Summary of Key Points: 28th September 2020
Economic & Financial Update:
Since our last call we have had the ‘rule of 6’ people meeting, COVID-19 cases are now four times higher than they were in July, with large regional lockdowns imposed on Northern England and the Midlands.
Lockdowns now include 10.00pm pub curfews.
A change in guidance now also asks those people who can work from home to return to doing so, despite previous encouragement to the contrary.
A Bank of England Report on the economy, published last week identified:
- So far there has been a 42% decrease in total hours worked in 2020 Q2.
- Retail sales strengthened; services demand remained weak
- Consumer spending significantly lower due to effects on hospitality industry.
- Restaurants busy with Eat out to Help out but limited to covers by social distancing rules.
- Some attractions improving with staycation effect.
- Sales of consumer durable goods (furniture, white goods, garden related items) strong reflecting accumulation of savings being spent on homes.
- Most sales still online, although store based sales improving.
- Used car sales up on last year whilst new car sales remains muted.
- Advertising, marketing and recruitment firms reported modest increase in demand but lower than normal (pleased to say Euro Projects is seeing healthier recovery).
- IT, Telecoms, employment law, debt management and corporate finance strong with Brexit planning activity picking up.
- Manufacturers have largely resumed production but activity is still weak across many sectors.
- Aerospace is still well below pre-Covid levels
- Automotive sector still weak, although electric vehicle sales have increased.
- Building products, timber products, paving and construction goods remains above normal levels. DIY is driving demand for this sector.
- Construction sites now all largely reopened although new house building projects are slow to start.
- Public construction works are buoyant with government backing large infrastructure projects.
- Investor appetite for commercial property remains subdued.
Employment and Pay
Companies continue to adjust staffing levels; pay growth is likely to be subdued in 2021.
Given the uncertain outlook, many companies reported freezing pay, and a large proportion of contacts said they planned to delay or cancel pay settlements this year. Companies in a number of sectors reported introducing temporary pay cuts, though these were mainly at management level.
Contacts said they had brought most furloughed workers back to work. Nonetheless, some companies across all sectors reported plans to reduce headcount, particularly in the second half of this year as the CJRS unwinds. Job losses were expected to be particularly severe in the hospitality, retail, aviation, automotive and oil and gas sectors. Some companies planned to see how demand evolves in the coming months before making headcount decisions.
There were some reports of headcount being increased in sectors where demand has been stronger than normal, however, such as food processing and retail; IT and digital services; medical and scientific development, and some financial services.
A recent REC report puts glaziers as the current most in demand job!
To find out more about detailed pay rates in Engineering, Manufacturing, Logistics and Technology, download our latest Recruitment Review and Salary Survey:
Job Support Scheme:
The Chancellor announced a follow on to the furlough scheme with the Job Support Scheme, Over to Helen Dyke for more details on this:
Helen Dyke, Senior Associate Solicitor, Irwin Mitchell LLP
DDI: 0121 214 5242
Furlough ends 31st Oct. new package of support to retain staff…
1. The scheme is called the Job Support Scheme and will start on 1 November 2020 and last for six months until 30 April 2021.
2. It is only available to business who can demonstrate that they have 'viable jobs'. This means that employees in viable jobs must work for at least 1/3 of their normal hours and their employer must pay them their normal rate for those hours. The Government and the employer together will then increase those employees’ wages covering 2/3 of the pay they have lost by reducing their working hours. The government will pay a maximum of £697.20 per month.
3. The government will target its support on those businesses that need it most. All SME's are eligible. However, larger employers will only be able to receive support if their turnover has fallen during the crisis.
4. The new scheme is open to employers across the UK even if they have not previously used the furlough scheme.
5. Businesses who are eligible for the Job Retention Bonus can still claim under this new scheme.
Breaching Self-Isolation Rules:
Today new Regulations came into force in England which impose, potentially, large fines for employers who allow staff who are self-isolating to work anywhere other than their homes.
The Health Protection (Coronavirus Restrictions) (Self Isolation) (England) Regulations 2020 are complex and set out rules that apply to individuals as well as to employers.
Essentially, if someone tests positive for coronavirus or is told to self-isolate by the Track and Trace Service or by other public health officials (but not via the new app) they must remain at home for the 'required period'. Generally, anyone who tests positive must remain at home for at least 10 days. However, if you are self-isolating because you have been in close contact with someone with the disease, or are in quarantine, the period is 14 days.
