What the government’s Summer Economic Update means for small businesses
This article was last updated on 20th July 2020.
Earlier today, the Chancellor revealed the next stage of the government’s plans for economic recovery from the unprecedented turbulence brought about by the coronavirus crisis. Here’s what today’s Summer Economic Update announcement had in store for small businesses.
Job Retention Bonus
Reiterating that the Coronavirus Job Retention Scheme for furloughed workers will end on 31st October, as planned, the Chancellor announced a new bonus scheme for employers who successfully bring furloughed employees back to work.
As long as certain conditions are met, these employers will be eligible for a ‘Job Retention Bonus’ of £1,000 per returning employee. To qualify for the bonus, employers must bring employees back to work in roles that will pay a minimum salary of £520 per month between November 2020 and January 2021.
Limited company directors who are employees of their own company and who had placed themselves on furlough through the Coronavirus Job Retention Scheme should qualify for this bonus, as long as their return to work meets the qualifying conditions.
More information on the Job Retention Bonus is expected from the government by the end of July.
The Kickstart Scheme is designed to help young people with entering or returning to employment following the coronavirus crisis. The scheme provides employers with an incentive to create six-month work placements for people aged 16-24 who are receiving Universal Credit and are deemed to be at risk of long-term unemployment.
Under the scheme, employers will be eligible to receive funding that covers 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance and minimum pension contributions, for each qualifying work placement.
Eat Out to Help Out
The ‘Eat Out to Help Out’ initiative will entitle diners in participating “food service establishments”, such as restaurants, pubs and cafes, to a government-funded 50% discount of up to £10 per person on meals and non-alcoholic drinks purchased on Mondays, Tuesdays and Wednesdays in August. The government will reimburse participating businesses directly for the 50% discount provided to customers through the scheme.
VAT reduction in the hospitality and tourism sectors
Finally, a temporary reduction in VAT has been announced to support businesses in the hospitality and tourism sectors.
From 15th July 2020 to 31st March 2021, a reduced rate of 5% VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafes and similar premises. The same reduction will apply over the same period of time to the supply of accommodation and admission to attractions.
Hospitality and tourism businesses that use the VAT Flat Rate Scheme will also benefit from a reduction in the amount of VAT they have to pay between 15th July 2020 and 31st March 2021. The VAT rate for businesses in the ‘catering services, including restaurants and takeaways’ category will change from 12.5% to 4.5%. Meanwhile, the rate for pubs will change from 6% to 1% and the rate for hotel and accommodation businesses will change from 10.5% to 0%.
These temporary VAT rate reductions will apply to all qualifying VAT-registered businesses across the UK.
You can read more about all the changes announced in today’s Summer Economic Update in the ‘Plan for Jobs’ report on gov.uk. To stay up to date with the latest news regarding the coronavirus crisis and its impact on small businesses, take a look at our small business coronavirus hub.
Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.