Farm industry leaders have welcomed chancellor Rishi Sunak’s £30bn support package, but have called for more information on how it will work in rural situations.
The chancellor’s Summer Economic Update was announced on 8 July and covers measures that include:
- VAT rate cuts from 20% to 5% on food and accommodation
- training and employment incentives
- green grants for property improvements
- stamp duty holiday.
Industry leaders say they need further detail on how might help farming businesses recover from the impact of Covid-19.
NFU president Minette Batters said: “We look forward to further announcements by the chancellor in the autumn on how his recovery package will support the rural economy”.
Chancellor’s Summer Economic Update
Accountant Dodd & Co has broken down the main areas covered by the Chancellor’s announcement:
Stamp duty holiday
- Residential properties purchased at up to £500,000 will not attract stamp duty in England and Northern Ireland
- 8 July 2020 until 31 March 2021.
- The government will pay employers to create six-month placements for 16-24 year olds on Universal Credit
- Government will pay 100% of national minimum wage for 25 hours/week in these jobs
- National Insurance contributions and employer minimum automatic enrolment contributions covered
- Opens August.
Training and apprenticeships
- £2,000 paid for each new apprentice hired under 25 years old
- £1,500 for each new apprentice hired aged 25 and over
- 1 August 2020 to 31 January 2021
- Scheme is additional to existing £1,000 funding for 16- to18-year-old apprentices
- Further £1,000 per trainee for work experience.
Job retention bonus
- Employer will receive £1,000 per furloughed employee who returns to work and is still employed on 31 January 2021
- To qualify, previously furloughed employees must be paid, on average, £520 a month from November to January.
VAT in the hospitality and tourism sector
- A temporary VAT cut from 20% to 5% from 15 July 2020 to 12 January 2021
- HMRC will provide further guidance soon on how this might affect those on the flat rate scheme.
Green home grants
- Voucher scheme paying for at least two-thirds of loft, floor and wall insulation up to £5,000 a household
- 100% government funding up to £10,000 for low-income households.
Eat Out to Help Out
- 50% discount of up to £10 a head on meals to encourage people to use cafes, restaurants and pubs
- Businesses should register from Monday 13 July.
How the measures could apply to farming
NFU president Minette Batters recognised that the VAT rate cut from 20% to 5% would stimulate demand for rural hospitality and tourism ventures. It would also help to increase demand from the food service sector.
“There are thousands of diversified farms with tourism and hospitality businesses that could benefit from this cut, helping them to play a key role in reviving the economy,” Ms Batters said.
Country Land and Business Association president Mark Bridgeman also welcomed the VAT rate cut as a boost for the “tourism sector to fight back from a devastating start to the year”.
The VAT rate would put UK destinations on a more equal footing with other countries that have already cut tourism taxes, Mr Bridgeman suggested.
However, he added: “The next challenge will be to ensure we are able to stimulate demand not just in the short term, but through the less popular winter months too.”
“The ‘Eat Out to Help Out’ discount could also play a significant role to stimulate demand for the quality British produce they supply,” Ms Batters said.
“There is an opportunity now for food service to demonstrate a commitment to British farmers and provide the public with even more opportunities to purchase quality British food and drink.”
Rob Hitch, rural specialist with accountancy firm Dodd & Co, highlighted further potential benefits within the package such as the job incentives.
“The kickstart incentives, to encourage the creation of jobs, apprenticeships and training, could help farm businesses that have struggled to find workers,” Mr Hitch suggested.
The stamp duty holiday might also stimulate demand for rural property and even drive up prices still further, he said.
However, it was less easy to work out how the stamp duty break would benefit rural businesses.
“We need more detail on how commercial businesses will benefit from the stamp duty holiday.
“Farms are often split up into separate lots of land and properties to avoid paying large stamp duty bills at purchase and do not come under the domestic rates.
“This complicates the issue and we are awaiting further detail on how stamp duty will be applied on agricultural properties,” Mr Hitch said.