A&M Tax Advisor Update

Chancellor’s Economic Update – Employer Highlights

Louise Jenkins, Senior Director

louise.jenkins@alvarezandmarsal.com

July 8, 2020 / UK

Well, a busy 8th July for a still relatively new Chancellor, announcing a series of measures intended to kickstart the U.K. economy. Against the backdrop of some very gloomy numbers, Rishi Sunak has outlined a number of initiatives to help the U.K. spend and build its way out of recession.

Focussing on the employment initiatives announced, there is to be:

  • A job retention bonus of £1,000 per person, retained in “meaningful employment” from 1 November 2020, once the Coronavirus Job Retention Scheme ends, through to 31 January 2021.
    By meaningful, earnings of above the earnings limit of £520 per month need to be in payment. The effect is that employers will need to fund a minimum of £1,560 wages, plus any associated National Insurance and pension costs, in order to receive the bonus of £1,000.
    It may be preferable for the rules to provide this carrot, rather than the stick threatened at the end of last week with the publication of the 3rd direction on CJRS, where it looked as if HMRC could clawback CJRS paid in termination cases, but employers will still need to have the business case to preserve roles and the cash flow in order to fund them, in order to “earn” the bonus.
  • A potential £2 billion injection via a Kickstart subsidy scheme, to bring in apprentices to businesses, to help prevent unemployment disproportionately affecting the younger population.
    Now we probably all remember the Apprenticeship Levy introduced at a time when the then conservative Chancellor had also announced a freeze on income tax and National Insurance. This promised much by way of delivering effective apprenticeships, but so far appears to have simply swelled the “National Insurance” take to the Treasury and delivered very little by way of true opportunities for apprentices.  Whilst the sentiment is appreciated, it will be interesting to see how effective this becomes, and across which particular sectors. Construction maybe, retail, leisure and entertainments, less likely.

In addition, it was confirmed that the CJRS scheme will end on 31 October. This has just entered CJRS phase 2, with flexible furloughing for employees returning to work on a phased basis. This remains mainly untested and rules have become far more complicated. It is little wonder that payroll teams are considered essential workers, and never before have they been more vital to the sustainability and success of struggling businesses.

What wasn’t announced was any National Insurance holiday, or any easements in time to pay arrangements, statutory reporting, or compliance deadlines. It remains business as usual, with much of the heavy lifting being undertaken by employers. The Autumn statement may contain more on this, along with other measures to seek to balance the books, or at least quantify the cost of borrowing which is currently paying for the above measures, so further changes are likely.

Whether the two initiatives outlined above, will indeed end up costing the Chancellor the £13 billion promised, only time will tell. A&M Taxand remains committed to assisting its clients and can provide practical support on all of the above, and wider employment tax considerations as we traverse this turbulent landscape…

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