NEWS – WEEKEND TO 21ST JUNE 2020
NEWS – WEEKEND TO 21ST JUNE 2020
TAX NEWS – WEEKEND TO 21ST JUNE 2020
Executives back rates rethink
A survey carried out by BDO shows that 84% of executives believe that the business rates system should be overhauled, with the levy replaced by an online sales tax. The Times’ Callum Jones notes that the tax on commercial property, which pulls in £30bn a year, weighs heavier on town centre entities than those operating online or out of town. He also says the coronavirus crisis has intensified calls for a rethink of the tax, with physical stores hit by the lockdown which saw online shopping soar, boosting digital retailers. The Government has granted a year-long rates holiday so as to help businesses amid the pandemic but there are calls for a wider, more permanent reform of the system. Paul Falvey, tax partner at BDO, comments: “There is widespread consensus that digital companies should pay more tax, but the key will be how,” adding that the poll shows business leaders “deem it logical for digital companies to pay tax based on their online sales to help the economy to recover.”
Sunak plans emergency cut in VAT
Treasury officials along with HMRC have been told to prepare to cut VAT for a fixed period to help the economy rebound from the coronavirus pandemic. The Chancellor, Rishi Sunak, also discussed slashing business rates in private briefings last week, the Sunday Times reports. The cut to VAT would include zero rating more products as well as a cut to the headline rate. Other proposals being worked up include extending a scheme under which businesses can defer VAT for three months, cutting employer’s national insurance to encourage bosses to hold on to staff and introducing an employer’s national insurance holiday for new staff to encourage recruitment. Former chancellor Sajid Javid says in an interview with the same paper that VAT should be cut from 20% to 17% for a year, arguing that it would “turbocharge growth”.
Business lobby calls for cut to National Insurance bill
The Federation of Small Businesses (FSB), the Institute of Directors (IoD) and the British Chambers of Commerce have all called on the Treasury to make cuts to National Insurance bills in the mini-Budget next month. Jon Geldart, director general of the IoD, said: “While the Government may want to hold off pulling some economic levers until later in the year, directors have to make hiring and investment plans in advance. The Treasury should act now to ease the cost of employment and help firms keep people on board.” Mike Cherry, FSB’s national chairman, said: “Protecting jobs has to be a top priority.”
The Mail on Sunday, Page: 124
HSBC sued for £1.3bn over film scheme
HSBC is facing a legal claim after the bank’s private banking arm promoted a Disney film financing scheme which has seen investors billed for as much as ten times their investment from HMRC. Law firm Edwin Coe, which is representing 371 of the 750 affected, has filed a £1.3bn claim.
The Mail on Sunday, Page: 124
RBS helped fraudsters cheat the taxman
Royal Bank of Scotland may have to pay out millions after the High Court found the bank guilty of offering fraudsters “dishonest assistance” in cheating the Revenue of £45m in VAT in a carbon tax scam in 2009. RBS is being pursued by Grant Thornton, acting for the Revenue.
The Mail on Sunday, Page: 124
RUGBY NEWS – WEEKEND TO 21ST JUNE 2020
PwC helping rugby through trying times
Premiership Rugby (PRL) has hired PwC to manage the post-lockdown restart to the season and will work with the firm until the first match on August 14. PRL has drafted in PwC having decided that it does not have the internal resources or expertise to manage an exercise of such scale and complexity. The Guardian says it is understood PwC has a broad remit with a particular focus on legal issues, risk management and COVID-19 testing procedures.
The Guardian, Page: 13 The Times, Page: 17
CORPORATE NEWS – WEEKEND TO 21ST JUNE 2020
Hilco makes £1m on Oasis and Warehouse sale
Restructuring firm Hilco made a profit of nearly £1m from its brief ownership of Oasis and Warehouse, having snapped the brands up in April before selling them to Boohoo this week. A report from administrators at Deloitte shows that the firm had received a higher offer than Hilco was prepared to pay but this had conditions including a trading strategy that made it a riskier option.
