On 24th September 2020, the Chancellor of the Exchequer, Rt Hon Rishi Sunak MP, unveiled the Government’s Winter Economy Plan. Central to the plan is the introduction of the Jobs Support Scheme, which is designed to focus on saving viable jobs across the UK.
The key aspects of the plan are as follows:
Jobs Support Scheme – The Government will directly support the wages of people in work, in viable jobs. Employees must be working at least a third of their normal hours and be paid for that work, as normal, by their employer. The Government and the employer will each cover one-third of the pay an employee has lost by reducing their working hours.
Anyone who as of yesterday is employed is eligible.
The Scheme will start in November and run for six months.
All small and medium-sized businesses are eligible to apply. Larger businesses may be able to apply but only when their turnover has fallen.
All businesses are eligible, even if they have not previously utilised the furlough scheme.
Employers who retain furloughed staff on shorter hours will be able to claim both the Jobs Support Scheme and the Jobs Retention Bonus.
The Self-Employment Support Scheme: The Government announced that it will be extending the Self Employment Income Support Scheme Grant (SEISS). An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875.
An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.
Coronavirus loan schemes: The application deadline for all coronavirus loan schemes, including the Future Fund, has been extended to 30 November 2020. The Government are currently working on a successor loan scheme, for introduction in January 2021.
Pay as you Grow: The Government have introduced a ‘Pay as You Grow’ scheme for businesses which took out government-guaranteed loans during the crisis allowing. Loans taken out under the Bounce Back Loan Scheme or the Coronavirus Business Interruption Loan Scheme (CBILS) can be extended from six to ten years. Businesses who are struggling can choose to make interest-only payments and can apply to suspend repayments altogether for up to six months.
VAT Deferral: Businesses who deferred their VAT will no longer have to pay a lump sum at the end of March 2021. They will now have the option of splitting it into smaller interest-free payments over the course of 11 months. Any self-assessed income taxpayers who need extra financial assistance can also extend their outstanding tax bill over 12 months from January.
VAT for tourism and hospitality: The Government has extended the 15% VAT cut for the tourism and hospitality sectors to the end of March 2021.
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***As announced on Thursday 24th September, The Chancellor has extended the 15% VAT cut for the tourism and hospitality sectors until the end of March 2021***.
The Chancellor’s summer economic update introduced a significant reduction in the UK VAT rate from 15 July 2020 to 12 January 2021. The changes will apply to the Tourism and Hospitality sectors, where it is hoped that a new 5% rate for ‘specific supplies’ will help to stimulate consumer spending as we enter the next phase of our recovery from the Covid-19 pandemic. The measures will cover the following:
Food and non-alcoholic drinks – The reduced (5%) rate of VAT will apply to the on-premises supplies of food and non-alcoholic drinks from pubs, restaurants, bars, cafés and similar premises across the UK. The reduced rate will also apply to supplies of hot takeaway food and drinks.
Accommodation and attractions – The reduced (5%) rate of VAT will apply to supplies of hotel and holiday accommodation (including caravan & camping fees) and admission fees to attractions such as theatres, theme parks, museums, amusement parks, cinemas, safari parks, zoos & similar cultural events and facilities across the UK (it does NOT apply to sporting events)
Taken together with the
easing of some lockdown restrictions, and other initiatives such as the Eat Out
to Help Out scheme, it’s clear that the hospitality and tourism industries are
a focus of the government’s efforts to support businesses affected by forced
closures and social distancing.
There are two potentially competing drivers for this VAT reduction. As there is no legal requirement for businesses to reduce prices to reflect the lower tax rate, the ‘benefit’ of the reduction could be to leave more of the day’s takings in the hands of the business and support the business. However, if businesses pass on the tax saving (as Nandos, Pret A Manger and Starbucks have said they will), hard-pressed consumers will feel the benefit and perhaps increase their spending.
However, some businesses may not experience increased
demand due to social distancing and may have limited ability to deliver on increases
in demand if social distancing makes it difficult to take on additional staff
or reinstate furloughed staff. Until
these constraints ease and more restrictions lift, it might be commercially
difficult for businesses to cut the price they charge.
