As predicted the Chancellor announced a number of packages to try and kick start the economy in his Summer Statement today (8 July 2020). Here we summarise the key points. As always the devil will be in the detail and this is expected to emerge over the next few days.
These financial measures, estimated at a cost of near £30 billion, are on top of the initial £160 billion plus announced back in March 2020 and are aimed at "protecting, creating and supporting employment." How they will be financed has not been disclosed, but details of this will no doubt be in the Chancellor's Autumn Budget.
Furlough scheme - Job Retention Bonus
The furlough scheme will wind down totally at the end of October.
A job retention bonus scheme has been announced to encourage employers to retain furloughed employees. Employers will be paid a £1,000 bonus to retain furloughed staff. The bonus will be payable in January 2021 provided furloughed staff have been kept employed until the end of January 2021. There is some criteria around the qualification for the bonus in that each individual must be paid on average £520 a month throughout the three month period.
Whilst sounding attractive, there are some key calculations that employers will need to do. In August they will have to start paying 5% of wage costs, 14% in September and 20% in October. Then from November to January full wages will need to be paid. If business picks up, then it could be a good incentive. If however it doesn't, the cost of keeping the employee on will far outweigh the £1,000 bonus which is expected to be paid in February.
Further details about the scheme are to be announced by the end of July.
Kickstart Scheme - Job Creation Scheme for Young People
Under this new arrangement, The Government has announced that they will pay the wages of new young employees (age 16-24) for six months. There is no cap on the number of places/jobs that will be available under this scheme.
To qualify, the employee must be claiming universal credit, be aged 16-24 and deemed to be at risk of being long-term unemployed. The funding provided will provide 100% of the wages (including employers NIC and Auto enrolment payment), at the relevant national minimum wage for 25 hours a week.
Training and Apprenticeships
Jobcentre work coach numbers will be doubled, the chancellor says.
Businesses will receive a payment of £2,000 for each new apprentice they take on aged under 25. Where apprentices are over 25 the payment will be £1,500.
An immediate increase in the stamp duty threshold to £500,000 from £125,000 was announced until 31 March 2021. This means that where individuals are buying a house, no stamp duty will be payable if the house is worth £500,000 or less.
The 3% surcharge on second homes will continue to apply.
A VAT cut, from 15 July 2020 to 12 January 2021 from 20% to 5% was announced on food, accommodation and attractions. The main driver here is to get the hospitality industry back up and running. This temporary cut should see prices fall when we eat or go out. However, whether the public will see much of this reduction depends on whether businesses pass on the VAT cut or businesses just keep the money and not cut their prices.
Further guidance is due to be published in the next few days as to the scope of this relief.
The reductions are temporary and will have practical consequences for businesses including:
- Businesses will need to make systems changes to ensure that the correct amount of VAT is charged to customers and declared to HMRC
- Changes will be required to sales invoices/VAT receipts
- Businesses will have to review existing contracts to implement the changes
- Businesses will need to decide whether to pass on the reduction to consumers or hold their prices
- Cash flow projections will need to be updated
For those businesses operating through Xero, we expect an announcement to be made in the coming days as to how Xero will help implement these changes.
Eating Out - a discount on your meals
In a further measure to help the hospitality industry, where meals are eaten out in August (from a Monday to a Wednesday), participating businesses will be able to offer a discount of 50% off food, with a cap of £10 per person.
A website is being launched on Monday for businesses to register. Claims will be made through this website. It is anticipated that money will be in the businesses bank accounts within 5 working days of claims being made.
Already announced the Government will provide £3 billion for decarbonising housing and public buildings. This scheme is due to start in September.
Vouchers worth £5,000 and up to £10,000 for poorer families will be made available out of a £2 billion pot to retrofit homes with insulation, helping to cut carbon emissions.
£1 billion will be allocated to make public buildings greener.
COVID 19 Tests - welcome exemption from tax
Finally, a welcome U-Turn!
Earlier this week, HMRC stated that where the cost of Coronavirus Tests are borne by the Employer, the employee will be subject to Benefit in Kind taxation on the cost of the tests.
Where employees, such as front line workers, are being tested several times a week, this could have lead to significant and largely unexpected tax bills.
The Chancellor undertook to look at this unwelcome tax charge and it was confirmed today (Wednesday) that an exemption from Benefit in Kind taxation would be implemented for all tests undertaken in the current tax year (2020/21).
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