NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
TAX NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Tax traps loom as market freeze holds up sales
A property market frozen due to the coronavirus pandemic is pushing an increasing number of homeowners towards an additional 3% stamp duty charge as they approach the end of a three-year limit on selling their old home after acquiring or building a second one. Chris Etherington of RSM said: “There will be a significant number of people who were hoping to sell their former homes this year and reclaim the surcharge but will not be able to do so.” Robert Salter of Blick Rothenberg also points out that a change to CGT rules could sting – before April 6, families had 18 months in which to sell a second home that was previously their main residence without paying CGT. Now they have nine months and if required to pay will have just 30 days to do so, rather than at the end of the year as before.
The Daily Telegraph, Money, Page: 3
Post-COVID society will reject the selfish
The Independent’s Chris Blackhurst believes the coronavirus pandemic must bring about a more fair society, with arguments for wealth taxes on individuals and businesses bound to grow louder while tax havens will face increased scrutiny. Blackhurst predicts too that pressure to bridge the inequality gap will mean “that anyone found to be attempting to lessen their dues can expect to be pilloried, their reputation badly tarnished, their business ostracised and frozen out of government work.” The Times’ Philip Aldrick also looks forward, concerned that the young will suffer higher taxes for years to pay for the UK’s spiralling debt. He points the finger at the wealthy self-employed, who he calls “villains” and accuses of using capital gains to dodge tax for decades.
The Independent, Page: 56 The Times, Page: 47
A flat tax is fairest way to resolve US ‘Swiss cheese’ problem
Dan Thornton, retired VP of the Federal Reserve Bank of St Louis, says that a flat tax would be the most radical solution for the US; and would mean the tax code could fit on a single page.
Cash-in-hand probes target lap dancers and dog breeders
Analysis by Pinsent Masons indicates that, in the 12 months to the end of March this year, HMRC has collected £540m in extra revenue from industries such as adult entertainment and dog breeding as it clamps down on sectors where it believes tax evasion and avoidance are rife. Andrew Sackey, a partner at Pinsent, said: “HMRC sees task forces as a key part of its ‘promote, prevent, respond’ strategy to boost tax revenues and change taxpayer behaviour. The additional funding pledged to HMRC’s compliance work in the March 2020 budget shows how cracking down on tax evasion remains a priority for the government.” There are 209 specialist task forces and Pinsents says other sectors under particular scrutiny include the tobacco industry, offshore property developers, the Scottish fishing industry and market traders.
Clubs face £70m in lost revenue
If Premier League clubs are forced to play the season’s remaining matches at neutral grounds due to coronavirus restrictions, they could face a £70m commercial loss, according to estimates by Duff and Phelps. The firm’s managing director Mike Weaver said: “If they are played at their own stadia, the majority of that would likely be recoverable.”
The Sunday Telegraph, Page: 33
Glazers accused of greed
The small print in Manchester United’s results show the football club decided to defer their £10m VAT bill to the UK Government for a year, but still made an £11m dividend payment, £8.5m of which will go to the Glazer family. The payment comes a week after the club announced that their net debt had risen by £127.4m to £429.1m.
The Mail on Sunday, Page: 140
A consumption tax is one way to pay for COVID-19
Ira Sohn suggests a consumption tax on social media platforms and other co-morbidities of “screen addiction” would help pay for the economic damage inflicted by COVID-19.
CORPORATE NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Specialist Leisure Group collapses into administration
The owner of coach company Shearings has collapsed into administration, putting around 2,400 jobs at risk. EY, the administrator for Specialist Leisure Group, had tried to find a buyer but it had not been possible. Richard Calvert, SLG chief executive, said: “This is a terribly sad day for employees, customers and commercial partners […] The effects of COVID-19 on our 117-year-old company and the wider travel industry have been devastating.”
