NEWS – THURSDAY 9TH JULY 2020
NEWS – THURSDAY 9TH JULY 2020
ECONOMIC STATEMENT – MINI BUDGET 2020
Rishi Sunak promises £30bn to supercharge economy and save jobs
In his summer statement, Chancellor Rishi Sunak said that the government will cut VAT on hospitality, introduce a stamp duty holiday, and spend up to £9bn rewarding employers that bring back furloughed staff, as part of a £30bn plan to prevent mass unemployment. VAT on food, accommodation and attractions will be cut from 20% to 5% next Wednesday; it will apply to eat-in or hot takeaway food and non-alcoholic drinks from restaurants, cafes and pubs, accommodation in hotels, B&B’s, campsites and caravan sites, attractions like cinemas, theme parks and zoos. He also introduced the “Eat Out to Help Out” plan, which he said would help protect 1.8m jobs, at cost of £0.5bn. Meals eaten at any participating business, Monday to Wednesday, will be 50% off in August, up to a maximum discount of £10 per head for everyone, including children. An immediate stamp duty holiday for homes sold for up to £500,000 in England and Northern Ireland, until 31 March, was also announced, as was a £1,000 bonus for employers for each one of the 9.4m staff furloughed since March that return to work. A £2.1bn “Kickstart Scheme” will subsidise six-month work placements for people on Universal Credit aged between 16 and 24, who are at risk of long-term unemployment. The Institute for Employment Studies praised the statement, describing the detail of Mr Sunak’s speech as akin to “a how-to kit for dealing with consequences of a big recession”.
Read the KSK summary of highlights here: –
SDLT: TEMPORARY REDUCED RATES
As announced in the Government’s Economic Statement on 8th July 2020, reduced rates of Stamp Duty Land Tax (SDLT) will apply for residential properties purchased from 8th July 2020 until 31st March 2021 inclusive. See details here: –
Covid-19: HMRC amend coronavirus testing BIK guidance
Released 07 July 2020
HMRC have made a rapid U-turn after publishing guidance indicating that employees would face a taxable benefit-in-kind (BIK) when their employer pays for coronavirus testing, following an outcry from MPs.
Updated guidance on how to treat certain expenses and benefits provided to employees during the Covid-19 crisis, which HMRC published on 6 July, included the information that if an employer paid for a coronavirus test, their employee would be required to pay income tax on that benefit.
A Treasury spokesman said: ‘Given the importance of widespread testing, we want to ensure that all employers who wish to provide third-party testing to their employees can do so without increasing their tax liability.
‘So, we will introduce a new income tax exemption for Covid-19 antigen tests provided by employers. HMRC will amend its guidance as soon as possible to reflect this change.’
For further guidance, see: –
TAX NEWS – THURSDAY 9TH JULY 2020
Tourism and hospitality firms welcome VAT boost
The hospitality industry has welcomed Rishi Sunak’s announcement that tourism and hospitality VAT will be cut from 20% to 5% for the next six months. Plans to give people a 50% discount, up to £10 per head, to eat out in restaurants in August were also well received. Russell Nathan, senior partner at HW Fisher, said: “Our restaurants, pubs, shops and hotels are struggling. This is a timely announcement from Government as businesses are in desperate need of a clear action plan.” However, the CBI and lobby group UKHospitality point out that capacity has been slashed dramatically due to social distancing rules, leaving firms keen to make up the shortfall. Russell Lynch suggests in the Telegraph that this could be partly achieved by increasing the cost of meals “to reflect the Government’s £10 a head largesse.” Meanwhile, Alison Horner, indirect tax partner at MHA MacIntyre Hudson, said premises serving alcohol would have to reprogramme their tills to deal with three different VAT rates: alcohol at 20%, zero-rated cold takeaway foo d and 5% for everything else. Finally, retailers lamented the fact that the VAT cut had not been extended to shops with Helen Dickinson of the British Retail Consortium describing it as a “missed opportunity”. The aerospace and motor industries also warned that a lack of targeted support for manufacturers could cost jobs.
Labour now not calling for tax rises
The Labour Party has dropped its demands for a wealth tax with shadow chancellor Anneliese Dodds conceding that further levies, combined with public service cuts, would “damage demand and inhibit our recovery”. On Monday, Sir Keir Starmer told LBC Radio the party supported a wealth tax in principle.
