NEWS -WEEKEND TO 3RD MAY 2020

NEWS ROUNDUP

TAX NEWS -WEEKEND TO 3RD MAY 2020

SATURDAY

HMRC flooded with WFH tax relief requests

HMRC is being “inundated” with claims from employees working from home during the coronavirus lockdown, with a number of people working remotely seeking tax relief on supplies like office desks, furniture, paper and printer ink. The Times says the relief, which is available if a worker can show their purchases are “wholly, exclusively and necessarily” in the performance of their role, has rarely been used but the COVID-19 lockdown has “opened the floodgates to claims.” Nimesh Shah, a partner at Blick Rothenberg, comments: “Because a large number of people have been forced to work from home during the lockdown, HMRC will be inundated with claims for home working expenses.” HMRC said it has no precise figures on the number of P87 claims it had received, but says the volume has increased significantly.

The Times, Page: 1

Taking pay cut ‘could trigger a tax bill’

Tax experts have warned that executives and employers taking pay cuts or giving up bonuses during the coronavirus lockdown could be pursued by HMRC for income tax and national insurance contributions.

Financial Times, Money, Page: 4

VAT scrapped on ebooks

With VAT on ebooks scrapped as of yesterday, Antje Forbirch at Blick Rothenberg comments: “This will be welcome news, provided the VAT saving is passed on to end consumers.”

Financial Times, Money, Page: 2

Treasury to look beyond lockdown

Philip Aldrick in the Times considers the measures the Treasury may take as Britain unlocks. He highlights that much of the Government’s support package will remain in place for a year or more, with VAT and self-assessed tax payments deferred to 2021, a business rates holiday lasting for 12 months and grants for small business not time-sensitive. Mr Aldrick says rebuilding will mean higher taxes to fix public finances, citing Blackrock portfolio manager Rupert Harrison who says higher taxes are justified because the pandemic has shown that the state was a “disaster insurer”. Higher tax would be a form of payment for the service, he suggests.

The Times, Page: 49

SUNDAY

Pension extension to spare NHS workers huge tax bills

The Government has extended a tax deadline to prevent NHS workers being hit by large tax bills while leading the frontline battle against the coronavirus. The Sunday Telegraph says issues with the tapered annual allowance meant doctors taking on extra shifts were at risk of ending up out of pocket. However, a deadline that allows staff to pay tax bills using their pension has been extended by three months. The deadline for a scheme enabling savers to settle annual allowance tax charges of more than £2,000 through the NHS pension fund without needing to pay cash upfront was due at the end of July for claims related to the 2018/19 tax year. However, wealth adviser Quilter flagged concerns with Chancellor Rishi Sunak and Health Secretary Matt Hancock, calling for a six month extension. The Government has extended the cut-off to the end of October and will review the issue again at the end of July.

The Sunday Telegraph, Business, Page: 3

Overtaxed pension savers reclaim £600m

Figures from HMRC show that savers charged too much tax when dipping into pension pots have reclaimed £600m so far this year. The data shows that more than 10,000 people were overtaxed when they took money out of their pension, to the tune of an average £3,141 each. HMRC says the number of people making pension withdrawals increased 23% from January to the end of March, with 348,000 people withdrawing money. The average amount accessed was £7,100, a 3% dip, year-on-year. Tom Selby, a senior analyst at investment manager AJ Bell, notes: “People dipping into their pensions for the first time as a result of COVID-19 risk getting thousands of pounds less than expected due to HMRC’s emergency taxation policy on single withdrawals”.

The Sunday Times, Business, Page: 13

Lockdown could deliver duty blow

Couples living together but yet to sell a previous home are at risk of a tax hit due to the coronavirus lockdown. They could fall foul of a rule saying that those buying a home while owning another have to pay an additional 3% stamp duty surcharge. Homeowners can claim a refund as long as they sell their other home within three years of buying the next one but there are concerns that as the pandemic has all but frozen the property market, owners face a tighter window for selling up. Chris Etherington at RSM says: “A significant number of people who were hoping to sell their former homes this year and reclaim the 3% surcharge will not be able to do so due to the current lockdown requirements,” while Zena Hanks at Saffery Champness comments: “Even when we do return to some sort of normality, a combination of reduced incomes and reduced confidence is not likely to inspire confidence in people to take on financial commitments.” Elsewhere, the Express also cites Ms Hanks, who warns that second homeowners who planned to sell before the April 5 tax deadline but were thwarted by the lockdown could end up paying more capital gains tax w hen they do complete.

