NEWS – TUESDAY 2ND JUNE 2020
NEWS – TUESDAY 2ND JUNE 2020
TAX NEWS – TUESDAY 2ND JUNE 2020
Sunak considers NI holidays while tax rises are unlikely
The Telegraph reports that Chancellor Rishi Sunak is considering national insurance holidays for companies as part of an economic recovery stimulus package set to be unveiled next month. Citing a source close to discussions on the measures being considered, the paper says tax increases under discussion in the Treasury, including raising income tax and VAT, are likely to be delayed until growth recovers. The source said: “This will not be a consolidation Budget – tax rises won’t happen until the recovery is in train”, adding: “If you raise taxes while the economy is struggling at 1%, you could choke off economic growth.” It is also suggested that stemming unemployment will be a focus of Mr Sunak’s stimulus package, with tax incentives or direct subsidies for employers who hire new staff among options that have been mooted.
Opinion: Tax cuts could boost recovery
Matthew Lynn in the Telegraph considers reports that Chancellor Rishi Sunak is planning to launch job creation schemes to help lift the economy, arguing that tax cuts and deregulation “will create new jobs far more effectively than lots of hastily assembled government projects.” Mr Lynn says that with supply chains shutting and firms sliding into administration, there will not be enough companies able to take on staff once lockdown measures come to an end. He suggests a large, temporary cut in employers’ national insurance would encourage lots of small companies to take a risk and bring in staff, while cuts in business rates could help entrepreneurs focus on working out ways of reviving “a shell-shocked high street”.
Saving inclination may blunt tax cuts
The Telegraph’s Tom Rees reflects on measures Rishi Sunak may turn to as he looks to nurse the economy back to health after the lockdown. Paul Dales, from Capital Economics, says the Chancellor could opt for reducing VAT and income tax to bolster incomes, or tweak stamp duty to lift the housing market. Kallum Pickering, UK economist at Berenberg, says that uncertainty may see people leaning toward saving while spending is needed to boost the economy. He comments: “Tax cuts won’t work because if you cut taxes when the inclination is to save, what will happen is saving goes up even further.”
The Daily Telegraph, Business, Page: 4
Scottish retail chiefs suggest tax cuts for workers
The Scottish Retail Consortium (SRC) has suggested tax cuts could help get the economy north of the Border restarted. In a submission to the Scottish Government’s Advisory Group on economic recovery, the SRC suggests a temporary income tax cut for workers, as well as a reduction or threshold change in Land and Business Transactions Tax to stimulate house sales, could play a role.
The Scotsman, Page: 5
FIRMS NEWS – TUESDAY 2ND JUNE 2020
Six businesses finding an upside in the coronavirus crisis
The FT names FRP Advisory among firms seeing positives amid the COVID-19 outbreak, saying financial pressure and challenges across a number of sectors have “provided rich pickings for restructuring experts”.
CORPORATE NEWS – TUESDAY 2ND JUNE 2020
Ted Baker in £95m cash call
Ted Baker has raised £95m in an emergency fundraising designed to see it through the coronavirus crisis. The proceeds from the placing, which excluded individual shareholders, will be used to cut debt and pursue a “digital first” strategy that will see it invest in online sales. It said that shareholders who did not participate would have their holdings diluted by 74%. The fashion chain hopes to sell a further £10m via an offer open to new and existing investors. The Times looks at pressures faced by the company in recent times, noting that it called in forensic accountants from Deloitte after overstating the value of its inventory by £58m, adding that KPMG, which was fined £2.1m for its work for Ted Baker in 2013 and 2014, will be replaced as its auditor by BDO.
The Times, Page: 34 Financial Times, Page: 7 The Daily Telegraph, Business, Page: 2 Daily Mail, Page: 73 The Guardian, Page: 29 City AM
Monsoon in rent warning
Retailer Monsoon Accessorize has warned landlords that unless rents are waived, it will have to shut down stores. Founder and owner Peter Simon, intends to buy the business back after putting it in administration, with Monsoon having been working with advisers at FRP with the aim of minimising its creditors’ losses.
Aldo in administration
Shoe chain Aldo has gone into administration, with administrators RSM keeping eight stores open while it explores further options for the retailer. Five stores, however, have closed, while its online platform remains active.
The Sun, Page: 43
PENSIONS NEWS – TUESDAY 2ND JUNE 2020
Experts voice concern over tax relief rule
Experts have voiced concern that pension withdrawals could face a tax charge that may affect future contributions, with Quilter writing to Chancellor Rishi Sunak calling for action to ensure pension tax penalties are not imposed on people returning to work after the coronavirus lockdown. The Money Purchase Annual Allowance means that if money is taken from a defined contribution scheme, the amount a person can pay into a pension and still get tax relief on reduces. Quilter has warned that this could hit savers using their pensions to cover a loss of earnings during the coronavirus pandemic. Jon Greer, the head of retirement policy at Quilter, said: “With millions of people being furloughed or made redundant, a huge number of people could be unfairly penalised.” He notes that a person topping up their income now will see their annual allowance cut by 90%.
ECONOMY NEWS – TUESDAY 2ND JUNE 2020
Hit to economy may be short and sharp
A report from Oxford Economics suggests a strong recovery following the coronavirus pandemic is likely, with the economic impact of the crisis potentially set to be sharp but short. The report, commissioned by ICAEW, says that as GDP has declined due to a planned, partial shutdown of the economy, activity and demand should in theory rebound as the economy reopens, with fiscal and monetary support rolled out by the Government and the Bank of England amid the pandemic helping drive an upturn. The study forecasts that further easing of lockdown measures in the coming months could deliver economic growth in the second half of the year. The report says GDP could dip 14% in Q2, while unemployment is likely to climb 3% from 4% at the start of 2020 to 7% by year end, with the Government’s furlough scheme helping ensure the increase is comparatively modest. The deficit, the report adds, is likely to hit £290bn in 2020 – around 14% of GDP. On issues that could hinder an economic recovery, Oxford Economics points to an extended lockdown, a second wave of COVID-19 infections, Government support being withdrawn too early and a collapse of trade talks between the UK and EU. ICAEW chief executive Michael Izza comments: “While this report sets out clearly the challenges facing the UK economy … it does provide some optimism that we will be able to rebound from this short, sharp shock.”
Government spending to exceed £1trn
Public spending is set to pass £1trn for the first time this year, with taxpayer money being pumped into efforts to support the country amid the coronavirus crisis. Cara Pacitti, an economist at the Resolution Foundation, said: “The unprecedented fall in economic activity, combined with the Government’s bold and necessary measures to support firms and workers through the crisis, are inevitably taking their toll on the public finances.” Isabel Stockton, an economist at the Institute for Fiscal Studies, said that if the Government continues to spend in a similar fashion, it will eventually need to generate more tax revenue. Government borrowing is this year expected to hit £300bn, or 15% of GDP, according to Office for Budget Responsibility estimates based on a three-month lockdown.
OTHER NEWS – TUESDAY 2ND JUNE 2020
Fraud warning over HMRC email
Fraud prevention organisation Cifas has warned of a coronavirus-related scam that sees fraudsters pretend to be from HMRC, sending an email offering support grants of up to £7,500. A link in the email takes the victim to an application page designed to steal their personal information.
Contact Paul Southward