Carluccio’s bought by Giraffe owner in deal that cuts 1,000 jobs
Carluccio’s has been bought out of administration by Boparan, the owner of Giraffe restaurants. The deal saves 800 jobs and 30 sites at the Italian chain, but 40 restaurants will close and more than 1,000 jobs will be lost, more than half the total workforce. FRP , acting as joint administrators on the sale, said the coronavirus pandemic had put “incredible pressure” on businesses in the leisure sector.
JLR seeks £1bn lifeline
Jaguar Land Rover is in talks to borrow more than £1bn through the UK’s emergency coronavirus lending program as the company battles to survive a collapse in car sales brought on by the coronavirus pandemic. JLR, which is owned by Indian conglomerate Tata, is also seeking tax breaks, research grants and other subsidies, according to people familiar with the matter, which could bring the total aid package to nearly £2bn. However, the company has disputed this figure. Tata may be required to back part of the UK government loan to secure the funding.
Pizza Express appeals for permission to delay accounts
Pizza Express is seeking to delay its 2019 accounts as the casual dining chain races to restructure its heavily indebted finances. The company is appealing to bondholders to give their consent to the delayed filing. Pizza Express has more than 600 sites and employs 14,000 people globally while bond investors are owed £1.1bn.
The Sunday Telegraph, Business, Page: 1 The Mail on Sunday, Page: 117
Aerospace sector faces being slashed by a quarter
Aerospace trade body ADS fears up to 25,000 UK jobs will go in the sector because of the collapse in air travel resulting from COVID-19 – almost a quarter of all jobs in the industry. Analysts expect it to take two years for demand for aircraft to be back to 75% of pre-coronavirus levels, “meaning the global fleet is a quarter too large.” Paul Everitt, chief executive of ADS, adds that the government needs to bring forward defence and space programmes to retain key skills and jobs as well as extra funding for new technologies as a means to support the industry through the downturn.
Debt disputes circle in LCF administration
The Times reports on a tussle between administrators handling the fallout from the London Capital & Finance (LCF) collapse. Smith & Williamson is the administrator of LCF and, jointly with CMB Partners, has the same role at London Oil & Gas. Kirker & Co is handling the administration of London Power Corporation, which Smith & Williamson says owes over £8m to London Oil & Gas, which was the main borrower from LCF receiving £124.1m. Kirker & Co disputes the debt and argues £1.3m of debt is due to London Power Corporation from London Oil & Gas, which is similarly disputed by the other side.
Lenders seek advice on Virgin Atlantic exposure
The Telegraph reports that Deloitte has been hired by Virgin Atlantic’s lenders to advise them on their exposure to the carrier. The banks have at least £250m owed to them, according to Sky News.
Business urged to avoid ‘destructive’ COVID-19 disputes
Fresh guidance from the government urges businesses to negotiate or seek mediation in contract disputes relating to COVID-19 before heading to court in a move designed to encourage “responsible and fair behaviour”.
Labour embarks on City charm offensive
The FT reports on how Labour is looking to heal divisions with the City, sending Shadow Economic Secretary to the Treasury Pat McFadden out to repair bridges.
SMEs NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Big business urged to repay grants meant for small firms
Oil giant Shell has been taking cash grants meant for small businesses from the Retail, Hospitality and Leisure Grant Fund (RHLGF) through its network of petrol stations, the Sunday Telegraph reveals. The RHLGF was set up to enable businesses to access grants of £25,000 against properties with a rateable value of under £51,000. Shell assured the paper that it would return the funds and that it “was not our intent” to take advantage of the scheme. A spokesman for the Business Department urged other companies to follow Shell’s example: “Some larger companies have acted responsibly by returning funds and this is the approach we expect.” Tui, Poundstretcher and Travelodge have also received RHLGF money, the Telegraph reports.
US-backed start-ups could get Treasury support
The Treasury is considering plans to give American-owned start-ups access to government cash. If the businesses are based in Britain but have been through US accelerator programmes they could gain access to the government’s Future Fund. The Sunday Times posits that relaxing the rules could spark a row about taxpayers supporting businesses with overseas investors.
