While the Chancellor didn’t announce any changes to direct tax there was some welcome news of short-term measures to reduce indirect tax to stimulate business and house buying. What’s the full story?

VAT and hospitality

Two of the main benefactors of the measures announced by the Chancellor were the hospitality and tourism sectors. Apart from the government picking up as much as half the tab if you eat out during August, restaurants, cafes, hotels and visitor attractions will also be able to charge a reduced rate of VAT, 5% instead of 20%. The idea is to lower prices to encourage more customers. Of course, it will be up to businesses whether they pass on the VAT reduction to customers or keep their prices the same and so more directly benefit from the VAT cut. We’re waiting for HMRC to publish the details of the VAT rate change, e.g. exactly what types of goods and services it will apply to. In the meantime, if you’re in the sectors affected, we can tell you that the reduced rate will apply from Wednesday 15 July until 12 January 2021 inclusive. We’ll bring you the full details as soon as they are available so that you can make the necessary changes to your tills and other billing processes ready in time for 15 July.

Stamp duty land tax only

The Chancellor confirmed the recently announced temporary changes to stamp duty land tax (SDLT). The measure only applies to purchases of residential properties in England and Northern Ireland. So far, the Welsh and Scottish governments haven’t announced changes to their equivalent taxes. The standard nil rate threshold for SDLT on residential property transactions will be increased from £125,000 to £500,000. This took effect for sales completing on 8 July and will apply to sales completing on or before 31 March 2021.

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