NEWS – FRIDAY 27TH MARCH 2020
NEWS – FRIDAY 27TH MARCH 2020
TAX NEWS – FRIDAY 27TH MARCH 2020
Sunak reveals financial support package for self-employed
The Chancellor has announced that self-employed workers can apply for a grant worth 80% of their average monthly profits – up to a maximum of £2,500 a month – to help them cope with the financial impact of coronavirus. Rishi Sunak said the cash will be paid in a single lump sum, but will not begin to arrive until the start of June at the earliest, due to the complexity of the scheme. The Chancellor has been warned the delay could see millions left unemployed. The scheme will only be open to those with trading profits of up to £50,000 a year, covering 95% of those who earn the majority of their money from self-employment. Mr Sunak said that the 5% who are not covered by the scheme will have an average income of about £200,000 a year.
Financial Times, Page: 1 The Daily Telegraph, Page: 1 BBC News The Times, Page: 6 The Guardian, Page: 6, 7 Daily Mail, Page: 6 City AM The Sun, Page: 10 Yorkshire Post, Page: 1 The Scotsman, Page: 1, 4-5
FOLLOW THESE LINKS TO THE GOV.UK FOR FURTHER DETAILS:
Claim a grant through the coronavirus (COVID-19) Self-employment Income Support Scheme
Use this scheme if you’re self-employed or a member of a partnership and have lost income due to coronavirus.
Covid-19: Support for Businesses
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Self-employed to pay more tax after state bailout
Rishi Sunak has warned that the tax treatment of the self-employed would have to change when the COVID-19 crisis is over. After announcing the coronavirus support package for contractors the Chancellor said: “I must be honest and say that in devising this scheme in response to many calls for support, it is now much harder to justify the inconsistent contribution between people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally in future.” Mike Cherry, the national chairman of the Federation of Small Businesses, praised the “hugely ambitious” package but said: “Now is not the time to be talking about major long-term structural reform of the tax system.” But the Resolution Foundation put the cost of the latest support scheme at £10bn and said a review of the tax disparity was “long overdue”.
The Daily Telegraph, Business, Page: 2, 3 Daily Mail, Page: 8
REPORTING NEWS – FRIDAY 27TH MARCH 2020
FRC issues COVID-19 guidance
The Financial Conduct Authority (FCA), Financial Reporting Council (FRC) and Prudential Regulation Authority (PRA) have announced a series of actions to ensure that information continues to flow to investors and to support the continued functioning of the UK’s capital markets. London-listed companies will now be permitted an extra two months to publish their audited annual reports, giving them six months from their financial year end, rather than the usual four. The FRC has published guidance for companies preparing financial statements and a bulletin for auditors covering factors to be taken into account when carrying out audits during the current COVID-19 crisis. Because of the “unprecedented level of uncertainty”, more companies would have to qualify their “going concern” statements, it said. Auditors have also been asked to be more sceptical before signing off “going concern” verdicts. David Rule, Executive Director of Supervision on at the FRC, said: “The current COVID-19 pandemic presents very real difficulties to companies and their auditors. The package of measures is designed to give both the ability to consider the impact of COVID-19 more comprehensively in the light of government and other responses and provide markets and investors with the information they need to make informed decisions.” Hemione Hudson, head of audit at PwC, welcomed the changes. “Company directors and auditors will all need to perform more work on going concern judgments, and there is a greater likelihood of modifications to audit opinions during this period of disruption,” she said. The FCA also called on investors and other market participants not to draw “undue adverse inferences” from companies that chose to take advantage of the new rules and delay reporting: “For a great many companies it will be a sensible decision to make in unprecedented times.” The PRA told banks to take “well-balanced decisions” when assessing covenant breaches on loans by businesses. Banks should differentiate between “normal” breaches and those occurring because of the COVID-19 pandemic, the regulator said.
Beancounters, bankers and investors mustn’t sweat the small stuff
The FT’s Cat Rutter Pooley says auditors, directors and shareholders will need to take a “lighter touch” to ensure minimal damage to companies during this crisis, arguing that regulators are united behind them.
Goodwill hunting: accountants in the spotlight
Goodwill in accounting – an intangible asset that is recorded when a buyer acquires a business – has risen up the political agenda in the profession, on both sides of the Atlantic. The London-based International Accounting Standards Board (IASB) was in the spotlight for a time, in the wake of high-profile collapses such as Carillion, with goodwill inaccurately blamed as the basis for such failures, while in the U.S. goodwill has become a priority at the Financial Accounting Standards Board (FASB), due to prominent cases involving GE and Kraft Heinz. In a piece for City AM Mohini Singh, director of financial reporting policy at the CFA Institute, says that one solution, the gradual writing-off of goodwill, will only artificially improve ratios, such as return on assets over the amortisation period. She argues that “delayed write-downs by poor management at several high-profile companies, or in connection with high-profiile corporate failures, should not be seen as widespread evidence of the need to replace impairment with amortisation of goodwill”.