The Sunday Times, Business, Page: 12 Sunday Express, Page: 46

Stamp duty holiday call

The Sunday Express looks at calls for stamp duty rules to be relaxed to support the property sector in the wake of the COVID-19 pandemic. The Royal Institute of Chartered Surveyors and the National Federation of Builders have called for a stamp duty holiday to come into effect once the lockdown ends, saying this would boost the market, particularly the buy-to-let sector. Mary-Anne Bowring, group managing director at property firm Ringley, comments: “A stamp duty holiday would no doubt cause a rush of transactions and help breathe life into a housing market that has been put into deep freeze in an effort to battle coronavirus.”

Sunday Express

INSOLVENCY NEWS -WEEKEND TO 3RD MAY 2020

SATURDAY

How COVID-19 is escalating problem debt issues

The FT looks at the financial pressures brought about by the COVID-19 pandemic, citing Begbies Traynor analysis showing that half a million British businesses are at risk of collapse.

Financial Times, Money, Page: 8

SUNDAY

Rule rethink may be rushed out

The Government could push emergency legislation through Parliament as soon as this week to make insolvency rules fit for purpose amid the coronavirus crisis, reports the Sunday Telegraph. This come s as analysis from Begbies Traynor shows that a record 509,000 businesses were in significant distress by the end of March. Business Secretary Alok Sharma has pledged a three-month suspension of wrongful trading rules related to directors’ personal liability for debts incurred if firms keep trading while insolvent, and is also promising firms three months “breathing space” to allow them to restructure without creditors enforcing debts.

The Sunday Telegraph, Business, Page: 7

CORPORATE NEWS -WEEKEND TO 3RD MAY 2020

SATURDAY

Breathing space for Intu

Shopping centre owner Intu has secured temporary relief from its lenders, agreeing waivers to avoid debt covenant breaches. The firm has been put under pressure having been paid just 40% of the quarterly rent due to be handed over at the end of March, with many tenants forced to close by the Government under the coronavirus lockdown. Intu said it was in advanced discussions with tenants over a further 28% of rents, and is discussing repayment plans with others. The firm, which owns 17 shopping centres in the UK and Spain, has parachuted in former PwC and EY consultant David Hargrave as chief restructuring officer.

The Daily Telegraph, Page: 32 Daily Mail, Page: 83

All change in store after lockdown ends

A Retail Economics poll suggests over a quarter of people will shop differently after the coronavirus lockdown, with PwC’s Lisa Hooker saying a significant minority could change their retail habits.

Financial Times, Page: 16

SUNDAY

Taskforce targets debt-laden companies

The Sunday Telegraph looks at a taskforce put together by industry lobby group CityUK that will look at ways to recapitalise companies that come out of the coronavirus pandemic laden with debt. It says the formation of the group, which is under the watch of CityUK chairman Sir Adrian Montague, came after Lloyds chairman Norman Blackwell asked Bank of England governor Andrew Bailey to consider a situation where banks are unable to lend because customers’ debt-piles are too high. Lord Blackwell comments: “The concern is that businesses which have a significant loss in revenue during the crisis may build up debt which they would struggle to repay”. He added that to ensure such firms become viable again, there is a need for “some form of recapitalisation, replacing debt with equity or other equity-like capital that doesn’t burden the business with interest and debt repayments”. The Sunday Telegraph says EY’s Omar Ali has called on his contacts across law, banking, accounting and fund management to volunteer to help the Recapitalisation Group.

The Sunday Telegraph, Business, Page: 6

PwC on board for ferry firm talks

The Department for Transport has called in specialist financial advisers from PwC to help negotiate a taxpayer rescue of Dubai-owned ferry operator P&O. The firm has been drafted in as talks with owner DP World over a £150m bailout risk collapse. P&O Ferries is targeting around £257m through cost cuts and state aid, with £40m in savings to come from changes to pension payments, while £55m would be saved through changes to working conditions and pay cuts. DP World wants the balance of around £150m to come from the Exchequer, despite paying £270m to shareholders.

The Sunday Telegraph, Business, Page: 3

Pandemic will see survival-of-the-fittest?

The Mail on Sunday considers the impact the COVID-19 outbreak may have on business and employment after advertising tycoon Sir Martin Sorrell warned that weak firms will be wiped out in a “Darwinian culling” that will see only the strongest firms make it to the other side of the pandemic. This comes with EY research showing that company profit warnings hit a record 301 in Q1, with this close to the 313 recorded in the whole of 2019 and exceeding 2018’s 287. EY’s UK head of restructuring Alan Hudson predicts a spike in insolvencies as the crisis has “exacerbated existing weaknesses”. Howard Archer, chief economist at the EY Item Club, says some policymakers “have sounded cautious about whether the economy will bounce back quickly”, suggesting that consumer caution even once the lockdown has eased “could cause the recovery not to be very sharp”.

