Summer Economic Statement: “A Plan for Jobs”

The Chancellor of the Exchequer Rishi Sunak presented his ‘Plan for Jobs’ to Parliament on Wednesday 8 July 2020 to outline how the government will boost job creation in the UK.

The Chancellor’s plan includes:

Supporting Jobs

• a “Job Retention Bonus” to help employers keep furloughed workers;

Responding to the furlough scheme coming to an end after a period of transition on 31 October 2020, the government will introduce a one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021.

Employees must earn above the Lower Earnings Limit (£520 per month) on average between 1 November 2020 and 31 January 2021. Payments will be made from February 2021. Further detail about the scheme will be announced by the end of July.

• Schemes to create new fully subsidised jobs for young people across the country;

This responds to data released by Government that confirms that employers have reduced demand for new workers, with vacancies in May 2020 62% lower compared to May 2019. Universal Credit claims have also increased, with 3.4 million individual declarations made from 1 March to 23 June, and reports of real time data showing the number of paid employees falling by 612,000 over April and May 2020. Taken together, these effects have resulted in a large-scale reduction in total output and on-going risk to employment. ^[1]

Relevant to employers, the schemes include:

A new “Kickstart” Scheme

The new “Kickstart” Scheme will allow employers to claim funding in return for creating new “high-quality” jobs for young people, aged 16-24 claiming Universal Credit and at risk of long-term unemployment.

Employers will be able to claim funding for six-month job placements at 100% of the National Minimum Wage for 25 hours a week plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions. The Chancellor explained that, in relation to a 24 year old, the grant would be around £6,500.

Employers will be able to pay a higher wage if they choose but the excess will not be funded.

It is clear that these must be new jobs - with the funding conditional on the employer proving the jobs are additional. They must also be good quality jobs – with employers providing “Kickstarters” with training and support to find a permanent job.

Employers can apply to be part of the scheme from August 2020, with the first Kickstarters in their new jobs this autumn.

The Chancellor has urged every employer, big or small, national or local, to hire as many Kickstarters as possible.

Traineeships

A traineeship is a course with work experience that gets the trainee ready for work or an apprenticeship. It can last up to 6 months. The traineeship is free to the business although employers may choose to support trainees with expenses such as transport and meals.

For the first time ever, the government will fund employers who provide trainees with work experience, at a rate of £1,000 per trainee. The government will improve provision and expand eligibility for traineeships to those with Level 3 qualifications and below, to ensure that more young people have access to high quality training.

New Apprentices

Apprentices are aged 16 or over and combine working with studying to gain skills and knowledge in a specific job. Apprentices can be new or current employees.

Employers in England will be given £2,000 for each new apprentice they hire under the age of 25. This is 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.

Employers in England will also be given a £1,500 payment for each new apprentice they hire aged 25 and over.

It is understood that these incentives will apply from 1st August 2020 to 31st January 2021.

Mercia comment: It would appear that this £2,000 per apprentice boost will apply to accountants in England taking on apprentices (including for the Level 7 Accountancy Professional Apprenticeship) this summer! We await confirmation from the professional bodies and the main tuition providers.

Protecting jobs

• Temporary reduction in VAT

The Chancellor announced a reduction in VAT, with further guidance on the scope of this relief to be published in the coming days.  The relief will apply from 15 July 2020 to 12 January 2021, and VAT will be cut to 5% on the following supplies which are currently standard-rated:

• Food and non-alcoholic drinks in restaurants, pubs, bars, cafes and similar;
• Accommodation; and
• Admission to attractions.

The above list is taken from HM Treasury’s publication, “Plan for Jobs”, but the Chancellor gave more away in his speech. For instance, he mentioned that take-away food will be subject to the reduced rating. Cold takeaway food is already zero-rated, but the measure should mean that hot take-away food, and possibly bottled drinks, will be subject to the relief.

He also expanded on “accommodation” by saying that hotels, B&Bs, campsites and caravan sites will benefit from the reduction.

Under the “Attractions” umbrella, he cited “cinemas, theme parks and zoos”. The current exemption for zoo admission fees only extends to not-for-profit zoos, so the reduction will apply to those that are profit-making.

What remains to be seen is how the relief will work in practice. Will the reduction in VAT be passed on to the consumer, or will prices remain the same?  It’s hard to predict, because the measure was presented as a way of helping the sector, not the consumer.  For a struggling hospitality business to benefit most from this measure they would maintain current prices but only pay the 5% VAT element over to HMRC.  This practice may draw the ire of consumers, however, so it’s likely that we’ll see a combination of the two strategies if the government does not legislate on this issue.

• Eat Out to Help Out!

The Chancellor employed impressive showmanship skills to create an exciting build up to this announcement, and many members of his audience must have immediately started wondering how they could take advantage of this measure, which is intended to get people to return to eating out.

Every diner will be entitled to a 50% discount of up to £10 per head on a meal in a participating restaurant, café, pub or similar establishment. The discount will be available on Mondays, Tuesdays and Wednesdays throughout August 2020, on sales of eat-in meals and non-alcoholic beverages. There will be no limit to the number of times a customer can benefit from the measure. The participating establishment will be reimbursed by the government for the 50% discount; each week in August, businesses can claim the money back, and the funds will be in their bank account within 5 working days. Businesses will need to register, and can do so through a website which will be open on Monday 13 July.

• Temporary cut in stamp duty land tax (SDLT)

From 8 July 2020 until 31 March 2021 the government will temporarily increase the Nil Rate Band of Residential SDLT, in England and Northern Ireland, from £125,000 to £500,000. This means that nearly nine out of ten people getting on or moving up the property ladder will pay no SDLT at all, and the average stamp duty bill will fall by £4,500.

During the above dates, the existing rules for first-time buyers will be replaced by this more generous temporary scheme.

Companies as well as individuals buying residential property worth less than £500,000 will also benefit from these changes, as will companies that buy residential property of any value where they meet the relief conditions from the corporate 15% SDLT charge. For more information please see here.

A summary of the temporary rates and bandings is:

Property or lease premium or transfer value	SDLT rate	SDLT rate for additional property
Up to £500,000	0%	3%
The next £425,000	5%	8%
The next £575,000	10%	13%
The remaining amount	12%	15%

 

Net present value of rent	SDLT rate
Up to £500,000	0%
Over £500,000	1%

 

The associated documents can be viewed here and watch this space for blogs and podcasts from our tax team coming later this month. These will be free to access and will outline the impact of the measures on accountants and business advisors, highlighting key messages for clients.

To help you keep your clients up to date with relevant announcements, we are also producing a concise, easy to understand summary of the key measures. For more information on how you can obtain a personalised PDF for your practice, click here.