Summer Economic Statement
|Please see below a summary of the key points of the summer statement, as announced by Chancellor Rishi Sunak.|
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|Summer Economic Statement 2020|
In his first response to the coronavirus (Covid-19) outbreak back in March, Chancellor Rishi Sunak said that the Government would do ‘whatever it takes’ to support the country through the pandemic. To date, the government’s furlough scheme has helped employers pay the wages of some 9 million employees across the UK and more that 2.7 million people have been supported by the self-employment income support scheme. Businesses have been supported by tax cuts and deferrals, as well as cash grants, and over a million loans through four government-backed schemes.
Over the last two months, Government figures show that the UK economy has contracted by 25% – the same amount as it had grown over the previous 18 years – and the Chancellor finds himself under great pressure to prevent a huge spike in unemployment and further economic decline.
The Government’s Plan for Jobs is designed to ‘protect, support and create jobs’ and ‘give businesses the confidence to retain and hire’. Announcing a package of measures in a Summer Economic update on 8 July, the Chancellor said the aim was to ‘give everyone the opportunity of good and secure work, so no one is left without hope’.
Coronavirus job retention bonus
The Chancellor confirmed that Coronavirus Job Retention Scheme (CJRS) will be flexibly and gradually wound down through to October as previously announced. Broadly, the CJRS scheme closed to new furloughed employees on 10 June 2020 with last claims for periods ending 30 June to be made by 31 July. The flexible CJRS will close at the end of October.The next phase of economic recovery will focus on bringing as many people as possible back from furlough and into jobs.To reward and incentivise employers to bring back employees, any employer who brings back a furloughed member of staff through to January 2021 will receive a £1,000 bonus per employee.
The bonus will be:
– a one-off payment of £1,000
– to UK employers
– for every furloughed employee who remains continuously employed through to 31 January 2021.
Employees must earn above the National Insurance lower earnings limit (£520 per month) on average between 31 October 2020 when the CJRS ends and the end of January 2021.
The bonus payments will be made from February 2021.
The amount of the bonus may seem modest but it will undoubtedly be useful, coming at a time when those businesses which have deferred tax debts begin to work out how to pay these. For example, self assessment taxes due at the end of January (by the unincorporated business owner) and VAT at the end of March.
Further detail about the CJR bonus scheme will be announced by the end of July.
Support for younger workers
The new Kickstart Scheme will directly pay employers to create new jobs for any 16 to 24-year-old at risk of long-term unemployment. The jobs must be new jobs – with the funding conditional on the firm proving these jobs are additional.
The government will pay young people’s wages for six months, plus an amount for overheads, which will give employers a grant of around £6,500 for each employee taken on. The funding is conditional on these being new jobs, paid at national minimum wage and for at least 25 hours a week.
The Chancellor said than an initial £2bn will be available to fund the scheme, with no cap on the number of places available. Employers will be able to apply from August.
In addition, the Government will pay employers £1,000 to take on new trainees, with the aim of tripling the number of level 2 and level 3 courses, at a cost of £100m. There is also extra funding for careers advice.
The Chancellor also announced that for the next six months, the Government will pay employers to create new apprenticeships.
Businesses will be able to claim a new payment of £2,000 per apprentice, and there will be a brand-new bonus of £1,500 for businesses hiring apprentices aged 25 and over.
The Chancellor announced a £2bn green home grant, to support a green-led recovery. From September homeowners and landlords will be able to apply for vouchers to make housing more energy efficient and to create local jobs.The government will cover two thirds of the cost up to £5,000 per household, and up to £10,000 for those on low incomes. There will also be £1bn of funding available for developing energy efficiency in public sector building.
SDLT temporarily reduced
The Chancellor highlighted that property transactions fell by more than 50% in May, while house prices fell for the first time in eight years.
Therefore, to help boost the housing market, there will be a temporary reduction in stamp duty land tax (SDLT) in England until 31 March 2021.
To achieve the reduction, the nil rate band threshold for SDLT payment has been increased from £125,000 to £500,000. This change applies with immediate effect but only applies until 31 March 2021. Treasury estimates suggest the average homebuyer will see their bill fall by £4,500, and nearly nine out of ten main home buyers will pay no duty at all.
The Chartered Institute of Taxation (CIOT) has suggested that replicating the Chancellor’s plans to cut SDLT could result in more than 90% of Scottish house sales being tax free but could drastically cut Land and Buildings Transaction Tax (LBTT) receipts.
VAT cut for hospitality sector
The Chancellor announced a six-month reduction in the VAT rate on supplies of food and non-alcoholic drinks from restaurants, pubs, bars and cafes, as well as to supplies of accommodation and admission to tourist attractions.
The rate cut from 20% to 5% will take effect on 15 July 2020 and will be in place until 12 January 2021 to support businesses and jobs in the hospitality sector across the UK.
It is not yet clear how the VAT paid on pre-booked holidays and advanced tickets will be dealt with, although normal rules on a reduction in VAT rate suggest that the lower rate may be available. Further guidance from HMRC on this is expected shortly.
Clarity is also needed on how the VAT change will interact with the government’s new ‘Eat Out to Help Out’ scheme, which was also announced in the Chancellor’s update. This scheme will see the government provide participating businesses with half of the cost up to £10 per head for eat-in meals sold Monday-Wednesday throughout August.
The full text of the Chancellor’s Economic Statement can be found on the Treasury website at A Plan for Jobs speech.