The government has announced that residential property transactions rose 15.6% in August following the introduction of a stamp duty holiday.

The government has announced:

• a rise in sales supports nearly three quarters of a million jobs in the sector – with new homeowners also spending extra cash on decorating, furniture and appliances
• a 30% boost in output in July for the construction sector.

New figures show that house sales rose 15.6% in August following the introduction of the stamp duty holiday, helping to protect nearly three quarters of a million jobs in the housing sector and wider supply chain.

The increase follows a 14.5% rise in July. Residential property transactions in August rose a further 15.6% as more people decided to buy a new home or move house. The increase in transactions came after the Chancellor announced a stamp duty holiday at the start of July that will last until March 2021.

The move has helped to protect nearly 750,000 jobs, benefiting businesses across the housing supply chain and beyond, with the Bank of England estimating that households who move home are much more likely to purchase a range of durable goods, such as furniture, carpets or major appliances.

It is expected that, among others, housebuilders, estate agents, tradespeople, DIY stores, removal and cleaning firms could all benefit from the increased activity.

Chancellor Rishi Sunak said:

‘Every home sold means more jobs protected – helping us to deliver on our Plan for Jobs.

‘But this isn’t just about the housing market. Owners doing up their homes to sell and buyers reinvesting stamp duty savings to make their new house feel like a home are also firing up local businesses, supporting, creating and protecting jobs across the country.’

As part of its Plan for Jobs, the government introduced a temporary stamp duty holiday for residential properties worth up to £500,000, effective from 8 July 2020 until 31 March 2021. The holiday means nine out of ten people getting on or moving up the property ladder will pay no SDLT at all. This measure delivers an average saving of £4,500 in SDLT.

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Over half a million businesses deferred VAT payments, which were due in March to June 2020, with these payments becoming due at the end of March 2021.

As part of the Winter Economy Plan the government has now announced the option for such businesses to spread their payments over the financial year 2021/22. Businesses will be able to choose to make 11 equal instalments over 2021/22. All businesses which took advantage of the VAT deferral can use the spreading scheme. Businesses will need to opt in and HMRC will put in place an opt-in process in early 2021.

Enhanced Time to Pay for self assessment taxpayers

Taxpayers were able to defer the income tax self assessment payment on account for 2019/20, due by 31 July 2020, to 31 January 2021. There are also other amounts due on 31 January 2021 – a balancing payment for the 2019/20 tax year and the first payment on account for the 2020/21 tax year.

Taxpayers with up to £30,000 of self assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. This means that self assessment liabilities due in July 2020, and those due in January 2021, will not need to be paid in full until January 2022. Any self assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay self assessment helpline to agree a payment plan.

Internet link: Gov.uk news

The Bounce Back Loan Scheme (BBLS) has provided support to many UK-based small businesses. Loans are between £2,000 and £50,000, capped at 25% of turnover, with a 100% government guarantee to the lender. The borrower does not have to make any repayments for the first 12 months, with the government covering the first 12 months’ interest payments. Under a Pay as you Grow scheme businesses will have options to:

• repay their loan over a period of up to ten years
• move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times)
• pause their repayments entirely for up to six months (an option they can use once and only after having made six payments).

Coronavirus Business Interruption Loan Scheme

The Coronavirus Business Interruption Loan Scheme provides loan facilities to UK-based businesses with turnover under £45 million. The scheme provides loans of up to £5 million with an 80% government guarantee to the lender. The government does not charge businesses for this guarantee and also covers the first 12 months of interest payments and fees.

The government has announced that as part of the Winter Economy Plan it intends to allow CBILS lenders to extend the term of a loan up to ten years.

The government is also extending the CBILS and BBLS to 30 November 2020 for new applications.

Applications for the Coronavirus Large Business Interruption Loan Scheme and the Future Fund will also be extended.

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The reverse charge represents part of a government clampdown on VAT fraud. Large amounts of VAT are lost through ‘missing trader’ fraud. As part of this type of fraud, VAT is charged by a supplier, who then disappears, along with the output tax. The VAT is thus lost to HMRC. Construction is considered a particularly high-risk sector because of the potential to make supplies with minimal input tax but considerable output tax.

The reverse charge does not change the VAT liability: it changes the way that VAT is accounted for. From 1 March 2021 the recipient of the services, rather than the supplier, will account for VAT on specified building and construction services. This is called a ‘reverse charge’.

The reverse charge is a business-to-business charge, applying to VAT-registered businesses where payments are required to be reported through the Construction Industry Scheme (CIS). It will be used through the CIS supply chain, up to the point where the recipient is no longer a business making supplies of specified construction services. The rules refer to this as the ‘end user’.

Broadly then, the reverse charge means that a contractor receiving a supply of specified construction services has to account for the output VAT due – rather than the subcontractor supplying the services. The contractor then also has to deduct the VAT due on the supply as input VAT, subject to the normal rules. In most cases, no net tax on the transaction will be payable to HMRC.

The charge affects only supplies at standard or reduced rates where payments are required to be reported via CIS and not to:

• zero-rated supplies;
• services supplied to ‘end users’ or ‘intermediary suppliers’.

Under the scheme a VAT-registered business, receiving a supply of specified services from another VAT-registered business, for onward sale, on or after 1 October 2020:

• should account for the output VAT on supplies received through its VAT return
• does not pay the output VAT to its supplier on supplies received from them
• can reclaim the VAT on supplies received as input tax, subject to normal VAT rules.

The supplier should issue a VAT invoice, indicating the supplies are subject to the reverse charge.

An end user should notify its end user status, so the supplier can charge VAT in the usual way.

Internet links: Gov.uk guidance gov.uk technical guidance