Several papers reflect on issues at Wirecard, with an accounting black hole having been uncovered at the payments firm. Auditor EY this week delayed publication of Wirecard’s financial accounts for the fourth time after finding that €1.9bn was missing from the balance sheet. KPMG was last year hired to conduct an independent audit of Wirecard’s finances in response to allegations of accounting inaccuracies but was unable able to obtain enough information to fully address the claims. Wirecard CEO Markus Braun, who is also the group’s largest shareholder, yesterday resigned.
Travelodge landlords back CVA
Travelodge landlords have approved the hotel chain’s CVA, agreeing to vote for the deal, which includes temporary rent cuts, after Travelodge gave them the option to break leases on the majority of the 564 hotels it operates in the next five months. Shareholders have agreed not to take money out of Travelodge before it returns to paying full rents in 2021.
The Times, Page: 51 Financial Times, Page: 16
Corporate Britain under pressure to make real change
The Observer reports on how recent protests over racial inequality are impacting corporates around the world, many of whom are acknowledging for the first time how they may have benefited from past injustices, such as the slave trade. Following the Black Lives Matter protests, the UK’s Confederation of British Industry and the Institute of Directors have urged all British firms to look to their pasts. “This time feels different,” says Mary Agbesanwa of PwC. “Companies have realised that it’s not good enough to just not talk about race.” Suki Sandhu, boss of the consultancy INvolve, says companies are under pressure from staff to act: “In the past, companies might have wanted to do something about race but haven’t known how and there hasn’t been that catalyst. Now there has.” Mr Sandhu, Ms Agbesanwa and Kanya King, founder of the Mobo music awards, all agree companie s should be required to publish workforce diversity data. “We need to see the data in their annual reports so we can hold them accountable,” says King. “That’s a chance to shine a light on inequality. When we had gender pay gap reporting, that was pretty astonishing.”
The Observer, Page: 49
Business leaders make diversity pledge
PwC chairman Kevin Ellis, Bill Michael and Melanie Richards – chairman and deputy chairwoman of KPMG UK respectively, Simon Roberts, the chief executive of Sainsbury’s and ITV boss Carolyn McCall are among the signatories to a letter pledging action to remedy systemic racism in their businesses. They write: “For years, diverse voices have pleaded for action on ethnic-minority inclusion in business. The sad truth is that organisations have not been ready to have a challenging and frank conversation about systemic racism within the four walls of their own offices. This cycle of inaction and disengagement must end. As business leaders, we need to talk about white privilege. We need to talk about racism. We need to talk about the role we have played in maintaining this system for so long. Finally, we need to talk about how we will change. By signing this letter, we pledge to set targets for diverse candidate slates for every vacan cy in our companies. Now is the time to act.”
Go Outdoors on brink of collapse
Restructuring experts from Deloitte have been lined up by Go Outdoors as the retailer teeters on the brink of collapse. JD Sports bought Go Outdoors in 2016 for £112m. The chain employs 2,400 staff across its 67 stores.
EMPLOYMENT NEWS – WEEKEND TO 21ST JUNE 2020
Government plans retraining “revolution” to help workers find alternative careers
Downing Street is working with the Treasury and the Department for Work and Pensions on plans for a retraining “revolution” amid fears millions more could be made unemployed this autumn as the government’s Job Retention Scheme for furloughed workers comes to an end. Proposals under consideration include helping those who are made redundant to retrain to work in other areas or industries and providing workers with an education allowance to carry out that training. Minsters are also considering a wage subsidy that could tempt firms to take on more apprentices. Separately, Labour MP John McDonnell and Green MP Caroline Lucas have urged the Chancellor to introduce a four-day working week as a way to overhaul the economy in the wake of the coronavirus pandemic.
