Stuart Wilkinson, head of tax at EY in Cambridge, comments on the latest goverment actions to help mitigate the economic impact of the COVID-19 outbreak.
EY comments on the Chancellor’s emergency stimulus announcements
“Business has been looking to the government for interventions, to help those organisations that have been rapidly affected by the change in circumstances. The changes being called for mainly relate to four key areas:
- reducing the costs of employment
- reducing fixed costs
- providing cash flow benefit and
- reducing the overall burden on businesses during this time.
“The Chancellor’s announcement addressed three of these areas: reducing the fixed costs by providing a business rates holiday for all businesses in the sectors most affected; providing interest-free loans for six months; and reducing the burdens for these businesses by providing cash grants. These measures will apply to single shops, pubs, theatres, music venues, restaurants – and any other business in the retail, hospitality or leisure sector.
“In contrast to the Budget measures, many of these changes will apply to all sizes of businesses in these sectors, and therefore addresses a particular concern from last week. This is intended to provide some significant breathing room for those businesses worst affected by the social-distancing policy.
“The announcements were addressed to those sectors most affected by the COVID-19 outbreak to date. Those in other sectors will be wanting to know what the Chancellor is planning to do for them next, if the economic impact spreads.
“A key area that was only hinted at was “employment support” – this will be essential if jobs are to be maintained over the next few months. The Chancellor recognised that this was a critical part of his package and was next on his list. This recognition will be good news for businesses, but they will be looking for answers on this rapidly, as they will quickly be facing tough decisions.
“The Chancellor said he was looking for measures that could be implemented quickly to help businesses with the immediate challenges they face, but without necessarily creating a new system. From a tax perspective, "Time to Pay" for tax liabilities provides this immediate relief, but is potentially a time consuming and uncertain process. By making it available automatically on request, he could remove a huge area of concern for business.
“We had no Budget last year and this year, through no fault of his own, the Chancellor is delivering a Budget by instalments. Each one so far has been helpful and many will be impatiently waiting to hear what is in the third instalment.”
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