15 July 2020
In the aftermath of COVID-19 outbreak, the UK faced an economic emergency. Thus, the UK Government has announced the following unprecedented measures to help businesses and families.
The measures were implemented to supports jobs in the country by giving businesses the confidence to retain and hire and providing people with the tools they need to get other jobs if made redundant. The measures established to prevent mass unemployment is the second part of the three-phase plan to ensure the UK's economy recovers after the coronavirus epidemic.
In addition, the UK Government has authorised reduced the rates of the Stamp Duty Land Tax (SDLT) and is applicable to residential properties purchased from 8th July 2020 to 31st March 2021.
New Measures and Improvements:
SDLT: Reduced Rates
The reduced rates of SDLT will apply for residential properties purchased from 8th July 2020 to 31st March 2021. For any residential property during this period, the buyer is only liable to pay SDLT for the amount of purchase price of the property above £500,000. The previous exemption figure was £125,000. These rates apply for both first time owners and individuals who have previously purchased a residential property. Companies buying residential properties for less than £500,000 will also benefit from these changes. Furthermore, companies can apply for relief for the corporate 15% SDLT charge if they met the relief conditions.
What is Stamp Duty?
SDLT is payable when purchasing a residential property worth over £125,000 in England and Northern Ireland. A reduced rate of SDLT typically applies to first-time buyers if the property is purchased for £500,000 or less.
Residential properties sold for more than £500,000 is taxed at the higher SDLT rate of 15%. However, some buyers qualify for relief from the 15% rate if they meet some conditions. Buy-to-let landlords and others acquiring a second property are subject to an additional charge of 3% over and above the applicable SDLT rate.
How much Stamp Duty tax due under the new reduced rates?
Property value | SDLT rate | With additional property | Without relief |
Up to £500,000 | zero | 3% | |
from £500,001 to £925,000 | 5% | 8% | 15% |
from £925,001 to £1.5 million | 10% | 13% | |
above £1.5 million | 12% | 15% | |
When does the reduced rate of Stamp Duty tax end?
On 1st April 2021, the reduced rates shown in the table able will revert to the standard rates of SDLT that were in place prior to the 8th July 2020.
Coronavirus Job Retention Scheme (CJRS)
Although the Coronavirus Job Retention Scheme (CJRS) will end in October, a £1,000-per-employee Job Retention Bonus is available to UK employers who keep their formerly furloughed employees in work until at minimum, the 31st January 2021.The retention bonus will be paid to employers from February 2021. Further details about this extension to the CJRS will be announced by the end of July.
What is the essence of the CJRS scheme?
The CJRS was established to allow UK businesses to retain their employees on a PAYE scheme during the epidemic by designating those employees as 'furloughed workers' ('furlough' generally means temporary leave of absence from work). By enrolling in the scheme, the employer gains access to government support to continue to pay at least 80% of these furloughed employees' salaries, thus, protecting these employees from redundancy.
Personnel not considered employees
Over claimed grant
Kickstart Scheme
Another government measure drafted to boost the economy; the Kickstart Scheme subsidises six-month work placements for 16 to 24-year-olds on universal credit. Funding is available for each placement for up to 25 hours of work per week, paying 100% of the National Minimum Wage, although employers can and are encouraged to 'top-up' this wage.
How will the six-month wage scheme work?
The scheme will be effective from August 2020, and each place is estimated to cost the government approximately £6,500. The government hasn't yet released full details on how the scheme will work.
There is also £1,000 grant per trainee available to businesses who provide trainees with work experience. The government has also pledged to increase the number of placements available and expand eligibility for traineeships to those with Level 3 qualifications and below, to ensure that more young people have access to high-quality training.
Self-employed Income Support Scheme (SEISS)
The SEISS is the equivalent of the CRJS for self-employed workers; self-employed workers can claim a taxable grant worth 80% of their trading profits over the last three years up to the value of £2,500 per month. The applications for the first SEISS grant was extended and remained open until the 13th July.
From 17th August until 19th October, eligible applicants whose businesses have been adversely affected on or after 14th July will be able to claim a second and final taxable grant worth 70% of their average monthly trading profits, paid in one instalment covering three months' worth of profits, capped at £6,570.
VAT: reduced rates
The reduced VAT rates came into force on 8th July and applies to food, accommodation and attractions sites reducing the VAT paid on these goods from 20% to 5%. The reduced rate applies to supplies used in the hospitality industry, in particular: restaurants; holiday accommodation and admissions to certain attractions.
Hospitality
Businesses who supply food and non-alcoholic beverages for consumption on their premises, (a restaurant, café or pub), are typically required to charge a VAT of 20%. However, from 15th July 2020 to 12th January 2021, such businesses are only required to charge 5% VAT. The reduced rate of VAT can also be claimed on supplies of hot takeaway food and hot takeaway non-alcoholic drinks.
Accommodation
Admission charges to attractions
Business Rates Holidays
To further support UK businesses, business rates holidays came into effect for the tax year 2020-21.The government has provided business rates holidays to English ratepayers in the retail, hospitality and leisure sectors. Ratepayers for eligible properties are exempted from paying business rates for the entire tax year of 2020-21.
Eat to Help Out Scheme
Restaurants, bars, cafes and other establishments who use this scheme will offer a 50% reduction, up to a maximum of £10 per person, to all diners who eat and/or drink in the premises throughout the month of August. Customers do not need a voucher as participating establishments can apply the discount automatically to the bill. Businesses can simply reclaim the value of the discount through an online service, supported by the HMRC. The scheme is open to all eligible establishments across the UK and can be used all day Mondays to Wednesdays, between the 3rd and the 31st August 2020. Registrations for the Eat Out to Help Out Scheme started on the13th July 2020.
Mortgage and Credit Payment Holidays
Under emergency rules, all banks had to allow a three-month mortgage breakwith the monthly payment amount switching to zero, although interests are still allowed to accrue during the period.
The government is working with mortgage lenders, credit providers and the Financial Conduct Authority to assist the population by providing payment holidays on mortgages (including Buy to Let mortgages to help renters), consumer credit products and support on overdrafts.
Future Fund
The Future Fund provides government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least an equivalent funding from private investors. These convertible loans are a suitable option for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme. The scheme is delivered in partnership with the British Business Bank.The scheme also remains open for applications.
Summary
These support measures are temporary and would be terminated once the economy stabilises or the epidemic ends. The information provided in this article regarding these measures may change and thus be updated in the coming days.
For further information on any of the points above contact
Mikita Makayou at mikita@lexefiscal.com, or
Dr. Frank at clifford.frank@lexefiscal.com