NEWS – WEEKEND TO 19TH APRIL 2020
NEWS – WEEKEND TO 19TH APRIL 2020
TAX NEWS – WEEKEND TO 19TH APRIL 2020
HMRC pauses tax probes
HMRC has paused some of its investigations amid the COVID-19 outbreak, including some cross-tax compliance checks and probes into national insurance contributions. Blick Rothenberg says its clients have received correspondence from the Revenue relaxing or removing deadlines for responses to its tax queries. The letters informed recipients that there has been a temporary hold on the checks they were subject to, with the taxman adding: “This means we will not contact you about this until we start this work again.” Fiona Fernie from Blick Rothenberg has voiced caution that the move “could be storing up problems for the future”, while Dawn Register of BDO notes that HMRC will “take a dim view of those perceived to be abusing their new tack.”
Caudwell calls for corona tax
Phones4u founder John Caudwell has called for a “corona tax” for online companies that have profited from the COVID-19 lockdown. This windfall tax, he argues, would help cover the cost of measures he says would reinvigorate the economy. His mooted measures include the state fully guaranteeing business loans and a removal of a cap on furlough payouts – as well as a rethink that would see the Treasury cover 100% of salaries.
Daily Express, Page: 8
Journalists urge tax on tech firms
The National Union of Journalists (NUJ) has called for an immediate windfall tax on tech companies to help support the journalism industry through the coronavirus crisis, warning that national newspapers could close unless the industry is supported. The NUJ has suggested a 6% tax on the revenues of tech companies like Google and Facebook, with the proceeds used to rescue and reimagine the journalism industry, and also called for tax credits and interest-free loans to support journalists’ jobs.
Davis: Give small firms a two year tax holiday
MP David Davis says that once coronavirus is under control, the brakes must come off the economy and as many people as possible must be returned to work. He calls for tax cuts for small businesses, saying they should “effectively not be asked to pay any tax for the next two years”. He says the idea of tax cuts “may give Chancellor Rishi Sunak a panic attack” but as “we will be paying back the cost of the Government’s massive virus-related aid for probably 50 years … we should not worry about tax breaks for small business for a relatively short period.”
The Mail on Sunday, Page: 12
McVey: Sales tax needed to replace business rates
Former Work and Pensions Secretary Esther McVey has backed calls for business rates to be abolished to protect high streets in the wake of the coronavirus crisis. She has voiced a belief that the levy should be replaced with a sales tax that would bring more equality between high street stores and online firms. Ms McVey said business rates are “an out-of-date tax that needs modernising so that it falls fairly on all businesses and doesn’t destroy the high street.”
Sunday Express, Page: 12
Taxman pauses tax probes
HMRC has paused some of its inquiries into non-payment of tax and has told some taxpayers they can delay some self-assessment payments and VAT until next year, with the moves coming to ease pressure stemming from the COVID-19 pandemic.
The Sunday Times, Business, Page: 12
CORPORATE NEWS – WEEKEND TO 19TH APRIL 2020
Record number of businesses in distress
Begbies Traynor has warned that the 500,000-plus UK businesses in significant financial distress in the first three months of the year could be just the “tip of the iceberg.” The number of bars and restaurants facing potential insolvency increased 37% in the last quarter, while real estate and property firms in the same situation increased by 21%. Begbies Traynor’s quarterly Red Flag Alert indicates that a record 509,000 companies were facing significant financial difficulty, up 3% on the quarter prior. SMEs have been hit hardest, with 504,000 of the total distressed businesses employing under 250 people.
The Daily Telegraph The I, Page: 70 Daily Mail, Page: 77
Thousands more firms to benefit from CLBILS
The Treasury’s expansion of the Coronavirus Large Business Interruption Loan Scheme means up to 10,000 more UK companies are now eligible for financial support. The changes, which come into force on Monday, allow companies with more than £250m of revenue to access loans of up to £50m, while firms with between £45m and £250m can get a £25m loan.
Retailers fear pain will last beyond the end of lockdown
The FT considers the climate for the retail sector, citing KPMG’s Paul Martin who predicts a 7%-10% decline in retail sales in 2020 and an 11%-12% fall in 2021.
Administrators seek to shed rent responsibility
Debenhams’ administrators FRP Advisory could launch a legal challenge absolving them of responsibility for its rent bill, reports the Sunday Times. It notes that Debenhams has urged landlords to agree to new leases that include a five-month rent-free period, with 120 agreeing. If the rest agree, it suggests, FRP may not need to go to court. The paper says accountancy firms are wary of placing companies in administration, with concern that any cash in the business could be rapidly exhausted.
Hotel asks landlords to check out rent rethink plans
Travelodge has drafted in Deloitte and investment bank Moelis as it looks to ease pressures brought about by the COVID-19 crisis, with the hotel chain seeking new rent deals that carry rent-free periods. Travelodge failed to pay its most recent quarterly rent bills, telling landlords that its “comprehensive plan to stabilise the business” included asking them to suspend payments.
