On 8 July 2020, the Chancellor of the Exchequer, Rishi Sunak, delivered the Summer 2020 Economic Update (update). The update launched a program entitled "A Plan for Jobs 2020", described as the second phase of a three-phase plan to ensure the UK's recovery from the COVID-19 pandemic.
The Chancellor announced a temporary increase in the threshold at which stamp duty land tax (SDLT) is payable on purchases of residential property in England and Northern Ireland to £500,000 and a temporary reduction in the rate of VAT to 5% for supplies of food and non-alcoholic drink, accommodation and admission to attractions. Both measures were widely trailed and are clearly targeted at reviving an ailing economy following the pandemic. No other tax measures were announced, although, in his reply to the Shadow Chancellor's response to the update, the Chancellor indicated that particular companies seeking access to government support to prevent mass job losses had been subjected to appropriate conditions, including as to tax.
The Chancellor confirmed that the third phase of the plan, focusing on rebuilding and restoring public finances, will include an autumn Budget and spending review; tax increases to pay for the government's response to the pandemic are widely expected to be announced at that time.
Temporary increase in SDLT threshold for residential property to £500,000 until 31 March 2021
The Chancellor announced a temporary increase in the threshold at which SDLT is payable on purchases of residential property in England and Northern Ireland from £125,000 to £500,000. The increase takes effect from 8 July 2020 and will apply until 31 March 2021.
It was confirmed by the Speaker that a provisional collection of taxes resolution would be published at the end of questions on the update.
Reduction in rate of VAT to 5% for hospitality industry until 12 January 2021
As widely expected, the Chancellor announced a reduction in the rate of VAT for the hospitality industry, to take effect from 15 July 2020 for a period of six months, expiring on 12 January 2021. Supplies of food and non-alcoholic drinks by restaurants, pubs, bars, cafes and "similar premises", along with supplies of accommodation and admission to attractions, which currently attract VAT at the standard rate of 20%, will benefit from the reduced rate of 5%.
The Chancellor indicated, in response to a question following the update, that guidance on the VAT reduction would be published on 9 July 2020 and a statutory instrument published on 13 July 2020.