UK companies put pressure on government to freeze taxes

Business groups are lobbying the UK government for a freeze on tax payments such as national insurance and VAT after a number of companies halted contributions to HM Revenue & Customs altogether.

Restaurants, travel operators, hotel groups and bars have stopped paying some taxes to preserve cash as they have been ravaged by the fallout from the coronavirus outbreak, according to a number of people familiar with negotiations between businesses, tax advisers and the government. 

Chancellor Rishi Sunak could announce a suspension on tax payments for some companies as early as this week, according to two of the people.

“If the game is to survive on reduced revenues, you’re going to need to defer all the costs you can,” said Dan Neidle, London head of tax at Clifford Chance, a law firm. “You can’t stop paying rent, you can’t stop paying employees. It’s hard to see how HMRC could say no to a request to cease some tax payments.”

A senior insolvency practitioner said some businesses, including large hotel groups and airlines, were prepared to “move outside the law” regarding paying taxes ahead of a decision by the chancellor.

He said: “Businesses are more interested in making sure essential staff and suppliers are paid and keeping the lights on.” He said that he had advised companies to approach HMRC to request a ‘time to pay’ arrangement but that some directors had taken the extreme measure to just stop paying.

Time to pay arrangements are typically used by small and medium-sized businesses to prevent an insolvency. The agreement with HMRC allows a struggling company to pay a tax bill in instalments rather than upfront.

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HMRC said that “businesses of all shapes and sizes” had called the tax authority’s new helpline to negotiate tax deferrals. The helpline was launched to support businesses impacted by the coronavirus and is staffed by 2,000 call handlers.

Des Gunewardena, chief executive of restaurant group D&D which runs venues such as Quaglino’s and German Gymnasium, said he had concluded a deal with HMRC in recent days. “Companies at the moment are in complete lockdown and will pay anything only if forced to as there is zero cash coming in,” he said.

Kate Nicholls, head of UKHospitality, the leading trade association for the sector, said that the industry needed deferrals on national insurance payments and other taxes if the government was to prevent hundreds of thousands of jobs being lost at restaurants, bars and hotels. 

Ms Nicholls, who has been in talks with the Treasury this week, said that she believed “help will be forthcoming to protect as many jobs as possible” as part of the chancellor’s next package of employment remedies.

Jonathan Downey, co-founder of London Union, which runs events spaces and the street food market Street Feast, said that anyone “who is still paying VAT and PAYE or NIC is a f***ing idiot”. 

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But Tim Martin, chairman of the pub group Wetherspoon, disagreed. He said that HMRC was lending a “sympathetic ear” to businesses, which he deemed “sensible”. “The situation is too unpredictable to say what Wetherspoon might do. My main hope is that pubs stay open subject to adequate ‘social distancing’ measures,” he said.

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Steve Moore, who runs Flight Club, a national bar chain, said that he had already agreed to delay national insurance contributions with HMRC. “Our priority is to protect the staff,” he said.

Tim Stovold, head of tax at accounting firm Moore Kingston Smith, said: “One of our clients was given a two-month payment holiday for £100,000 of taxes in a call of a few minutes. Making that call [to HMRC] will give businesses breathing space and avoid workforce cuts any earlier than is absolutely necessary.”

An investment manager at a private equity firm that owns several UK high street chains said “all taxes” had been stopped at its portfolio companies.

The pressure for the government to do more was building on Thursday.

Lord Simon Wolfson, chief executive of clothing retailer Next, called swift action to protect jobs. Speaking as Next delivered its annual results, Lord Wolfson said that the retailer would have an extra £240m to manage the crisis if the government deferred its PAYE, national insurance, VAT and corporation tax.

Business leaders have met cabinet ministers in emergency meetings on Wednesday and Thursday to work out what the government needed to do to keep British industry afloat. “The government is taking it very seriously,” said one executive, who forecast a meaningful package of tax holidays and support for employers to help pay wages and retain staff during the virus outbreak.



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