Around 80-90% of production capacity has been shut down in recent weeks with a small strategic network of sites supplying essential projects including health, road and rail maintenance, agriculture, utilities including water and other vital activities. All businesses are in survival mode, holding onto cash where possible to keep afloat until the recovery starts and builds back to more economical levels of activity. It will take many months for the pre-crisis cash flow pipelines to settle again with concerns for higher credit risk likely to linger for the rest of 2020 and possibly into next year.
With cash retention being the number one aim after the safety of employees and customers, the MPA paper calls for several tax reliefs to help businesses hold on to cash. These include a further deferral of VAT, deferral of employers National Insurance, Corporation Tax and Business Rates. It also lists some additional charges and costs that should be able to be deferred. Greater flexibility and tapering of furloughing will soon need to be evaluated to avoid a ‘cliff-edge’ at the end of June that may trigger avoidable redundancies.
The paper also calls for “Time to Pay” arrangements with HMRC for the Aggregates Levy to be more readily available. This tax is falling due now as businesses face a very challenging cash environment and making deferment more easily accessible would be invaluable.
Nigel Jackson, chief executive of MPA, said: “Our members are in survival mode and have been for some weeks, but they are starting to look ahead. The rollout of furloughing has been very impressive, averting many redundancies, and the VAT deferral is also very welcome. Extending furloughing beyond June coupled with more flexibility will be needed to avoid avoidable loss of jobs and skills.
"We have concerns that HMRC is showing limited flexibility over Time to Pay arrangements for the Aggregates Levy, unlike Treasury’s approach to many other costs facing businesses, and call for HMRC to align and become more supportive. Surviving the recovery, when bills will come in faster than the payment of invoices for some months, will be another challenge for industry and we need Government to provide direct support and to ensure that planned infrastructure goes ahead as soon as possible.”