SUMMER STATEMENT 2020
The Chancellor has announced a range of measures designed to fire up the economy, get people into work, or back to work, and out spending so that society starts to operate again.
GETTING US BACK INTO WORK
Coronavirus Job Retention Scheme (CJRS) Bonus
There will be £1,000 bonuses per employee for employers who bring their staff back from furlough and keep them in work until the end of January 2021. The employee will need to earn more than £520 per month on average over the period and payments to employers will not start until February 2021. It does mean that there is a three-month gap effectively from the CJRS arrangement coming to an end on 31 October and CJRS bonuses being paid in February 2021.
This cashflow delay may reduce the effectiveness of this measure if the business does not return to pre-Covid levels quickly enough, but it is a creative solution to what may have been seen as a looming cliff edge. Alongside this, businesses will have one eye on how they use flexible labour and support cost effectively and compliantly given the changes that are likely to be introduced from April 2021 in respect of IR35.
Although the CJRS Bonus is intended to help protect jobs (albeit there may be changes in roles required), there is still likely to be redundancies as organisations plan to survive 2020. However, this new announcement is hoping to mitigate the need for redundancies as much as it possibly can.
Further detail will be announced before the end of the month and we maybe yet to see changes to this as we did with CJRS as events continue to unfold.
Traineeships and Apprenticeships
Employers can also receive funding of £1,000 per individual if they provide work experience for trainees. Traineeship funding will increase to fund a trebling of the current number of positions.
Funding will be increased for those hiring new apprentices between 1 August 2020 and 31 January 2021. There will be £2,000 per apprentice for those aged under 25 and £1,500 per apprentice for those aged over 25. This funding is additional to that already available via the Apprenticeship Levy for training costs, and also the NIC relief employers receive for employing apprentices under the age of 25.
This is a key development. Organisations across all sectors can really make a positive difference to their workforce management and cash flow by taking some time to review how they engage current employees returning to work and look to bring in new job roles in the short and medium term. Alongside the CJRS bonus arrangement, this may help organisations bring back furloughed workers into new roles given potential changes to business needs brought upon by Covid-19, particularly in the hospitality, retail, construction and manufacturing sectors.
Funding will be available to cover 100% of the National Minimum Wage, employer’s national insurance and minimum pension payments for six months for employers who create work placements for 16-24-year olds who are currently receiving Universal Credit and are at risk of long-term unemployment. There is no detail yet on how employers can identify those individuals when taking on people for work placements, but this may come via the increased investment in job centre staff.
GETTING US SPENDING
The hard-hit hospitality sector is to receive special attention as it is a key source of work for young people. There is to be a swinging VAT cut from 20% to 5% between 15 July 2020 and 12 January 2021 on food and non-alcoholic drinks bought in cafés, bars or restaurants. A similar reduction will also apply to accommodation and admission to attractions (including cinemas).
For all of August, every person eating out on a Monday, Tuesday or Wednesday can receive a discount of 50% on the costs of the meal and soft drinks, capped at £10 per head. Any food establishment can apply to participate in the scheme and will be reimbursed weekly for the discount.
Stamp Duty Land Tax (SDLT)
In addition to hospitality the housing market also gets special attention. The current exemption for SDLT on residential property sales in England and NI is £125,000, this will be increase from the 8th July 2020 until 31st March 2021 to £500,000. This will reduce the cost of house moves and should inject life into the housing market provided people feel secure enough to take on the extra costs of buying a new house.
In a further boost to the housing and construction sector, grants will be available of up to £5,000 for work to make homes more energy efficient. The grant is £2 for every £1 spent by the householder but for low income household the grant will be up to £10,000 and fully fund the spend. Spending in this way targets job creation and preservation in the construction sector but also helps the government move towards its green targets. Whether the grants come on stream fast enough to allow businesses to bring workers back from furlough remains to be seen but coupled with the job retention bonus it is certainly a positive move for the sector.
The standard rate of VAT will be temporarily cut for a six-month period
The standard rate of VAT will be temporarily cut for a six-month period from 20% to 5% on selected goods and services, taking effect from Wednesday 15 July 2020 until 12 January 2021. It is anticipated that this will provide a much-needed stimulus to the UK economy in the current uncertain environment.
The rate cut will apply to supplies of certain food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. It will also apply to supplies of accommodation and admission to attractions across the UK.
The cut in the VAT rate is expected to assist businesses in increasing their sales and to bounce back from the current situation created by the Covid-19 pandemic. It will however create additional administrative burdens. The extent to which businesses will be affected will vary, however, the following non-exhaustive, broad considerations are relevant when developing an action plan to deal with the rate cut:
- It is important that businesses understand how the rate cut will impact them. In particular they need to understand when their sales take place for VAT purposes, ie the ‘tax point’, to enable them to correctly determine the rate of VAT to apply.
- The accounting software used should be capable of dealing with multiple VAT rates.
- The accounting software master data should be reviewed and updated.
- Retailers should ensure that their tills are configured to deal with the reduced VAT rate from 15 July 2020.
- It may be necessary to contact software providers for assistance in preparing the accounting system for the change in rate.
- Prices of goods and services that are displayed VAT inclusive in shops, online etc need to be amended if the VAT rate cut is being passed onto the customer.
- Affected business should be reviewing their pricing policies in view of the VAT rate cut, particularly where their customers are unable to recover VAT on their purchases.
- Consideration will need to be given to procedures for correctly accounting for VAT where a business offers products or services attracting both the standard and reduced rate of VAT