“Our health emergency is not yet over. And our economic emergency has only just begun”.

These were the stark words from the Chancellor, Rishi Sunak yesterday as he delivered the 2020 Spending Review; with little indication as to how the Government intended on balancing the books and instead provided a heavy emphasis on spending in 2021/22:

This ultimately means that Government borrowing is only set to increase. Seven months into the pandemic and with Government support already offered by the way of the Job Retention Scheme (JRS), Self-Employed Income Scheme (SEISS) and local Government grants, albeit to name a few; it is expected that the Government has already borrowed around £215bn in response to the pandemic and with the total expected to hit £394bn this year, this is the highest level seen since the 1960’s.

Underlying the OBR’s (Office for Budget Responsibility) picture of the future path of the UK economy are a range of assumptions and projections, some of which Mr Sunak mentioned in his speech. On the OBR’s central scenario:

It is not yet clear how the Chancellor is expected the cover the increase in Government spending over the next few years but the OBR alongside the Institute for Fiscal Studies and Resolution Foundation suggested that around an extra £40bn a year in additional tax would be required over the medium term. This would mean raising tax receipts by around 2% of GDP. Such an increase would require a range of measures across the full tax spectrum.

As the second lockdown took effect on 5 November, the Chancellor returned to Parliament to announce a further extension to the furlough scheme through to March 2021.

The extension of financial support under the Coronavirus Job Retention Scheme (CJRS) will now run past the original new cut-off of 2 December through to the end of March. Provision is at the same level as that given for August, with employees receiving 80% of their salary for hours not worked, capped at £2,500 per month. Employers have to cover National Insurance contributions (NICs) and workplace pension costs.

Two new job support schemes (JSS Closed and JSS Open) set out in the Chancellor’s Winter Economy Plan will now not take effect, if at all, until the furlough scheme ends.

Differences

One important difference from the previous furlough scheme is that claims can be made for employees notified to HMRC with an RTI submission by 30 October. Otherwise, the extension is similar to the old scheme:

The extension will be reviewed again in January to determine whether there is scope to increase employer contributions, depending on economic circumstances.

Additional measures are also available for businesses and individuals affected by this second lockdown, including:

Government-backed loan schemes and the Future Fund are likely to be extended through January in plans yet to be announced, plus options to top-up Bounce Back Loans.

If you require any assistance in assessing your companies situations and requirements, please don’t hesitate to get in touch with a member of our team on 01226 298 298  

INTRODUCTION

                         Capture

Source: ONS

Today’s ‘Economic Update’ by the Chancellor, Rishi Sunak, arrived six months and a day after the Prime Minister announced the start of lockdown on 23 March. Twelve days earlier the Chancellor had made his Budget debut, announcing a “temporary, timely and targeted” package of measures to “deal with the coronavirus”. Their estimated total cost was £12 billion.

That figure now looks like small change in terms of the cost of the pandemic so far. This week’s HMRC statistics on the response to Covid-19 show that to 20 September:

These figures tell only part of the story. There is also the cost of one year’s business rates relief, grant funding and enhancements to social security benefits. The latest (August) central scenario projection from the Office for Budget Responsibility is for government borrowing to reach £372.2 billion in 2020/21 against the £54.8 billion estimate it made at the time of the Spring Budget.

The latest statement from the Chancellor will increase this year’s borrowing further. However, the consensus among economists is that for now, life support for UK plc trumps any consideration of public debt levels. Today Mr Sunak has divided that support into three main areas:

1. Employment
2. Loan arrangements
3. Taxation


      EMPLOYMENT

      Job Support Scheme

      The Chancellor made clear that the CJRS will end on 31 October, as planned. Its replacement will be the Job Support Scheme (JSS), which will run for six months from 1 November. Under the terms of the scheme:

      Self-Employment Income Support Scheme

      The SEISS will be extended in a new form for six months from 1 November 2020. The scheme’s new terms are:


      LOAN ARRANGEMENTS

      The closing application date for the four main loan schemes will be extended to 30 November.

