We are starting to hear murmurings of the birth of a new scheme – the sustainable farming initiative in England. The environmental land management scheme is coming into force from 2024, but until then we will be under this new scheme in England. The illustration above gives full details of the scheme as available at present.
Scotland and Wales have their own systems and will not be part of this plan.
Furlough is ending on 30 October, and as a partial and we are told more targeted replacement with have a new Job Support Scheme which will be introduced from 1 November. This will apply for ‘viable’ jobs in businesses who are facing lower demand due to coronavirus. The scheme starts on 1 November 2020 and will last for 6 months..
Employers will continue to pay the wages of staff for the hours they work – but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.
In order to support only viable jobs, employees must be working at least 33% of their usual hours. The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
This is a simplistic example based on weekly payments for a 36 hour week at £10 per hour.
Total normal weekly hours
36
12
Pay per hour
£10
Normal weekly
360
120
Unworked hours
24
Employer top up -1/3 of 24
8
80
HMRC top up – 1/3 of 24
8
80
Total gross pay
£360
£280
Percentage of normal pay
78%
Cost per hour work
£10
£16.67
Taxes, national insurance and pension costs do not seem to be included. If I find out more I will extend the example.
The scheme is designed to work alongside furlough and in particular
The Job Support Scheme will be open to businesses across the UK even if they have not previously used the furlough schem.
It is designed to sit alongside the Jobs Retention Bonus and could be worth over 60% of average wages of workers who have been furloughed – and are kept on until the start of February 2021. Businesses can benefit from both schemes in order to help protect jobs.
Self employed
In addition, the Government is continuing its support for millions of self-employed individuals by extending the Self Employment Income Support Scheme Grant (SEISS). An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875.
An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April – ensuring our support continues right through to next year. This is in addition to the more than £13 billion of support already provided for over 2.6 million self-employed individuals through the first two stages of the Self Employment Income Support Scheme – one of the most generous in the world.
VAT cut and deferrals
As part of the package, the government also announced it will extend the temporary 5% VAT rate for the tourism and hospitality sectors to the end of March next year.
In addition, up to half a million business who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.
On top of this, around 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.
Giving businesses flexibility to pay back loans
The burden will be lifted on more than a million businesses who took out a Bounce Back Loan through a new Pay as You Grow flexible repayment system. This will provide flexibility for firms repaying a Bounce Back Loan.
This includes extending the length of the loan from six years to ten, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses. These measures will further protect jobs by helping businesses recover from the pandemic.
We also intend to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.
In addition, the Chancellor also announced he would be extending applications for the government’s coronavirus loan schemes that are helping over a million businesses until the end of November. As a result, more businesses will now be able to benefit from the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund. This change aligns all the end dates of these schemes, ensuring that there is further support in place for those firms who need it.
Comment
My fundamental problem with this is understanding why an employer would enter into the scheme. It costs them more to employ the person part time than it does to employ someone else full-time as part of the role to carry out that work. I totally except that I might be missing something, or there may be rules introduced in legislation to protect existing workers. We will have to wait and see.
The reduction in the rate of the self-employed income support scheme to 20% seems particularly severe. I am surprised that it’s gone down from 80% via 70% and now straight to 20%.
It is interesting that possibly for the first time ever and economic plan has been published with absolutely no costing at all.
And no, there was really no excuse for another red squirrel picture…
Right now squirrels across the country are collecting up nuts getting ready for winter, food that they hope will feed them into next year. We as a country I’ve had a complicated year with Coronavirus and the vast social issues that has created and there are many people now who are receiving help from the government and all of this needs to be paid for. Many of us have some money squirrelled away for many of us that amount might be reducing, And it may be with some concern that we think about what tax rises there might be in store for us.
My aim here is to collect together the announcements that have been made, and some thoughts about what we might be expecting when Rishi Sunak next stands up for his autumn budget, and I will update this as we get closer to the budget. As at the date of writing the budget date has not yet been announced.
Income Tax
It is very unlikely that the rate of income tax will change in the short to medium term. Indeed with the current Labour opposition there is little pressure on the government here.
