Summer economic update: What’s new?

Jul 9, 2020 | COVID-19

There is monumental pressure on businesses to retain employees as the furlough scheme starts to wind down, jobs come under pressure and the number of individuals claiming Universal Credit reaches an all-time high.

Yesterday, the Chancellor delivered his Summer economic update. The purpose of the update was threefold, to stimulate the economy by 1) supporting job seekers, 2) creating jobs, and 3) protecting existing jobs. Here is a round-up of some of the key announcements.

Job Retention Bonus

In a bid to reward and incentivise employers who bring back furloughed employees, the government will provide a £1,000 bonus. The bonus applies to furloughed employees who remain continuously employed through to the end of January 2021, and who earn at least £520 a month on average during that time. With 9 million workers currently furloughed, this could equate to a bonus fund worth £9 billion. This is met with caution, as there are still many businesses across the UK that are unlikely to have the cash flow available to continue to pay all of their employees’ wages in the first place.

VAT reduction

From 15 July 2020 to 12 January 2021, VAT on goods and services provided by the hospitality and tourism sector will be reduced from 20% to 5% in a bid to stimulate spending. It will apply to spending on food and non-alcoholic drinks, accommodation, and attractions. It was not made clear whether the benefit would be to the business or whether it would be passed on to the consumer as a discount.

Stamp duty

Effective as of 8 July, the nil rate band of Stamp Duty Land Tax relating to residential property will be increased from £125,000 to £500,000. This temporary increase will last until 31 March 2021.

Kickstart scheme

The Kickstart scheme has been launched to help create new jobs for 16-24 year olds who are on Universal Credit and who are deemed to be most at risk of long-term unemployment. For those new jobs created, the scheme will pay young people’s wages for six months (100% of the relevant National Minimum Wage for 25 hours a week), plus an amount to cover overheads, National Insurance contributions and employer minimum automatic enrolment contributions.

The government also plans to scale-up traineeships by paying employers £1,000 to take on trainees, as well as incentivise apprenticeships by paying businesses a £2,000 bonus to hire apprentices under 25 or £1,500 for those 25 and over.

Eat out to help out

And finally, in an unexpected twist, the Chancellor announced a new campaign called ‘Eat out to help out’: an initiative to help stimulate spending on food and drink. Restaurants, pubs and cafes will be able to register to be part of the scheme as of Monday 13 July. Once registered, they will be able to pass on a 50% discount on dine-in food and non-alcoholic drinks, up to £10 per head, to diners Monday through Wednesday, which can be claimed back and paid within 5 days. This is yet more welcome news for an industry suffering from a cap on covers and loss of footfall.

Commenting on the update, Chris Barrington, Tax Partner, said: “These changes are all about incentivising consumers and rebuilding confidence. This is essential to getting businesses to invest in being COVID secure, to open their doors, and to bring back furloughed employees.”

For a more detailed look at the changes affecting the property sector, please click here. Otherwise, if you would like to speak to our team in relation to a query, email us or call on 0161 905 1616.