Leap of faith
Many businesses should find there are measures announced in the Summer Statement that are worth looking into for the autumn and beyond, reports Santhie Goundar.
T he Summer Statement on 8 July saw the chancellor of the Exchequer, Rishi Sunak, announcing a further £30bn “plan for jobs” to boost the coronavirus-hit British economy – including a stamp duty land tax (SDLT) holiday for residential purchases under £500,000 until 31 March 2021, and a VAT rate cut from 20% to 5% for the hospitality industry until 12 January 2021.
With the Coronavirus Jobs Retention Scheme “winding down flexibly and gradually” until 31 October, Sunak also introduced the Jobs Retention Bonus, as well as measures to encourage employers to hire young people at risk of long-term unemployment, and a Green Homes Grant. As a senior accountant in your organisation, understanding the relevance of these schemes to your business and then communicating out to management is critical.
Build for the future
Employers now finally have sufficient information to decide whether to use the tapering Coronavirus Job Retention Scheme support for a contribution to their redundancy costs now, or to keep staff on and bear their cost unsupported by CJRS from 1 November through to early next year for the Jobs Retention Bonus boost in the spring of 2021,” says RSM employment legal partner Carolyn Brown.
However, Factotum chief executive Bobby Lane wonders if the £1,000 payment per employee for bringing back furloughed staff is enough for some. “If a business can’t afford to keep the staff on, are you really going to keep them on just for that February payment,” he notes.
With the government announcing they will pay new bonuses for businesses hiring trainees and apprentices, Lane believes they are worth considering – and that they will help businesses to “build the workforce for the future” and prevent a “lost generation”.
Traineeships are for unemployed young people (aged 16 to 24) in England, not in education with little or no work experience, while apprenticeships combine practical training in a job with study. “If you want to look at the future of your business, you should look at the apprenticeship scheme – I know a lot of firms that have hired young people under this scheme, and the benefit of taking on apprentices is that the government pays for their training,” Lane says.
Chris Biggs, managing director of Theta Financial Reporting, agrees that businesses should look at traineeships and apprenticeships, adding that his company was considering the traineeship scheme before the £1,000 payment to employers made the offering more attractive. “We’re the typical business the chancellor is trying to help out,” Biggs says. “For businesses that are fifty-fifty on whether to decide to take on a young trainee or apprentice, [the Summer Statement bonus announcement] might tip the balance for them to consider hiring.”
Biggs calls the Kickstarter Scheme “a positive thing overall”, adding: “If a business has confidence that things will pick up next summer, then bringing someone [as a young Kickstarter] now is good – in the worst-case scenario you’ll have to let them go, but they will still have employable skills, and in the best case scenario they will become a valuable resource for your business when the economy improves. I expect a lot of firms will do the right thing and top up the national minimum wage that the government will be paying.”
“The Kickstarter Scheme was inspired,” says David Hannah, Cornerstone Tax principal consultant. “With the government paying the probationary period salaries and overheads, the scheme is a great opportunity to hire and train young people, e.g. for professional services firms looking to create graduate jobs for university leavers.
“Digital businesses in particular have skyrocketed sales during lockdown – for small businesses looking to expand, this scheme could provide an opportunity to take market share from bigger firms, create jobs for young people and have the government pay the salaries of those staff for six months.”
There are concerns, Biggs says, that the government has missed out on older people who are looking to re-skill, particularly those who have lost their jobs in the crisis, and that the schemes for younger people might be abused. “Traineeships and the Kickstarter Scheme can be good to obtain and train up a good long-term employee, but there is a concern that businesses might use the schemes for short-term cheap labour,” he notes.
The tax cuts are likely to have an impact on industries targeted, and considerations should be given to those. According to Hannah, the temporary SDLT holiday has seen a “massive surge” in residential property demand. “It has also caused a return of the buy-to-let investor,” he observes, noting: “We’re seeing signs they’re buying more properties”.
Bobby Lane notes that the VAT rate cut to 5% should help the hospitality sector – especially with the “Eat Out To Help Out” scheme during August – but “the decision that businesses need to make is whether the VAT saving will be passed onto consumers, or whether it’s more economical to keep prices the same.”
Whether businesses take advantage of any of the government’s new schemes or not, one should still consider future prospects, current staffing and cashflow. “In terms of business planning, we will not return to anything near normal until maybe the fourth quarter of 2021,” David Hannah notes, while Chris Biggs says: “There are measures the government has introduced that have been good, but as a business you don’t want to use ‘sticking plasters’ to resolve long-term issues and problems – especially if a business is not going to survive in the longer term anyway.”
Santhie Goundar is a freelance journalist