Small business champion optimistic credible scheme will be in place this Autumn
The Times’ James Hurley talks to Lewis Shand Smith, chairman of the nascent Business Banking Resolution Service (BBRS), which has still not gone live due to ongoing arguments over which small businesses will be eligible for its support. Banks say those who have been through a previous redress process, or who have tried to sue their bank, should be unable to apply, but SME representatives say the credibility of the scheme will be fundamentally undermined if valid cases are excluded. Mr Shand Smith says his team have developed a nuanced approach that will see individual cases assessed on their merit but campaigners fear the eligibility issue could leave the organisation unstuck. Ian Lightbody tells the Times that “banks are pushing back like you wouldn’t believe”. Shand Smith concedes there are “knotty points to unpick,” but insists that “none are insurmountable.”
EMPLOYMENT NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Employers to pay a quarter of wages from August
The Chancellor, Rishi Sunak, is expected to announce next week that employers will have to pay at least a fifth of the wages of furloughed employees from August. All companies using the scheme will be required to cover between 20 and 30% of people’s wages, even if they are still under lockdown, the Times reports. They would also be required to cover the cost of employer’s national insurance contributions, on average 5% of wages, but the government will continue to pay pension contributions. Businesses will be allowed to take furloughed workers back part time for as many hours a week as they want. A Treasury source said: “We’ve got two full months of support left and afterwards the government will help to pay people’s wages, but it’s fair to everyone that businesses contribute as they get back to work.”
The Sunday Times The Observer
Reed warns of ‘tsunami of job losses’
The chairman of recruitment firm Reed has warned of a “tsunami of job losses” in the UK when the government’s furlough scheme comes to an end. “Companies I talk to are a half or a quarter of the size they were when they furloughed people, or they are on the verge of going bankrupt.” Jamie Reed says.
PERSONAL FINANCE NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Call to extend car finance relief
Motor industry experts have said owners with finance should be given an extra three-month break from paying their bills after mortgage holidays were extended to help borrowers. The Finance and Leasing Association said that in the eight weeks to May 1st, members had received an estimated 1,243,000 requests for COVID-19 related forbearance from customers, 82% of which had been granted by that date. Andrew Burn, an automotive expert at consultant KPMG, adds: “The last thing wanted is a load of repossessed vehicles coming back into the market – just as the manufacturers are trying to start production.”
The Daily Telegraph, Business, Page: 29
PROPERTY NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Mortgage holiday scheme extended to September
The Treasury has confirmed that the mortgage payment holiday scheme is set to be extended for a further three months. The scheme had been due to end in June after launching in March and aiding more than 1.8m homeowners. The Treasury and Financial Conduct Authority said borrowers would either be able to continue to withhold payments until the end of September or start making reduced payments instead.
Landlords facing further coronavirus woes
Landlords in the North of England are facing tax hikes and the threat of rising arrears from tenants as the COVID-19 pandemic continues to take its toll. Eight of the 10 cities with the largest increase in Universal Credit claims are spread across the three regions where landlords are the most leveraged, new research from think-tank Centre for Cities has found.
The Daily Telegraph, Page: 3
Code of conduct underway for landlords and tenants
A “code of conduct” is being drawn up by ministers to ease mounting tensions between commercial landlords and businesses struggling or refusing to pay rent. Landlords, tenants and officials are attempting to thrash out rules to help tackle a backlog of disputes that has built up through the pandemic. Landlords collected about one third of the £2.5bn usually paid by retail tenants on the March quarterly rent day and are braced for worse in June. Melanie Leech, chief executive of the British Property Federation, said a “united approach” was needed while Dominic Curran, property policy adviser at the British Retail Consortium, said a code could only work if it was binding on all parties. He is also calling for it to be linked to longer debt enforcement bans, and for direct help on rent from the Government.