There are a number of exceptions to the requirement to stay at home including:
- To obtain groceries, medicines etc. 'where it is not possible to obtain these provisions in any other manner'
- To seek medical attention (including opticians, dentists etc.)
- To fulfil a legal obligation, including attending court or participating in legal proceedings
Employers must pay SSP to anyone who is self-isolating (unless they are quarantined after returning to the UK) who can't work from home. However, individuals who are on a low income may be entitled to a one-off payment of £500 through the Test and Trace Support Payment scheme.
To be eligible, they have to claim at least one of the following benefits: Universal Credit, Working Tax Credits, income-related Employment and Support Allowance, income-based Jobseeker’s Allowance, Income Support, Pension Credit or Housing Benefit.
Rules for employers
Under Regulation 7, if you know that a member of your staff (including an agency worker) is self-isolating, you must not allow them to work - unless they can work from home - during their isolation period.
Employees who are told to self-isolate must tell their employer of the date they started their self-isolation and when they expect it to end. They have to do this 'as soon as is reasonably practicable' and no later than they are due to start work. The only exception is where they are already working from home.
Agency workers can notify their work agency, principal or employer (if this is a different person/organisation). Whoever is notified, has to pass on the information to a relevant person. So, if the agency worker notifies their principal they have tested positive for coronavirus, the principal has to notify the job agency.
Penalties for breaching the rules
Individuals and employers can be fined if they breach the rules. Fines start at £1k for a first offence, £2k for a second, £4k for a third and £10k for repeated offences.
Preparing for Tax Rises:
Julia Rosenbloom, Partner, Private client tax services
Smith & Williamson LLP
Tel: 0121 710 5243
Whilst the Autumn Statement has been cancelled, leaks on changes to taxation to pay for the cost of COVID-19 suggest corporation tax will rise from what should have been 17% this year (currently 19%) to 24%. Other potential changes may be to dividend tax rates and capital gains tax.
To help us prepare for the expected changes to taxation, we are delighted to introduce Julia Rosenbloom, Tax Partner with Smith and Williamson LLP, Julia is a regular commentator on taxation to the Media, including the BBC, Sky News, Financial Times and Investors Chronicle, we are especially to you for your time Julia and may I begin asking you In your professional opinion, which taxes are most likely to be increased?
- Capital gains tax likely to go up and align with income tax levels, currently as low as 10%, could go up to 45%
- Entrepreneur’s relief (Business Asset Disposal Relief) likely to be changed and relief levels reduced, stimulating a flurry of sales from business owners considering a sale and acquisitive purchasers looking to buy cheaper before rates go up.
- Corporation tax may change although possibly not for trading businesses, more likely those parts of a business holding assets and investments, or pure investment businesses.
- Suggestion that if 50% or more of a business is investment this could be targeted for higher taxation (not an exact science!).
- Ways to separate and de-merge trading and investment business activities through company structure.
- Possible changes to inheritance tax, at the moment businesses pass on to next generation tax free. There are talks of changes to this regime, possibly incurring inheritance tax, maybe through lifetime tax charges.
- Business owners usually dispose of assets upon sale, succession or cemetery
- Depending upon your age and where you are in the cycle will depend upon your strategy and it’s not advisable to purely make decisions based on tax changes but if its already on your mind to sell then a lot of clients thinking about accelerating succession plans
- If thinking of selling – in imminent future short to medium (next 5 years) could be a hugely increased tax bill
- If you sell for £1m now - pay £100k tax
- In Spring next year, if you sell for £1m, you might pay £450k tax
- A £350,000 swing on that exit
- There are some ways to “bank” at the current rate of tax
- Pleased that autumn statement deferred, providing business owners extra time to plan for it.
Read more budget insights from Smith and Williamson at: https://smithandwilliamson.com/en/insights/tax-changes-on-the-horizon/
As everyone’s situation is unique, and therefore Julia has offered to hold individual conversations with anyone wishing to have a question answered, free of charge until engaged.
This presentation is of a general nature and is not a substitute for professional advice. No responsibility can be accepted for the consequences of any action taken or refrained from as a result of what is said. Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. Clients should always seek appropriate tax advice from their financial adviser before making financial decisions.
Our next meeting will be at 2.00pm on 12th October 2020
With the prospect of a no deal or ‘slim deal’ on the horizon we will be focussing what preparations your business should be making to reduce the impacts of Brexit.