The Sunday Telegraph, Page: 5 The Sunday Telegraph, Business, Page: 3 The Mail on Sunday
FINANCE NEWS – WEEKEND TO 21ST JUNE 2020
Specialist lenders call for parity with big banks
Non-bank lenders are to meet Treasury officials this week as they lobby for access to ultra-cheap funding from the Bank of England and the same loan guarantees provided to big banks. Stephen Haddrill, director general of the Finance & Leasing Association (FLA), warned: “Non-banks are stretched between providing forbearance, satisfying the people they get their funding from, and trying to satisfy demand for new lending.” He goes on to say that some non-bank lenders are “not far off” the point of not being able to offer new lending. Specialist consumer lenders also want access to cheap Bank of England funding. Consumer Credit Trade Association chief executive Greg Stevens said: “Specialist lenders like my members are at a huge disadvantage, they cannot access the near-free Government funding facilities available to the banks. As a result, they have significantly higher costs of capital, which pushes up borrowing costs for customer s.”
Sunday Express, Page: 43
SMEs NEWS – WEEKEND TO 21ST JUNE 2020
Small businesses raid savings to stay afloat
A survey by Redwood Bank has found nearly half of small businesses have had to raid their savings to stay afloat during the coronavirus pandemic. It estimates as much as £22.4bn has been withdrawn from corporate deposit savings accounts to pay bills. Gary Wilkinson, chief executive and co-founder of Redwood, said: “With no or little income, many are desperately trying to stay afloat and have had to tap into their savings to pay costs and keep going.”
Sunday Express, Page: 43
PROPERTY NEWS – WEEKEND TO 21ST JUNE 2020
Barclays tightens rules on buy-to-let mortgages
Barclays is to slim down its mortgage offering later this month by halting lending to private landlords looking to buy properties with more than one unit and to limited-liability partnerships. The bank will also stop giving mortgages to buy-to-let landlords who buy property through their own limited company, a method which became attractive for gaining relief on mortgage interest – a tax treatment that is being phased out for individual landlords. Experts say lenders are moving to cut their exposure to the economic fallout from the coronavirus pandemic.
REPORTING NEWS – WEEKEND TO 21ST JUNE 2020
FRC mulls plans to require reporting on ethnicity
The Financial Reporting Council will discuss with government ministers its plans to introduce new reporting requirements around ethnicity after the regulator’s CEO Sir Jon Thompson described efforts by large companies to hit diversity targets as “poor”. The Sunday Telegraph reports that any new measures will be introduced as part of the FRC’s Corporate Governance Code. Changes being considered include new requirements to disclose the ethnic balance of those in senior management roles, in line with recommendations made in the government-backed Parker Review. David Styles, director of corporate governance at the FRC, said: “We are carrying out an in-depth analysis of the new code. We are specifically going to focus on diversity. We expect to see high-quality reporting on all aspects of diversity. If this does not happen, then we are going to have to look at what we do in the future in terms of getting better- quality reporting.”
REGULATION NEWS – WEEKEND TO 21ST JUNE 2020
Business Secretary announces new takeover laws
Alok Sharma, the Business Secretary, writes in the Mail on Sunday on how the law will be changed to allow the government to intervene more easily in takeovers of UK companies if the acquisition is deemed to impact the UK’s ability to combat public health emergencies. Mr Sharma writes: “In recent years, the UK has made big leaps in three emerging areas critical to our national security: artificial intelligence, cryptographic authentication technology and advanced materials.” A new law to lower the threshold for intervention on turnover and share of supply for these three areas will give government the oversight it needs, he adds. “These measures will address national security risks in the short-term, before I set out further plans in the forthcoming National Security and Investment Bill.”
The Mail on Sunday, Page: 16
Pressure on auditors and boards must be maintained
The Sunday Times’ Oliver Shah says with the audit sector under more regulatory pressure than it has faced for years two of the biggest critics of the audit market have stepped down from their oversight roles. Simon Dingemans has left the Financial Reporting Council and Andrew Tyrie has announced his departure from the Competition & Markets Authority in September. Shah says recent failures at NMC Health and Wirecard “underline the importance of keeping up the pressure on auditors and boards.” He adds: “Whoever takes up the baton from Dingemans and Tyrie must think about the problem in the round and make sure bosses, as well as auditors, are held to account.”
