Chancellor Rishi Sunak has revealed his summer economic update with the aim of mitigating the impact of the COVID-19 crisis. The key focus was boosting job creation and stimulating consumer spending, particularly in the hard-hit hospitality sector.
All the business support measures will be very welcome. As we have said many times before, the devil will be in the detail and we appreciate that the following update might create more questions than answers. But we are only at the end of a phone or email and please get in touch if you have any immediate concerns.
Coronavirus Job Retention Scheme (CJRS) – Job Retention Bonus
A job retention bonus is being introduced to help keep furloughed employees in employment. Employers will receive a one-off payment of £1,000 for every furloughed employee who remains continuously employed through to 31 January 2021. The bonus payments will be made from February 2021.
The bonus is conditional on employees earning above the Lower Earnings Limit (£520 per month) on average between 31 October 2020, which is when the CJRS ends, and the end of January 2021.
The Kickstart Scheme is designed to help 16-24 year olds into work through the creation of high quality 6-month work placements.
It will allow employers to receive up to £6,500 per work placement, to cover each individual’s wages and associated costs. The grant available would cover the costs of paying an employee National Minimum Wage (NMW) for 25 hours of work per week, plus their associated National Insurance and pension contributions (see example below).
There does not appear to be a cap on the number of placements an employer can provide. But the funding is conditional on the work placements being new jobs and that potential new employees are in receipt of universal credit.
Employers will be able to apply for the funding from August. in jobs in the autumn.
Current costs of paying an employee NMW:
|Weekly Costs||6 Month Costs (26 weeks)|
|24 year old NMW Minimum Wage||£.8.20|
|Gross Pay for 25 hours work per week||£205||£5,330|
|Employer NI contributions||£4.97||£129.22|
|Employer Pension contributions||£2.55||£66.30|
As with the other support measures announced there is still further clarification and detail needed including qualifying criteria on what counts as a ‘high quality’ placement, whether there will be a minimum number of hours the employee has to work. We will update you on any further guidance once this is available.
Trainee and Apprenticeships Support
Employers who can provide work experience for 16-24-year-olds in work placements and training will be incentivised with a payment of £1,000 per trainee.
Although trainee positions are unpaid, employers normally pay expenses and cover the cost of support courses. Usually trainees complete a minimum of 100 hours and a maximum of 240 hours of work experience over six months.
There is also a new incentive for employers to hire apprentices over the next six months. (From 1 August to 31 January, any company hiring an apprentice aged 16 to 24 will receive £2,000, while those that hire apprentices aged 25 and over will be paid £1,500. This funding is additional to that already available via the Apprenticeship Levy for training costs.
Eat Out to Help Out
To support those many restaurants impacted by the COVID-19 crisis the government is introducing the Eat Out to Help Out scheme to encourage people to return to dining out.
The offer will be implemented through a voucher scheme, which will entitle diners to 50% discount on sit down meals and non-alcoholic drinks at any participating restaurant, café, pub from Monday – Wednesday throughout August, with a value of up to £10 per person. The discount can be used unlimited times and the participating business will be fully reimbursed for the 50% discount.
The government will open a website where businesses can register for the scheme online, with the funds they claim back being paid within five working days.
VAT Cut – Food and Non-Alcoholic Drinks / Accommodation and Attractions
VAT will be cut from 20% to 5% for a temporary period of six months on food, accommodation and attractions.
From 15 July 2020 to 12 January 2021 a reduced (5%) rate of VAT will apply to:
- food and non-alcoholic drinks sold by restaurants, pubs, bars, cafés and similar premises
- supplies of accommodation
- admission to attractions, including zoos, cinemas and theme parks
We are waiting for the exact detail of the VAT reduction from HMRC. However, for businesses that fall within the scope, all affected takings, supplies made and subsequent invoices issued on or after 15 July 2020 until 12 January 2021 must be charged at the 5%.
The reduction of the VAT rate is obviously designed to encourage consumer spending. It does appear though, that there is no obligation to pass the VAT reduction on to customers by reducing prices. That will be a decision for each individual business make.
Further guidance on the precise scope of the reliefs will be published by HMRC in the coming days. Until then this change to VAT will probably raise more questions than possibly any of the other incentives outlined in the mini Budget. However, you will need to make changes to your invoicing and accounting system, it’s just not clear what those changes will be just yet.
Rather than preempt future announcements, we will issue more guidance as soon as that clarity is available. In the meantime, please do call either the partner who looks after your affairs or our expert VAT team who will try and answer any questions you may have.
Stamp Duty Land Tax (SDLT) Cut (England and Northern Ireland only)
Homebuyers will no longer pay stamp duty on the first £500,000 of a property’s purchase price as a result of a temporary SDLT reduction.
The government has raised the Nil Rate Band of Residential SDLT, in England and Northern Ireland, from £125,000 to £500,000. As stamp duty is tiered, anyone buying properties costing more than £500,000 will pay nothing on the first £500,000 and then normal rates on anything above that.
The change is immediate, applying from 8 July 2020 until 31 March 2021.
The new 0% band will also apply to residential leasehold sales and new residential leases
The change will not apply in Scotland or Wales.
Green Homes Grant (England only)
In order to make homes more energy efficient, vouchers worth up to £10,000 will be available to homeowners and landlords in England as part of the Green Homes Grant. The aim is to enable homeowners and landlords to upgrade their homes and properties with energy-saving features in order to reduce energy usage.
Grants will provide at least £2 for every £1 that homeowners and landlords spend on energy efficient improvements up to the value of £5,000. For those on low incomes the scheme will fully fund improvements raising the value to £10,000.
Again, we are still waiting for more comprehensive information but some of the improvements the scheme will cover include:
- double glazing (windows, doors, etc)
- wall insulation
- roof insulation
Applications for the Green Homes Grant Scheme are expected to open in September.
As further change and challenges continue, please remember you are not on your own. Our team is continuing to provide assistance and for us it is ‘business as usual’ when it comes to client support.
There is no change to our email or phone numbers so please do contact us as you would normally do. We are here to help wherever we can.
Information correct as of 9 July 2020