NEWS – WEEKEND TO 10TH MAY 2020
NEWS – WEEKEND TO 10TH MAY 2020
TAX NEWS – WEEKEND TO 10TH MAY 2020
Wealth taxes needed to avert spiralling inequality
Former Citibank trader Gary Stevenson tells the Guardian that a fairer tax system is needed to prevent rich people like him from profiting from crises like the 2008 crash and today’s coronavirus pandemic. He says: “All the signs are that coronavirus will increase inequality even further. The government is accumulating debt to subsidise the wages of the employed and self-employed unable to work because of the lockdown. Businesses are taking out loans to keep afloat. This debt is being used to pay bills and rent to those who own assets.” Stevenson goes on to cite proposals from Gabriel Zucman and Emmanuel Saez “for wealth taxes that could help reduce spiralling inequality in a way that is fair, and specifically targets the richest in our society.”
Sacrificing salary or waiving bonuses could bring tax bill
Accountants are warning directors and senior staff that unless they sign a formal written agreement with their employer to waive their salary, sacrificing pay or bonuses to help their business to survive the coronavirus lockdown could trigger an unexpected tax bill. HMRC will collect the tax and national insurance due on the amount they were entitled to, rather than what they actually received, the Times reports. Nimesh Shah from Blick Rothenberg says the agreement must be drawn up before any salary or bonus becomes payable. The Chartered Institute of Taxation is calling for a rule change so waived bonuses or salary sacrifice are regarded as negative earnings and so not be taxable.
Companies based in tax havens should pay for virus aid
The Tax Watch think tank has proposed that companies based in tax havens should have to pay tax on dividends from their UK operations if they draw on government support during the coronavirus pandemic. It says the move “would prevent the payment of dividends or other payments to offshore companies and restrict the potential for offshore owners to benefit from bailout funds.”
The Times, Page: 47 Daily Mirror, Page: 28
Referees send HMRC claim to the bench
The Upper Tax Tribunal has rejected a claim by HMRC that football referees should be reclassified as employees of their representative body for tax purposes. Some 30,000 football referees in England could have faced higher NI charges while the Professional Game Match Officials Limited (PGMOL) would also have had higher tax bills if the case had been lost. HMRC said it intends to appeal.
Tax rises will still be a bad idea after COVID-19 – Javid
Former Chancellor Sajid Javid has warned against tax rises after the coronavirus pandemic is under control arguing they would “strangle” any economic recovery. Mr Javid told Sky News the crisis should not change “our understanding of the economic model that leads to the highest growth rate possible, which is still going to be a free-enterprise, low-tax, competitive economy”.
The Independent, Page: 16
HMRC launches coronavirus income support scheme for self-employed
HMRC has begun contacting 3.5m people who may be eligible to receive a backdated cash grant worth up to £7,500 via the government’s Self-Employment Income Support Scheme (SEISS).
Tories may have to renege on pledge not to increase taxes
The Sunday Telegraph says experts believe the Conservatives will have to break manifesto promises not to increase rates on income tax, National Insurance and VAT in order to cover the cost of the coronavirus rescue spending. In addition to the over £1trn expected to be spent by the Treasury this year, the Budget for Office Responsibility estimates that the economy could shrink by as much as 13% over the period with a drawn-out bounce-back making the picture even more bleak. George Bull of RSM UK told the paper: “The Government has been successful in getting people to adhere to unprecedented social distancing rules and living their lives in a completely different and uncomfortable way. I think, due to the severity of the situation, they will be betting on winning similar support, even for something as unpopular as raising taxes, which this Conservative party promised it would not do.”
EMPLOYMENT NEWS – WEEKEND TO 10TH MAY 2020
Think tank calls for cuts to furlough scheme
The Institute for Fiscal Studies (IFS) says the government’s furlough scheme must be cut back in order to encourage employees back to work and protect the public finances. Its director Paul Johnson suggested trimming the percentage of workers’ wages paid by the state under the programme from 80% to either 70% or 60% to make it more sustainable. Meanwhile, former Labour chancellor Alistair Darling warned that mass unemployment could be triggered unless the government continues to pay the wages of a large proportion of the workforce until the end of the year.