EMPLOYMENT NEWS – THURSDAY 9TH JULY 2020
Chancellor warned his job boosting package may fall flat
Unions have said Rishi Sunak’s economic statement yesterday did not go far enough to save jobs with Unite’s Len McCluskey warning that: “Redundancy notices are already flying around like confetti.” He went on to say that with the end of the job retention scheme in October now confirmed the flood of job losses would “surely only gather pace.” Garry Young, a deputy director of the National Institute for Economic and Social Research, agreed this could “precipitate a rapid increase in unemployment” as the incentives offered to employers “look too small to be effective” and employers will now be reluctant to continue to top up the wages of furloughed workers. Peter Cheese, chief executive of the Chartered Institute of Personnel and Development, backed this assessment as did Clare McNeil, associate director at the Institute for Public Policy Research, who described the bonus a s a “halfway house reform – not a proper wage subsidy”. The Chancellor pledged to pay firms £1,000 for each worker they bring back from furlough. It will cost £9bn if the 9m individuals currently furloughed return to work. Dame Carolyn Fairbairn, director general of the CBI, said: “The job retention bonus will help firms protect jobs, but with nearly 70% of firms running low on cash, and three in four reporting lack of demand, more immediate direct support for firms, from grants to further business rates relief, is still urgently needed.”
SMEs NEWS – THURSDAY 9TH JULY 2020
Company directors overlooked in Sunak’s mini-Budget
The Institute of Directors (IoD) have said that small businesses have been overlooked in the Chancellor’s latest stimulus package with no help forthcoming for company directors, who have not been able to receive income support during the pandemic. Jonathan Geldart, of the IoD, said: “A glaring omission throughout this pandemic has been the exclusion of small company directors, many of whom have not been able to access income support. Widening grant schemes could help those who have been left struggling without assistance and help more firms to re-open.” Mike Cherry, chairman of the Federation of Small Businesses, agreed while Gina Broadhurst, of the #ForgottenLtd Campaign for small company directors, added: “The Government’s strategy is premised on businesses remaining solvent, but hundreds of thousands of small business owners employing millions of people have received zero support and are on the verge of collapse. At this rate more businesses will fall, never to be seen again.” Additionally, Andy Chamberlain, of the Association of Independent Professionals and the Self-Employed, said freelancers were “noticeable by their absence” in Rishi Sunak’s statement. He urged the Chancellor to introduce a tapered end to the Self-Employment Income Support Scheme as well as the furlough scheme.
Funding Circle boosted by business interruption loans
Shares in Funding Circle rose 5% yesterday after the online lender announced that it had approved £460m of emergency loans to small companies. The platform was cleared to offer the Government’s coronavirus business interruption loans in April. It has arranged £8.5bn of loans to 80,000 businesses since it was founded in 2010. CEO and co-founder Samir Desai said that demand for the scheme showed how many companies had struggled to secure the credit from a traditional bank.
The Times, Page: 42 Daily Mail, Page: 76
PROPERTY NEWS – THURSDAY 9TH JULY 2020
Stamp duty cut welcomed
Rishi Sunak has confirmed that the threshold for paying stamp duty will be raised from £125,000 to £500,000 immediately in a bid to help the UK housing market out of the coronavirus lockdown. The Chancellor said the stamp duty holiday, which will run to March 31 next year, will result in an average saving of £4,500 and will benefit nine in 10 house buyers. John Tonkiss, chief executive of housebuilder McCarthy and Stone, said the move is a “no-brainer to reinvigorate the economy,” while according to Jonathan Evans, real estate director at Deloitte, based on the average price of a home in England, a purchaser can now expect to save almost £2,500 by not paying stamp duty. In addition, Evans notes, the average property in London (£485,000) will also be exempt and save £14,200. But Tim Stovold, head of tax at Moore Kingston Smith, said it was a blow for first-time buyers, who would find themselves “competing in a market full of landlords keen to cash in.”
CORPORATE NEWS – THURSDAY 9TH JULY 2020
Bell Pottinger bosses face bans
Former bosses at the failed PR firm Bell Pottinger face potential director bans under action by the Insolvency Service, the Times reports. Under the Company Directors Disqualification Act (1986), the Insolvency Service can pursue bans of between two and fifteen years for conduct that does not meet integrity standards. The firm collapsed in 2017 after a scandal in South Africa, where it was accused of inciting racial hatred in a campaign for the Gupta family. BDO has been liquidating the company and has been considering lawsuits against partners for their role in the failure.
PENSIONS NEWS – THURSDAY 9TH JULY 2020
Watchdog fears UK employers will seek to cut pensions bill
The UK’s pensions ombudsman, Antony Arter, told MPs yesterday that he expected the COVID-19 crisis will lead to more employers trying to persuade staff to quit their pensions.
ECONOMY NEWS – THURSDAY 9TH JULY 2020
UK public borrowing to exceed £350bn with Sunak’s stimulus plan
The Chancellor’s £30bn stimulus plan to heave Britain out of recession brings the Government’s crisis spending to £188bn and public borrowing to over £350bn this financial year. The FTSE 100 fell 11.50 points following Rishi Sunak’s statement and closed 29 points, or 0.5% down at 6,160.
Contact Paul Southward