On Wednesday 8th July the Chancellor delivered his summer statement announcing measures to help the UK navigate out of COVID19, with the key focus being on maintaining jobs and helping the leisure retail and hospitality industry.
So what were the measures announced and how will they impact our clients?
The key takeaways for me are:
- £1,000 job retention bonus for furloughed staff but not to delay redundancies to get this bonus.
- Stamp duty cuts (bit the additional property surcharge still applies
- VAT rate cut for hospitality, holiday accommodation and attractions
- Eat Out Help Out Scheme, you need to register 7 days before making a claim
- Funding for new employees through the Kick Start Scheme, Traineeships and Apprenticeship incentives
- Boost to construction industry with investment in infrastructure and Green Home Grants
Job retention bonus
The Coronavirus Job Retention Scheme will be wound down by the end of October this year, however to incentivise employers to keep furloughed workers in employment a £1,000 job retention bonus will be paid on 31st January for each employee that:
- Has previously been furloughed
- Remains in employment
- Has earned at least £520 per month between the end of the Coronavirus Job Retention Scheme and the end of January
Payments will be made on February 2021 and full details will be available at the end of July 2020.
How does this impact me?
If you have employees on furlough and it is your intention to bring them back then this will be a welcome additional boost to your finances. Look at your business plans and your cashflow forecast to assess how this grant will affect you.
Should this stop me making staff redundant?
No, your business should be entering into recovery mode at the moment, if redundancies are necessary for the survival of the business, or to get the momentum moving again we would strongly advise against changing your plans. Retaining employees that are no longer needed simply delays the problem, put additional cash flow strains on the business as well as the additional burden of managing employees you don’t need.
Stamp duty cut
The nil rate band of stamp duty has risen from £125,000 to £500,000 until 31st March 2020.
How does this impact me?
If you are looking to sell your home it will make the property more attractive if it was above the stamp duty threshold before and if you are looking to buy a property then there will be a significant saving on stamp duty.
I am looking to buy an additional property, does the additional charge still apply?
Yes, it still does the additional 3% surcharge will be payable on properties up to £500,000. Over £500,000 the rates are higher on a tiered system from 8% through to 15%.
This is still refundable withing 3 years if you sell your only or main residence.
Hospitality and Tourisim Industry
VAT rate cut
VAT for hospitality, holiday accommodation and attractions has been temporarily reduced to 5% until 12th January 2021. Full details can be found here.
How does this impact me?
If your business operates in one of these sectors instead of paying £1 VAT on every £6 you take, you will be paying £1 VAT on every £21 you pay. For a restaurant taking £5,000 per week the VAT saving will be £595 per week or £2,579 per month. Which is a welcome boost to this industry.
You will need to ensure that your accounting system has been amended to calculate the reduced rate of VAT.
What if I use the flat rate scheme?
The percentages to the flat rate scheme have been adjusted to account for these changes.
Eat Out Help Out Scheme
This scheme is being launched to kick start the restaurant industry. Entitling every diner, a 50% discount of £10 on their meal at participating outlets from Monday to Wednesday for all of August 2020. The 50% discount will be reimbursed by HMRC. Full details of the scheme can be found here.
Claims can be made from 7 days after registration, they can be made weekly and will be reimbursed within 5 days.
How does this impact me?
If you sell food for immediate consumption, then this can be a much needed boost to your business. You will need to register using the link here.
What if I am closed Monday to Wednesday is it worth opening?
The only way you can establish this is modelling the estimated number of covers, income from opening, costs of staffing these days. Then if you do decide to extend opening hours keep monitoring the additional income v’s the additional costs. With the flexible furlough staff can be rotated back onto furlough if needed.
Kick Start Scheme
This is a new 6 month placement scheme to help get 16-24 back into employment. HMRC will cover 100% of the employees Salary, NI and Pension contributions for 6 months.
To qualify employers need to:
- Employee a 16-24 year old that is claiming universal credit
- Provide at least 25 hours employment per week
- Pay the employee at least the minimum wage
Full details are not available yet.
How does this impact me?
If you are planning on taking new members of staff this is an affordable way to do this. The full details are not available at the moment, based on the headlines we would anticipate that most of the candidates that qualify for this scheme will be on furlough under the Job Retention Scheme until the end of October 2020 so it will be November 2020 before they are on universal credit and can qualify for the scheme.
Look at your staffing plan for the next 12 months, can some of the additional recruitment be brought forward? Could any of the new team members be recruited under this scheme?
Should I delay employing people until the scheme detail is announced?
Re-visit your forecasts and establish if you can hold off until the winter, if you have a need staff prior to this we would recommend starting the recruitment process now. Whilst the scheme has a great financial incentive delaying recruitment could result in lower productivity, which leads to reduced sales which then ultimately has a negative impact on your cash flow.
New traineeships and apprenticeship incentives
An additional £11million pounds is being made available for new traineeships for 16-24 year olds this year. This will fund training and give employer a £1,000 bonus to take on new trainees.
Extra funding is also going into the apprentice scheme, where employers will get an additional £2,000 for each apprentice that they take on under the age of 25 and £1,500 for over 25’s between 1st August 2020 and 31st January 2021.
How does this impact me?
This is an attractive way of taking on new team members, these members will need training and support. If you are planning to take on new members of your team review the staffing plan for the next 12 months and if this scheme could apply, could some positions be brought forward considering training time involved? If you need more experienced members of the team then these measures may not be for you.
Green Home Grants
The government will introduce vouchers providing at least £2 for every £1 spent by landlords and homeowners making their home energy efficient. Vouchers will be provided up to the value of £5,000 (or £10,000 for lower income homes).
How will this impact me?
If you are a business that supplies energy efficient products then once the detail is out you will need to register for the scheme, this could be a significant boost for your business coming out of COVID19
Conclusion
The Summer Statement brings lots of positive incentives for businesses particularly in the Retail, Leisure and Hospitality Industry which have been one of the worst impacted because of COVID 19. With a strong focus on employment incentives as well as boosting construction it all helps to kick start businesses.
However it is important not to get sidetracked from your business recovery plan which needs to be your key focus at the moment.
If you need any help or assistance with these changes please get in touch hello@spotlight-accounting.co.uk.
