Chancellor’s Summer Economic Statement and What You Need to Know
As we said last week, this July is not quite the same as any other. We have not had a summer “mini-budget” before and yet Rishi Sunak stood in the House of Commons on Wednesday delivering exactly that. The Chancellor said the aim was to “give everyone the opportunity of good and secure work, so no one is left without hope.”
‘Our plan for jobs has a clear goal – to protect, support and create jobs. We want to give business confidence to retain and hire.’
In this article we summarise the main points of his announcement that we think you should know.
THE JOB RETENTION BONUS
The current furlough scheme ends in October and the Chancellor looked to cushion expected redundancies with the announcement of a Job Retention Bonus (JRB).
The new scheme will give employers £1,000 for each previously furloughed employee they retain and keep in employment until January 2021, however they will need to be paid at least £520 a month.
Further details of the scheme and how to make the claims are expected later this month.
KICKSTART SCHEME AND MEASURES TO HELP PEOPLE FIND WORK
In order to support people finding jobs, the Chancellor announced the Kickstart Scheme, which will provide £2 billion to support the creation of six-month work placements for 16 to 24-year-olds on Universal Credit and at risk of long-term unemployment.
The Government will pay the wages of these young people for six months. The funding will be equivalent to 100% of the relevant level of the National Minimum Wage for 25 hours a week but Employers can top this up if they choose to.
It will also cover the associated Employer NICs and minimum automatic enrolment pension contributions. Employers will be able to apply from next month with first “kickstarters” in a job by the autumn.
The current minimum wage rates per hour are:
£4.15 for an apprentice
£4.55 for 16 – 18 year old
£6.45 for 18 – 20 year old
£8.20 for 21 – 24 year old
£8.72 for 25 years and over
Extra Funding
Having highlighted that the younger generation have been hit hardest by the Covid-19 outbreak, Rishi Sunak also outlined additional measures, including funding for traineeships and employers that hire new apprentices, as well as funding for several careers and job-finding programmers.
For the first time ever, the government will pay employers to take on new trainees. The apprenticeships funding will provide £2,000 to employers for every apprentice hired under the age of 25 and £1,500 for each newly hired apprentice aged 25 or older.
VAT REDUCED RATE FOR HOSPITALITY AND TOURISM SECTORS
The Chancellor outlined a VAT rate cut for the Hospitality and Tourism sectors from 20% to 5%. The measures relate specifically to food and non-alcoholic drinks and to accommodation and admission to attractions.
The VAT rate change comes into effect on Wednesday 15 July 2020 and will be in place temporarily until 12 January 2021. A bit of an odd date to stop!
If you are in this industry you will need to ensure your accounting/bookkeeping system is correct and therefore applying the right rate of VAT from next Wednesday. No doubt the software houses are busy looking at their systems as we speak. If you operate an EPOS till system, please speak to your provider sooner rather than later.
EAT OUT TO HELP OUT
The “Eat Out to Help Out” scheme will provide a discount of 50% of up to £10 a person on eat-in meals, including non-alcoholic drinks, at participating establishments on Mondays, Tuesdays and Wednesdays for the month of August. This discount will also apply to children, so this is clearly aimed at spending by families during the summer holidays.
Restaurants, cafés and pubs who would like to participate can sign-up for the scheme on a new website from next Monday. Of course, if you are in this business you need to assess things and get registered for the scheme.
A bit more admin work involved yet again but participating in the scheme will ensure you are competitive with the other establishments and you carry on attracting customers over the Summer. You may wish to consider putting up signage so your patrons are aware of the discounts they will be receiving. Of course, update your social media channels too.
STAMP DUTY LAND TAX HOLIDAY
There is a temporary cut in Stamp Duty Land Tax from 8 July by raising the nil-rate band from £125,000 to £500,000 until 31 March 2021. The Treasury estimates that, therefore, around nine in 10 people buying a main residence will pay no stamp duty.
Finally, a word of warning! We have heard from several clients this week that HMRC are asking for the PAYE / NIC liability relating to furloughed workers be paid up before agreeing a further time to pay arrangement for PAYE liability
The logic is that businesses have had the refund via their furlough claim for April to June and should therefore have the cash to pay the liability now. Delay in paying this liability may also delay your July refund for the furlough grant.
If you are struggling to pay your tax liabilities, please speak to us. It would be a shame if HMRC withheld the July grant because this will be going towards paying your furloughed workers.