On 8th July, Chancellor Rishi Sunak delivered his summer economic update in which he outlined the government’s “Plan for Jobs”, with a focus on the creation, support and protection of jobs while acknowledging the challenges that will bring.
Here are the key announcements of the statement:
Job Retention Bonus
While Mr Sunak confirmed that the Coronavirus Job Retention Scheme (aka Furlough Scheme), won’t be extended beyond October, he did announce a Job Retention Bonus. This will see employers receive £1000 for each furloughed employee that they bring back to work and retain until January 2021.
For a business to be eligible, the affected employees must earn above the lower earnings limit (£520 per month) for the three month period between November 2020 and January 2021.
Further details about the Job Retention Bonus scheme are due to be released by the Treasury by the end of July.
Stamp Duty Land Tax holiday
In a bid to stimulate the housing market post-pandemic, the Chancellor also announced a stamp duty holiday for house purchases below £500,000 until 31st March 2021 , in England and Northern Ireland. This means that the majority of purchases will be exempt from stamp duty, saving home-buyers up to £15,000).
VAT cut for hospitality
Additional measures were announced specifically for the hospitality sector including a temporary reduction in the rate of VAT charged. A reduced rate of 5% will apply to certain supplies of food, drink, accommodation and attractions from 15th July 2020 up to 12th January 2021, although alcoholic drinks will continue to attract VAT at 20%.
A new £2 billion fund designed to create jobs for young people at risk of long-term unemployment. This plan will see the government fund six-month job placements for 350,000 18-24 year olds. The funding available for each placement will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated National Insurance contributions and employer minimum automatic enrolment contributions, in a bid to lower unemployment among the younger population.
The Kickstart Scheme will be accompanied by investment in traineeships and apprenticeships, job centres and the National Careers Service.
IR35 Off-payroll Reforms
While IR35 and the off-payroll private sector reforms did not get a mention in the Chancellor’s speech, it was referred to in the “Plan for Jobs” published soon after.
Here it was claimed that delaying the reforms from April 2020 to April 2021 means that “businesses and individuals do not need to implement and adjust to the reform while dealing with the economic impact of Covid-19”.
We think this is misguided. The economic repercussions of Coronavirus will reach well beyond April 2021. Businesses have no choice but to properly prepare for the IR35 off-payroll changes, while continuing to bear the economic fallout of Covid, or they risk losing key contingent workers at a critical time.
Rishi Sunak confirmed that the next Budget will take place in the Autumn, and noted that he would deal with “the challenges facing our public finances”. We expect significant changes, ahead, with no doubt more storms to bear.
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