New Economic Recovery Schemes
On Wednesday 8 July, chancellor Rishi Sunak announced several schemes intended to help the UK economy recover as we come out of lockdown. Whlst we are still awaiting details on many of these schemes at time of writing, the details provided so far are below.
As businesses have had to temporarily close or reduce their operations, many employees have found themselves on furlough in recent months. This scheme provided for furloughed employees to receive at least 80% of their normal wages, with their employers able to reclaim that amount from the government. The reclaimable amounts are to reduce over the coming months, with the scheme ending entirely at the end of October.
In an attempt to stave off a wave of redundancies when the scheme ends, the chancellor is offering a furlough bonus. The amount offered is £1,000 per previously furloughed employee that is still working at the end of January 2021. Any employees kept on over this period must be paid at least £520 per month for their employer to be eligible for the bonus. The amounts due will be paid out in February.
There are very large numbers of young people coming on to the job market as they leave full-time education. With reduced activity in the economy, many will struggle to find their first job. To encourage employers to take on young people, the Kickstart scheme is being introduced. This will reward employers who provide new jobs for 16-24 year olds. The jobs have to be genuinely new, not replacements for existing jobs. They must also provide real opportunities, with a minimum of 25 hours per week work
plus training. For qualifying employees, employers will be able to claim the first 6 months of wages, plus an as yet unspecified amount to help with overheads. Applications for this scheme are expected to open in August.
New Apprentice Scheme
In a similar vein, one-off payments are being offered for employers who take on new apprentices. Apprenticeships provide on-the-job training in a particular field and are usually paired with an academic course on the same subject. Anyone who takes on a new apprentice will be eligible for a one-off payment of £2,000 for doing so. To help older people who may be having to retrain in the current climate, an additional one-off payment of £1,500 will be paid if the new apprentice is 25 or over.
Targeted cut to VAT
The hospitality and leisure industry has undoubtedly been hard hit by the lockdown. Many of these had to close down entirely, and some of them are still not able to reopen properly. To help this sector of the economy get back up and running, the VAT rate for goods and services provided is being temporarily reduced. The reduction is to 5% from the standard rate of 20%, and will be in effect from 15 July 2020 to 12 January 2021. The eligible categories are as follows
PICTURE: Dan Gold/Unsplash.
• Food – This covers both hot and cold food served on the premises as well as non-alcoholic drinks. Where a takeaway is provided, the food and drink will need to be served hot to qualify for the reduced rate. Alcoholic drinks will still be subject to 20% VAT
• Accommodation – Overnight accommodation in hotels and similar businesses, campsites and caravan parks will be eligible for the reduced rate. Where a deposit has been taken in advance for a booking that falls in the relevant period, the business owner will be permitted to amend the rate charged on that deposit.
• Attractions – Admission to attractions will be eligible for the reduced rate. Sporting events have been specifically excluded from this, but the majority of tourist destinations are covered. For full details on which businesses qualify, see the government guidance. tinyurl.com/AttractionVAT.
As is normal where a single transaction includes elements with different VAT rates, the reduced rate can be used for the entire supply if the other elements are incidental. For example, a winery tour which includes sampling of the product would all be eligible for the reduced rate as the alcohol supplied was incidental to the tour.
The flat rate scheme percentages for eligible businesses will also be temporarily adjusted to account for the reduction.
Eat Out to Help Out
Of course, the reduced VAT rate will not help out businesses at all if they do not have any customers. To encourage people to return to restaurants and cafes, the chancellor is offering everyone a discount on their meal. Businesses will have to register to be able to offer the discount, with applications expected to be possible next month. Any meals purchased Monday to Wednesday, along with any non-alcoholic drinks, will be eligible for a 50% discount up to £10 per person. Businesses will be able to reclaim the discounts offered from the government on a weekly basis.
Stamp Duty Threshold
Finally, the Stamp Duty threshold for property has been temporarily increased to £500,000. Previously 2% Stamp Duty was due from £125,000 increasing to 5% from £250,000. This was brought into effect from the day of the announcement, and will last until 31 March 2021.
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