UK (Sky News)

Coronavirus: Firms urge government for three-month tax holiday from National Insurance, PAYE, and VAT

By March 20, 2020 No Comments
LONDON, ENGLAND - MARCH 19: A woman wearing a mask walks past a closed clothes store in Oxford Circus on March 19, 2020 in London, England. Transport for London announced the closure of up to 40 stations as officials advised against non-essential travel. Bus and London Overground service will also be reduced. (Photo by Dan Kitwood/Getty Images)

Major UK businesses including car manufacturers have pressed the government to implement a second wave of urgent financial support to prevent mass lay-offs and company closures as a consequence of the coronavirus pandemic.

In a call with business secretary Alok Sharma on Wednesday, business leaders and company representatives urged immediate action to support cash-flow and jobs.

They urged the government to grant an immediate three-month tax holiday from National Insurance, PAYE, and VAT, in addition to relief on business rates.

This would help support cash-flow hit by a sudden and huge decline in consumer demand, driven in large part by social distancing measures required to tackle the virus.

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There were also calls for the government to provide direct support to pay employee wages, in line with the German model of “short-time pay”, in which around 60% of salaries are funded by the state during periods of unusually low demand.

The Society for Motor Manufacturers and Trades wrote to the Treasury on Wednesday, recommending the measures it believes are necessary to ensure that the car industry and associated trades can bounce back when the current crisis passes.

Every UK car company with the exception of Jaguar Land Rover has paused production as a consequence of the coronavirus outbreak, largely to protect workers and the risk of increasing infection rates.

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PSA, which owns Vauxhall, halted production at its Luton and Ellesmere Port plants this week until Friday 27, with staff retained on full pay. Honda, BMW and Toyota have taken similar steps.

Industry sources believe that the government is seriously considering the measures they recommended to try and head off the deepening economic crisis.

A host of other sectors have also called for support, including the hospitality industry in which large scale lay-offs are already underway as people stay away from restaurants, pubs and cafes.

On Tuesday, Chancellor Rishi Sunak announced a range of measures to support businesses in addition to those set out in his first Budget just eight days ago.

Chancellor Rishi Sunak speaking at a media briefing in Downing Street, London, on Coronavirus (COVID-19). Picture date: Tuesday March 17, 2020. See PA story HEALTH Coronavirus. Photo credit should read: Matt Dunham/PA Wire

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These were largely based on government backing for up to £330bn of loans to companies struggling because of the coronavirus, and he faced immediate calls to provide direct support rather than committing businesses to indebtedness.

In the House of Commons former business secretary Greg Clark urged the government to pay wages if companies agreed to keep workers on.

“At a stroke this would save jobs, save businesses and put an immediate end to the contagion and help save the economy,” he said.

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Labour leadership frontrunner Kier Starmer also called for a “national income support scheme”, citing Denmark where the state puts in up to three-quarters of workers’ salaries.

Treasury minister John Glen told parliament “we are looking thoroughly at all these options,” and indicated a further announcement from the Chancellor was imminent.

Stephen Phipson, Chief Executive of Make UK, which represents UK manufacturers, said: “There are alarm bells going off right across the manufacturing sector with the prospect of substantial lay-offs looming.

“Order books are collapsing and this is creating immediate cashflow issues for companies which need addressing within days not weeks.

“The measures already announced by the Chancellor are welcome but, events are so fast moving that we need to go further.

“As such, we need urgent measures which will have an immediate impact on the ability of companies to stay afloat during this crisis and retain their staff.”

A Treasury spokesperson said: “The Chancellor has made clear his determination to do everything we can to keep this country, and our people, healthy and financially secure.

“That includes ensuring that businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs.

“We have set out a comprehensive, coordinated and coherent response to what is a serious and evolving economic situation, and will outline the next stage of our response in the coming days.”