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Winter Economy Plan: What is it, and how will it affect my business?

Kriya Team
December 7, 2020
min read
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We go through the government's Winter Protection Plan, which aims to help 'nurture the recovery and protect jobs'

Despite the UK economy showing strong signs of recovery(,17.2%25%20below%20February%202020%20levels.) throughout the summer months, small to medium-sized enterprises (SMEs) across the country are still facing an incredibly difficult winter. Due to a spike in Covid-19 cases and a series of subsequent restrictions that were enforced towards the end of 2020, thousands of businesses have been pushed to the very edge as they try to make it through what many are considering to be the worst global recession in decades. In response to the economic dip that was predicted to take place in the fourth quarter of the year, the UK government freed up the Treasury by cancelling the Autumn 2020 Budget, which is the government's annual financial statement which includes its future financial strategy and economic forecast for the year ahead. This gave them the power to deal with the immediate impact of the coronavirus, by implementing a new series of measures, such as those outlined in the Winter Economy Plan.

The central premise of the plan, presented to Parliament by Chancellor of the Exchequer Rishi Sunak on September the 24th, was to 'nurture the recovery and protection of jobs' across the nation throughout the difficult winter months. However, the set of measures are also indicative of a broader economic shift in the way that the UK government is responding to the virus. This is because, due to the prolonged disruption of the coronavirus, and the UK's fragile economic recovery, the government isn't able to issue financial support as robust as the initial set of measures that were taken as a response to the first lockdown. However, despite the plan being less generous than previous ones in terms of spending, it does still offer up a lifeline to thousands of struggling businesses across the country.

In a time where business owners can do with all the economic support they can get, understanding the details of the Winter Economy Plan is essential if you want to minimise the harm posed by Covid-19. Therefore, to help you garner all the information you need, this article will give you a comprehensive rundown of the Winter Economy Plan, so you can gauge how these measures will impact the functioning of your business. In doing so, we're going to look at what measures are being implemented to support jobs, to provide relief to the self-employed, and to support the growth of businesses. So, without further ado, let's explore the details of the Winter Economy Plan and its impact on businesses across the UK.


Designed to run from November the 1st 2020, but currently being postponed until the beginning of December (due to the onset of the month-long national lockdown), the Job Support Scheme is geared towards supporting businesses who can support employees working part-time, but who are in need of economic reinforcement while the demand for goods and services is still recovering. The JSS replaces the Coronavirus Jobs Retention Scheme (CJRS), more popularly known as the Furlough Scheme, which covered 80% of employees wages, subject to a cap of £2,500 a month.

Which employers can use the scheme?

If your business has a UK bank account and a UK PAYE scheme, it will likely be eligible to apply for the scheme. However, large businesses are required to do a financial assessment test in order to prove that their profits have been negatively impacted as a result of the pandemic. In addition to this, the government also expects that large businesses not make capital distributions, such as dividend payments or share buybacks, while enrolled in the JJS. In contrast, Small and Medium-Sized Enterprises (typically characterised as one that generates an annual turnover up to £45 million) are normally automatically eligible for the scheme, as they are not required to meet a financial assessment test.

Which employees are eligible?

To be eligible to receive support from the JJS, employees must have been on their employee's PAYE Payroll before or on September the 23rd 2020, and not be on a redundancy notice. Employees are also required to work a minimum of 33% of their usual hours for the first 3 months of the scheme, and after this period, the government will consider whether to increase this or not.

If employees are on a zero-hours contract, they can still qualify for the scheme, as the government announced that employers will be able to change their contracts to make them eligible for the JSS. However, the requirements for businesses needing to do so remain unclear.

How much support will employees receive?

For the hours that employees work, they will be paid their normal working wage. But in the time that they are not working due to the impact Covid-19, they will be paid up to two-thirds of their normal wage; with the employer covering one-third of the wages and the government providing the other third. However, the government's contribution will be capped at £697.92 each month. If the employee is only able to work for 33% of their usual hours, the government will pay 22% of their wages (subject to the cap), and the employer will be required to pay 55%, enabling the worker to get paid 77% of their normal wages, compared to 80% under the CJRS.

The more employers are able to work, the more their wages are increased. So, for example, if they are about to work for 33% of their normal hours, their pay will increase to 78%, and if they can work 70% of their normal hours, they will receive 90% of their pay. However, the scheme will not be covering Class 1 employer NICs or pension contributions, and the calculation of 'usual pay' is expected to follow a similar methodology as it did for the initial furlough scheme.

What are the working arrangements?

One key difference between the Job Support Scheme and the initial Job Retention Scheme is that the new extension lends itself to much more flexible working conditions. Employees will be able to hop on and off the scheme and will be able to work on a different schedule each month, although each short-time working arrangement must cover a minimum period of one week. Another difference from the CJRS is that workers protected under the scheme also aren't able to be placed on notice of redundancy whilst their employer is claiming support from the JSS. In another step to retain as many staff as possible, the JSS has made the option of flexible furloughing possible to employers. This makes it possible for the scheme to support staff who are on contracts for shorter hours, and therefore support is able to be provided to a much wider pool of the workforce.