SMEs NEWS – FRIDAY 27TH MARCH 2020
UK banks pressured to relax bailout loans rules
The government has chided banks for requiring borrowers to provide personal guarantees in order to access new emergency loans backed by the state with Downing Street declaring that no lender was allowed to “take a guarantee against the borrower’s home … We will take all action necessary to ensure that the benefits of the measures are passed on.” But one banker said, “the scheme design obliges us to follow normal credit procedures. They need to rethink it.” Yesterday, Barclays, Royal Bank of Scotland, Lloyds Banking Group, Virgin Money and HSBC said they would not ask customers for personal guarantees on loans up to £250,000, but larger loans could require security which may include personal guarantees. Meanwhile, the Chancellor has promised a “workaround” for businesses too small to have an investment grade rating and too big to qualify for the SME-focused scheme.
Small business alarm drives steep fall in employer confidence
The latest jobs report from KPMG and the Recruitment and Employment Confederation (REC) shows small businesses are most concerned about the economy as the coronavirus crisis rumbles on. A fall in sentiment among small businesses drove employer confidence down 22 percentage points in March to a net figure of -23%. Neil Carberry, REC chief executive, said: “It’s no surprise that this global pandemic has caused the UK’s labour market to stall…When the storm passes we will bounce back, and quickly.”
Blackstone promises arches firms rent holiday
Private equity giant Blackstone has agreed to give small businesses renting properties in railway arches a three-month rent holiday, rather than a deferral for three months – a position the firm had been criticised for. The Arch Company, which manages the portfolio on behalf of Blackstone and another investor, Telereal Trillium, said a £10m hardship fund would be used to cover the cost.
The Times, Page: 43
PROPERTY NEWS – FRIDAY 27TH MARCH 2020
Banks call for freeze on UK housing market
Government ministers are in talks with banks about instituting a full suspension of the housing market after ministers told buyers and sellers to delay transactions because of the coronavirus outbreak. Industry group UK Finance said it had been seeking “urgent clarification from the Government about whether home purchases should continue at the current time, particularly as physical property valuations are no longer possible.” Additionally, UK Finance announced that banks would grant homebuyers who have exchanged contracts the option of the three-month extension to their mortgage offer.
Property companies need debt holiday to survive
Landlords are calling on the government to waive their debt commitments to help them navigate the three-month rent moratorium given to tenants. All commercial property tenants have been allowed to defer rent payments for a quarter without risk of eviction. But Andy Pyle, head of real estate at KPMG, said that had put property companies “under increased pressure to pay interest on their loans” and some risk default. Melanie Leech, chief executive of the British Property Federation, said that property owners were “facing the impacts of coronavirus on their own businesses and will need further support if they are going to help as many businesses as possible come through the next few weeks”.
PENSIONS NEWS – FRIDAY 27TH MARCH 2020
Industry responds to FCA delay of DB rules
The Financial Conduct Authority’s decision to delay publishing new rules on contingent charging has received a mixed response. Steven Cameron, pensions director at Aegon, welcomed the regulator’s decision to delay its policy statement on reforms to the defined benefit pension transfer market. But Clive Harrison, partner at LCP, said delays to pension transfer rules could jeopardise pension scheme members in the current coronavirus lockdown.
Pension income falls
Data published by the Department for Work and Pensions shows the average weekly income from pensions has continued to fall as numbers of defined benefit pensions dwindle. In 2018-19, the average income from occupational pensions received by individuals who have reached state pension age was £181, down 10% from £199 in 2016-17. The DWP also found over the past three years the average income from personal pensions received by individuals who have reached state pension age has fallen by 43%, from £30 per week in 2016-17 to £17 in 2018-19.
ECONOMY NEWS – FRIDAY 27TH MARCH 2020
Bank of England warns of ‘very sharp’ economic downturn
The Bank of England warned on Thursday that the UK economy would suffer “a very sharp reduction in activity” as the coronavirus outbreak forces businesses to close and sharply reduces consumer spending. Leaving interest rates on hold at the lowest levels in its 325-year history, the Bank said long-term damage to employment and growth was likely as the government steps up its efforts to contain the disease. The Monetary Policy Committee pledged to take whatever steps necessary to prevent disorderly financial markets amplifying the downturn as it warned of longer-term damage to the economy. The bank also published its business condition report, in which the economic situation was described by many of its regional agents as “being worse than the financial crisis in 2008”.
Consumer confidence in UK plunges
Consumer sentiment dropped 29 points to minus 26 between December last year and this March, the sharpest quarterly fall in more than 10 years, according to a survey by PwC. However it is higher than the minus 51 recorded in October 2008, indicating that stimulus measures are paying off. Lisa Hooker, Consumer Markets leader at PwC, said: “Despite the magnitude of the challenges facing the country, government intervention in the past week does seem to have cushioned the blow for many families […] The question is whether this will be enough to hold up consumer sentiment should the current lockdown measures last longer than expected.”
IFS predicts £200bn deficit
New analysis from the Institute for Fiscal Studies (IFS) project that the national deficit could rise to £200bn or more next year – far higher than the £158bn seen in 2009 and four times the amount forecast by the Office for Budget Responsibility (OBR) two weeks ago.
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