The Daily Telegraph The Independent, Page: 57
CORPORATE NEWS – WEEKEND TO 10TH MAY 2020
Online sales double during COVID-19 crisis
New figures from BDO show online sales rocketed in April by 109% compared to last year, the highest level since records began in 2010. However, they failed to offset the “catastrophic” loss of high street sales caused by the coronavirus lockdown. Like-for-like sales, across stores and online, were 29.6% down on the same month last year. Sophie Michael, head of retail and wholesale at the firm, said: “Even when restrictions ease, it seems likely that this will have a lasting impact.”
The Daily Telegraph, Business, Page: 3 The Times, Page: 38 Daily Express, Page: 49 The I, Page: 55 Yorkshire Post, Page: 6
Buyout giants circle Branson’s Virgin Atlantic
Greybull Capital and Apollo Global Management have joined the likes of Centerbridge Partners, Temasek and Cerberus Capital Management on a list of parties interested in Virgin Atlantic. The pair have reportedly scheduled to open negotiations with the airline’s advisers Houlihan Lokey this week. The news comes amid reports Virgin Atlantic has hired Alvarez & Marsal to advise on any potential administration.
Council-backed energy firm in trouble
Robin Hood Energy, which is owned by Nottingham city council, has called in Deloitte to help with a strategic review after posting a £23.1m loss – up from £1.3m the year before. The company has received £25.5m of loans from Nottingham city council since it launched in 2015.
Antler ground down amid virus woes
Luxury luggage maker Antler has hired restructuring advisers from KPMG after sales dived due to the COVID-19 crisis. Mark Hall, chairman of the company, said he was “focused on navigating the business successfully through this difficult period”.
SMEs NEWS – WEEKEND TO 10TH MAY 2020
Government scheme criticised as banks accused of taking too long to grant loans
The British Chambers of Commerce (BCC) has criticised the pace of lending through the CBILS scheme. The industry body warned that “Government must also be ready to further expand the existing grant schemes to ensure that as many businesses as possible get access to the support they need.” This comes as Barclays faced questions from ministers after reports that its application process was causing delays, with a spokesman noting that it had approved over 50,000 Bounce Back Loans worth over £1.5bn this week, while some customers were required to provide extra details to complete their applications. Meanwhile, Bank of England governor Andrew Bailey said he urged banks nearly every day to lend more, asserting that credit “is the best way to actually prevent a more adverse outcome which could affect them more.”
Small businesses call on insurers to end “callous” approach to claims
Thousands of small companies face collapse unless insurers start to pay out on business interruption claims, the industry has been warned. Hiscox, QBE, Allianz, RSA and Zurich are among insurers that have been threatened with legal claims from policyholders, the Times notes. Almost 700 business owners have signed a letter to the Association of British Insurers accusing the industry of an “abrogation of responsibility”. “There is no suggestion that insurers should make payouts to businesses with only basic cover. However, those of us that paid for extended policies are justified in expecting providers to honour them,” the letter says. It goes on to accuse insurers of having taken a “callous” approach to claimants and of trying to escape valid claims on “preposterous” grounds.
FSB says US is UK’s most important trading partner
According to the Federation of Small Businesses (FSB), almost half of small firms see the US as the UK’s most important trading partner after Brexit. The findings suggest that a wide-ranging post-Brexit trade agreement with the US could help accelerate the UK’s economic recovery from the COVID-19 pandemic. Negotiations between the two countries began on Tuesday, via a videoconference between International Trade Secretary Liz Truss and US Trade Representative Robert Lighthizer. FSB Chairman Mike Cherry said: “For small businesses, the US is the number one single market of choice for importers and exporters for the next three years, which is why these negotiations are so critical,” adding: “Exporting will be crucial for many small businesses to support their recovery from the pandemic and that is why it’s crucial to see a reduction in tariff and non-tariff barriers.”
BBB under pressure to reform after CBILS bungles
The role of the British Business Bank (BBB) should be reviewed after the coronavirus crisis with Tory MP Kevin Hollinrake saying its shortcomings had been exposed through its handling of the Coronavirus Business Interruption Loan Scheme (CBILS). He says: “We could have brought in new lenders to break the stranglehold the big banks have over SME finance.” Christian Faes, chairman of the Digital Finance Forum and co-founder of LendInvest, also said a review of the BBB’s role would be “a very sensible idea”. Mr Faes continued: “Unfortunately, in the current crisis, I don’t think the BBB has covered itself in glory by any stretch of the imagination.”
