After several days of briefings and leaks, the tax side of today's Summer Statement from Chancellor of the Exchequer Rishi Sunak contained few surprises. While some people argue that the Chancellor should have gone further and faster, all of the changes are welcome. Each is distinctive and every one of them has features which their intended beneficiaries need to be aware of.
Jobs jobs jobs…
Payroll data shows that the number of paid employees fell by 612,000 over April and May so the Chancellor announced several initiatives to help employers create or maintain jobs alongside support for those looking for work. For employers this means assistance in the form of:
- New job retention bonus
A bonus for those who bring back someone who was furloughed and continuously employed by them through to the end of January called the Job Retention Bonus of £1,000 per person.
This is will available where employees have earnt above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme in October and the end of January 2021. Payments will be made from February 2021. Further details about the scheme will be announced by the end of July.
- New "kickstart scheme" later to create more jobs for young people.
A fund which will subsidise six-month work placements for people on Universal Credit aged between 16 and 24, who are at risk of long-term unemployment. Covering more than 200,000 young workers.
Each new “kickstarter” job will see the government cover the cost of 25 hours work a week at the National Minimum Wage for six-months plus some overheads amounting to around £6,500. Employers will have the option to top up those payments. Applications are expected to open in August, and the first jobs covered by the scheme will start in the autumn and run until December 2021.
- Traineeships and Apprenticeships bonuses
Funding for 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.
The government will also introduce a new payment of £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over, from 1st August 2020 to 31st January 2021. 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.
Stamp Duty Land Tax
The government will temporarily increase the nil rate band of residential SDLT, in England and Northern Ireland, from £125,000 to £500,000. This will apply from 8 July 2020 until 31 March 2021 and cut the tax due for everyone who would have paid SDLT. Nearly nine out of ten people getting on or moving up the property ladder will pay no SDLT at all. It’s estimated that his stimulus will produce a total saving for purchasers of £3.8 billion, effectively making the first-time buyer regime redundant until April 2021. We shall have to wait and see whether equivalent changes will be made by the Scottish Parliament and the Welsh Assembly.
The Chancellor has announced a targeted temporary VAT cut to support businesses and jobs in the hospitality and tourism sectors. From 15 July 2020 to 12 January 2021, supplies of hospitality, accommodation and attractions - currently subject to VAT at the standard rate of 20 per cent - will be eligible for the reduced VAT rate of 5 per cent.
Although full guidance on the scope of these reliefs has not yet been released, statements made in the House of Commons and publications made available by HMRC today indicate that the 5 per cent VAT rate will apply to:
- Supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and hot takeaway outlets.
- Supplies of accommodation in hotels, B&Bs, campsites and caravan sites.
- Admission to shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events and facilities.
It is understood that further guidance will be published tomorrow, and the necessary legislation put in place early next week.
Although the announcement is welcome for the hospitality and tourism sectors, which were among the first and hardest hit by the coronavirus emergency, it may be difficult for some operators to benefit from increased demand when social distancing measures limit the number of customers who can be admitted to their premises. Also, some zoos, theatres and other cultural events are already eligible to treat their admission prices as VAT-exempt under the existing exemption for cultural services, so will not receive any additional benefit from the rate cut.
Notable by their absence
Some tax issues were notable by their absence. For example, while the Summer Statement includes energy-saving measures, the Chancellor has not given taxation a role to play in the Prime Minister’s New Deal. It is to be hoped that this deficiency will be tackled in the Autumn Statement. That will also be the occasion when we might hear more about a wealth tax, council tax reform and changes in the direction of UK tax policy.
While each of the tax measures announced today will be very welcome, the effectiveness of all of them will be influenced by successes in limiting the spread of coronavirus itself. To the extent that more local, regional or national lockdowns are imposed, the contribution of tax cuts to the economic recovery of the nation will be limited and may have to be revised.