INVESTMENT NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Shake-up in private equity is due
The Sunday Times’ Oliver Shah says the private equity industry “doesn’t deserve to be penalised as a matter of course” during the coronavirus crisis just because it has its share of bad actors. However, Mr Shah suggests a reckoning is due for those “buyout barons” who use debt to manufacture statutory losses and lower corporation tax bills. EU state-aid rules say that distressed companies whose accrued losses exceed 50% of their share capital should not be eligible for support. So businesses such as the steak chain Hawksmoor have been rejected for government assistance. But it should be allowed to go bust and taken over by another investor who is not so aggressive with their accounting, Shah suggests. The use of carried interest to lower tax bills on partners’ earnings should also be addressed, asserts Shah, who concludes by saying: “In private equity, as in any other industry, the profit motive – even greed – is fine. But it shouldn’t be subsidised by the state.” The paper’s Sabah Meddings looks at the issue too, citing one investment banker who says when private equity was called venture capital, it was high-risk, but now “it’s all been offshore companies in tax havens and multibillion-pound funds – and this isn’t risk capital, it’s financial engineering and flipping assets on.”
Officials consider £25bn sovereign wealth fund
The government is actively considering the creation of a £25bn sovereign wealth fund that will take stakes in struggling regional firms in the wake of the coronavirus crisis. The plans have been proposed by peer Jim O’Neill who tells the Mail on Sunday that companies could also use the taxpayer funding to convert any onerous debt incurred during the crisis into an equity stake.
The Mail on Sunday, Page: 113
FINANCE NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Starling defends BBLS performance
Oliver Shah examines the performance of Starling Bank in distributing state-backed emergency loans to small businesses in the Sunday Times. Starling is the only fintech aside from Tide to be accredited to lend under the government’s Bounce Back Loan Scheme (BBLS) and many say the digital bank has failed to deliver. Led by Anne Boden, Starling has been accused of using credit checks to reject bounce back customers, against application rules outlined by the British Business Bank, and of conducting a mass decline of applications mid-May, something the bank denies happened. Starling has also rowed back on a promise to make the loans available to new customers, saying now that they cannot apply until next month. But Boden insists the lender can cope with the demand: “We have a highly automated process and our response and turnover were best in class.”
Bank of England works to bring fintechs into Term Funding Scheme
The Telegraph reports that talks on a support package for non-bank lenders have advanced but remain stuck over risk as non-traditional lenders do not have to comply with the same rules as mainstream banks. It is understood non-bank lenders would likely receive help through the Bank of England’s Term Funding Scheme (TFS), but funds would be channelled via a special purpose vehicle to reduce risk to the Bank. Non-bank and fintech lenders were behind £140bn of new credit to UK businesses and households in 2019, according to trade body the Finance & Leasing Association, and their leaders are now warning of collapse just when their customers need help most.
ECONOMY NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Borrowing rose to its highest level on record in April
Government borrowing climbed to £62.1bn in April as the UK fought to support the economy through the COVID-19 lockdown. Office for National Statistics data also show the national debt climbed to £1,887.6bn, or 97.7% of GDP – up from 80.3% in April last year. April’s borrowing is the highest monthly figure since records began in 1993 and almost equals borrowing for the entire last financial year. Paul Dales, chief UK economist at Capital Economics, said: “With little prospect of a swift return this year towards pre-crisis levels of economic activity, we expect borrowing to total £340bn, 17.5% of GDP, over 2020-21.”
PM urged to build air bridges to drive recovery
Business leaders have written to Boris Johnson urging the PM to create “air bridges” to low or no-infection countries as soon as possible, arguing this would “be a vital step towards allowing British businesses to maintain connectivity as part of a sensible, risk-based measure.” Signatories to the letter include Airlines UK, the Federation of Small Businesses, Make UK, UKHospitality and the British Chambers of Commerce. They say quarantine measures announced by Priti Patel on Friday are a blanket approach which will have “significant consequences for the UK’s tourism and hospitality industry, and any sector of the economy which relies on air connectivity for their supply chains, recruitment and exports.”