Small firms boosted by £3m DMGT help
The Mail on Sunday (MoS) has teamed up with the Federation of Small Businesses to launch a £3m advertising giveaway for struggling small businesses. MoS owner DMGT is giving away £3,000 of free advertising in its newspapers to each of 1,000 small businesses as they battle to survive the coronavirus crisis, the paper says. Mike Cherry, chairman of the Federation of Small Businesses, said: “Our members will be hugely grateful to The Mail on Sunday for this generous offer of support. It’s fantastic to see you getting behind them.”
The Mail on Sunday, Page: 117
WEALTH MANAGEMENT NEWS – WEEKEND TO 10TH MAY 2020
Legal battle over Hargreaves Lansdown’s role in Woodford fund looms
Litigation specialist RGL Management has revealed it is preparing to launch a group legal claim against Hargreaves Lansdown (HL) for its aggressive promotion of Woodford Equity Income ahead of the fund’s abrupt closure in June last year and subsequent collapse. RGL believes that investors who bought the fund based on it being on HL’s list of best buys were not fully informed of the risks involved as fund manager Neil Woodford increasingly sought to make returns from illiquid holdings. Leigh Day and Slater & Gordon are pursuing similar actions against HL.
The Mail on Sunday, Page: 127
EMPLOYMENT NEWS – WEEKEND TO 10TH MAY 2020
Flexible furlough, legal right to work from home
UK ministers have indicated to businesses that the furlough scheme could be phased out gradually over the summer, allowing some workers to return to work part-time to begin with. Elsewhere, the Telegraph reports that Whitehall is considering enshrining the right to work from home in law so Britons are not forced to go into workplaces after the lockdown ends. Unions are in favour of the idea; Germany last week unveiled proposals to introduce a legal right to work from home after the pandemic.
Young people and women bear brunt of jobs pain
A study by PwC has found that over 78% of those who have lost their jobs since the coronavirus crisis began are women and two thirds are between 18 and 34. Carol Stubbings, global leader of people and organisation at the firm, said: “It’s concerning to see that young people are disproportionately affected by COVID-19 related unemployment. This may well be due to higher proportions of this age group working in jobs that require face-to-face contact or in heavily affected industries, such as hospitality and retail. Moreover, women in these industries are more likely to work in lower-skilled or lower-paying positions, which are more susceptible to COVID-19 related layoffs than men.” The report also found that while a greater proportion of women had lost their jobs, men and women had been furloughed in almost equal numbers.
Unions demand H&S changes before backing Johnson’s back-to-work plans
Britain’s biggest trade unions – Unison, Unite, the GMB and Usdaw – along with the TUC, are demanding a nationwide health and safety revolution before they send their members back to work. In a letter to the Observer, union leaders say all employers should have to publish risk assessments and state what measures they have taken to make work safe for their employees. They say their members have already lost their lives “transporting people and goods, protecting the public and caring for the vulnerable” amid the coronavirus pandemic. “The trade union movement wants to be able to recommend the government’s back-to-work plans,” they say. “But for us to do that we need to ensure that ministers have listened and that we stay safe and save lives at work too.”
The Observer, Page: 1, 2
FINANCIAL SERVICES NEWS – WEEKEND TO 10TH MAY 2020
City must prepare for hard swerve from Brussels
The international director at the Financial Conduct Authority (FCA), Nausicaa Delfas, has said the City of London must be prepared for a clean break from Brussels when the Brexit transition period ends in December. She voiced concern to the Telegraph that finance chiefs in the Square Mile had taken their eye off the ball amid the coronavirus crisis. Ms Delfas said financial services businesses were among the most well-prepared for Brexit, but added that “the risks that remain are the ones we can’t resolve unilaterally”.