The Mail on Sunday, Page: 121 Sunday Express, Page: 43

KPMG to serve up support for restaurant

Azzurri Group, owner of Zizzi and Ask Italian, has drafted in KPMG to help it negotiate the coronavirus crisis. The firm has already suspended payments to landlords and is using the furlough scheme to pay most of its staff. Boss Steve Holmes says KPMG would help the business make the “right decisions at the right time”. Meanwhile, Burger chain Byron is close to collapse, with KPMG set to contact potential buyers tomorrow.

The Sunday Times, Business, Page: 1

EMPLOYMENT NEWS -WEEKEND TO 3RD MAY 2020

SATURDAY

Office staff face months of remote work

Ministers are exploring how Britain will come out of lockdown, with many office staff facing several more months of working remotely. Plans being discussed would also see staggered start times and workforces being split up, working alternate weeks at home or in the office so as to limit the number of people at work and using transport. The Telegraph says EY consultants have reportedly been brought into work with the Business, Energy and Industrial Strategy department to provide detailed guidance for different types of workplaces. The business department will publish its recommendations next week.

The Daily Telegraph Financial Times

SUNDAY

City staff face new normal

The Sunday Times looks at the changes City firms may roll out as staff return to work, with Andrew Kail, head of financial services at PwC, saying offices could have occupancy rates of just 25% while desks could be moved to canteens to maintain social distancing.

The Sunday Times, Business, Page: 3

SMEs NEWS -WEEKEND TO 3RD MAY 2020

SATURDAY

Firms call for expanded grants scheme

Hundreds of small firms in London have called for an extension to Government support amid the COVID-19 outbreak, saying many firms are at risk of collapse. In a letter to Chancellor Rishi Sunak, the East End Trades Guild and Guardians of the Arches, a tenants’ association representing businesses based in railway arches, said that while they recognise the “unprecedented scale” of the Government support package and the “many competing demands on the state”, many of the small firms they represent will go out of business in the next few weeks without further action. They warn that due to high London property prices, many small firms in the capital have a rateable value above the threshold for grants. The groups have proposed a London weighting for business support.

Evening Standard

SMEs set to run out of cash in weeks

A survey by the Association of Practising Accountants suggests the majority of owner-managed businesses will run out of cash in 12 weeks, while 70% have lost at least half their revenue.

Financial Times, Money, Page: 2

SUNDAY

A third of SMEs fear collapse in lockdown

Research from Hitachi Capital Business Finance suggests that almost one in three SMEs will struggle to survive between now and the end of June, while 31% are scaling back their businesses due to the coronavirus. The poll saw 14% of SME bosses say they expect to see growth this year, down from 39% in a survey carried out before the lockdown.

Sunday Express, Page: 43

UK pledges extra funds for businesses that share office space

The Government has pledged £617m in grants to help small firms ineligible for existing coronavirus support as they do not pay business rates, adding to the £12.33bn pot for small business grants.

Financial Times

PROPERTY NEWS -WEEKEND TO 3RD MAY 2020

SATURDAY

House prices set for post-lockdown rebound

Nationwide has forecast that house prices could rebound after the coronavirus lockdown eases. Data from Nationwide shows that UK house prices grew 3.7% year-on-year in April, the strongest rate of growth since February 2017, while month-on-month analysis shows a 0.7% increase, with the average UK home worth £222,915 in April compared to £219,583 in March. The increase in April came despite the coronavirus-prompted lockdown as Nationwide’s data reflects mortgages approved in April but submitted earlier. Robert Gardner, chief economist at Nationwide, warned that the medium-term outlook is “highly uncertain”, predicting a significant contraction in the short term, but suggested a raft of policies from the Government “should set the stage for a rebound once the shock passes”.

City AM

Office model hangs in the balance after virus

The FT says CEOs may see property portfolios as a good starting point for cost cutting, with a PwC poll showing a quarter are considering cutting back on real estate.

Financial Times, Page: 15

SUNDAY

Homeworking shift could see 20% of office space ditched

Businesses are expected to abandon up to a fifth of their office space as part of a permanent shift towards working from home post-coronavirus. Andy Pyle, head of UK real estate at KPMG, said: “Ultimately, I would expect there will be a need for less office space and also different office space. My guess is that the fall would be somewhere between 10%-20%, on an individual company level on average.” A string of major employers have said they are already preparing to cut costs by reducing their office estates, with Barclays, St. James’s Place and WPP all exploring changes to working practices.

