Summer Statement 2020

Today, Chancellor of the Exchequer Rishi Sunak delivered his much anticipated Summer Economic Statement. The House of Commons was sparsely filled and thus necessarily fairly quiet, and the Chancellor himself was sombre and statesmanlike. The notes that we downloaded from HMRC and the Treasury were uncharacteristically short, so (exceptionally) we heard one or two details in the speech that did not make it to the notes; perhaps this was an indication of the speed at which this package was finalised. Our own notes below indicate where we are told to wait for further details.

Anneliese Dodds responded for the opposition. She expounded on the misery a bit, but acknowledged the government’s big decisions. Her main complaint was about the Government’s poor response to the pandemic and she was concerned that ‘Test, track and isolate’ was not working. No doubt this is a legitimate concern, but it was not really what the day was about.

Mr Sunak broke the government’s response to the crisis into three phases. Phase One was ‘Social Distancing’, and he reminded everybody (again) of the billions that has been spent on job (and self-employment) protection.

Phase Two is where we are now, and he describes this as his ‘Plan for Jobs’.

Phase Three is for later, and will be about ‘Rebuilding’. The budget and spending review in the Autumn will address this, and explain how public finances must revert to a stable footing – which presumably means that he is going to explain how we (and our grandchildren) are all going to pay for this.

The Plan for Jobs

  • The Job Retention (furlough) Scheme will come to an end at the end of October, as previously announced. There will be no stay of execution.
  • Job retention bonus – Employers will receive £1,000 for every employee who has been furloughed if they come back from work and remain continuously employed (earning more than £520 per month) until the end of next January 2021.
  • The Kickstart scheme will pay employers 100% of wages, limited to the National Minimum Wage for just 25 hours per week, but including pension and NIC contributions, for six month work placements for 16 to 24 year olds. Employers will be able to apply from August.
  • There will be additional support for traineeships for that age group (at £1,000 each) and apprentices (at £2,000 per apprentice up to 24, £1,500 over 25).
  • Grants to promote a Green Recovery, including making homes more energy efficient. Grants will be up to £5,000 for most households; double that for those on low incomes.
  • Stamp Duty Land Tax: The Nil Rate Band of £125,000 is extended to £500,000 from today until 31 March 2021.

These measures seem to be aimed largely at younger people – but some older people, often with families,  are also going to lose their jobs this year, and apprenticeships may not do a lot for them.

Then there were three announcements intended to get us all spending money again:

Temporary VAT cut for food and non-alcoholic drinks

From 15 July 2020 to 12 January 2021, the 5% rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. We don’t have more details at this stage, but HMRC promise to publish more within the next few days. Mr Sunak did not take advantage of the tradition of sipping whisky during a budget speech, so we might have anticipated that the price of an honest pint is not going to go down.

With two changes of VAT rate coming up, both in mid-month, and another rate of VAT to deal with for businesses that generally only deal with the zero and standard rates, there are going to be some challenging record keeping issues for businesses in this sector.

Temporary VAT cut for attractions

For the same period, the reduced rate will apply to ‘attractions’ – which seems to include zoos, theme parks and cinemas. We think that definition might go a bit further but, again, we have to wait a few days for published guidance from HMRC.

Eat Out to Help Out

This scheme will run throughout August. Everybody will be entitled 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 from Monday to Wednesday on any eat-in meal (including non-alcoholic drinks) for the month of August 2020 across the UK. Participating establishments will be fully reimbursed for the 50% discount.

The challenge for customers is going to be social distancing, but we suspect that human ingenuity will find a way – and there are some really good restaurants in Barnard Castle.

We turn now to several matters not dealt with in today’s speech:

Targeted help for culture, heritage and the arts

The government recently announced a funding package of £1.57bn for this sector sector, covering the performing arts and theatres, heritage, historic palaces, museums, galleries, live music and independent cinema. This will comprise emergency grants and loans.

Further detail on how to access the funding is awaited.

Coronavirus Job Retention Scheme (CJRS)

We should like to remind clients taking advantage of this scheme that, from 1 July, it’s possible to bring back staff to work flexibly and still make a claim under the scheme for hours not worked. Any shift pattern or working hours can be agreed. It is very important that you have the right paperwork in place; examples of furlough and flexible furlough agreements can be found on the ACAS website.

The calculations inevitably become a lot more detailed as a result of this change so, when sending instructions, please make sure we have full information on your staff working patterns and details of hours actually worked.

Remember that, from 1 August, employer NIC and pension contributions can no longer be claimed, and in September and October employers will be required to contribute towards furlough pay (with the grant reducing from 80% to 70% and then 60%).

Self-Employed Income Support Scheme (SEISS)

This scheme has been extended to cover another three months’ worth of grants, and the application process is expected to be available from 17 August.

The application process will be the same, as will eligibility criteria – except that taxpayers will have to confirm that their business is being adversely affected by the coronavirus on or after 14 July. “Adversely affected” is not specifically defined and we suggest keeping some form of evidence to back up your claim.

The second tranche of grant will be at 70% of average profits capped at £6,570 for the three months.

If you were eligible under the initial scheme, and have not yet applied, the closing date for applications is 13 July.

We are here to help

Amy and John have co-authored this newsletter; it’s a rapid reaction, so there is time for further thought. Please let us know if we can provide any further information.