Macro-economic background to COVID-19

    We have been living though the most challenging economic times of our lives. Huge swathes of owner-managed businesses have been savaged by the coronavirus pandemic ('COVID-19').

    Various UK and other Government measures, such as social distancing, lockdown and furloughing employees, have taken a huge toll on consumer demand, business supply chains and finances. Furthermore, the unprecedented nature of COVID-19 and its inherent uncertainty has also damaged commercial confidence, which may take some years to be regained.

    Of course, these radical changes in our lives have created some winners – for example those involved in the food chain supply (although they have had to cope with very different challenges). On the other hand, the leisure, hospitality, tourism and general 'physical' retail sectors have suffered tremendous damage as consumers have been forced into lockdown. Supply chains have also been severely disrupted.

    The pressures of COVID-19 have caused many businesses to collapse completely, and have 'claimed' many high profile UK businesses. The victims include, Brighthouse, Carluccio's, Chiquito, Café Rouge, Debenhams, FlyBe and Laura Ashley amongst others. Admittedly, some of these businesses were already struggling before the COVID-19 storm.

    At the end of May 2020, around 8.4 million employees have received £15 billion under the Job Retention Scheme (covered extensively in section 3 of this Digest) and 2.3 million claims (worth £6.8 billion) have been made through the Self-employment Scheme.

    Businesses have also had to cope with major disruption to their workers and working practices. A large number have switched to remote working, with the consequential IT, staff welfare and other challenges this presents.

    The outlook seems bleak and uncertain. The UK is on course to suffer its worst recession in living memory, with the economy shrinking by 14 per cent and some 2 million people expected to lose their jobs this year.

    In May 2020, Steve Rowe (Chief Executive Officer of Marks & Spencer) opined that we 'may never shop the same way again … Whilst some customer habits will return to normal, others have changed forever'. He is probably right. The same goes for the way we will conduct our lives and businesses in future.

    Business survival

    When the COVID-19 crisis broke in the UK, the majority of businesses acted very quickly to take critical decisions to ensure their survival. The highly unprecedented nature of dealing with the business impact of the life-threatening virus and the legal and moral constraints on existing working patterns have posed significant challenges.

    Companies that have 'survived' this phase will be going through varying 'recovery' plans and this is therefore the main focus of this Digest. This Digest provides various strategies and resources that owner-managers and their advisers can use to assist with the important 'recuperation' phase

    This Digest is based on information available at 29 May 2020. Given that the various Government and HMRC responses to COVID-19 disruption are often being amended, the reader should always check the current position.

    Contents of this Tax Digest

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