Summer statement 2020

Summer statement 2020

On 8 July 2020 the Chancellor announced a range of measures largely concerned with trying to reduce the inevitable rise in unemployment and to encourage us all to start spending again to kick start the economy.  As is often the case, we only have headline details at present with further detail to follow over the next few weeks, and here is a summary of what we know at present:

Measures to encourage spending

VAT cut in bid to support hospitality sector – wef 15 July 2020

In his Summer Statement, the Chancellor announced a six-month reduction in the VAT rate on supplies of food and non-alcoholic drinks from restaurants, pubs, bars and cafés, as well as to supplies of accommodation and admission to tourist attractions.

The rate cut from 20% to 5% will take effect on 15 July 2020 and will be in place until 12 January 2021 to support businesses and jobs in the hospitality sector across the UK.

Further guidance on the scope of the reliefs will be published by HMRC in the coming days. Until then it is not clear how the VAT paid on pre-booked holidays and advanced tickets will be dealt with, although normal rules on a reduction in VAT rate suggest that the lower rate may be available.

Clarity is also needed on how the VAT change will interact with the government’s new ‘Eat Out to Help Out’ scheme, which was also announced in the Chancellor’s update. 

Eat out to Help Out Scheme

The government will give up to 50% off meals out up to a maximum of £10 per head for everyone including children for meals at certain restaurants on Mondays to Wednesdays in August.

“A first-of-its-kind government-backed discount for all”, he declared. “To get customers back into restaurants, cafes and pubs, and protect the 1.8 million people who work in them.”

The meal-deal discount will not apply, however, to alcoholic drinks or takeaway meals.

Businesses can claim the money back from the government weekly, receiving funds within 5 working days. Guidance for businesses will be published next week.  No customer voucher is required– the discount applies simply by turning up and buying the meal.

SDLT boost for homes in England and Northern Ireland – with immediate effect

The Chancellor announced an immediate increase in the nil rate band for residential SDLT in England and Northern Ireland, from £125,000 to £500,000. This increase will apply from 8 July 2020 until 31 March 2021.

However, SDLT does not apply in Wales and Scotland with land transaction tax (LTT)  applying in Wales and land and buildings transactions tax (LBTT) applying in Scotland. It is not yet known if the devolved administrations will make similar announcements for those taxes.

The announcement does not change the position for first-time buyers who already enjoyed a relief from SDLT on purchases up to £500,000.

However, it will temporarily reduce the amount of SDLT payable at the higher rate for additional dwellings. It will also reduce the amount of SDLT payable on transactions over £500,000 as the first £500,000 of chargeable consideration will benefit from the lower rates.

For example, if you brought a property that was not an additional property for £750,000 on 7 July 2020, the SDLT would have been £27,500. If you purchased the same property on 8 July 2020, the SDLT is £12,500.

The table below sets out how the rates have changed. 

Property value

Standard rates

Higher rates

 

Rate up to 7 July 2020

Rate from 8 July 2020 to 31 March 2021

Rate up to 7 July 2020

Rate from 8 July 2020 to 31 March 2021

Up to £125,000

0%

0%

3%

3%

The next £125,000 (the portion from £125,001 to £250,000)

2%

0%

5%

3%

The next £250,000 (the portion from £250,001 to £500,000)

5%

0%

8%

3%

The next £425,000 (the portion from £501,001 to £925,000)

5%

5%

8%

8%

The next £575,000 (the portion from £925,001 to £1.5m) 

10%

10%

13%

13%

The remaining amount (the portion above £1.5m)

12%

12%

15%

15%

Measures to help Employment

£1k job retention scheme bonus for employers

Employers who retain staff for three months after the furlough scheme ends will receive £1,000 government ‘bonus’ for each employee.

The government is introducing a new Coronavirus Job Retention 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,
  • to UK employers,
  • for every furloughed employee who remains continuously employed through to 31 January 2021.

Employees must earn above the National Insurance lower earnings limit (£520 per month) on average between 31 October 2020 when the CJRS ends and the end of January 2021.

The bonus payments will be made from February 2021.

Further detail about the CJR bonus scheme will be announced by the end of July.

Traineeships and Apprenticeships – extension of current scheme

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.

Businesses can sign up to the traineeship scheme by contacting the National Apprenticeship Service, or they can choose to get in touch with a local traineeship provider. 

Kickstart scheme

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.

And after some negative publicity

COVID-19 tests and PPE for employees not taxable

HMRC has withdrawn guidance that stated coronavirus tests purchased for employees would be treated as a taxable benefit in kind, 

On 6 July HMRC updated its guidance on how to treat certain expenses and benefits provided to employees during coronavirus to include sections on personal protective equipment (PPE) and testing.

The guidance stated that COVID-19 testing kits or tests by third parties purchased by an employer for their staff would be taxable; however, the section was subsequently removed on the evening of 7 July.

HMRC’s guidance has also clarified that in certain circumstances the provision by employers of PPE is also not a taxable benefit. It states:

“If your employees are working in a situation where the risk of coronavirus (COVID-19) transmission is very high, and your risk assessment shows that PPE is required, then you must provide this PPE to your employees free of charge. Any PPE you provide must fit properly. The provision of PPE to your employees is non-taxable.

“If your employee requires PPE to carry out their role and you are unable to provide this, you must reimburse the actual expenses of employees who purchase PPE themselves. This is non-taxable and employees cannot claim tax relief on these expenses from HMRC.”