Never was the ‘In it Together’ mantra more pertinent – many businesses in the tourism and hospitality sector have been closed and without income for months. They need the support of consumers. But consumers need the encouragement of a price reduction to come out and trade with local businesses. Some middle ground and understanding should see improved confidence for both as we work our way out of lockdown.
Chairman & Head of VAT, MHA Henderson Loggie
As Government support schemes are gradually withdrawn and businesses can start to fully assess the harm sustained by lockdown and what the ‘new normal’ will look like, now is a crucial time to get key guidance to help your business adjust to this new future and take advantage of any tax and financial opportunities.
This afternoon (8th July) Chancellor Rishi Sunak has unveiled a package to kickstart the UK economy’s recovery.
The Chancellor announced a VAT cut, stamp duty holiday, restaurant discounts and a suite of measures to boost hiring as part of his mini-Budget.
We have listed the full details below, but here is a brief overview of the key announcements:
A Jobs Retention Bonus, giving £1,000 to businesses who bring back employees from furlough
A “kickstart scheme” to get unemployed 16 to 24-year-olds into work
New payments for businesses hiring apprentices
A temporary VAT cut for hospitality and tourism – down from 20% to 5%
A rise in the threshold of stamp duty from £125,000 to £500,000 (England only)
An “Eat Out to Help Out” scheme for August, giving a discount to people eating at cafes, restaurants and pubs
The furlough scheme will wind down flexibly and gradually until the end of October, Sunak confirms.
“Leaving the furlough scheme open forever gives people false hope that it will always be possible to return to the jobs they had before,” says the chancellor.
A jobs retention bonus will help to wind down the scheme: businesses will be paid £1,000 for every furloughed member of staff retained through to January 2021. This would cost the Treasury more than £9bn if every job furloughed is protected, Sunak says.
Mr Sunak unveiled a new £2bn Kickstart Scheme as a key plank of his “Plan for Jobs”. The fund will create government-subsidised jobs for unemployed young people and employers will be able to offer a six-month placement for people aged between 16-24.
The Treasury will cover 100% of the National Minimum Wage for each young employee for up to 25 hours a week with firms able to top up the worker’s pay.
Training & Jobs
Jobcentre work coach numbers will be doubled, the chancellor says.
Apprenticeships will be supported by bonuses for companies. Firms will get a payment of £2,000 for each apprentice they take on. Companies taking on apprentices aged over 25 will be given £1,500.
VAT Cut for Tourism & Hospitality
Sunak says 2 million people work in the hospitality sector and that it has been one of the hardest hit by Covid-19, warranting further support from the government.
VAT will be cut from the current rate of 20% to 5% for the next six months on food, accommodation and attractions. The cut lasts from Wednesday 15 July until 12 January 2021.
Sunak says the move is a £4bn catalyst, benefiting more than 150,000 businesses and consumers.
Sunak says the government wants a “green recovery with concern for our environment at its heart”.
As previously announced, the government will provide £3bn for decarbonising housing and public buildings.
Vouchers worth £5,000 per household, and up to £10,000 for those with a low income will be made available out of a £2bn pot to retrofit homes with insulation, helping to cut carbon emissions.
£1bn will be allocated to make public buildings greener.
The chancellor announces he will cut stamp duty to reinvigorate the housing market.
The threshold for stamp duty will increase from £125,000 to £500,000. The cut will be temporary, running until 31 March 2021, and will take effect immediately.
We will keep you updated on any Scottish announcements once they are made.
Discounts on Eating Out
The chancellor announces an “eat out to help out discount” to encourage consumers to spend at restaurants and cafes.
Meals eaten at any participating businesses, from Mondays to Wednesdays in August, will be 50% off up to a maximum discount of £10 per head for everyone, including children.
Businesses will be able to register through a website launching on Monday. Firms can claim money back to have money in their bank accounts within five working days.
Sunak says 1.8 million people work in the industry, whose jobs can be supported. “We can all eat out to help out,” he adds.