How can employers claim?

It's quick and easy to apply to the Jobs Support Scheme. Employers are able to make a claim through the website up until March of this year. Then, if the business has been approved, employers are required to agree on the new short-term working arrangements with their staff, and make any adjustments to the employee's contracts that are necessary.


In a statement to the House of Commons on 5 November where Chancellor Rishi Sunak announced the extension of the pre-existing furlough scheme, he also mentioned that the Job Retention Bonus would be scrapped moving forwards. The JRB previously provided a £1,000 one-off payment for every employee they were able to keep on the payroll until the end of January 2021, however the government has agreed to retract the plan for the time being. This accompanied the dismay of thousands of business owners across the country, many of whom were looking forward to a bit of guaranteed income in January. However, in order to replace the bonus, Sunak mentioned that a new 'retention incentive' would be introduced at an 'appropriate time'. Details on this new incentive are yet to be announced.


Throughout much of 2020, many self-employed workers across the country felt that they had been left out of the government's various financial initiatives. This was largely because any support provided to members of the self-employed population typically fell short of what was granted to those in stable employment. However, this push-back was largely appeased when the government announced that the Self-Employed Income Support Scheme (SEISS) would be extended for six months, as this provided self-employed workers with taxable grants that were calculated at 80% of their trading profits.

In the Winter Economy Plan, it was announced that, although SEISS would continue, the grants would be less generous than they previously were. SEISS is now designed to cover 20% of a traders average monthly profits, in comparison to 80% under the initial scheme. It is also capped to a limit of £1,875, between the months of November and January. If you're deemed eligible for the grant, it does not need to be repaid. However, it will be subjected to Income Tax and National Insurance, and is required to be reported on your 2020 to 2021 Self Assessment tax return.

In order to make this process easier, the government has introduced 'Enhanced Time to Pay' for self-assessment taxpayers who owe up to £30,000 in self-assessment liabilities, and who deferred their payment. With tax payments initially being due on January the 31st 2021, this amendment means that individuals who exercised their right to defer are able to pay their tax contribution over an additional 12 month period.

The extended scheme is eligible to self-employed individuals including sole-traders, business owners, and freelancers, whose trade has been impacted by reduced demand due to Covid-19 from November the 1st. These workers also need to earn over 50% of their income from self-employment, and, like the grants that have come before, the trader is required to intend to continue trading as a condition of receiving the support. However, a key difference is that the new grants are only able to be claimed by those who can prove they are actively trading.

For more information on the Self-Employed Income Support Scheme, and to figure out if you're still eligible, visit the site here.


Throughout the duration of the Covid-19 crisis, the government remained quiet when it came to the matter of taxes. Subsequently, throughout 2020, questions surrounding tax policy and its potential to stimulate the UK economy and rebalance the books have begun to arise.

Fortunately, in the chancellor's Winter Economy Plan announcement, three significant extensions to the pre-existing measures were announced, and they were all focused on reducing a potential cash flow crisis. Alongside the self-employed 'Enhanced Time to Pay' initiative that we just addressed, the chancellor also announced a VAT deferral 'New Payment Scheme', and an extension to the reduced VAT rate for hospitality and tourism.

The New Payment Scheme

The VAT deferral 'New Payment Scheme' is open to all businesses who deferred payments in the period from March the 20th to June the 20th 2020. According to HM Treasury, more than half a million businesses chose to defer VAT payments, contributing to around £30 billion adjourned payments in total. This new scheme gives businesses the option to break up the VAT total into 11 equal instalments throughout the financial year 2021-2022, attempting to provide a lifeline to thousands of struggling enterprises across the UK.

If businesses would like to take part in this scheme, they should first make sure all of their payment arrangements, such as credit cards, are appropriate and up to date. Then, they are required to opt into this scheme, as they will not be enrolled automatically. Details on this process are set to be released by the government sometime in early 2021, so if you're interested in opting into this scheme, keep an eye out for regular updates.

Extension of the temporary VAT-reduced rate for hospitality and tourism

On 15 July 2020, as part of an urgent response to the Covid-19 pandemic, the government introduced a temporary 5% reduced rate of VAT for certain supplies within the hospitality and tourism industries. This was a reduction from the original 20% that businesses were required to pay on supplies, such as: food and alcoholic beverages, hot takeaway food, and hot takeaway non-alcoholic beverages, sleeping accommodation in hotels and similar facilities, and admissions to attractions such as theatres, amusement parks, museums, and zoos, as well as many others. This VAT cut was originally designed to last until January the 12th 2021. Still, as part of the Winter Economy Plan, Chancellor Rishi Sunak has announced the reduction will now be eligible for businesses to claim until March the 31st of this year.

Businesses are able to implement this VAT reduced rate in one of two ways. Firstly, they can lower the prices of their goods and services by adding on the VAT at 5%. This means that the reduction in tax benefits the customers over the business itself, but the lower prices may draw in more trade, thus increasing revenue. Alternatively, the business may wish to hold onto the 5% VAT reduction, keeping prices the same, but helping the enterprise to save more money internally.