      Bounce Back Loan Scheme

      The BBLS provides loans of between £2,000 and £50,000, capped at 25% of turnover, with a 100% government guarantee. Under the original BBLS, the borrower did not have to make any repayments for the first 12 months, with the government covering the first 12 months’ interest payments. The maximum loan repayment term was six years.

      Under new ‘Pay as You Grow’ options for BBLS:

      Coronavirus Business Interruption Loan Scheme

      CBILS lenders
      will be allowed to extend the term of a loan up to ten years, while retaining the benefit of the 80% government guarantee.

      Coronavirus Large Business Interruption Loan Scheme

      The Coronavirus Large Business Interruption Loan Scheme (CLBILS) will continue in its current form until the end of November.

      Future Fund

      The operation of the Future Fund, which provides matching convertible loans to innovative businesses will continue in its current form until the end of November.

      Covid-19 Corporate Financing Facility

      The Covid-19 Corporate Financing Facility, targeted at large businesses and operated by the Bank of England, will remain open until 22 March 2021. Where a company has exhausted all other options, and is of strategic importance to the UK, the government may also consider providing bespoke financial support.

      TAXATION

      Temporary VAT cut for hospitality and tourism

      The reduced (5%) rate of VAT will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, and to supplies of accommodation and admission to attractions across the UK until 31 March 2021 rather than ending on 12 January 2021.

      VAT deferral

      A ‘New Payment Scheme’ for VAT deferral will offer businesses that deferred VAT due in March to June 2020 the option to spread their payments over the financial year 2021/22 in 11 equal instalments. All businesses that took advantage of the VAT deferral are eligible and can use the scheme. However, they will need to opt in using a process HMRC will launch in “early 2021”.

      Self-Assessment Tax Deferral – Enhanced Time to Pay

      The self-employed and other taxpayers will be given more time to pay taxes due in January 2021, building on the self-assessment deferral provided for payments on account in July 2020.

      Taxpayers with up to £30,000 of self-assessment liabilities due will be able to use HMRC’s online self-service Time to Pay facility to secure a plan to pay over an additional 12 months. The application for time to pay will be agreed automatically when the taxpayer applies using an online form. If the liability exceeds £30,000 or the taxpayer needs longer to pay, the telephone service will still be available to agree a bespoke plan.

      This means that self-assessment liabilities originally due in July 2020, and any liability becoming due in January 2021, will not need to be paid in full until January 2022. Any self-assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.

      If you have any queries on the above information, please do not hesitate to call our office on 01226 298 298 and a member of a team will be able to provide advice and support.

      The scheme has been extended and a second grant can be paid to those who are eligible from today’s date (17th August).

      If you were eligible for the first grant and can confirm to HMRC that your business has been adversely affected on or after 14 July 2020, you’ll be able to make a claim for a second and final grant from 17 August 2020. The deadline for making a claim is 19 October 2020.

      The scheme allows you to claim a grant worth 70% of your average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £6,570 in total. The grant does not have to be repaid but will be subject to income tax and self employed National Insurance.

      As with the first grant HMRC will contact you if you’re eligible, alternatively when the scheme goes live on the 17th August you can follow the link below to check if you are eligible to make a claim.

      https://www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme#claim

      Eligibility for the second grant will be worked out in the same way as the first grant.

      You can make a claim for the second grant if you’re eligible, even if you did not make a claim for the first grant.

      WE LOOK FORWARD TO WELCOMING YOU BACK TO OUR OFFICE!

      With effect from Monday 10th August, our gbac team has moved back to the office on a staggered basis. This is in line with Government guidance following COVID-19.

      We wanted to share with you the steps we have taken to ensure that the office is a safe environment for our employees, their families, and our clients. This is the result of a thorough risk assessment which has been completed and revised throughout lockdown. For your information,

      How might this change affect our clients:

      We pride ourselves on being a welcoming team so we encourage clients to come into the office and speak with us. There have to be slight adjustments to how we do this so that we can ensure the safety of our employees, our clients and visitors.