Think tank warns of 10% unemployment rate
The Resolution Foundation warns that the coronavirus crisis could see a return to a jobless rate of 10% or more for the next five years, considering the number of universal credit claimants has risen to 2.1m since the pandemic struck Britain. The think tank said unless the government follows up the furlough scheme with further measures to shore up employment the rate could rise to an average of 10%, or 3.5m people out of work, at a cost to the Treasury of about £175bn in lost taxes and higher benefit spending over five years. Meanwhile, the Royal Society of Arts has called for a three-day week return-to-work plan which would see workers split into two teams working Monday-Wednesday or Thursday-Saturday.
Treasury draws up bailout plan for strategically important companies
The Treasury has outlined principles under which the government would rescue individual companies whose failure would “disproportionately harm the economy”, the FT reports. The plan, dubbed Project Birch, could see loans extended that made the taxpayer the primary creditor, but taking an equity stake is not thought to be the preferred option. Meanwhile, the Telegraph talks to experts who are backing the idea of the UK government taking equity stakes in companies it bails out amid the COVID-19 crash. Regarding Jaguar Land Rover, which is in talks about a loan of more than £1bn, Professor David Bailey at Aston University said having loan packages convertible into equity is a very good idea and could help form a new industrial policy, adding that governments holding a stake in automakers is less unusual on the continent. Tej Parikh, chief economist at the Institute of Directors, adds that a sovereign wealth fund could help deal w ith the problem of huge debt dragging on business investment in the months ahead. However, Professor Philip Booth at the Institute of Economic Affairs says an equity stake leaves the government with the lowest level of security and could lead to poor corporate governance with a company run by a mix of bureaucrats and politicians.
City centres may never be the same again
In a piece for the Times, KPMG chief economist Yael Selfin considers the future of big cities in a post-COVID-19 world as more people work from home and large retailers continue their struggle with online giants. The shift will see local communities and local trade outside economic centres further strengthened; but there is no reason why city centres should be hollowed out. Selfin suggests premises freed up could be occupied by university labs and college workshops that may collaborate with businesses and communities to create start-up accelerators, for example.
PENSIONS NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Hargreaves to pay out over unsuitable DB transfer advice
Hargreaves Lansdown’s advice arm has been ordered by the Financial Ombudsman Service to compensate a client after failing to properly assess his case for a pension transfer.
UK’s largest pension scheme stockpiles cash
Nest, the UK state-backed pension scheme, has increased its cash reserves from a normal range of 1-2% to roughly 5% due to risks developing as a result of the coronavirus pandemic.
INTERNATIONAL NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Beijing hits back at audit plan that imperils US listings
Proposals from the US Senate to force companies to delist from US stock exchanges if they do not comply with audits by the PCAOB “was directly targeted at China” and risked politicising securities regulation, China’s securities regulator stated on Sunday.
OTHER NEWS – HOLIDAY WEEKEND TO 25TH MAY 2020
Essex council borrows £1bn to fund solar deals
The FT reports on massive investments into solar farms made by Thurrock Council, which has used loans from 150 other UK local authorities and pension schemes to fund its renewable energy assets.
Luke Johnson: Speak up or we’ll be in a socialist lockdown forever
Luke Johnson warns in the Sunday Times that unless private sector bosses start speaking up about the merits of wealth creation and free markets they can expect to be swallowed up by “semi-permanent lockdown socialism”. He says almost the entire broadcast news agenda in the UK is filled with public sector voices. Of his recent experience on the BBC’s Question Time programme, Johnson says the other four panellists were all public sector: “None of them was fearful about losing their job because of COVID-19 and the lockdown; none of them would lose a defined benefit, taxpayer-underwritten pension; none had a business at risk of going bust; none was seeing redundancies in their organisation, having to beg for a loan or negotiate with creditors to survive; none was in rent arrears and worried about eviction; and they could all do their jobs comfortably at home.” Hard-left elements see this crisis as a great opportunity to expand the state, Johnson goes on, yet “entrepreneurs, and those who believe in markets, trade and the profit motive, seem paralysed and depressed.”
Richest nations face $17tn government debt burden from coronavirus
The OECD estimates that the increase in public debt among its members as a result of coronavirus will be worse than the $17tn rise seen during the financial crisis of 2008-09.
Contact Paul Southward