Whichever option businesses pick, this 15% VAT reduction can make a substantial difference to a company's cash flow, and with the HM Treasury estimating that the tax cut is benefitting over 150,000 businesses across the UK, the impact of this scheme is extensive. Additionally, by targeting the hospitality and tourism sector, the extension of the measure gives businesses in some of the hardest-hit industries a bit of necessary breathing space throughout the end of winter and into spring.


As part of the Winter Economy Plan, the extension of government-backed loan schemes was announced, with some to be extended until November the 30th 2020, giving businesses an extra month to access loans that were due to close at the end of September.

However, on 4 November 2020, when the government announced that England would be placed into its second national lockdown, the Prime Minister announced that the deadline of these schemes would be postponed once again. In a statement to the House of Commons, Boris Johnson notified the public that government-backed loan schemes would now be available until January the 31st 2021. This is done with the aim of giving businesses across the country more time to apply for generous funding schemes as we enter the new year.

So, for those of you that haven't already been made aware of the Bounce Back Loan Scheme (BLLS), Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS), or the Future Fund, here's a quick outline of their benefits and what types of businesses they are catered towards:

Bounce Back Loan Scheme (BBLS)

Standing as one of the most popular government-backed loans, the Bounce Back Loan Scheme enables small to medium-sized businesses to borrow between £2,000 and 25% of their turnover - with the maximum amount available being £50,000. The loan is completely government-backed, which means that businesses can borrow the funds from accredited private lenders without paying interest for the year. After this 12 month period, the amount of interest only rises to 2.5%.

You're eligible to apply for this loan if your business is based in the UK, was established before March the 1st 2020, and has seen a dip in revenue as a result of the coronavirus. You cannot apply for this scheme if you're already claiming under another government-backed scheme. However, suppose you've already received a loan of up to £50,000 through CBILS, CLBILS, or the COVID-19 Corporate Financing Facility. In that case, you can transfer it into the Bounce Back Loan scheme if you arrange to do so with your lender before January the 31st.

Coronavirus Business Interruption Loan Scheme (CBILS)

Catered towards businesses looking for slightly larger amounts of financial support, the Coronavirus Business Interruption Loan Scheme helps small and medium-sized businesses to access loans up to £5 million. Unlike the Bounce Back Loan Scheme, the government guarantees 80% of the funds to the lender, but the business is still exempt from paying any interest during the first year of borrowing.

You're able to apply to this scheme if your business is based in the UK and has an annual turnover of under £45 million. However, due to recent stipulations, you need to be able to prove that your business has been adversely impacted by Covid-19, and would be viable if it weren't for the pandemic. In addition, if you want to borrow more than £30,000, you need to be able to confirm your business wasn't classed as a 'business in difficulty' on December the 31st 2019.

CBILS loans are quick and easy to apply to. Here at Market Finance, we provide a fuss-free platform with a friendly customer service team available to guide you through every step of the process. We don't believe in unnecessary charges, and, of course, we're 100% government-backed. If you're interested in CBILS and want to find out what else we can do for your business, just visit our website here.

Coronavirus Large Business Interruption Loan Scheme (CLBILS)

If you operate a medium to large-sized business and are looking for larger amounts of temporary funding, the Coronavirus Large Business Interruption Scheme may be suitable for you. CLBILS offers loans and other types of finance up to £200 million, and, like CBILS, the loan is 80% government-backed; with the business not being required to pay interest on the sum for the first year. To be eligible to apply, your business needs to be based in the UK, have an annual turnover of more than £45 million, and have received no support under the Bank of England's COVID-19 Corporate Financing Facility (CCFF).

Future Fund

Finally, the coronavirus Future Fund is a scheme that issues convertible loans between the value of £125,000 and £5 million. The loans are subject to at least equal match funding from private investors, and the scheme is targeted towards innovative businesses who may miss out on other support programmes because they're either pre-revenue or pre-profit. Your business is eligible for the future fund if it is UK-incorporated, has raised at least £250,000 in equity investment from third-party investors in the past five years, and was incorporated on or before December the 31st 2019.

For more information on the Future Fund, and details on how to apply, visit the British Business Bank's website here.

Pay As You Grow Scheme

When Chancellor Rishi Sunak was announcing the Winter Economy Scheme back in September, he pointed out that a "major challenge" of protecting jobs across the country was helping with a businesses cash flow. So, in an attempt to tackle this, Sunak announced the 'Pay As You Grow Scheme' to support firms across the UK who have loans to repay.

The scheme is specifically targeted towards businesses who are borrowing funds via government-backed loan schemes, like the ones we have just outlined above. It extends the loans for up to 10 years (from the current six), and allows struggling companies to make interest-only payments; as well as take six-month repayment holidays in order to give their business time to stabilise. The scope of the Pay As You Grow Scheme is broad, as it lifts a substantial financial burden off of millions of businesses across the country who are currently borrowing money from government-backed loan schemes.

For more information about the Winter Economy Plan, and information on how it can affect your business, view the full HM Treasury policy paper here, and keep an eye out for regular updates on the GOV.UK page here.

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