      We kindly ask the following:

      We are grateful for your support and understanding during this phase which sees us start to welcome back clients to our office for physical meetings. Your safety and that of our gbac team and their families is at the forefront of every decision made. If you have any queries about our COVID-19 secure plan or wish to discuss any concerns, please do not hesitate to contact Charlotte Ward on 01226 298 298.

      Cycling has received a significant boost since the Coronavirus crisis, with more people cycling to avoid public transport and get back to work. Cycle-to-work schemes give tax benefits to both employers and employees.

      How the scheme works:

      What are the tax benefits of a salary sacrifice arrangement:

      What assistance are available to employers:

      You can set up and run your own salary sacrifice scheme, or there are Cycle to Work scheme providers who can run a scheme for you.

      Scheme providers usually have access to nationwide retailers with a wider range of brands of bikes, components and accessories, that will cater to employees’ preferences.

      What to watch out for:

      If you require assistance and / or advice regarding the scheme or the administration of the salary sacrifice arrangements through your payroll, please don’t hesitate to get in touch with a member of our team.

      The Covid-19 furlough scheme has been effectively revised into a new scheme running from 1 July until 31 October, but this comes with a level of complexity that did not exist in its original guise.

      Much of the complexity arises because employers can now bring furloughed employees back to work flexibly on a part-time basis, while still being able to claim under the scheme for the hours not worked.

      One very important change is that claims cannot now straddle months. This is because the scheme rules will change from month to month.

      From 1 July, only employees who were furloughed under the original scheme ending on
      30 June are eligible for further grants. However, the minimum three-week furlough period has now been removed.

      Hours worked

      For flexibly furloughed employees, employers will have to calculate the employee’s:

      A new written agreement is required for flexibly furloughed employees to confirm the new arrangements.

      When claiming for flexibly furloughed employees, employers should not claim until they are sure of the exact number of hours that will be worked during the claim period. If a claim is made in advance and fewer hours are worked than expected, a refund will have to be made to HMRC.

      Maximum number

      With certain exceptions, the maximum number of employees included in a furlough claim from 1 July onwards cannot exceed the highest number of employees included in any claim up to and including 30 June.

      HMRC has provided various worked examples of how to calculate an employees’ wages, NICs and pension contributions.

      If you require assistance and / or advice calculating your furlough claim, please don’t hesitate to get in touch with a member of our team. 

      If you are self-employed or a member of a partnership and were eligible for the first self-employed income support grant, you will be eligible to claim for the second and final grant from the 17th
      August 2020      , provided that you can confirm with HMRC that your business has been adversely affected by COVID-19 on or after 14th July 2020. 

      The scheme works in the same way as when your first claim was made, with the only difference being that the grant is based on 70% of your average monthly trading profits, paid out in a single instalment covering 3 months and capped at £6,570 in total (the first claim was based on 80% of your average monthly trading profits).

      You can make a claim for the second grant if you’re eligible, even if you did not make a claim for the first one. 

      To claim you’ll need your:

      It is expected that the final date you will be able to make your second and final claim is 19th October 2020.

      HIGHLIGHTS

      INTRODUCTION

      The Chancellor, Rishi Sunak, has spent so much time in the spotlight that it seems hard to believe he has not yet been in the job for five months. Today’s Financial Statement was just the latest of a series of announcements by Mr Sunak since he presented his Spring Budget on 11 March, four weeks after entering 11 Downing Street. One way or another, all the announcements have been responses to the financial impact of the Covid-19 pandemic.

      His latest statement was perhaps the most difficult, given the circumstances in which it was set:

      The challenge for the Chancellor in his Summer Statement was to start the transition from the emergency employment support that has so far been the focus of his strategy. He presented his statement as a ‘Plan for Jobs’, composed of three elements promoting jobs:

      1. Supporting

      2. Protecting

      3. Creating

        The Chancellor placed a price tag on his measures of up to £30 billion. He also promised that in the Autumn Budget and Spending Review he would deal “with the challenges facing our public finances”.


