FOR PARN MEMBERS

Update - 16/04/2020

The Government have now responded to the below document from the PBSC, you can read the complete response by clicking here

The document below was submitted to the Secretary of State by the PBSC (Professional and Business Services Council of which Andy Friedman, CEO of PARN, is a member) at 14:30 on 2 April 2020. It reflects information they had at the time from many participating firms and some professional and trade bodies on regulatory easements and other government interventions. Most of the early items are relevant only to professional services firms, but we would like to draw your attention to items from number 11 onward which are potentially of relevance to professional bodies. Please let us know what you think of these interventions we should be asking government to make and add any others you think would be useful.

Please click here in order to respond

Alternatively you can contact us via info@parnglobal.com please make the subject line ‘Government Support'

Andy Friedman

Regulatory easements

  1. Deferral of consultations. Ceasing calls for evidence on non-critical work and deferring the following consultations on regulatory instruments in order to concentrate effort on COVID-19 response priorities:
    1. AML Levy consultation. The consultation announced in the budget will require attention from senior people. Can the consultation be deferred until crisis-related workloads reduce significantly?
    2. DAC6 on cross-border transactions. Implementation of DAC6 is extremely complex and is due to come into force on 1 July. There could be compliance risks if the current lockdown persists until then. It is understood that HMG will need to agree any deferral with the other 26 EU member states; firms in other countries may be making similar requests given the geographical reach of the pandemic. Can the existing legislation be deferred?
    3. Trusts register. Those who need to report will not be able to gather information under current situation. Increased demand for probate will increase trust establishment. Can the extension of trust reporting service be deferred?
    4. Crown preference. This will make it more difficult/expensive for businesses to raise funding. It is due to start from December – can this be deferred until the crisis has passed?
  2. Creditors /debtors.The Irish Revenue Authority have stayed debt collection and a comparable approach in the UK, or extending timelines would be beneficial.
    1. All creditor/debtor relationships to be protected with no enforcement action threatened or actioned for an agreed period of time and no penalties should be incurred.  This would include HMRC and Companies House.
    2. Accelerated payment by the public sector for private sector goods and services (including subcontractors) and payment on order/delivery.
  3. Antitrust.  In the response to COVID-19, a number of firms may find they have to work together to support HMG. Greater clarity to permit the sector to effectively collaborate, e.g. a waiver on conflicts (similar to the Supermarkets waiver) would be helpful. This would enable candid discussion among industry leaders and sector firms to help HMG on some of the bigger projects without being left open antitrust concerns. 
  4. Insolvency rules. There is a concern that the temporary suspension of wrongful trading provisions for company directors applied retrospectively from 1st March 2020 may be difficult to administer in the current crisis. Additionally clarity and consideration would be welcome on:
    1. What the proposed moratorium might involve and the criteria for accessing as soon as possible.
    2. Temporary moratorium on petitions relating to liquidity/cash flow.
    3. Whether there is sufficient capacity amongst the small pool of Insolvency Practitioners/judges.
    4. Focusing on interim measures to allow companies to stay in a state of ‘hibernation’, leaving the company in the control of management.