The Sunday Times, Business, Page: 1
COVID-19 prompts concern over care homes
The Sunday Telegraph looks at the climate for care homes amid increasing pressure brought about by the coronavirus pandemic. The paper cites analysis from BDO, saying the firm’s report details how UK care home firms have been “buckling under the pressure of funding cuts, crippling debt and rising costs.” BDO found that between 2014 and 2016, there were an average of 69 care home company insolvencies per year, with this up to 123 in 2017, while 101 collapsed last year.
Firms look beyond lockdown
Jill Treanor in the Sunday Times says firms are “starting to prepare for what life may look like after the lockdown”. Will Gosling at Deloitte says: “My hunch is we’re going to see long-lasting change that’s driven largely by individuals wanting to build more resilience into their lives”, while Andrew Burn of KPMG considers whether firms will centre strategy more on local suppliers, saying: “We are already starting to see noise around that across multiple sectors.” Also in the Sunday Times, Peter Evans considers the challenges faced by the media industry, pointing to a PwC report that says previous downturns suggest the “high levels of creativity and innovation” in the industry “should support it through these challenging times”.
REGULATION NEWS – WEEKEND TO 19TH APRIL 2020
Firms allowed to hold online AGMs
The Department for Business, Energy and Industrial Strategy and Financial Reporting Council have announced that companies will be allowed to hold their annual shareholders’ meeting over the phone or online during the coronavirus pandemic. Business Minister Alok Sharma last month vowed to pro pose legislation that would enable firms to hold their annual meetings while maintaining social distancing and without breaching curbs on non-essential travel. Guidance issued on Friday details that shareholders will only have the ability to vote by proxy at virtual meetings and also outlines that firms will not have to make hard copies of AGM notices and other documentation available.
The Times, Page: 46 Daily Mail
SMEs NEWS – WEEKEND TO 19TH APRIL 2020
BoE governor urges banks to boost SME lending
Bank of England governor Andrew Bailey has called for banks to increase lending to small businesses, saying loans to smaller enterprises must be boosted or there is the risk of “a scarring effect” on the economy. He also suggested that guarantees for small business loans could be extended. While the business interruption loan scheme sees the Treasury guarantee 80% of any losses, Mr Bailey suggested a blanket guarantee for loans under £25,000 may be of benefit. In a call with reporters, he mused: “Is there a case for 100% guarantees for very small firms that account for quite a high volume of applications? Would it unblock things to change the risk appetite for those firms?”
SMEs need more help
Amit Pau, COO at business management tool provider Accloud, warns that, with just 6,000 small businesses managing to access the emergency loan initiative due to lack of clarity and lender support, many British SMEs are “fighting for survival.” The Corporate Finance Network has suggested that a fifth of UK small businesses are at risk of collapsing within the next month. “SMEs are often run by the type of person who excels in the face of adversity. Hungry for success and willing to work all hours in the day to get it. But right now, that hunger is going to waste,” Mr Pau says.
Sunak mulls 100% loan guarantee
Chancellor Rishi Sunak is reportedly weighing up whether to fully underwrite loans to small businesses facing pressure due to the coronavirus crisis. He has held talks over the Coronavirus Business Interruption Loan Scheme with British Business Bank CEO Keith Morgan, addressing increasing calls for a shift that would see the state guarantee 100% of loans to small businesses where it currently covers 80%. Bank of England governor Andrew Bailey has said there may be a case for a blanket 100% guarantee for loans up to £25,000, but added the decision is “entirely one for the Treasury”. Carolyn Fairbairn, director general of the Confederation of British Industry, says a move to 100% could save thousands of businesses, while British Chambers of Commerce director general Adam Marshall has called for a simplified system to deliver access to one-year, interest-free loans.
The Observer, Page: 29 The Sunday Times, Business, Page: 1
Less than a third of rescue fund handed to SMEs
Analysis by the Sunday Telegraph shows that less than a third of a £12.3bn fund designed to provide rescue grants to smaller companies has been distributed to firms. The report shows that in some areas, just 9% of funds from the Government’s Small Business Grants Fund have been handed out. The pot, which was announced in the Budget on March 11, is in place to provide rescue grants of £10,000, while a separate retail and leisure fund provides £10,000 or £25,000, depending on the rateable value of the firm’s property. The Local Government Association said councils were “working fast” to hand over funds but said it had been a “significant challenge” to roll out the scheme “in a matter of weeks.” The Department for Business, Energy and Industrial Strategy says around £3.7bn in grants have been distributed to small businesses and insists the Government “is working hard to make sure local authorities continue to get this money to eligible businesses as quickly as possible.”
A third of small firms fear for the future
A poll from Hitachi Capital shows that almost a third of small firms – and 19% of medium-sized companies – are concerned about their survival chances in the wake of the coronavirus pandemic and resulting lockdown. The poll saw almost a third of SMEs say issues with technology are hindering efforts to operate as normal, with 21% of small firms and 15% of medium-sized entities saying remote working poses their business a problem.