        SUPPORTING JOBS


        The Chancellor announced a range of initiatives under the ‘Supporting Jobs’ heading, including:

        Job Retention Bonus

        The Chancellor made it clear that he intends to end the CJRS in October as planned. To encourage employers to support those people who have been furloughed, a Job Retention Bonus will be introduced.

        The Job Retention Bonus will provide a one-off payment of £1,000 to UK employers for every previously furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn more than £520 a month on average between the end of the CJRS and the end of January 2021. Payments will be made from February 2021. Further details about the scheme will be announced by the end of July.

        Kickstart Scheme

        The Kickstart Scheme, which only covers Great Britain, aims to provide “hundreds of thousands of high quality six-month work placements” for those aged 16-24, who are on Universal Credit and are considered to be at risk of long-term unemployment.

        Government funding for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week plus the associated employer NICs and employer minimum automatic enrolment contributions (a maximum of about £6,500).

        There is to be no cap on the cost of the scheme.

        Traineeships

        Employers who provide work experience for 16-24-year-olds in work placements and training will receive a payment of £1,000 per trainee. Provision of traineeships and eligibility for them will be extended to those with Level 3 qualifications and below, to ensure that more young people have access to training.

        Payments for employers who hire new apprentices
        Employers in England will receive a new payment of £2,000 for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over.

        The scheme will run from 1 August 2020 to 31 January 2021. These payments will be made in addition to the existing £1,000 payment the Government already provides for new 16-18-year-old apprentices, and any of those aged under 25 with an Education, Health and Care Plan.

        Other supporting jobs measures

        Other initiatives under this heading include:


        PROTECTING JOBS


        The Protecting Jobs element focuses on the hospitality and leisure sector, which saw over 80% of firms temporarily cease trading in April and has 1.4 million furloughed workers. It is a sector of the economy that employs over two million people, according to the Chancellor, disproportionately drawn from the young, women and people from Black, Asian and minority ethnic communities.

        Temporary VAT cut for food and non-alcoholic drinks

        A reduced 5% rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. The temporary rate will apply from 15 July 2020 to 12 January 2021. Further guidance on the scope of this relief will be published by HMRC in the coming days.

        Temporary VAT cut for accommodation and attractions

        The 5% rate of VAT will also apply from 15 July 2020 to 12 January 2021 to supplies of accommodation and admission to attractions across the UK. HMRC will publish further guidance on the scope of this relief in the coming days.

        Eat Out to Help Out

        The ‘Eat Out to Help Out’ scheme will be introduced to encourage people to return to eating out. Every diner will be entitled to a 50% discount of up to £10 a head on their meal, at any participating restaurant, café, pub or other eligible food service establishment.

        The discount can be used without limit throughout the UK on any eat-in meal (including on non-alcoholic drinks). It will be valid Monday to Wednesday during the month of August, and participating establishments will be fully reimbursed for the 50% discount.


        CREATING JOBS


        The job creation measures are primarily targeted on the housing and construction sector.

        Stamp Duty Land Tax

        Capture


        Receipts of Stamp Duty Land Tax (SDLT – covering England and Northern Ireland) have fallen precipitously in the past few months, as the graph above shows. The slowdown in transactions has been accompanied by a stalling in prices – the latest data from Nationwide showed house prices falling in June 2020 for the first time in almost eight years. A temporary cut in SDLT on residential properties was widely trailed and duly arrived.

        From 8 July 2020 to 31 March 2021, there will be no SDLT on the first £500,000 slice of property value, creating a maximum saving of £15,000. However, the 3% additional rate will still apply to additional properties.

        The resulting revised SDLT table for residential property is shown below:

        Capture1

        The rates of Land and Buildings Transaction Tax (LBTT) in Scotland and Land Transaction Tax (LTT) in Wales are set by the devolved administrations in those countries. In the past, they have tended to follow changes to SDLT with their own variations. At the time of writing, the devolved Governments had not made any announcements.

        Green Homes Grant

        A £2 billion Green Homes Grant will be introduced, providing at least £2 for every £1 up to £5,000 per household to homeowners and landlords who spend on making their residential properties more energy efficient. For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household.

        Other creating jobs measures

        Other initiatives under this heading include: