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Summer economic update comments from our experts

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To support the recovery of the UK economy from the effects of the Covid-19 pandemic, Chancellor, Rishi Sunak, has announced a series of measures to encourage employers to keep on staff and make new hires, and to boost spending.

Our Tax and HR experts comment on the measures announced in the Chancellors Summer Statement.

Incentives for employers to keep staff on

Richard Godmon - Menzies Accountant

Richard Godmon, Tax Partner

“The Job Retention Bonus is a timely, tactical measure that will boost business confidence just as the furlough scheme begins to wind down. The £1,000 bonus payable to employers for every furloughed worker that they choose to keep on through into next year is a significant cash incentive, particularly for SMEs and businesses that have been forced to furlough a large proportion of their workforce.

“It’s a shame the Chancellor didn’t take further action to support employers in this area by cutting Employer National Insurance Contributions, which are often described as a ‘tax on jobs’.”

Incentives for employers to hire staff – traineeships / apprenticeships

Ed Hussey - Menzies Accountant

Ed Hussey, Director of People Solutions

 “The new Kickstarter Scheme will encourage employers to create new, well-supported jobs for young people (aged 16-24) who are at risk of long-term unemployment. The wages of every new ‘Kickstarter’ appointed will be paid by the Government for the first six months. We expect this scheme to popular for businesses in all industry sectors, not just those worst-affected by the lockdown restrictions. The funding announced for new apprenticeships is also welcome.

“This funding (Kickstarter Scheme and apprenticeships) is an opportunity for all businesses, regardless of the impact of Covid-19, to improve their resilience by refreshing their own talent pool for the future whilst contributing to increased employability across the economy.”

VAT and consumer spending

Sarah Baron - Menzies Accountant

Sarah Barron, VAT Senior Manager

“This dramatic reduction of the VAT rate for food, accommodation and attractions, from 20% to 5% (until 12th January 2021) is unprecedented and will be massive cash boost to the businesses worst affected by the lockdown restrictions. Coming at the start of the summer, it will also help these businesses to optimise profits and take full advantage of the staycation market.”

Cash incentives for consumer spending

Richard Godmon - Menzies Accountant

Richard Godmon, Tax Partner 

“Cash contributions are the best way to get cash into the economy quickly. Gifting consumers a generous discount when eating out in the month of August is designed to get the hospitality and leisure sector off to good re-start by ensuring there is plenty of supply-side demand.”

Incentives for business spending

Nothing to encourage businesses to bring forward investment in capital equipment or R&D, but that may come in the Autumn Budget.

Stamp duty land tax and the housing market

Richard Turner - Menzies Accountant

Richard Turner, Senior Tax Manager

“The decision to raise the SDLT threshold to £500,000 for all buyers for six months is a welcome move, which will benefit the majority of homebuyers in the UK and help to reboot the housing market and encourage consumer spending. However, with first-time buyers already exempt up to £500,000 in London and £300,000 elsewhere, the only question is will this be enough?”

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Richard Godmon - FCA CTA

Partner

Richard Godmon is a Menzies Tax Partner in the Solent office specialising in business tax for SME businesses and personal tax planning for individuals.