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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.
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 it’s not clear whether directors that have furloughed themselves will be able to claim this bonus. However, the treasury has committed to releasing further detail by the end of July and we will keep you updated.
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 most purchases will be exempt from stamp duty (saving up to £15,000).
Simon Butler from CMME commented:
“This is great news for buyers; Zoopla estimate 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 at 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. This reduced rate is not limited to bars and restaurants; it will also apply to 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.
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 to 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.
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 rather than waiting, we advise businesses and contingent workers should start their preparations immediately, particularly those operating through personal service companies.
Failure to adequately prepare for the reforms could see businesses lose vital contingent workers at a time when then can scarcely afford to do so, it could also see businesses that fail to apply the rules correctly hit with unexpected tax liabilities. If not now, when does the government suggest business prepares for these reforms?
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 is nothing in this speech to change their minds.
Of course, it is inevitable that there will be future tax increases to recover the cost of these generous schemes, those announced today in isolation are expected to cost around £30billion.
Let’s hope these tax increases do not disproportionately impact the contingent workforce that have 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.
Appointing an accountant can save you time and stress when starting up on your own. If you would like to speak to someone about any of the above information or any other queries you may have, arrange a callback and a member of the team will be in touch.