It is possible that a hypothecated increase in national insurance contributions might be introduced, but this would probably be unpopular and would take money away from the very people who need to be spending it right now.
Corporation Tax
The government have let it be known that corporation taxes might float up to somewhere around 24% almost returning to the rate of 26% at which they stood when the Conservative government came to power. Labour are not currently putting any pressure on corporation tax rates.
It is very possible that corporation taxes will be restructured to take away some of the advantages to small companies of using dividends to reduce national insurance contributions. We have been waiting a long time for such changes, and this may be as simple as applying national insurance to dividends paid to directors of close companies for example.
Business reliefs
There is increasing speculation that that might be tax relief for business investment, and this may involve another yo of the capital allowances yo-yo. The annual investment allowance is currently at £1 million under a temporary measure which expires in December 2020. It might be that this gets prolonged a little bit longer.
Alternatively the Chancellor may look at shareholding beliefs such as extending the Enterprise Investment Scheme or the Seed Enterprise Investment Scheme. Both of these beliefs are aimed at investors who are investing monies into new or relatively new companies. In the situation where we as a country need investment into new companies and investors have cash in their bank accounts it would seem sensible to allow new businesses to bubble up using such a relief. Having said that the seed enterprise investment scheme is already very attractive and a little bit of tweaking to take away some of the complications and bear traps involved in this relief might be more rewarding.
Capital Taxes
There is already a review into capital gains tax which has been referred elsewhere in this page. There is current speculation that the rate of capital gains tax might be increased up to income tax rates, but this might be seen to break with an important underlying philosophy of capital gains tax that it should not tax inflationary gains. It is for this reason that in the history of capital gains tax there have been various mechanisms to relieve the inflationary gains, starting with an indexation allowance moving onto a type of relief and currently a simple rough halving of the rate. To my mind it seems fair that capital gains tax rate is half the rate of income tax if that is seen as a simplified relief for installation of the gains.
Looking more broadly, the reason we have to have a capital gains tax is that if there was not such a tax, wealthy individuals who are able to control cash flows, might arrange that all of their ‘income’ will take the nature of capital and they would thus escape taxes. There is a long history of anti-avoidance legislation targeted at treating such short-term gains as income and it may be that this is a more fertile ground for short-term capital gains. This might lead to a general rule introduced which says there are short-term capital gain, safer assets held for less than two years, might be just added in as income.
Inheritance tax is constantly under review and this might be fairly fertile ground for changes. The rate of inheritance tax at 40% for death transfers or 20% for lifetime transfers is analogous to the rate of income tax at a basic rate (20%) or the higher rate (40%).
With rules to tax non-UK domiciled individuals on UK residential property (even when held by a non UK company) for both inheritance tax and capital gains tax, it is getting more difficult to avoid inheritance taxes on property. It would not be very surprising to see the non-domicile walls swept away completely to put all individuals on an equal footing here. It would then be the case that a non-resident individual might simply be taxed on assets in the UK without the complications that we have now. It is often the complications that allow for cracks through which tax can leak.
Taking away the tax-free probate uplift on property where not subject to inheritance tax would create a nice tax take for the country. It is clearly right and proper that if the value of an asset has been subject to inheritance tax that same value should then be the base cost for a future disposal. If however the asset was exempt in the estate, by reason of nil rate band business property relief or agricultural relief for example, then it seems fair to both future capital gains on the original cost without that probate value uplift.
The idea of an annual wealth tax has been mooted, but I do not see an appetite for this at the moment. To me, a new tax on capital would be politically unacceptable to the Conservative party at this moment in time. However we will need to wait and see…
VAT
As we move away from Europe so we will be unshackled from the EU is VAT rules. This gives the Chancellor some scope for adjusting VAT rates or the commodities and services on which VAT is charged.
Businesses are now able to sign up to the Kickstart scheme under which people aged between 16 and 24 who are claiming Universal Credit can receive a six-month work placement.
Under the scheme, the Government will pay 100% of the age-relevant National Minimum Wage, National Insurance and pension contributions for 25 hours a week.
Employers will be able to top up this wage, while the Government will also pay employers £1,500 to set up support and training for people on a Kickstart placement, as well as helping pay for uniforms and other set up costs.