  5. Enabling money into the real economy.Banks are feeling the pressure on their balance sheet, in terms of risk and regulatory capital. Regulator assurance only gives so much comfort. A repeat of the UK government’s Asset Protection Scheme in 2009 could be helpful - this was unfunded insurance by HMT of banks’ exposures, against a (material) fee which made the government a substantial net profit. In the COVID crisis, this would allow the banks to focus on getting money into the real economy, without concerns as to defaults. It would also avoid the need for funded support from the government, whether in the form of nationalisations, or a NAMA-style funded acquisitions.
  6. Immigration & right to work checks. The Home Office have announced a freeze on all visa processing for at least 6 weeks. 
    1. Right to work checks are temporarily digital but the biometrics stage still needs to be done in person.  A waiver or deferment of the biometrics meeting would make a significant difference.
    2. Due to the travel restrictions, a pragmatic approach to visa extensions and personal tax for individuals unable to leave/return to the UK.
  7. Wet signatures and oaths. This is a short-term issue requiring a rapid digital fix to be agreed with government and has also been raised with the MoJ.
    1. The existing legal/regulatory regime needs to be relaxed to permit virtual signatures for affidavits, statutory declarations, stock transfer forms and signatures for statements of truth.
    2. Action is required now otherwise business will face significant problems (e.g. an invalid affidavit could result in an administrator’s actions being unlawful).
  8. Deferring Counter Party Client Due Diligence.   To ease pressure for real estate agencies and improve the flow of transactions for clients, could this requirement for residential and commercial transactions be deferred?
  9. Transportation and air freight costs.  These costs are rising exponentially - could a cap be set on the cost of such services?
  10. Audit & Accountancy.
    1. Responses to the BEIS consultation and Select Committee request are due in May. Given the operational challenges, could this be delayed?
    2. Large private companies that come under the definition of other entities of public interest, are due to make changes with their service providers this year, to comply with standards – could this timeline be delayed?
    3. Accountancy bodies are subject to independence and conflict checks. There is a proposed easement from the FRC but it looks narrowly constrained to individual audit firms and their clients. 
      • To enable seamless cross-firm collaborations as a crisis response for COVID-19, could these be waived?  
      • Review regulation preventing firms from providing emergency advisory services to audit clients, and emergency powers to allow the FRC to apply a fee cap moratorium for non-audit services.
    4. Filing deadlines I. Emergency powers to enable Companies House to provide automatic extensions and waive penalties.
    5. Filing deadlines II. Reporting deadline extension for FCA regulated unlisted entities
    6. Filing deadlines III. Extend reporting deadlines to reduce pressure on public sector, but maintain high standards of accountability and governance which will be even more important with the fiscal stimulus.
    7. MAR. Guidance for listed entities on complying with Market Abuse Regulation / updating market during current situation.
    8. Defer audits. Defer client money audits for FCA regulated firms, reporting dates for Solicitors Regulatory Authority (especially useful for companies with December year ends who have to file by end of June), Civil Aviation Authority reports and audit.
    9. Support from FCA. Support from the FCA to accommodate expected systemic issues (such as lack of current audited accounts) without blanket qualification of prospectuses/working capital statements.

