NEWS – TUESDAY 28TH APRIL 2020
NEWS – TUESDAY 28TH APRIL 2020
CORONAVIRUS (COVID-19) SUPPORT FOR BUSINESS
FINANCE NEWS – TUESDAY 28TH APRIL 2020
Rishi Sunak launches bounce back loan scheme for small firms
The Chancellor has launched a new loan scheme for Britain’s smallest firms following intense lobbying over fears millions of businesses would never recover from the coronavirus lockdown. The new “Business Bounce Back” loans will be 100% guaranteed by the taxpayer and will provide firms with up to 25% of their turnover up to £50,000 with no interest payable in the first year. Rishi Sunak has come under fire for the Coronavirus Business Interruption Loan Scheme (CBILS) designed for SMEs after businesses complained that lenders were complicating credit decisions. Under CBILS, firms with turnover of up to £50m are allowed to apply for loans of up to £5m with 80% of the debt backed by the government. Small firms applying under the new scheme need to fill out just a “simple, quick, standard form”, Mr Sunak said, while banks will not need to perform any “forward looking tests of businesses viability”. Yesterday, the Bank of England said banks should rely “on judgement in the absence of financial forecast information” when making credit decisions. Banking body UK Finance responded by saying that lenders “will only ask businesses [applying for CBILS-backed lending] for information and data they might reasonably be able to provide at speed.”
TAX NEWS – TUESDAY 28TH APRIL 2020
Tax avoidance – should we punish past misdemeanours in the middle of a pandemic?
Following a call from leading clergyman for companies based in tax havens to be denied government help during the coronavirus pandemic, Labour MP Peter Kyle pressed the Chancellor to push such companies to adjust their behaviour once the crisis is over. In response, Rishi Sunak said simply that it was important that businesses “act responsibility”, but did not set out any plans to bar tax-avoiding firms from state bailouts. Elsewhere, Margaret Hodge, another Labour MP and former head of parliament’s public accounts committee, says multinationals that avoid paying tax in the UK should be made to repay their loans before paying dividends. Singling out Starbucks, Virgin Active, Arcadia and The Range, Dame Margaret suggests in a piece for the Times that the government require companies to demonstrate they make a “fair contribution to the public coffers by paying their tax” before they can benefit from state aid. “The law-abiding taxpayer will settle for nothing less.” Finally, the Telegraph’s Matthew Lynn asserts that such arguments are moot considering if the companies are not helped they will be paying no further taxes anyway. Lending to them regardless of their past behaviour now means the government can influence how they are run in the future. In the middle of the worst recession in history, “we need to make sure that each bailout remains a purely economic decision. Everything else can wait for later.”
Tax avoidance products in decline
According to a survey of market onlookers, advising consultants and tax specialists, the majority now believe tax avoidance practices are far less widespread. The respondents to the survey suggested that the regulation and political actions taken during the last decade had significantly reduced the options available to make tax avoidance possible. Rachael Griffin, tax and financial planning expert at Quilter, said: “People are now more likely to steer clear of schemes that skirt close to the boundaries of what is acceptable for fear that it may be challenged at a later date.”
CORPORATE NEWS – TUESDAY 28TH APRIL 2020
Private equity firms seek rule change to gain aid access
The British Private Equity & Venture Capital Association is working with the Treasury and the British Business Bank, along with its counterparts in Europe, to persuade Brussels to adjust EU laws preventing companies deemed to be in financial distress from being bailed out by taxpayers. The “undertaking in difficulty” provisions mean a firm applying to the government’s Coronavirus Large Business Interruption Loan Scheme (CLBILS) would be turned down if its accumulated losses exceed 50% of its share capital. Private equity firms typically load the buyout target with debt, sometimes secured from low-tax countries, reducing corporation tax while accumulated losses can also offset future liabilities. They say the European Commission should amend the scheme so businesses that were “funded primarily by debt, are investing heavily to grow and are otherwise performing well (save for the current crisis)” could apply.
NMC Health to quit London Stock Exchange
Private hospital firm NMC Health has revealed plans to quit the London Stock Exchange after issues with its finances led to a two-month share suspension. Richard Fleming, joint administrator of NMC Health and managing director of turnaround firm Alvarez & Marsal, commented: “We are working at pace to ensure continuity of patient care, stability for staff and suppliers and financial security for NMC’s operating companies.”
EMPLOYMENT NEWS – TUESDAY 28TH APRIL 2020
HMRC moves to combat double counting furloughed workers
The accuracy of data on furloughed workers has been questioned after HMRC said it would end daily reporting and move to a weekly update on the numbers. The move aims to avoid double counting those workers who have more than one job and so could show up several times. Figures suggest that more than 4m people are now relying on the scheme, which covers 80% of employees’ wages up to £2,500 a month. Tej Parikh, chief economist at the Institute of Directors, commented: “While double-counting may be affecting the overall number of individuals affected, it’s still valuable to be able to put a figure on how many jobs are being protected by the scheme. Gauging which sectors are engaging most with the system can help our understanding of the current impact on the economy.” Meanwhile, the Chancellor Rishi Sunak is discussing with business groups and unions how to phase out the job retention scheme to avoid a surge in unemployment when it ends.
INDUSTRY NEWS – TUESDAY 28TH APRIL 2020
Coronavirus should not be an excuse to slow audit reform
The FT’s Lombard says it is more important than ever that audit reform goes ahead, with a stable number of mid-tier firms vital for a competitive well-functioning market going forward.
PERSONAL FINANCE NEWS – TUESDAY 28TH APRIL 2020
Car finance protection ‘could lead to financial difficulty later on’
Experts at AA Cars have said newly-introduced car finance protection will ensure drivers are “greatly reassured”. New guidelines by the Financial Conduct Authority allow for car finance policies to be frozen for up to three months. Duff & Phelps spokesperson Mike Turner urged firms to be cautious when granting payment freezes, warning that some customers could find themselves in “greater financial difficulty” at a later date.
ECONOMY NEWS – TUESDAY 28TH APRIL 2020
Business leaders eye cautious return to work but fear second wave
As Boris Johnson assures the country that discussions will this week take place about how the country can get back to work, the Business Secretary Alok Sharma has been working with businesses and unions on guidance covering outdoor, leisure, offices, non-food retail, factory and warehousing. The work will feed into central plans for lifting the lockdown. Some business leaders are calling for greater clarity, such as Adam Marshall, director-general of the British Chambers of Commerce, who said information about the timeline was needed to help businesses prepare. Elsewhere, Kate Nicholls, chief executive of UK Hospitality, said: “With social-distancing measures still in place, reopening the hospitality sector without a plan would be catastrophic.” Ryanair boss Michael O’Leary also warned against risking a second lockdown, arguing that plans to have airlines running partial services were “idiotic”.
English councils plead for £10bn to cope with coronavirus
The Chartered Institute of Public Finance and Accountancy has said at least £10bn will be needed to help English local authorities survive the coronavirus pandemic – just £3.2bn has been offered so far.
OTHER NEWS – TUESDAY 28TH APRIL 2020
Furloughed employees urged to utilise new skills toolkit
Gavin Williamson, the Education Secretary, is today launching a toolkit offering furloughed workers free lessons in video calling and everyday maths. “The Skills Toolkit” will also include online lessons on how to code and use social media and have been developed by Leeds University, The Open University and the Institute for Coding. Mr Williamson urges businesses to encourage their furloughed employees to use The Skills Toolkit to “improve their knowledge, build their confidence and support their mental health”.
Contact Paul Southward