NEWS – WEEKEND TO 12TH APRIL 2020
NEWS – WEEKEND TO 12TH APRIL 2020
TAX NEWS – WEEKEND TO 12TH APRIL 2020
Tax avoidance schemes target returning NHS staff
Tax avoidance scheme promoters are cold calling retired doctors and nurses who are returning to the NHS to provide emergency help with the coronavirus pandemic, the Times reports. The schemes divert the worker’s salary to an external company which passes the money back to them disguised as loans or other payments in order to disguise the true level of taxable income. Dr Iain Campbell, secretary-general of the Independent Health Professionals Association, said: “I’ve personally had promoters try to sell me such schemes twice recently – needless to say I refused. The schemes are now also targeting returning workers.” Dawn Register, a partner at BDO, says: “Anyone entering into these arrangements can expect an inquiry and financial penalties.”
HMRC may give virus-hit families more time to repay benefits
HM Revenue & Customs has indicated that it will give families facing bills for child benefit claimed in error more time to pay the cash back if they have suffered a drop in income or been furloughed as a result of the coronavirus crisis. Rebecca O’Connor from Royal London says: “The taxman has chased people for some big backdated bills running into thousands of pounds in some cases. It should show leniency and temporarily suspend demands for payment.”
The Times, Page: 55
SMEs NEWS – WEEKEND TO 12TH APRIL 2020
Investors and start-ups at risk from COVID-19 fallout
Investors into tax-efficient venture capital trusts (VCTs) and enterprise investment schemes (EISs) are suffering heavy losses as the entrepreneurs they back are crippled by the fallout from the coronavirus pandemic. Alex Davies, the chief executive of Wealth Club, one of the biggest VCT and EIS investment platforms, says start-ups continue to seek funds, but investors are worried. “We have to be frank. If these companies don’t get the cash, a lot will fail,” he says. “That’s bad for the economy because it is these types of company that create a disproportionate amount of jobs and economic growth. Some EIS’s or VCTs have taken hits of 10 or 20%.”
Challenger banks approved to give emergency loans
The Co-operative Bank, Cynergy Bank, Oak North and Starling have been added to the government’s emergency coronavirus lending scheme. The British Business Bank’s CEO Keith Morgan said the quartet would help meet the “incredible demand” from small businesses. The move follows criticism that the scheme has failed to get money to businesses quickly enough. Non-bank lenders, including Funding Circle, Iwoca and Market Finance, hope to be approved to join the programme next week.
The Times, Page: 48 The Daily Telegraph, Page: 30
Buyout firms push for access to UK emergency loan scheme
The UK government is being lobbied by private equity firms for access to the state-backed emergency loans package, with venture capitalists worried their companies will be viewed in aggregate, making them ineligible. Meanwhile, officials fear providing funds to PE groups would be bad optics and could break EU state aid rules.
High demand for small emergency loans from businesses
Royal Bank of Scotland (RBS) has approved 70% of the loans handed out to businesses under the government-backed Coronavirus Business Interruption Loan Scheme (CBILS). New figures show RBS approved 2,500 loans and the lender is the only major bank offering CBILS loans worth below £25,000. Small businesses are reporting that banks require them to borrow a minimum of £25k. HSBC told the Telegraph it is working on reducing the size of loans available to sole traders to below this amount. Elsewhere, fintech firms insist they could get loans out to small businesses faster than high street banks, which they say use crumbling legacy systems while fintechs can utilise machine learning for rapid assessment of claims. Charlotte Crosswell, of Innovate Finance, says: “There’s a lot of back and forth with us and the government and regulators on how we can really leverage the fintech sector now.” Finally, the Sunday Times reports that only 5,000 small businesses have received cash under the CBILS more than three weeks since it was launched. The paper says lenders are blaming the British Business Bank for creating a bottleneck for loan applications.
SMEs at risk if JRS comes in late
The Federation of Small Business (FSB) has warned that SMEs face a disastrous cash crunch if the government’s Job Retention Scheme (JRS) is not ready on time. The JRS will give grants to employers covering 80% of furloughed employees’ salaries and is scheduled start on April 20th. FSB national chairman Mike Cherry said: “Employers with no revenue coming in have already had to find the money for last month’s payroll from their own reserves. For many, their only means to shoring-up cashflow has been an elusive emergency loan scheme. Cash reserves are dwindling fast. If the job retention scheme is not online by the time April’s wages need to be paid, thousands of small firms all over the country will be at risk.”
Sunday Express, Page: 47
Miliband says state must guarantee 100% of business loans
The new shadow business secretary, Ed Miliband, is calling for an overhaul of the government’s emergency loan scheme warning that thousands of companies were on the verge of collapse. The former Labour leader said unless the government agreed to underwrite 100% of all loans, banks would continue to reject applications from cash-strapped firms. Germany has made just such a move for all short-term, COVID 19-related loans made to small businesses.
The Observer, Page: 21
CORPORATE NEWS – WEEKEND TO 12TH APRIL 2020
Number of firms going bust rose 50% in March
Data from the London Gazette, the UK’s official public record for insolvencies, show the appointment of receivers, liquidators or administrators surged to 3,736 between March 10th and April 9th, compared with 2,495 in the same period last year. James Russell, a partner at Humphries Kerstetter who compiled the figures, said: “We are just three weeks into the COVID-19 shutdown yet we are already seeing the speed and severity of the downturn facing UK companies. We are entering into what could well be a brutal recession.”