      Other interventions government could take - clarifications

  11. Clarification on current government interventions. Ideas to make government reliefs more effective for LLPs, other partnerships and medium sized corporates:
    1. CCFF. Further communication is required as to how/whether CCFF could apply to LLPs, given their structure and nature.
      • EY have discussed this topic with the Bank of England’s CCFF team who have advised that LLPs with investment grade ratings (or internal bank and Credit Metrics consensus ratings) would be accepted by the CCFF. This is yet to be confirmed on BoE website.
      • What options there are for providing liquidity to partnerships with turnover more than £45m? The rating requirement (note above) would be prohibitive for many in the legal sector and some flexibility to enable CCFF access would be welcome.
    2. Coronavirus Job Retention Scheme (JRS). Business confidence will need to rise again before firms can start to employ more people. For some PBS subsectors, the lead-in time will be longer, compared to retail for example, where shops will reopen and staff are needed again. A selection of questions for clarification include:
      • Extension to part-time work. Could the furlough scheme be more flexible as schemes in other countries such as Germany which can enable part time work?
      • Legal. Can firms initiate redundancy discussions while staff are on furlough?
      • Timing. When will businesses will actually receive the reimbursements from for the furlough scheme and when will the government make the decision to extend the Furlough scheme?
    3. Business rates holiday. This is currently targeted at retail, hospitality and leisure sectors.
      • Could the scope be expanded as many professional services firms will be impacted (e.g. Recruiters occupy retail premises), with several subsectors facing similar pressures with very low to zero revenues likely in the coming months.
      • A number of PBS subsectors would welcome a business rate reduction, with suggested rates varying from 50-100% for one year.
    4. Self-employed income support scheme. Discussions on restrictions on the salary threshold and extending the remit of the self-employed regime to sole practitioners.
  12. Support for PBS SMEs. There is urgent need for extra support for small and medium-sized organisations and securing liquidity in the SME market. Firms are facing significant cashflow shortage with issues around larger client firms not paying invoices, extending terms as well as access to HMRC/government phone lines. Firms are also already making redundancies. More direct support to keep people on the payroll and give SMEs more breathing room would be helpful. Clarification on the following interventions would also be helpful:
    1. Clarity on loan conditions. Clearer communication on the criteria of risk is required. Loans will not help if SMEs already have debts and are unsure when they start to earn enough income to pay them back.
      • Can government apply more pressure on banks to lend and reduce the risk associated (e.g. requests for personal guarantees) for applying for a loan?
    2. Other short term reliefs. Until we resume near normal working arrangements, temporary interventions will enable more businesses to remain solvent for longer.  For example:
      • Maximising corporation tax breaks and payment plans for PAYE tax
      • A temporary suspension of utility payments and loan / tax payments
      • Capital allowance increases for emergency technology spend for firms to facilitate remote working.
      • Can the prompt payment code (PPC) be strengthened or adapted by government for the current situation?
    3. Deferral of July Self-Assessment for self-employed members of LLPs. This is helpful, however the risk remains to partners, particularly in smaller practices, who will be injecting capital to invest in business. At present the tax remains a liability of the member and will not vanish in the event that a firm can no longer conduct business as such the money will effectively need to be ring fenced and not easily used to maintain the business.  Converting this to a grant/writing off the payments will give LLP’s real relief and opportunities to invest more in their businesses
  13. Pooling of broader capability to support government. In order to manage demand effectively, a “quarterbacking system” would be helpful. This would aggregate demand signals from across Government and convert them into programmes of activity, together with a contracting/partnership management framework to allow rapid pooling and deployment of sector skillsets to support a cohesive COVID-19 response.
  14. Engineering firms may need to consider similar joint working to support critical infrastructure maintenance/delivery during the pandemic (hospital building, major utility supplies, and the cross industry support to the ventilator build programme), so a clear framework to enable this would be beneficial.
  15. Public sector work. There is concern whether current projects with government departments will continue, with associated impacts for keeping people in employment and long term planning. Getting the market moving again by not delaying on initiating new public sector projects work will have a positive impact. Other suggestions include:
    1. Push through its pipeline of projects ASAP to keep the supply chain going.
    2. Additional short and medium term funding to cover staff absences or redeployment to maintain operating capacity.
    3. A temporary relaxation of time limits for planning applications to allow prioritisation – (i.e. for buildings such as the NHS Nightingale Hospitals), waivers for planning information requests.
  16. Fiscal & monetary support. Government to actively consider fiscal stimulus such as personal allowances, changes to direct and indirect tax rates, also including but not limited to:
    1. Maintaining long-term government funding support at minimal to zero interest rates, to replace the deferred VAT and income tax payments in the event that the crisis continues for more than one quarter.
    2. Reverse National Insurance as a possible route for the provision of funding support for employees. 
    3. Defer non-critical changes to the tax system. These changes will be disruptive for business and could be deferred for now: (i) 30 day reporting for CGT on sales of UK property; and (ii) extension of MTD in 2021.
    4. Reintroduce extended loss relief carry back. Reintroduce temporary extension to the carry back of losses to the previous year as was provided after the 2008 financial crash.
  17. Digital infrastructure. Increase capacity and ensure broadband providers are working together to ensure home workers have sufficient bandwidth.
  18. Post-crisis stimulation. It remains important to keep an eye on the horizon and consider, the measures government can be thinking about now to support a surge of confidence at the right time when the crisis abates; be it fiscal, monetary or other domestic policy interventions. Conversations will need to resume at pace on productivity, tackling poor innovation and developing future skills.

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