Bruce Potter, chairman at law firm Blake Morgan LLP, said: “It might not be the summer blockbuster some were expecting, but the Summer Statement represents a significant investment in our recovery from a COVID-19 recession.
“Rightly, employment sits at the heart of the statement. Today’s announcements on job retention funding, apprenticeships and the kick starter scheme are good news for businesses across the Thames Corridor who want to keep people on or want to invest in future talent. Equally, there’s cautious optimism for younger people and job seekers whose opportunities may have just broadened, and investment in ‘green’ job creation through the £2 billion re-fitting scheme is an important step towards our net zero targets.
“Other measures are very welcome but much more predictable. While VAT cuts, Stamp Duty cuts and money off meals out will support the housing market and stimulate the hospitality sector – and encourage people to spend, they’re standard fare for a recessionary recovery and won’t help the engineering and manufacturing sectors. Instead, what businesses and consumers across the region are looking for is a macro-economic plan for the future – how do we really tackle our infrastructure, housing, environmental and healthcare issues as well as what a vision for post-Brexit Britain really is.
“We know the government wants to ‘level-up’ the regions, but there was little on how that might happen today. But by addressing these big challenges this autumn, the Chancellor is more likely to create confidence in a sustainable future – which will ultimately help unlock private sector investment and increased consumer spending.”
David Gage, director of business tax services at Smith & Williamson, commented:
The hidden costs of a VAT cut to businesses
“While the VAT cut will be welcome news for many businesses hard hit by the Covid-19 pandemic , the hidden costs to today’s cut may prove to be a costly headache for some – especially for those whose business didn’t operate during the 2008 VAT cut. To mitigate these hidden costs, my top four tips for businesses would be to:
- Be aware that Point of Sale systems, commonly used in the hospitality and tourism sector, will need to be updated and aligned to the new rate. If not, then businesses could automatically lose savings and inadvertently overcharge customers. Further consideration and updates may also be needed for wider accounting and internal systems configuration.
- Be aware that the new VAT rate will not necessarily apply to all the transactions currently in play. So, from a cash-flow perspective it would be prudent to work to the existing 20% rate for all transactions either pending or made before today’s announcement
- Some potential anti-avoidance measures are likely to be in place following today’s cut – meaning you could face penalties for incorrectly tinkering with any pending transactions
- To avoid being stung by HMRC it’s best to seek professional advice or consult Government guidance before making any revisions. Official guidance should be released following today’s announcement, so it’s best to review this at the very least
VAT cut a vital boost for businesses, but little impact expected on consumer demand
“Today’s announcement of a sector-based VAT cut may see an uptick in consumer spending, but the scale of this uptick will be in part down to the businesses themselves. Based on previous VAT rate cuts, it is possible businesses will not pass on the savings to the end consumers and instead will pocket the 15% cut to increase their own business margins.
“For instance, a coffee priced at £3.80 before today’s cut should see a 47p reduction being passed to the customer. A business may choose to maintain that original price to try recoup any loss of earnings since the pandemic, or simply to save time and expense of changing internal pricings and point-of-sale systems.”