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This week's opinion: 16 July 2020

14 July 2020 / Andrew Hubbard
Issue: 4752 / Categories: Comment & Analysis
Unusual announcements for a chancellor to make

I am sure that Rishi Sunak didn’t go into politics to subsidise restaurant meals, nor could he have dreamt that he would be rewarding employers simply for keeping staff in employment. Neither of these policies can be guaranteed to work – hence HMRC’s Jim Harra requiring a formal instruction from the chancellor to approve them – but they are at the very least an imaginative way to tackle the risk that unemployment will spiral out of control. Both measures will inevitably result in subsidies going where there is no need for them, such as to businesses that have revived and need no support, but this is inevitable for schemes that need to be rolled out quickly with minimal compliance requirements. This has been a feature of all of the coronavirus support to date and, on balance, it seems to have worked, although those who have fallen the wrong side of the line will have a different opinion.

The possibility of fraud is ever-present. Already I have seen calculations showing that it would be financially advantageous for a restaurant to create non-existent sales invoices up to the £20 limit. The extra tax on those sales would be less than the government subsidy. While that was a purely theoretical illustration I have no doubt that there will be attempts to exploit the system. We would all encourage strong HMRC action to prevent such fraud and I was heartened to read of the first arrest for alleged abuses of the job retention scheme (

Doubtless the autumn Budget will start the process of rebuilding the public finances through tax increases – so enjoy subsidised meals while you still can: frugal times lie ahead.

If you do one thing...

Read the guidance on how the reduced rate VAT scheme for hospitality will operate. Note in particular the effect on the flat rate scheme (

Issue: 4752 / Categories: Comment & Analysis
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