As expected, the Chancellor, Rishi Sunak, made a number of announcements in his Summer Economic Update yesterday.
Given the shocking statistic that the UK economy has contracted by c25% in a matter of months as a result of the COVID-19 situation, there was a clear focus of limiting job losses.
Some of the announcements will be welcomed by some of the sectors in Cornwall and the Isles of Scilly, however, given the huge economic impact of the crisis, it has to be questioned whether the announcements go far enough.
We can assure you of our continued commitment to provide as much advice, guidance and support as you need to help you to come through this as best as you possibly can. Communication is imperative and we will continue to ensure that we disseminate relevant and up to date information as it emerges from government.
VAT – Temporary VAT cuts
The Chancellor announced VAT rate cuts from 20% to 5% for the following to last for 6 months between 15 July 2020 – 12 January 2021:
• Supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafes and similar establishments;
• Supplies of accommodation; and
• Supplies of admission to attractions.
The focus is clearly to attempt to provide much-needed boost to these sectors, with a focus on retaining jobs.
This is a welcome boost to Cornwall’s hospitality and attraction based sectors.
Job Retention Scheme – New bonus
As previously announced, the Chancellor reconfirmed that the Job Retention Scheme (JRS) would end at the end of October 2020.
As part of the announcements yesterday, the Chancellor stated that a bonus of £1,000 will be paid to employers for bringing previously furloughed employees back to work, and retaining those employees until January 2021. This £1,000 bonus will be for each such employee.
Once condition of the bonus is that the employee must be paid at least £520 per month between the end of the CJRS and the end of January 2021.
The bonus payments will be made in February 2021.
Stamp Duty Land Tax (SDLT) – Temporary changes
One change that was widely rumoured to be announced was a form of SDLT holiday, and this was what we have got.
The current SDLT 0% rate band of £125,000 will rise to £500,000 for purchases of dwellings purchased in England and Northern Ireland from 8 July 2020 – 31 March 2021. This means that no SDLT will be payable on transactions involving chargeable amounts less than £500,000.
The 3% ‘additional property’ rate will also be reduced for residential property where the chargeable amount is up to £500,000.
Previous SDLT holidays have done less to boost volume of transactions, than merely to bring the timing of transactions forward. Additionally, will it merely ‘kick the can down the road’ to when the holiday ends? Will house prices now align to merely take into account the saving for the purchaser?
‘Eat Out to Help Out’ scheme
It was announced that every diner at any participating establishment (restaurant, café, pub or other food service establishment) will be entitled to a 50% discount on any meal (including non-alcoholic drinks) they eat in the establishment on a Monday, Tuesday or Wednesday in August 2020, up to a maximum of £10 per person.
The use of the scheme will not be capped.
This discount will then need to be reclaimed by the business which must apply to participate. The requirement to apply to participate is a key point for clients in the hospitality sector.
The changes outlined above were very much the headline announcements, however, the following announcements were also made:
The scheme will apply to employers who employ a new 16-24 year old employee that is currently claiming universal credit for a minimum of 25 hours per week (providing the employee is paid the National Minimum Wage).
The scheme will be in the form of a grant that will effectively cover the employee’s wages for the 25 hours per week for the first 6 months, plus an amount for overheads.
We understand that the employee cannot be an apprentice to qualify for the scheme.
Trainee and Apprenticeship Bonus Scheme
This scheme will pay employers:
• £1,000 for employing a new trainee;
• £2,000 for every new apprentice employed aged 16-24; and
• £1,500 to every new apprentice employed aged 25 and over.
Green homes voucher scheme
The scheme will match £2 for every £1 that residential property owners spend to make their properties more energy efficient, up to a maximum of £5,000 per household.
The scheme will fully fund such projects for those on the lowest incomes up to a maximum of £10,000.
Detail on these measures is understandably limited at this time, however, detailed guidance is expected in the coming days. We will provide updates as and when further guidance is published.
If we can help and advise you in any way, please get in touch with your usual RRL contact, we continue to work remotely to keep our staff and clients safe and our telephone contact details can be found here. We will respond to emails as usual. We are conducting meetings virtually (using Microsoft Teams).
We will provide further updates, as and when further announcements are made and detail/guidance released.