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Summer Statement 2020

MACO business

Key highlights from the UK Chancellor's Summer Statement 2020.

  •  In his Summer Statement, the Chancellor confirmed that the Government is introducing a new Coronavirus Job Retention (CJRS) bonus to reward and incentivise employers who continue to employ their furloughed employees through to the end of January 2021. The bonus will be a one-off payment of £1,000 for every furloughed employee who remains continuously employed through to 31 January 2021.
  • A new Kickstart Scheme will cover employers’ costs for the first six-month for those taking on 16-24 year olds for a minimum of 25 hours per week at the NMW.
  • A £1,000 payment will be made to employers for each new trainee aged 16-24-year.
  • Employers who hire new apprentices will receive payments of up to £2,000.
  • There will be a temporary cut to Stamp Duty Land Tax on residential property in England, increasing the zero-rate band to £500,000 and saving purchasers up to £15,000.
  • In Scotland, starting point for land and buildings transaction tax is to rise temporarily from £145,000 to £250,000, although this reduced threshold will not apply to second homes purchases.
  • The rate of VAT will be cut temporarily from 20% to 5% for restaurant, food, accommodation and attractions businesses.
  • An ‘Eat Out to Help Out’ Scheme will offer 50% meal discounts, up to £10 per head during August.£1,000

Brief summary

Mr Sunak emphasised that we are only part way through the pandemic crisis and he will be coming back with further proposals later in the year – most notably in the planned Autumn Budget, when there will be a full major review of government spending (postponed from the pre-election timetable) as well as proposals for tax.

A couple of significant tax changes were included in the Summer Statement:

  • Businesses in the hospitality sector will enjoy a six-months VAT reduction to 5% from 15 July to 12 January 2021.
  • The other change was the increase in the Stamp Duty nil rate band to £500,000 in England and Northern Ireland intended to boost the housing market.

 19796 MACO FINANCIAL ACUITY NEWSLETTER WEB FILES 04

Feared tax increases affecting pensions, inheritance tax and taxes on income did not feature in the Summer Statement. There are likely to be a raft of tax proposals in these areas in the Autumn Budget.

Some of the other measures were all about increasing Government spending to support, protect and create jobs. They included:

  • A Job Retention Bonus for employers of £1,000 for each furloughed employee who is employed after the Coronavirus Job Retention Scheme ends in October and still on the payroll at the end of January 2021.
  • A new Kickstart Scheme covering employers’ costs for new six-month work placements for trainees aged 16-24 who are on Universal Credit and at risk of long-term unemployment.
  • Payments of up to £2,000 to employers who hire new apprentices.
  • 50% meal discounts up to £10 per diner on Mondays, Tuesdays and Wednesdays during August under an ‘Eat Out to Help Out’ Scheme.

 

We are living in extraordinary times – hence the need for these unique measures. Please get in touch with us if you would like to discuss any aspect of these new measures, or any of the previously announced Covid-19 support measures made by the UK and Scottish Governments - links below. 

Covid-19 Support available for businesses, charities and individuals >read more
Scottish Government Covid-19 Support for businesses >read more Reminder: The closing date for Coronavirus Business Support Grants available via Local Authorities in Scotland is 10 July 2020.

 

Economic situation19796 MACO FINANCIAL ACUITY NEWSLETTER WEB FILES 01

The Chancellor, Rishi Sunak, has spent so much time in the spotlight that it seems hard to believe he has not yet been in the job for five months. Today’s Financial Statement was just the latest of a series of announcements by Mr Sunak since he presented his Spring Budget on 11 March, four weeks after entering 11 Downing Street. One way or another, all the announcements have been responses to the financial impact of the Covid-19 pandemic.

His latest statement was perhaps the most difficult, given the circumstances in which it was set:

The government finances are in deep deficit. In only the first two months of the current financial year, the Treasury borrowed £103.7 billion, which was over six times as much as in the same period in 2019/20 and close to double the Budget forecast for the entire year. In May, for the first time since 1963, total government debt exceeded 100% of GDP the UK’s economic output for the whole year.