The Sunday Telegraph, Business, Page: 5

ECONOMY NEWS -WEEKEND TO 3RD MAY 2020

SATURDAY

Long lockdown will shrink economy by a fifth

Analysis by consultancy firm Capital Economics suggests Britain’s economy will shrink by a fifth during 2020 if a full lockdown has to remain in place for a year. It calculates that each additional month of full quarantining would knock 1.5 percentage points off annual growth. Ruth Gregory, senior UK economist at Capital Economics, said keeping restrictions in place until April 2021 would see the economy contract by 19.6%. The report also forecasts that maintaining a full lockdown until the end of June will shrink the economy by 12% over 2020. Capital Economics notes that even with an immediate end to the restrictions, the economy would still shrink by 8.2% during 2020.

The Guardian

Record low for manufacturing

UK manufacturing collapsed in April, with the IHS Markit/CIPS Purchasing Managers’ Index recording a score of 32.6 from March’s 47.8 – the lowest level since the survey began 28 years ago. The Independent’s Ben Chapman says woes in the sector “point to a deep decline in the wider economy,” citing Howard Archer, chief economic advisor to the EY Item Club, who expects the UK economy to shrink by 13% in the latest quarter and 6.8% over 2020.

The Independent, Page: 11

Exports slip in Q1

The BDO export index for the UK has slipped from 106.2 to 91.6 quarter-on-quarter, marking the most significant hit to exports among Europe’s five largest economies. The index for Italy, Spain, France, Germany and the UK dropped 11 points to 87.2.

The Daily Telegraph, Page: 32

SUNDAY

Business leaders call for furlough extension

Chancellor Rishi Sunak is facing calls to offer increased financial support to businesses as the threat of unemployment and company bankruptcies looms amid the coronavirus pandemic. Business groups are urging Mr Sunak to extend the Government’s £40bn job-retention scheme in an effort to “give an essential lifeline” to the economy. The Royal Society for the encouragement of Arts, Manufactures and Commerce has warned that pulling the furlough subsidy too early risked a surge in unemployment rates, while manufacturing trade body Made has detailed the need for a more flexible scheme allowing part-time working to be subsidised to boost factories. Tej Parikh, chief economist at The Institute of Directors, says a “sharp” removal of the furlough scheme at the end of June could cause “significant problems” for some businesses, proposing instead a tapering off of the system. “Getting the economy running again won’t be like flicking a switch”, he warned. Writing in the Observer, Shadow Business Secretary Ed Miliband says the Government “must act urgently with a second wave of support” and “look again at the gaps in current schemes.” In an open letter to Prime Minister Boris Johnson, the president of the British Chambers of Commerce, Ruby McGregor-Smith, said the Government must ensure schemes “continue to evolve to support a phased restart of the economy”.

The Observer

Business return could prompt 2021 rebound

Yael Selfin, KPMG‘s chief economist, believes that if coronavirus is contained and a level of business activity resumes by September, the economy will contract by 5% this year and rebound by 7.5% in 2021. However, if activity does not resume until next summer, GDP could drop by 8% this year and halve next year.

The Sunday Times, Business, Page: 2

OTHER NEWS -WEEKEND TO 3RD MAY 2020

SATURDAY

Dolan challenges lockdown

Businessman Simon Dolan, former owner of SJD Accountancy and founder of Dolan Accountancy, has launched a legal challenge to the coronavirus lockdown. He argues that the restrictions are “draconian”, “paralysing the country” and causing “long term damage”, and has urged the Prime Minister to ease the lockdown so the economy can return to normal. His lawyers are challenging the Government on: the legality of lockdown, whether it breaches human rights law, and if an exit strategy has been properly considered.

The Times, Page: 11 Daily Mirror The Sun, Page: 5

SUNDAY

Fraud warning

The Investment Association has advised savers and investors to be vigilant in a bid to “protect their hard-earned savings from ruthless financial criminals” after cases where fraudsters have attempted to use the coronavirus crisis to convince investors to withdraw money. Blick Rothenberg warns that companies wanting to furlough staff had been sent emails purportedly from HMRC requesting bank account details. The firm’s Fiona Fernie notes: “Neither HMRC nor Government communicates by email or by text unless you have signed up to the relevant protocol with them.”

The Sunday Times, Business, Page: 11

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