The Plan for Jobs: The UK’s Summer StatementPosted on 8 July 2020
On Wednesday 8 July 2020, the UK Chancellor announced an impressive set of measures to protect, support and create jobs in light of the COVID-19 pandemic. The UK previously focused on phase one to stop the spread of the virus (the renowned ‘stay at home’ campaign) and as the UK is inching its way out of lockdown, the UK announced supportive measures to generate jobs to facilitate the UK to ‘get back to work’. The third phase of the government’s plan will be set out in the Autumn Budget with measures to support the longer-term recovery through a Budget and a Spending Review.
Job Retention Scheme & the Job Retention Bonus
The Coronavirus Job Retention scheme involved putting employees on ‘furlough’ (temporary leave) whereby the employees stop work temporarily but stay employed. Since March 2020, the UK generously paid 80% of the wages of employees on furlough. This scheme helped to pay the salaries of 9 million employees in the UK which represents more than 25% of the UK workforce. Sadly, this system was abused by many employers which led to a recent criminal arrest of an individual as part of an HM Revenue & Customs (“HMRC”) investigation into a suspected £495,000 Coronavirus Job Retention Scheme fraud. There have been numerous other reports of suspected fraud of the job retention scheme.
The Coronavirus Job Retention Scheme will end on 31 October 2020. To prevent these employees facing redundancies, the UK introduced a new Job Retention Bonus to incentivise employers who retain furloughed employees. The government will contribute £1,000 per employee who is retained until at least January 2021. The Job Retention Bonus is available for all companies and this has been criticised by some as not effectively targeting those who need the monies the most. Certain large companies (for example, Primark) have publicly declared that they would not take advantage of the Job Retention Bonus as they did not deem it necessary in light of their (albeit reduced) profits.
Other measures to support people in finding jobs includes extra funding for the National Careers Service; incentives for employers to hire new apprentices; a £2 billion fund creating work placements aimed at ages 16 to 24 on Universal Credit and the Kickstart Scheme. The Kickstart Scheme seeks to create high quality jobs for young people at the highest risk of long-term unemployment. These measures are most welcomed given the concern that unemployment rate could peak at up to 10%.
The UK property market was severely impacted by the pandemic and effectively came to a standstill between March 2020 and May 2020 at which point the restrictions in the UK were relaxed. There were no property transactions during this period due to the lockdown in the UK which prevented estate agents and surveyors from working as normal leaving the completion of contracts on hold. To boost the UK property market, the UK announced a cut to Stamp Duty Land Tax (“SDLT” – equivalent to purchase tax in Israel). The threshold for paying SDLT was raised to £500,000 until 31 March 2021 with immediate effect. This means that the first £500,000 of any UK property transaction will not be subject to SDLT. We note that there is already an existing 3% SDLT surcharge on the acquisition of a second property (relevant for those who own a property anywhere else in the world). Interestingly, the previous UK budget delivered on 11 March 2020 announced an additional SDLT surcharge of 2% for non-UK residents buying UK residential property to take effect from 1 April 2021. Non-residents looking to purchase UK residential property therefore ought to act sooner rather than later to avoid this extra proposed surcharge and take advantage of the current cut to SDLT.
Alongside a number of other jurisdictions, the UK also announced temporary VAT cuts to boost the economy. From 15 July 2020 to 12 January 2021, to support businesses and jobs in the hospitality sector, the reduced 5% rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs and bars in the UK. Similarly, the 5% VAT rate will apply to supplies of accommodation and admission to attractions across the UK.
2.7 million UK taxpayers have been supported by the Self-Employment Income Support Scheme (“SEISS”). Applications for the first taxable grant worth 80% of average monthly trading profits ended on 13 July. A second grant worth 70% of average monthly trading profits will open from 17 August until 19 October for eligible applicants.
The UK hospitality sector of course is among the hardest industries hit by the pandemic. The UK introduced the ‘Eat Out to Help Out’ scheme to support approximately 130,000 businesses and the jobs of approximately 1.8 million employees. This will entitle every diner to a 50% discount of up to £10 per head on their meal during August 2020 (subject to certain restrictions). Participating establishments will be fully reimbursed for the 50% discount. The objective of this is to encourage the UK to go out and spend money to support the UK hospitality sector.
Access to Finance and HMRC Time To Pay
The government also launched five temporary schemes to help to support businesses across the UK who may need to respond to cashflow pressures as a result of the impact of COVID-19 by seeking additional finance. Additionally, the government has agreed to over 70,000 new tax deferral arrangements since COVID-19 to support individuals and businesses with outstanding tax liabilities and find themselves in financial difficulties
The Office for National Statistics (“ONS”) estimates that Gross Domestic Product (“GDP”) in April in the UK was around 25% below the level recorded in February. The UK had to put together comprehensive and generous economic measures to respond to this and is currently focusing on its objective to protect and create jobs. Clearly, the UK will need to take on more debt to achieve its objectives. The Autumn Budget will set out how the UK will recover after the coronavirus bill of more than £300 billion. In the meantime, the focus remains rightly so at rebuilding post COVID-19.