The UK economy contracted by 2.2% in the first quarter of 2020, according to the Office for National Statistics (ONS). In April alone – the first full month of lockdown – the ONS estimates that there was a further 20% shrinkage in output.

The Chancellor’s flagship employee furlough scheme, the Coronavirus Job Retention Scheme (CJRS), will start to be phased down in August. At that point, employers become responsible for the pension contributions and National Insurance Contributions (NICs) currently met by the Treasury. The CJRS, which has already been extended twice, is set to finish at the end of October. As of 5 July the scheme covered 9.4 million furloughed jobs provided by 1.1 million employers and had received claims totalling £27.4 billion.

The constituent parts of the UK are each emerging from lockdown, a process that could lead to an increased infection rate and local flare ups, as has happened in many US states and parts of Europe. On the day before the Chancellor’s statement, the Organisation for Economic Development published a report saying the UK unemployment rate could reach 14.8% by the end of 2020 if there is a second wave.19796 MACO FINANCIAL ACUITY NEWSLETTER WEB FILES 15

The challenge for the Chancellor in his Summer Statement was to start the transition from the emergency employment support that has so far been the focus of his strategy. He presented his statement as a ‘Plan for Jobs’, composed of three elements promoting jobs:

1.Supporting


2.Protecting


3.Creating

The Chancellor placed a price tag on his measures of up to £30 billion. He also promised that in the Autumn Budget and Spending Review he would deal “with the challenges facing our public finances”.

 

Supporting Jobs

The Chancellor announced a range of initiatives under the ‘Supporting Jobs’ heading, including:

Job Retention Bonus

The Chancellor made it clear that he intends to end the CJRS in October as planned. To encourage employers to support those people who have been furloughed, a Job Retention Bonus will be introduced.

The Job Retention Bonus will provide a one-off payment of £1,000 to UK employers for every previously furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn more than £520 a month on average between the end of the CJRS and the end of January 2021. Payments will be made from February 2021. Further details about the scheme will be announced by the end of July.

Kickstart Scheme

The Kickstart Scheme, which only covers Great Britain, aims to provide “hundreds of thousands of high quality six-month work placements” for those aged 16-24, who are on Universal Credit and are considered to be at risk of long-term unemployment. 

Government funding for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week plus the associated employer NICs and employer minimum automatic enrolment contributions (a maximum of about £6,500).

There is to be no cap on the cost of the scheme. MACO TPL Thumps up sticker

Traineeships

Employers who provide work experience for 16-24-year-olds in work placements and training will receive a payment of £1,000 per trainee. Provision of traineeships and eligibility for them will be extended to those with Level 3 qualifications and below, to ensure that more young people have access to training.

Payments for employers who hire new apprentices 

Employers in England will receive a new payment of £2,000 for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over.

The scheme will run from 1 August 2020 to 31 January 2021. These payments will be made in addition to the existing £1,000 payment the Government already provides for new 16-18-year-old apprentices, and any of those aged under 25 with an Education, Health and Care Plan.

Other supporting jobs measures:

  • £895 million to enhance work search support across Great Britain by doubling the number of work coaches in Jobcentre Plus before April 2021.
  • An additional £150 million in the funding for the Flexible Support Fund in Great Britain, including increased capacity for the Rapid Response Service.
  • £101 million for the 2020/21 academic year to give all 18-19-year olds in England the opportunity to study targeted high value Level 2 and 3 courses when there are not employment opportunities available to them.
  • £95 million in 2020/21 to expand the scope of the Work and Health Programme in Great Britain to introduce additional voluntary support in the autumn for those on benefits who have been unemployed for more than three months.
  • £40 million to fund private sector capacity to introduce a job finding support service in Great Britain in the autumn.
  • £32 million new funding for the National Careers Service.

 

Protecting Jobs

The Protecting Jobs element focuses on the hospitality and leisure sector, which saw over 80% of firms temporarily cease trading in April and has 1.4 million furloughed workers. It is a sector of the economy that employs over two million people, according to the Chancellor, disproportionately drawn from the young, women and people from Black, Asian and minority ethnic communities.

