NEWS – WEDNESDAY 29TH APRIL 2020
NEWS – WEDNESDAY 29TH APRIL 2020
TAX NEWS – WEDNESDAY 29TH APRIL 2020
Expect cuts to relief when crisis is over
The Telegraph’s Harry Brennan considers ways in which taxes could rise to pay for the coronavirus downturn, noting that March tax receipts were down £2.2bn compared with last year. This, says Paul Haywood-Schiefer of Blick Rothenburg, provides just a glimpse of what is to come. Sean McCann of NFU Mutual expects relief on passing unused pension assets or the seven-year rule on gifts to be the first things to be scrapped. Reliefs for farmers and family business owners, which provide exemption from the death duty, could also be in the line of fire.
IR35 expansion ‘should be re-examined in light of coronavirus’
Anita Monteith outlines recommendations from the House of Lords on rethinking IR35’s expansion and seeking a better way to tax work, in light of the changes brought by coronavirus. She quotes the first sentence of the report: “The IR35 rules – the government’s framework to tackle tax avoidance by those in ‘disguised employment’ – have never worked satisfactorily, throughout the whole of their 20-year history. We therefore conclude that this framework is flawed,” and its conclusion, calling for the development of “a short-term means of raising revenue that will not prove burdensome for businesses as they emerge from the COVID-19 pandemic, and a long-term alternative solution to the off-payroll working rules.”
Tax tribunal struggling to cope with remote hearings, lawyers say
Tax lawyers including Jolyon Maugham QC have warned that suspension of tax tribunal cases to stem the spread of coronavirus could bankrupt firms and result in continued uncertainty for taxpayers.
CORPORATE NEWS – WEDNESDAY 29TH APRIL 2020
BA cuts 12,000 jobs while Lufthansa considers bankruptcy option
British Airways is set to cut up to 12,000 jobs from its 42,000-strong workforce due to a collapse in business because of the coronavirus pandemic. Parent company IAG said it needed to impose a “restructuring and redundancy programme” until demand for air travel returns to 2019 levels. The move comes as Lufthansa prepares to file for bankruptcy in a bid to protect itself from creditors for three months; SAS announces 5,000 job losses and Norwegian prepares for a crunch vote on a debt-for-equity swap as the first part of a process that will allow it to access nearly £230m in aid.
NMC Health – Shetty’s bank accounts frozen
The United Arab Emirates’ central bank has ordered the accounts of NMC Health founder Bavaguthu Raghuram Shetty and his family and former senior directors to be frozen. NMC is in hot water over its accounting and governance and the FCA is probing for fraud. Abu Dhabi Commercial Bank, which is exposed to NMC to the tune of $1bn, forced the company into administration this month. Barclays and Standard Chartered, are also owed $146.6m and $157.8m, respectively.
Two-fifths of UK retailers ceased trading entirely
The CBI’s latest distributive trades survey has found that 39% of retailers reported a total shutdown of UK activity due to the coronavirus outbreak. April’s monthly health check of high street and online sales also revealed that activity was down for 71% of businesses, 67% said the outbreak was having a significant negative impact on their sales, while 96% said they were now experiencing cashflow problems.
The Guardian, Page: 33
SMEs NEWS – WEDNESDAY 29TH APRIL 2020
Banks fear mass fraud with “bounce back” loans
Senior bankers have warned that Rishi Sunak’s new “bounce back” lending scheme for small businesses may not begin on Monday as planned because of legal problems and the need to create new digital systems. The scheme offers 100% government-backed loans of up to £50,000 to micro businesses. But bankers fear the simplified application process, which also lifts obligations on lenders to carry out their own checks, risks a huge rise in fraud and makes it difficult to call in loans in future. Banks also say the scheme will require changes to the Consumer Credit Act, particularly over its stipulation that courts can rule a relationship between lender and borrower unfair, and these changes will not be in place for Monday.
Small businesses ‘must be supported after lockdown’
An article in City AM calls for a small business-first exit strategy to help the UK economy recover after lockdown ends. It states: “Small business owners are the bedrock of our economy, contributing around £1.5trn per annum (37%) to UK private sector turnover, and they need to be given hope that an end to this crisis is on the horizon with a clear strategy that will lead them out of the economic crisis.” It also notes that small e-commerce platform Badger Commerce “quickly introduced new features to allow businesses, particularly cafes and restaurants to continue to trade by accepting takeaway orders online through the platform.”
Just 13% succeed in CBILS application
Only 13% of those businesses that applied for the Coronavirus Business Interruption Loan Scheme (CBILS) have succeeded, according to the British Chambers of Commerce’s latest business impact tracker. The BCC also found over half do not intend to apply for the loans, which offer up to £5m for companies in trouble and are 80% backed by the taxpayer, amid fears that they may not be able to repay them.
The Daily Telegraph, Business, Page: 1
EMPLOYMENT NEWS – WEDNESDAY 29TH APRIL 2020
Sunak mulls sector-by-sector furlough extension
The Chancellor Rishi Sunak has hinted that he could provide an extension to the employee furlough scheme for businesses in the sectors worst hit by the coronavirus crisis. The job retention scheme is due to end on June 30th so companies will need to choose in the middle of next month whether to begin the statutory redundancy consultation period. Meanwhile, the human resources body CIPD has called for more flexibility to allow businesses to take back furloughed staff part-time.
ECONOMY NEWS – WEDNESDAY 29TH APRIL 2020
Thinktank warns on economic effects of pandemic
The National Institute of Economic and Social Research (NIESR) has warned that the UK economy is likely to miss out on some £800bn in income over the next decade as a result of the coronavirus lockdown and subsequent job losses. The thinktank issued a report stating: “The government’s announced measures to limit the long-term economic effect of COVID-19 have a direct cost to the exchequer of about £75bn in our main-case scenario. Borrowing is likely to rise above £200bn in 2020-21.” NIESR deputy director, Garry Young, remarked: “There is massive uncertainty about how long and how severe this crisis will be. For our reassuring main-case forecast scenario to come true it is necessary to believe that the complex network of relationships that make up the economy can be restored after the lockdown without any significant long-term damage.”
Germany and eurozone braced for record slump
Germany’s economy is set for a 6.6% slide in growth this year and the country’s Ifo economic institute warned that the economy would not return to pre-pandemic levels until the end of 2021. Meanwhile, UBS believes the eurozone’s economy will contract by 6.1% in 2020, worse than the 4.5% seen during the financial crisis. Standard & Poor’s has a worse forecast predicting a 7.3% slump and that both the UK and eurozone economies will remain 1.4% below pre-pandemic levels by 2023. Separately, Fitch has cut Italy’s credit rating to “BBB-minus” just one notch above junk. Italian finance minister Roberto Gualtieri said the ratings agency had failed to take account of important decisions taken by the EU and the ECB to support eurozone economies.
REGULATION NEWS – WEDNESDAY 29TH APRIL 2020
Coronavirus brings fresh calls to adjust post-Brexit immigration system
The government has been called upon to revise its post-Brexit points-based immigration system in light of the coronavirus crisis, with lobbyists arguing that the pandemic has highlighted how dependent the UK economy is on foreign low-skilled labour. Morgan Schondelmeier, head of external affairs at the Adam Smith Institute, urged the Home Secretary, Priti Patel, to revise the salary threshold “to allow for such essential low-paid work as is necessary” while Marley Morris, associate director at the Institute for Public Policy Research, believes the model “needs to be a more nuanced and targeted” claiming that most of the workers helping out in the NHS, social care, retail and logistics would not be allowed under the new rules.
Contact Paul Southward