Earlier today, Chancellor Rishi Sunak delivered his summer economic update in which he outlined his ‘Plan for Jobs’. The creation, support, and protection of jobs was without doubt the focus of today’s statement as the government acknowledged that the challenge facing them now is to support the economy opening up whilst protecting as many jobs as possible.
Job Retention Bonus
Whilst Mr Sunak once again confirmed that the Coronavirus Job Retention Scheme will not be extended beyond October; he did announce the Job Retention Bonus. This will see employers receive £1,000 for each furloughed employee that they bring back to work and retain until January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021. At this point, we don’t have any further detail on this scheme and any further eligibility criteria. However, the Treasury has committed to releasing further detail by the end of July and we will keep you updated.
Stamp duty tax
As predicted, in a bid to stimulate the housing market, the chancellor also announced a stamp duty holiday for house purchases below £500,000 until 31st March 2021. This will mean that the majority of purchases will be exempt from stamp duty (saving up to £15,000).
Simon Butler from CMME commented:
“This is great news for buyers; Zoopla estimates that as many as 89% of all purchases in 2019 would have been exempt. Given the lack of low deposit options on the market, the temporary removal of stamp duty from the process will allow many buyers to boost their deposit fund. This can only be seen as a positive move for the housing sector and mortgage market.”
There were additional measures targeted specifically in the hospitality industry including a temporary reduction in the rate of VAT charged by businesses in the tourism and hospitality sector from 20% to 5% for the next six months. The reduced (5%) rate of VAT will apply from 15th July 2020 to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés, and similar premises and supplies of accommodation and admission to attractions across the UK. Further guidance on the scope of this relief will be published by HMRC in the coming days.
Eat Out to Help Out
In an unprecedented step to help the struggling hospitality sector, the chancellor announced the Eat Out to Help Out scheme. This will entitle every diner to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café or pub. The discount will be valid Monday to Wednesday on any eat-in meal throughout August. The government will reimburse the establishment, essentially picking up 50% of your tab. The aim is that this will provide a much-needed boost to one of the sectors most damaged by coronavirus.
Overnight the chancellor had already announced the Kickstart Scheme aimed at job creation for young people. This job creation plan for under 25’s is expected to cost £2billion and will see the government fund six-month job placements for 350,000 18-24-year olds. The funding available for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions, in a bid to lower youth unemployment.
This scheme was accompanied by further investments in apprenticeships, job centres and the National Careers Service.
Whilst IR35 and the reforms to off-payroll working in the private sector did not get a mention in Mr Sunak’s speech, it was mentioned in the soon after published ‘Plan for Jobs’.
The document claims that delaying the reforms from April 2020 to 2021 means ‘businesses and individuals do not need to implement and adjust to the reform while dealing with the economic impact of COVID-19.’
It is very likely that the economic impacts of COVID-19 will last beyond April 2021 and preparations must begin well in advance of this date. This leaves businesses with no choice but to prepare for the reforms whilst dealing with the economic impact of the pandemic.
Failure to adequately prepare for the reforms could see businesses lose vital contingent workers at a time when they cannot afford to do so. It could also see businesses that fail to apply the rules correctly hit with unexpected tax liabilities. Deferring preparations is simply not an option.
Whilst the measures announced today are welcome, they come at significant cost to the treasury and there is little here to help contractors, small businesses or the self-employed generally. These workers will be critical to economic recovery and many already feel they have been left behind or excluded from government support packages. There was nothing in this speech to convince them otherwise.
Looking to the future it is inevitable that there will be tax increases to recover the cost of these generous schemes. Those announced today in isolation are expected to cost around £30 billion. Let’s hope these tax increases do not disproportionately impact the contingent workforce that has struggled to access help when it was needed, particularly as the industry will already be dealing with the off-payroll reforms to the private sector now confirmed for April 2021.
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