 11-month interest free period. More information can be found on the government website here

Access to finance

The government has extended the application for deadlines on four of its Covid loan schemes until 30 November. The schemes still available for small businesses are the Business Bounceback Loan (BBL) and The Coronavirus Business Interruption Loan (CBILS).

There are also some important updates to repayment timeframes:

  • BBL – a new ‘Pay as you grow’ scheme giving businesses the option of repaying the loan over 10 years to reduce their monthly payments. The option of making interest only payments for 6 months and pausing repayments for 6 months if needed
  • CBILS – the term of these loans can now be extended to 10 years and additional flexibility will be allowed for SMEs who may not be able to repay

It’s worth noting, that if a business is unsuccessful with one of the above, there are other lending options worth exploring. 

All this information has been taken directly from HMRC and is subject to change. Please look out for future updates from HMRC and the government

The post The Winter Economic Plan: The latest changes and how to reflect these in Xero appeared first on Xero Blog.

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