Summer Economic Update 2020 - Headline Announcements
In his first financial statement since the Budget in March, Chancellor Rishi Sunak announced new measures to stimulate the economy following the Coronavirus crisis. This is the second phase of the economic response – a Budget and Spending review will take place in the Autumn.
Mr Sunak has announced a range of measures to help re-start the housing market, reward and incentivise employers to save jobs and take on new trainees and apprentices, create new jobs through infrastructure projects and making homes more energy efficient. There is also help for the hospitality and tourism industries.
Stamp Duty Land Tax – increase in 0% band
The Chancellor has announced in his Summer Economic Update a tax cut for Stamp Duty Land Tax (SDLT).
The announcement states that from 8 July 2020 until 31 March 2021 the 0% band for SDLT on residential land and buildings, in England or Northern Ireland, will increase from £125,000 to £500,000. Resulting in no SDLT being payable on purchases of up to £500,000. The new rates being:
|Property Value||SDLT Rate|
|£0 - £500,000||0%|
|£500,001 to £925,000||5%|
|£925,001 to £1,500,000||10%|
This represents a tax saving of £15,000 on a property purchase of £500,000.
The 3% surcharge will still apply for purchases of second homes or investment properties, or purchases by limited companies, however they will benefit from the fact that the SDLT rate will be 3% up to £500,000.
There are no announcements to any changes to Land and Building Transaction Tax for property in Scotland or Land Transaction Tax in Wales.
Job Retention Bonus
With the Chancellor announcing the official end to the Furlough Scheme in October (after a “flexible and gradual wind down”), the Job Retention Bonus is intended to incentivise businesses to bring back those employees who are currently furloughed.
The Government have pledged to pay businesses a £1,000 bonus for every employee they bring back from furlough. In order for a business to be eligible for the bonus, the Chancellor advised that each employee claimed for must:
- Remain in continuous employment through to the end of January 2021; and
- Be paid a minimum of £520 per month on average during that time.
The bonuses are expected to be paid from February 2021, with further details on how the scheme will operate being released by the end of this month.
The Chancellor acknowledged in his Summer Economic Update that younger people (those aged under 25) are 2.5 times more likely to have had their employment affected by the impact of COVID-19. To aid those worst affected, the Government has proposed the introduction of a new Kickstart Scheme in Great Britain.
The £2 billion fund is intended to help with the creation of hundreds of thousands of high quality 6-month work placements aimed at those aged 16-24 who
are on Universal Credit and are deemed to be at risk of long-term unemployment. Funding available for each job created under the Kickstart Scheme will
- 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.
The Chancellor advised in his speech that it is crucial that young people are also given the opportunity to gain the skills they need to find new employment. To achieve this, the Government will provide an additional £111 million this year for traineeships in England, to fund high quality work placements and training for 16-24 year olds.
Employers who provide trainees with work experience will be provided with a bonus of £1,000 per trainee, with the Government also pledging to improve provision
and expand eligibility for traineeships to those with Level 3 qualifications and below. This should widen the net to ensure that more young people
have access to high quality training, whilst also rewarding those businesses who assist with the provision of those places.
The Apprenticeship Scheme in England has flourished over the last 10 years, with 91% of apprentices either staying in employment following completion of their contract or going on to complete further training.
To build on the success of the scheme and help more young people secure employment post-pandemic, the Government will introduce a new payment of £2,000
to employers in England for each new apprentice they hire under the age of 25. The Government will extend the scheme to also apply to new apprentices
hired who are over the age of 25, with employers receiving a reduced payment of £1,500 per new apprentice.
The scheme will run from 1st August 2020 to 31st January 2021 and these payments will be in addition to the existing £1,000 payment
the Government already provides for new 16-18 year old apprentices, and those aged under 25 with an Education, Health and Care Plan – where that applies.
Green Jobs Plan
The Chancellor announced a £3 billion Green Jobs Plan to aid a green recovery and create up to 140,000 jobs, improve energy efficiency, save household
bills and cut carbon. As part of this package he announced:
- £2 billion Green Homes Grant. From September, homeowners and landlords can apply for vouchers towards the costs of making homes more energy efficient through energy efficient improvements such as insulation. The grants will cover at least two thirds of the cost up to £5,000 per household. Low income households will be able to claim 100% of the costs up to £10,000 per household. Savings of up to £300 per year on household bills are anticipated;
- £1 billion of funding will be released to improve energy efficiency in public sector buildings, including schools and hospitals.
In addition, the Chancellor announced a £50 million social housing fund to decarbonise social housing. The fund will pilot innovative retrofit projects
in social housing using heat pumps, insulation and double glazing. It is envisaged this will reduce energy bills by up to £200 per household.
The measures are designed to stimulate jobs in refurbishment as well as cutting bills and carbon emissions.
Hospitality, Accommodation and Attractions - VAT & “Eat Out to Help Out”
The Government has announced new policy measures for the Hospitality and Tourism industries in an attempt help boost demand in these sectors by making goods and services more affordable to the public for a short period of time.
The Government has announced a temporary reduction in VAT (5%) for the supply of food, non-alcoholic drinks, accommodation and attraction admissions from 15 July 2020 through to 12 January 2021. The reduced rate of VAT will apply to suppliers such as pubs, bars, cafés, hotels, theme parks, cinemas and similar premises across the UK.
In addition, specifically targeted at the food and drink sector, the government will introduce the ‘Eat Out to Help Out’ scheme to encourage people to return to eating out. This will entitle every diner (adults and children) to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal (including non-alcoholic drinks) for the entire month of August 2020 across the UK. Participating establishments should be fully reimbursed for the 50% discount within 5 days of the claim.
Further guidance on the scope and eligibility of these reliefs will be published by HMRC in the coming days.
If you would like to discuss any of these matters or talk to us about your tax affairs in general, please contact our Tax Partners, Steve Crompton or Lucy
Williams on the details below:
Partner – Head of Tax
direct dial: 01942 292541
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