PROPERTY NEWS – WEEKEND TO 10TH MAY 2020
Labour proposes five-point-plan to prevent flood of evictions
The Labour Party has developed a five-point plan to avert a possible flood of evictions as unemployment rises. The Bank of England has warned that the country faces its worst recession in 300 years, while polling has shown that 1.7m people in the private sector fear they will lose their jobs in the coming months. Labour has called for people to be given two years to pay back rent arrears accrued due to COVID-19, for an extension to the ban on evictions, for the Government to bring forward its ban on section 21 “no-fault” evictions, and for residential tenants to be given the same protections as commercial tenants, to prevent them being made bankrupt by their landlord for non-payment of rent. The party also wants changes to the welfare system to help stop people from falling into arrears in the first place.
REGULATION NEWS – WEEKEND TO 10TH MAY 2020
FCA publishes timetable of revised regulation
A timetable of revised dates for consultations and regulatory action to take place over the next 12 months has been published by the Financial Conduct Authority. The Financial Services Regulatory Initiatives Forum is responsible for drawing up the timetable. The group is made up of the FCA, Bank of England, Prudential Regulation Authority, Payment Systems Regulator and the Competition and Markets Authority. The Treasury will observe the work of the forum, while the Information Commissioner’s Office, the Pensions Regulator and Financial Reporting Council will be invited to attend and contribute when needed.
ECONOMY NEWS – WEEKEND TO 10TH MAY 2020
BoE foresees doubling of unemployment and contraction of economy
The Bank of England has cautioned that the UK economy could contract by 14% this year with unemployment figures more than doubling. Gross domestic product (GDP) could fall by 25% in the second quarter, according to its estimates. Governor Andrew Bailey said of the coronavirus response in the country: “The scale of the shock and the measures necessary to protect public health mean a significant loss of economic output has been inevitable in the near term.” However, Mr Bailey did predict a relatively rapid recovery once social distancing measures are eased.
Mervyn King: Don’t bank on V-shaped recovery
Former Bank of England governor Mervyn King has cast doubt on hopes that Britain’s economy will enjoy a V-shaped rapid recovery from the coronavirus pandemic. Lord King said ministers needed to get a grip of business loan schemes quickly to prevent lasting damage. “Politicians are used to making announcements. But they have no experience in actually running anything. I think the problem has been less the high-level design of schemes and more the need to worry about their implementation on the ground.” He also expressed surprise that “reverse taxation” had not been used to support businesses, with direct payments made via existing connections with HMRC. He concluded an interview with the website Reaction by saying: “What I will say is that there is too much confidence in a quick V-shaped recovery. It will take longer.”
The Guardian, Page: 36
GDP contracted by 2% in first quarter
Data from the Office for National Statistics is expected to show on Wednesday that Britain’s GDP shrank by 2% during the three-month period to the end of March, compared with flat growth in the previous quarter. According to the Institute for Turnaround, made up of experts from accountants, banks, law firms and restructuring advisers, 130,000 businesses in the UK were showing signs of distress prior to the outbreak. “There is going to be a lot more now,” said IFT chairman Steve Swayne. “What we’re seeing is deterioration across all sectors. COVID-19 is a game changer.” The figures follow forecasts from the Bank of England of a 25% contraction in the size of the economy in the second quarter. The Bank is expected to provide £50bn to £100bn of fresh economic stimulus next month.
Sunday Express, Page: 47
OTHER NEWS – WEEKEND TO 10TH MAY 2020
Over two thirds of Europeans want a basic income
Researchers have found that 71% of Europeans back the introduction of a universal basic income. Support for the idea was strong across all generations, a survey by Bertelsmann Stiftung found. The study also revealed that 53% of those aged 16 to 29 believed that authoritarian states were better equipped than democracies to prevent climate change. Older people were less enthused by the idea of authoritarianism to tackle climate issues, however.
Letter: Britain’s chance to create a sovereign wealth fund
A letter to the FT agrees with the proposition that the UK could solve its coronavirus bailout problem by setting up a Sovereign Wealth Fund, helping to fund the NHS and avoid a steep hike in taxes.
Karlsruhe decision could spell the end of the single currency
Writing in the Sunday Telegraph, Liam Halligan says the decision by Germany’s constitutional court in Karlsruhe last week to rule ECB bond purchases contrary to EU treaty was seismic, but has received scant attention in the media. The “economic, political, financial and judicial brew” resulting from this “stunning judicial clash” is “incendiary” says Halligan, and puts the single currency in grave danger, “possibly a sovereign downgrade or two away from collapse.”
Contact Paul Southward