PERSONAL FINANCE NEWS – WEEKEND TO 21ST JUNE 2020
FCA extends payment holiday
The Financial Conduct Authority (FCA) has told banks and credit providers to extend payment holidays until October as people continue to feel the financial impact of the COVID-19 pandemic. While a policy that allows those whose income has been hit by the lockdown was expected to be wound up at the end of July, the watchdog has proposed an extension of the support window. The FCA says lenders will be expected to continue offering repayment breaks, as well as offering support to those yet to request it. While the extension covers credit cards, store cards, personal loans and overdrafts, the FCA is yet to update separate guidance on motor finance, payday loans, rent-to-own, pawn-broking or buy now pay later. Figures show 4.2m people have taken advantage of the repayment breaks to date.
Tax in testing times
With research showing that the lockdown has driven a surge in divorce enquiries, with a 42% increase compared to last year, BDO’s Vanessa Lee looks at the financial implications of a separation, saying that while tax issues may not seem a priority, “they’re an extremely important factor”.
Yorkshire Post, Page: 18
ECONOMY NEWS – WEEKEND TO 21ST JUNE 2020
Debt worth more than the economy
The UK borrowed a record £55.2bn in May, nine times more than in May 2019. May’s borrowing took total Government debt to £1.95trn – or 100.9% of GDP, with national debt now worth more than the economy for the first time since 1963. While Government expenditure included funding for support measures rolled out amid the coronavirus crisis, income from tax, National Insurance and VAT fell, with HMRC data showing tax payments were down £16.2bn – or 43% – on the same period last year. The Office for National Statistics estimates that borrowing for the 2020/21 financial year will hit £298bn, while the EY Item Club has predicted borrowing of £320bn and warned “it could well exceed this level”. ICAEW public sector director Alison Ring noted that the Treasury had spent more cash in April and May than in the previous three financial years combined. Chancellor Rishi Sunak said May’ s figures “confirm that coronavirus is having a severe impact on our public finances.” Alex Tuckett of PwC comments: “In the near term, there are signs the economy is recovering as the country re-opens, and this should boost tax receipts,” but noted that the data for May “remind us that Chancellor Rishi Sunak faces a difficult backdrop to any summer fiscal event.”
Retail sales bounce back
British retail sales rebounded last month, with a stronger than forecast increase as the country gradually relaxed its coronavirus lockdown. The Office for National Statistics said that sales were up 12% last month, compared to April, which saw an 18% fall in sales. Despite the upturn, sales in May were still 13.1% down on the same month a year ago. Sales at non-food stores increased by 24% in May, but were still 42% down on a year earlier, with clothes stores the hardest-hit category, down by more than 60%. Online sales represented a third of all spending, a new record. In the three months to May, overall sales fell by 12.8% compared with the previous quarter .
UK recovery slowest in Europe
Analysts predict the UK will achieve a slow U-shaped recovery rather than the rapid V-shaped rebound as economists cast doubt on upbeat forecasts from the Bank of England and government officials. Ethan Harris at Bank of America reckons the UK will suffer the “worst of both worlds” with the weakest 2020 economic performance in Europe and one of the highest COVID-19 death rates. Elsewhere, Fabrice Montagné, UK economist at Barclays, warned the rebound has “remained in a low gear” despite “signs of pent-up demand”. However, the reopening of shops and schools should provide a “second wind”, he added.
OTHER NEWS – WEEKEND TO 21ST JUNE 2020
Smuggling fears over Irish border
The Government has been warned that delays to an IT system could see a post-Brexit “smugglers’ charter” on the Irish border. While HMRC is updating computer systems that will monitor goods crossing the border between Northern Ireland and the Republic once Britain leaves the EU, Simon Sutcliffe, customs and excise partner at Blick Rothenberg, says the Government is not ready to deliver the digital customs regime. He said that while smuggling between the north and the south has always existed, “now we have a situation where the days of a porous border return with a renewed intensity.” The I cites an HMRC insider who says the new customs declaration service “is not only delayed, it is also does not talk to other systems in HMRC.” The tax office source adds that there is “no way” HMRC is ready to implement a digital customs system that will prevent goods from getting across the border.
The I, Page: 17
Contact Paul Southward