Sunday Express, Page: 47
EMPLOYMENT NEWS – WEEKEND TO 19TH APRIL 2020
Chancellor extends furlough scheme
Chancellor Rishi Sunak has announced an extension of the furlough scheme which sees the state cover the wage of workers put on leave during the COVID-19 lockdown. The 80% subsidy, which is part of the Government’s job retention strategy, will be available for an extra month, taking it to the end of June. Mr Sunak said the salary scheme would be extended again “if necessary”. Confederation of British Industry director-general Dame Carolyn Fairbairn welcomed the move, saying it will “will help protect the economy and prevent unnecessary job losses through this new lockdown phase.” The extension, she added, means firms will not have to issue redundancy notices in the coming days to comply with 45-day consultation requirements.
Extended lockdown puts 6.5m jobs at risk
Analysis by the Institute for Social and Economic Research (ISER) suggests that if the lockdown continues for an extended period, at least 6.5m jobs may temporarily be taken out of the economy – a fifth of the national total. It estimates that almost 2m jobs in the wholesale and retail industry and 1.3m jobs in hotels, pubs, restaurants and cafes have disappeared, representing 48% and 75% of the sector totals, respectively.
The Observer, Page: 7
PERSONAL FINANCE NEWS – WEEKEND TO 19TH APRIL 2020
FCA proposes payments freeze
The Financial Conduct Authority (FCA) has outlined plans for a payment holiday for those struggling with payday loans, car finance and pawn shop borrowing amid the COVID-19 outbreak. The City watchdog has called on car leasing firms to offer three-month repayment pauses for customers in financial difficulty and rule out vehicle repossessions during the crisis. In addition, lenders should offer a one month interest-free payment freeze on short-term credit agreements, while lenders involved in pawn broking agreements are expected to give customers a three-month payment freeze.
Child benefit boost for families hit by pandemic
Families who have seen their income hit by the coronavirus outbreak have been advised to claim child benefit, with Robert Salter of Blick Rothenberg suggesting that a “wait-and-see approach could be costly” due to a three-month limit for backdated claims.
The Daily Telegraph, Money, Page: 8 Financial Times, Money, Page: 5
INSOLVENCY NEWS – WEEKEND TO 19TH APRIL 2020
Insolvency rule rethink on the cards
Changes to insolvency rules being considered by ministers would see vulture funds able to take control of companies, with the court-led scheme of arrangement process reportedly in line for an overhaul. The rethink would allow distressed debt investors to overrule creditors including traditional banks, but only if they can convince judges it is in the best interests of the company. While a scheme of arrangement requires the consent of 75% of creditors by value and a majority by number across every class of creditor, the mooted reform would see dissenting creditor classes having to accept terms proposed by others. The proposed mechanism, a “cross class cram down”, would aim to ensure finances are restructured more quickly. Carl Jackson of Quantuma described the possible shift as a “potentially innovative approach”, adding that it “avoids ransom creditors holding out and blocking a restructuring when they are being offered more than they would get in an insolvency.” This, he adds, is “good for companies, employees and creditors.”
ECONOMY NEWS – WEEKEND TO 19TH APRIL 2020
Bailey: 35% GDP slide ‘not implausible’
Bank of England (BoE) governor Andrew Bailey has said a 35% decline in GDP over Q2 is “not implausible”. Pointing to a scenario where the economy slipped by a third, which was set out by the Office for Budget Responsibility this week, Mr Bailey said it was “quite within the grounds of possibility”. He told reporters on a conference call on Friday: “I don’t think there’s anything implausible about a second quarter contraction of that nature.” He also suggested that while the OBR report suggested the economy would bounce back swiftly from such an economic crash, the BoE may not be as optimistic. Mr Bailey also noted that the BoE is using a tool designed to monitor high frequency data on the economy ahead of a potential hard Brexit to gauge the immediate impact of the coronavirus outbreak.
Graduates to be hardest hit by recession
The Institute for Fiscal Studies (IFS) has warned that graduates entering the labour market this year are likely to be hardest hit by a recession prompted by the coronavirus outbreak. The forecast is based on analysis of previous recessions which shows that new graduates find it harder to secure jobs than their immediate predecessors, especially in higher paying positions. Paul Johnson, director of the IFS, said: “Previous experience suggests that university graduates will start off in lower paying jobs than otherwise and will suffer scarring effects,” adding that they are more likely to be unemployed several years after graduating while it will take “several years before their earnings catch up with what they otherwise would have been”. Separate IFS research shows young workers, low-paid staff and women will see the biggest economic impact from COVID-19, as a “remarkable concentration” ar e employed in sectors which have had to shut down.
OTHER – NEWS – WEEKEND TO 19TH APRIL 2020
Firms look to ensure remote working works
Christine Armstrong in the Sunday Times considers the impact of the closure of many offices as staff take to remote working amid the COVID-19 lockdown. Anna Purchas of KPMG says that while the firm has a culture of agile working and the tech in place to support it, “working on your own from home like this on a long-term basis is unchartered territory for us all.” She says there is a focus on well-being, noting that it is “easy to fall in to the trap of working longer hours and never really switching off when you are working from home.” Elsewhere in the paper, Gabriel Pogrund and Tom Calver look at how the lockdown may change the workplace, with KPMG’s Mel Newton saying it is “a game-changer in terms of working from home”.
The Sunday Times, Magazine, Page: 26 The Sunday Times, Page: 11
Contact Paul Southward