The Mail on Sunday, Page: 112
PROPERTY NEWS – WEEKEND TO 12TH APRIL 2020
Buy-to-let landlords suffer triple-whammy tax hit
Landlords have this week suffered a “triple-whammy” tax hit as three reliefs were axed or scaled back as the new fiscal year began. Mortgage interest tax relief, capital gains tax exemptions for “accidental” landlords and letting relief were all cut. Though some landlords will be unaffected by the changes, those with higher incomes may see their profits eaten into significantly. And ‘accidental’ landlords, who previously lived in the properties they now let out, will see some of their old tax exemptions taken away. The replacing of mortgage interest tax relief with a 20% credit is likely to make the biggest impact, as the calculation means most landlords will pay more in income tax. Along with the scrapping of mortgage interest tax relief, a new capital gains tax regime has been brought in for ‘accidental’ landlords. Lettings relief has also been scaled back and under new rules only landlords who live in the property with their tenants will qualify for this benefit.
Supermarket giants hoover up relief cash
The Sunday Times’ Sam Chambers considers the reputational damage done to large businesses making use of the government’s emergency funding during the coronavirus crisis when they could do without it. Tesco has attracted ire for claiming £585m in rates relief soon after paying out a final dividend of £635m for 2019-20. Property consultant Altus calculates that £3bn in business rates relief will go to supermarkets. “The business rates holiday is a taxpayer windfall to help firms through a crisis in which supermarkets are coming out clear winners,” said Kevin Hollinrake, MP for Thirsk and Malton. “A great gesture would be to say, ‘We’re all in this together’ and put it back in the pot for distribution to SMEs.” However, Shore Capital analyst Clive Black said the “quid pro quo from the government is that they told supermarkets to go out there and feed the nation…and boy have they done that.& rdquo;
COVID-19 hits council property investments
The Sunday Times looks at local authority investments in commercial property – with rents endangered by the coronavirus pandemic. Retail centres “are quickly going from being a cash generator to a cash drag for councils,” warns Sam Resouly, a partner at investment firm Trinova, although Mark Williams from RivingtonHark notes that private sector criticism of council investments is often based on much greater importance placed on short term gains by the private sector. However, although councils could not have foreseen the COVID-19 pandemic, LSE professor Tony Travers warns that repayments to the Public Works Loan Board rank above other council outgoings, meaning authorities could be forced to raise tax or cut services to make repayments.
PENSIONS NEWS – WEEKEND TO 12TH APRIL 2020
Master trusts weather the storm
Kate Palmer in the Sunday Times profiles how master trusts have shielded those approaching retirements from the worst of the market turmoil. Analysis by Corporate Adviser found that the pot of a worker in their mid-30s fell by 23% between January 1st and March 23rd as stock markets around the world crashed as a result of the coronavirus pandemic. In contrast, the retirement pot of a 68-year-old lost 14%.
PERSONAL FINANCE NEWS – WEEKEND TO 12TH APRIL 2020
Lenders U-turn on mortgages
Mortgage companies have U-turned on their decision to pull riskier loans after deciding that withdrawing them would hit their balance sheets. The number of mortgage products halved from 5,239 on March 11 to 2,768 today according to Moneyfacts, the data analysts. But some lenders who said that they would only consider applications from people with deposits of at least 40% are now reconsidering their stance. Halifax is now offering mortgages at 80% LTV, while Barclays and Skipton are offering 75% LTV deals. Nationwide brought back tracker mortgages at 95% (LTV) last month and this week offered interest-only remortgages for the first time in eight years, although only up to a maximum of 60% LTV. “Other lenders who withdrew mortgage deals have signalled that they are coming back before lockdown finishes,” says Chris Sykes from the mortgage broker Private Finance. He believes that the volume of people who were searching for cheaper deals as they worried about money during the lockdown took banks by surprise.
ECONOMY NEWS – WEEKEND TO 12TH APRIL 2020
UK government concerned about shutdown damage
Ministers in the UK are acutely aware of the potential for tens of thousands of deaths to occur as a result of the economic downturn brought about by the coronavirus pandemic. Matt Hancock, the Health Secretary, said he is working with the Chancellor on a formal analysis to assess the economic impact of the lockdown on mortality. His comments come as forecasters predict a 14% fall in GDP in Q2 this year, which some in government believe is an underestimate. Sir Iain Duncan Smith, former Conservative party leader, said it would “not be feasible for us to be locked down to May.” He added: “My concern is, the longer we go into lockdown, the more difficult it becomes to restart the economy again. And the consequences may be enormous.” Meanwhile, plans being drawn up in Whitehall could see Britain begin to emerge from lockdown next month. However, experts warn that social distancing measures may need to remain in place for many months, o r even years, until a vaccine is available.
Sunak’s old boss called on to help with rescue
Rishi Sunak’s old boss at Goldman Sachs, Richard Sharp, has been appointed as a strategic adviser to the Treasury on rescuing the coronavirus-stricken economy, pending approval by the Cabinet Office. Mr Sharp left Goldmans to advise Boris Johnson when he was mayor of London and worked alongside Andrew Bailey, the Bank governor, on the Financial Policy Committee.
The Sunday Times, Business, Page: 1 The Sunday Telegraph, Page: 1
Debt bomb fears with $20trn needing refinancing this year
The Institute of International Finance (IIF) has warned that the shock to the global economy by the coronavirus outbreak risks destabilising $20trn of bonds and loans due before the end of the year. The world economy is entering a recession with $87trn more debt than at the onset of the financial crisis, the IIF said, adding that the global debt to GDP ratio now stands at 322% and is set to rise to 342% this year.
WEALTH MANAGEMENT NEWS – WEEKEND TO 12TH APRIL 2020
Smaller wealth managers will be all the more vulnerable after the crisis
Stefan Wagstyl profiles in the FT how many run-of-the-mill wealth managers will be vulnerable to collapse because of the coronavirus pandemic.
Contact Paul Southward.