UK GDP fell by more than 25% in March and April 2020 as entire sectors were closed by the coronavirus lockdown. It had previously taken 18 years for the economy to grow by the amount.
Some sectors were harder hit than others. Businesses operating in hospitality, tourism, and construction were particularly affected by the lockdown.
Chancellor Rishi Sunak’s speech on 8 July was the second fiscal event within his first four months in the top job at the Treasury. His spending in that time exceeds £160 billion, almost all of it in the wake of the coronavirus pandemic.
Instead of tightening the purse strings as we might have expected from many of his predecessors down south, further key measures have kicked in immediately to offer further support during these tough times.
VAT cut in hospitality and tourism sectors
Most notably, the standard rate of VAT for food, accommodation and attractions has been cut from 20% down to 5% until 12 January 2021.
It will apply to the supplies of food and non-alcoholic drinks from pubs, restaurants, cafes, and similar premises, as well as supplies of accommodation and admission to attractions across the UK.
This move aims to stimulate consumer demand and protect more than 2.4 million jobs in the hospitality sector, which began to fully reopen for business earlier this month.
For business owners in these sectors, they can either cut prices to tempt consumers to spend with them or keep their existing prices and use the 15% saved in VAT to boost cashflow.
This is the second temporary change to VAT in recent months after VAT-registered businesses in all sectors had the opportunity to defer VAT payments up to 30 June 2020. Those need to be paid in full on or before 31 March 2021. Reinstate your direct debit if you have not already done so.
Economic update: incentives for employers
Almost all (1.2 million) of the UK’s 1.4 million employers have taken advantage of Westminster’s furlough scheme since it was announced in March. In Scotland, 736,500 employees had been furloughed by 30 June.
UK-based employers will be paid a job retention bonus of £1,000 for every furloughed worker they bring back to work and retain on payroll until 31 January 2021. Those employees need to earn at least £520 a month from now until then, with the grants available to employers from February 2021.
Employers can also use the kick-start scheme to take on 16 to 24-year-olds who receive Universal Credit. Westminster will cover the cost of the national minimum wage, up to 25 hours a week, plus any National Insurance contributions and workplace pension contributions.
In addition, employers can receive an extra £2,000 for every apprentice they take on who is under the age of 25. For apprentices who are over-25, an extra £1,500 is available.
The scheme runs from 1 August 2020 to 31 January 2021, with the incentives sitting on top of existing apprenticeship grants.
How we can help
Administering payroll in these difficult circumstances is proving to be tougher than usual. Our staff can take care of that, and we can advise on any of the employer incentives currently on offer.
To find out more, email us at contact@thomasbarrie.co.uk or call us on 0141 221 257.