Furlough penalties part of Chancellor Rishi Sunak's Summer Statement?
6th Jul 2020
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By Steve Cox, Chief Evangelist, IRIS
Businesses who lay off staff after using the furlough scheme may effectively face big financial penalties.
The Telegraph reports that employers might be told to return the money they were given for the Coronavirus Job Retention Scheme where they have gone on to make mass redundancies. It's been described as 'reparations'.
This could be one of the major announcements in Chancellor Rishi Sunak’s Summer Statement on Wednesday – dubbed by some as a ‘mini Budget’, though likely to be far less wide in scope and importance.
Larger businesses are facing growing pressure to hand back taxpayer cash used to furlough their staff after the support scheme's cost topped £25billion. According to some media reports, a number of firms have already volunteered to pay back the funds, including Taylor Wimpey and Ikea.
What else might be in the Summer Statement?
With the economy shrinking a record 20 per cent in April, a whole range of policies could be introduced as the Government looks to address the challenges caused by the COVID-19 pandemic. Mr Sunak says the announcement will be a ‘fiscal plan’ rather than an ‘emergency budget’.
New wealth tax?
Among the rumours so far are that a new wealth tax could be brought in as one measure to boost the country’s coffers after the damage of the lockdown. Gus O’Donnell, who served as cabinet secretary under David Cameron and Tony Blair, is among those to have called for such a move.
Could VAT be cut from 20%? Perhaps just for particular sectors like hospitality? This is another speculated change coming. Sunak’s predecessor, Sajid Javid, has reportedly said the Treasury should be thinking about a cut to 17% - possibly costing about £21bn.
The Guardian reports that the chancellor “could tweak the system of business rates, which brings in about £30bn for the Treasury each year, by levying taxes on companies based on the value of the buildings from which they operate.”
It would follow calls from industry groups for the business-rate “holidays” granted to retail, leisure and hospitality firms during the coronavirus crisis to be extended to other companies.
Pensions tax relief to change?
One area that is often mentioned in the lead up to recent Budgets as one to be reformed is pensions tax relief. Although it has yet to be reviewed in the way many analysts have predicted, some commentators believe this time could be different due to the need to claw back cash for the Treasury after the colossal spending on support schemes like furlough.
When will we know?
We’ll discover what’s in on Wednesday around lunchtime. Check back then on the IRIS blog to see a summary of the changes most interesting for accountants.
Meanwhile, visit our hub for more resources on adapting to the next normal.