Summer Statement 2020: What the Mini-Budget Means for Businesses
As restrictions ease and places start opening, businesses are trying to get back on their feet. To help businesses in their recovery and to try to stimulate the economy, a host of new government measures were announced in the Summer Statement.
There have been many changes since Rishi Sunak delivered his debut budget in March 2020. In a few short months, many businesses have been devastated by the COVID-19 pandemic, and the government has had to deliver numerous schemes in an attempt to minimise the long-term impact on the economy.
Businesses have been forced to adapt to these new circumstances and, with the future holding considerable economic challenges, the government has announced new measures to help businesses deal with the predicted deep recession and rise in unemployment.
On 8th July 2020, Chancellor Rishi Sunak delivered his Plans For Jobs Speech. This mini-Budget laid out various schemes that focus on stimulating economic activity, as well as creating and maintaining employment.
In this article we explain all the announcements in the Summer Statement that businesses need to know about.
Job Retention Bonus
With the Chancellor confirming that the furlough scheme will end in October, businesses will have to make decisions on whether to keep people on or make redundancies.
In a bid to encourage employers to bring back furloughed workers, the government is offering businesses a £1,000 bonus for every furloughed worker they bring back. Employers can claim these payments from February 2021.
To receive this bonus, employers will need to continuously employ a previously furloughed worker through to the end of January 2021 (as a minimum). The employees must also be earning a minimum of £520 a month, to ensure they are returning to worthwhile jobs.
Because the hospitality, leisure, and tourism industries have particularly suffered as a result of the COVID-19 restrictions, the government announced a VAT cut to help them as they start to reopen to visitors.
VAT rates for these sectors will be reduced from 20% to 5%, and will last from 15th July 2020 until 12th January 2021.
This VAT cut will apply to eat-in establishments (e.g. restaurants), businesses serving hot takeaway food and non-alcoholic drinks, overnight accommodation (e.g. hotels), and a range of attractions including theatres, amusement parks, museums, zoos, cinemas, circuses, concerts, and exhibitions.
“Eat Out to Help Out” Scheme
In a move to further revive the hospitality sector, the Chancellor also announced the UK-wide Eat Out to Help Out scheme. This novel scheme aims to encourage people to start eating out again, by giving all customers a 50% discount on their food and non-alcoholic drinks, up to £10 a head, on every Monday, Tuesday, and Wednesday in August 2020.
Eligible businesses are those which offer dine-in food options, such as restaurants, cafés, pubs that serve food, hotel restaurants, and more. The discount does not apply to takeaway food or to any alcoholic purchases. Service charges are also excluded from the offer.
If they wish, businesses can use this discount alongside their own special offers.
How will the scheme work?
Participating establishments will apply the 50% discount to each bill. Then, they will be able to reclaim the total discounted amount from the government online on a weekly basis, starting from 7th August.
Bear in mind that any money that you receive from the scheme is considered taxable income, and you will still need to pay VAT on the total amount of your customers’ bills.
To qualify for this scheme, businesses will need to register on the gov.uk website. A list containing all the registered establishments that are participating in this scheme will be available to the public.
The Summer Statement placed great emphasis on retaining and creating jobs, especially for the under 25s who have been particularly affected by the COVID-19 pandemic and its related restrictions.
As a result, the government is launching a Kickstart Scheme to help increase employment among the younger generation. This scheme will pay employers to create high-quality work placements lasting 6 months, with the aim of getting 16-24 year olds that are on Universal Credit and at risk of long-term unemployment into the workplace.
To qualify for the scheme, businesses will need to create jobs of value that provide proper training and/or support with a job search, to help individuals get into steady and sustainable employment. Businesses should be able to prove that these jobs are new and are not replacing any existing jobs, as the point of the scheme is to get young people into work who otherwise may not have had the opportunity to do so.
Under the Kickstart Scheme, the government will cover 100% of the young person’s wage for the full 6-month period. This will be based on 25 hours of work a week at the relevant National Minimum Wage, but employers can choose to offer more hours and top wages up with their own money if they wish. The government will also fund associated overhead costs, including employer National Insurance contributions.
Employers will be able to register for the Kickstart Scheme in the coming weeks, with the “Kickstarters” able to begin their placements from the autumn. The scheme is expected to run until December 2021.
Other employment measures
As well as the headline Kickstart Scheme, the government announced other measures to help young people gain skills and training to improve their employment prospects.
Employers can receive £1,000 for every new trainee aged 16-24 that they take on. The government has expanded the funds available for this, with the aim of tripling the number of trainee places on offer.
This trainee scheme will be in place from September 2020.
Similarly, employers can receive a £2,000 payment for each new apprentice under the age of 25 they take on. For apprentices over the age of 25 this payment reduces to £1,500.
This apprenticeship payment scheme runs from 1st August 2020 until 31st January 2021, and is in addition to the £1,000 payment that is already given to businesses that hire apprentices aged 16-18.
To help the construction industry hold onto skilled and talented workers, the government announced that they were funding a Construction Talent Retention Scheme. This will provide a portal which will allow businesses to redeploy any workers that are at risk of redundancy across the construction sector, and will also be a way to temporarily loan employees between firms.
Government funding for this scheme is guaranteed until at least April 2021.
Another key emphasis in the Chancellor’s mini-Budget was on green investment. A host of green measures were announced, many of which were at least partly-aimed at preserving and creating green jobs.
As well as various green R&D projects, the government will also invest in a Green Jobs Challenge Fund targeted at environmental charities and public authorities. This aims to create and protect 5,000 jobs in England that are dedicated to helping the environment, such as restoring habitats, creating green spaces, and clearing waterways.
The Green Homes Grant Scheme will also aim to support thousands of green jobs, as it offers homeowners and landlords funding to make their homes more energy-efficient.
Public sector bodies will be eligible for grants from the Public Sector Decarbonisation Scheme to fund energy efficiency and low carbon upgrades, as well as other ways to become greener workplaces.
Other funding support for businesses
Some of the schemes that were launched earlier in the year are still open for applications. For example, businesses can still apply for a Bounce Back Loan or a Coronavirus Business Interruption Loan until they close in the autumn.
Self-employed individuals can still access support from the Self-Employment Income Support Scheme. Although applications for the first grant have closed, the scheme was extended and individuals can now apply for a second grant from 17th August 2020.
To receive the second grant, you don’t need to have received the first one. However, your business needs to have been adversely affected by coronavirus on or after 14th July 2020, whether that’s from contracting the virus, self-isolating or shielding, supply problems, or simply fewer customers and a lower income.
The grant is based on your average trading profits, like the first one, but this grant will only cover 70% of your profits, rather than 80%. HMRC will work out the amount you are eligible for, and will pay the sum in one instalment to cover 3 months’ worth of profits- up to a maximum of £6,570.
Information can change since publication. Please check gov.uk for the latest updates.
Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more