Temporary VAT cut for food and non-alcoholic drinks 19942 MACO Tax Planning 31

A 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. The temporary rate will apply from 15 July 2020 to 12 January 2021. 

Temporary VAT cut for accommodation and attractions 

The 5% rate of VAT will also apply from 15 July 2020 to 12 January 2021 to supplies of accommodation and admission to attractions across the UK. 

HMRC’s initial guidance on the changes can be found online within the following VAT notices. More details are expected shortly.

 

If you have any specific query regarding a supply you are making, please do not hesitate to get in touch with Iain Johnston, VAT Specialist, or your usual contact at Martin Aitken>get in touch

Eat Out to Help Out 

The ‘Eat Out to Help Out’ scheme will be introduced to encourage people to return to eating out. Every diner will be entitled to a 50% discount of up to £10 a head on their meal, at any participating restaurant, café, pub or other eligible food service establishment.

The discount can be used without limit throughout the UK on any eat-in meal (including on non-alcoholic drinks). It will be valid Monday to Wednesday during the month of August, and participating establishments will be fully reimbursed for the 50% discount.

 

Creating Jobs

The job creation measures are primarily targeted on the housing and construction sector.19942 MACO Tax Planning 38

Stamp Duty Land Tax

Receipts of Stamp Duty Land Tax (SDLT – England and Northern Ireland) have fallen precipitously in the past few months, as the graph above shows. The slowdown in transactions has been accompanied by a stalling in prices – the latest data from Nationwide showed house prices falling in June 2020 for the first time in almost eight years. A temporary cut in SDLT on residential properties was widely trailed and duly arrived. 

From 8 July 2020 to 31 March 2021, there will be no SDLT on the first £500,000 slice of property value, creating a maximum saving of £15,000. However, the 3% additional rate will still apply to additional properties.

Scottish Finance Minister Kate Forbes announced on 9 July 2020 that the starting point for land and buildings transaction tax (LBTT - Scotland) is to rise temporarily from £145,000 to £250,000, although this reduced threshold will not apply to second homes purchases. She also announced that the Scottish Government would spend another £50m on the First Home Fund to support first time buyers, and another £100m would be spent on targeted employment support and training to help keep people in work or to help them to retrain.

Green Homes Grant

A £2 billion Green Homes Grant will be introduced, providing at least £2 for every £1 up to £5,000 per household to homeowners and landlords who spend on making their residential properties more energy efficient. For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household.

Other creating jobs measures:19796 MACO FINANCIAL ACUITY NEWSLETTER WEB FILES 13

£5.6 billion of accelerated infrastructure investment, covering hospitals, schools, courts, prisons, town centre improvements and local road maintenance.

A £1 billion investment over the next year in a Public Sector Decarbonisation Scheme that will offer grants to public sector bodies, including schools and hospitals, to fund both energy efficiency and low carbon heat upgrades.

By boosting the Short-Term Home Building Fund, an additional £450 million in development finance will be made available to smaller firms that are unable to access private finance.

£400 million will be allocated via the Brownfield Housing Fund to seven Mayoral Combined Authorities to bring forward land for development of homes in England.

£100 million of new funding will be provided for researching and developing Direct Air Capture ¬ a new clean technology that captures CO2 from the air.

A new Social Housing Decarbonisation Fund will be established to help social landlords improve the least energy-efficient social rented homes. It will start in 2020/21 with a £50 million demonstrator project.

£40 million will be spent to improve the environmental sustainability of the courts and tribunals estate in England and Wales, investing in initiatives to reduce energy and water usage.

Up to £40 million will be made available in a Green Jobs Challenge Fund for environmental charities and public authorities to create and protect 5,000 jobs in England. The jobs will involve improving the natural environment, including planting trees and creating green space for people and wildlife.

£10 million of funding is to be made available immediately to the Automotive Transformation Fund for the first wave of innovative R&D projects to scale up manufacturing of the latest technology in batteries, motors, electronics and fuel cells.

 

If you require clarification or further guidance on any of the above support measures please do get in touch with your usual Martin Aitken adviser or via complete our short Contact Us form and we'll get back to you.

 

Tax Planning for Life 2020-21