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Summer Statement 2020 – Tax Announcements

  • Legal Development 10 July 2020 10 July 2020
  • UK & Europe

  • Tax

You may have already heard about the Chancellor's announcements to stimulate the economy and save jobs. But we want to give you some more of the detail behind the headlines on the two key tax announcements.

These are the changes to Stamp Duty Land Tax (SDLT) and the cuts in VAT.

1. Stamp duty holiday – no SDLT on first £500,000 of price of residential property until 31 March 2021

SDLT is charged on a 'slice'-based system. This means that the rate for each band applies only to the part of the consideration that falls in that band. Currently, there is an initial nil rate band. This means that no SDLT is paid on the first £125,000 of consideration for residential property.

The nil rate band has now been expanded so that there will be no SDLT on the first £500,000 of the consideration. This applies to all residential acquisitions. For the part of the consideration over the £500,000 threshold, the normal SDLT rates will continue to apply - starting at 5% and progressing to 12% (or 15% for companies and other 'non-natural persons').

Note that it will only apply to buyers in England and Northern Ireland. For now, the rates for buyers in Wales remain unchanged but the Scottish government has also now announced an increase in the threshold at which Land and Buildings Tax is paid from £145,000 to £250,000.

People buying second homes and buy-to-let properties will also benefit from the rate reduction, but will still have to pay the 3% additional rate.

This change is effective immediately and will apply until 31 March 2021.

2. VAT reduction to 5% for the hospitality and tourism sectors

For the next six months, there will be a reduction in VAT from 20% to 5% for the hospitality sector.

The reduced rate will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafes and similar premises.

The reduced rate will also apply to supplies of accommodation and admission to attractions such as zoos, theme parks and cinemas.

This measure will apply across the UK and full details will be published by HMRC in the next few days.

This lower rate applies from next Wednesday (15 July) to 12 January 2021.

A brief reminder of existing interim tax measures

  • HMRC introduced the Time to Pay scheme to support businesses and individuals who have outstanding tax liabilities and are in financial difficulty as a result of COVID-19. The scheme provides targeted tax deferral and payment plans to help with finance and cash flow challenges. Duty deferment account holders and registered importers can also apply for more time to pay duties and import VAT.
  • UK VAT-registered businesses can defer VAT payments to the end of March 2021. Payments towards the deferred VAT can be made at any time up to and including 31 March 2021.
  • VAT on supplies of PPE has been temporarily zero-rated. This applies from 1 May to 31 October 2020.
  • There is a business rates holiday for the 2020-21 tax year for eligible retail, hospitality, leisure and nursery businesses. The relief is administered by local authorities.
  • Income tax self-assessment payments are deferred. This applies to the second payment on account for 2019/20 due on 31 July 2020 which is deferred until 31 January 2021. This is an automatic offer and no application is required.

This is general information and no action should be taken in reliance on it without first consulting a member of the Tax Team. If you have questions, please contact Ray Smith, David Blumenthal, Malcolm Frost or your regular contact in the Tax Team.

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Additional authors:

Malcolm Frost

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