Summer Economic Statement – Chancellor plans to save jobs and boost the economy
The Chancellor Rishi Sunak has made an emergency Summer Statement with a focus on saving jobs, the UK’s struggling hospitality and tourism sector and encouraging consumption. Against a backdrop of the UK economy contracting by 25% – the Statement aimed to support the UK’s economic recovery while continuing to prioritise health.
The Summer Statement headlined with a Job Retention Bonus, a cut in VAT and changes to stamp duty land tax.
With the Job Retention Scheme set to end in October and the threat of widespread redundancies, the Government will from the end of October give businesses a £1,000 bonus payment for every furloughed member of staff that returns to work.
There are of course conditions, as Andy Wallis’ ‘Summer Statement – supporting and creating jobs’ article explains. There is no upper cap to what is called the Job Retention Bonus, meaning that if all nine million people currently on furlough return to work, the Government will have provided a £9bn stimulus.
Partner, Chay Took, says: “This is certainly welcome news, but the challenge is to ensure the funding is making a difference to decisions being made. Being a flat rate, it may be more attractive to those businesses with lower paid staff, but employers will still look to get some productivity from their employees before the end of January when the bonus will be paid.”
And in recognition that young adults, those aged between 16-24, are most at threat to the risk of unemployment, the Chancellor introduced a new Kickstart Scheme with the Government paying the wages of new staff in new roles for six months together with the costs of running the scheme. Again, there are conditions, as this article explains.
The Government acknowledged that the UK economy is driven by consumption and announced a headline grabbing drop in VAT for the hospitality industry. Accommodations and attractions will from 15 July 2020 be able to charge VAT at just 5%, rather than the current 20%, until 12 January 2021. And, for every Monday, Tuesday and Wednesday in August, the Government is offering diners at restaurants, pubs, bars and cafés a 50% discount of up to £10 per head that the business will then be able to claim back in what it is calling its ‘Eat Out to Help Out’ scheme. Lunch and supper is, in part, on the Chancellor.
But, as the saying goes, there is ‘no such thing as a free lunch’ and the scheme does come with conditions, which Rupert Moyle explores in the ‘Summer Statement – tasty VAT measures’ article.
And finally, and much trailed in the national press, the Chancellor announced a stamp duty holiday. Stamp duty currently kicks in on all house sales over £125,000. From 8 July 2020 until 31 March 2021, stamp duty will not apply to homes under the £500,000 threshold. The move aims to kick start the stalled housing market. The stamp duty holiday will not apply to those buying a second home or a buy-to-let property where the current stamp duty arrangements remain unchanged. For those with existing properties, the Chancellor also announced a range of initiatives to subsidise ‘green’ energy-saving home improvements. Read more in Jo White’s ‘Summer statement – The property and construction updates you need to know’ article.
Laurence Parry, Tax Partner, comments; “Today’s Summer Statement follows a Government theme of supporting businesses in the immediate aftermath of the coronavirus pandemic. It offers sensible and valued support to all businesses, and particularly the hospitality and leisure sector – one that is so important to the economy in London and the South East. It should not be viewed in isolation but as a wider package of support and will be welcomed.
“And of course, we are expecting a more detailed Autumn Budget and that is where we expect much deeper and longer lasting changes.”
A summary of the key announcements include:
- Job Retention Bonus – to reward and incentivise employers who keep on furloughed employees – a one-off payment of £1,000
- Kickstart scheme – a £2 billion fund to create hundreds of thousands of high quality 6-month work placements aimed at those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment. Funding available for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions.
- Payments for employers who hire new apprentices – The government will introduce a new payment of £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over, from 1st August 2020 to 31st January 2021.
- Eat Out to Help Out – In order to support around 130,000 businesses and to help protect the jobs of their 1.8 million employees, the government will introduce the Eat Out to Help Out scheme to encourage people to return to eating out. This will entitle every diner to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café, pub or other eligible food service establishment.
- Temporary VAT cut for food and non-alcoholic drinks – From 15 July 2020 to 12 January 2021, to support businesses and jobs in the hospitality sector, the 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.
- Temporary VAT cut for accommodation and attractions – From 15 July 2020 to 12 January 2021, to support businesses and jobs, the reduced (5%) rate of VAT will apply to supplies of accommodation and admission to attractions across the UK.
- Temporary Stamp Duty Land Tax (SDLT) cut – The government will temporarily increase the Nil Rate Band of Residential SDLT, in England and Northern Ireland, from £125,000 to £500,000. This will apply from 8 July 2020 until 31 March 2021 and cut the tax due for everyone who would have paid SDLT.
- Green Homes Grant – The government will introduce a £2 billion Green Homes Grant, providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household. For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household.
Further guidance and information on the above will be published shortly.
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