#askKPMGWebinar SeriesSession 1: COVID19 - Channel Islands business outlook26 March 2020
Webinar presenters
Linda JohnsonHead of [email protected]
Tony ManciniTax Partner [email protected]
Rob KirkbyAdvisory Partner [email protected]
Paul EastwoodTax Director [email protected]
Mark AshburnAdvisory Director [email protected]
AgendaIntroduction
Macro economic position
Local economic position
Stimulus measures— Guernsey— Jersey
Tax initiatives— Guernsey— Jersey
Liquidity / Cashflow
Banking
Wrap up and Questions
Introduction
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Introduction
Format of the webinar
Asking questions
Further webinars and updates
Reference to materials / webinar playback
Macro economic situation
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Macro economic position
World position— Wide range of mixed views around length of recession, depth and recovery— Bandwidth of governments to make a difference— Prioritisation shift from ESG to survival mode
UK positionMixed views, KPMG paper available on our website and key views of this are:
— Main scenario 2020 GDP fall 2.6% and a rebound of 1.7% in 2021— Downside scenario 2020 GDP fall 5.4% and a further fall of 1.4% in 2021— Inflation to remain low
Economic situation locally
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Local economic position — Balance sheet of the Governments and credit ratings— Predominant GVA / GDP based on Financial Services. Four key areas:
— Banking— Fund Administration— Private and Corporate Client Administration— Insurance
— Underlying fee base is more reliant on fixed and time based fees than AUA / AUM.— Key is understanding the profile of underlying clients and their cash position. Risk
areas include:— Real Estate— Debt Funds
— People matters— Spend and tax
Stimulus measures
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Jersey – measures to support businessSeries of measures introduced by the Government of Jersey:— £50 million in a new Jersey Disruption Loan
Guarantee Scheme, to provide Government guaranteed bank lending and overdrafts to businesses;
— A Special Situations Fund of a further £50 million to support larger businesses;
— Consideration to be given to a small business emergency fund, for the self-employed and very small businesses;
— Deferral of Social Security contributions and GST payments;
— Deferrals or rent renegotiations;— Flexibility from utility companies; and— Upgrading of all users to 1 Gigabit broadband.
However, it is unclear at the moment how businesses will be able to access these funds
The States have voted to allow transfers from the strategic reserve to the stabilisation fund of up to £400m. Borrowing limits have also increased from £20m to £500m
Banks are working on processes to lend against the Government guarantee
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Guernsey – measures to support business Announced 18th March
— Establishment of scheme to support banks in providing liquidity, govt guarantee up to 80% of loan. Early stages at the moment.
— Deferrals of social security payments and rates.
— Suspension of mooring fees for commercial fishermen.
— £5m ‘hardship fund’ established – administered via social security where individuals would not receive income support or sickness benefit, preserving future labour market.
— Adjustments to population management regime.
80%
£5m
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Guernsey – further measures to support business
Announced 24th March, costing up to £41m
Coronavirus Payroll Co-Funding Scheme
— States to pay 80% of minimum wage (£8.50ph / £300pw)
— Employer must pay at least 20%
— Must have been in business for six months
— Available for three months
— Most adversely affected sectors only
Sectors:— hospitality and tourism;— passenger transport and travel;— rental and leasing of cars and recreational
goods;— recreation and entertainment;— event management and event services;— personal service activities such as
hairdressers, beauticians and animal boarding;
— commercial fishing;— private extra-curricular education such as
dance and riding schools;— non-food and non-pharmacy retail;— advertising and marketing;— construction;— manufacturing
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Guernsey – other measures to support business
Business grants, aimed at small business and self-employed10 employees or fewer £3,000 grant Deferral of TRP
payments until July 2020 –excluding regulated finance business and professional services
Allow Aurigny to extend overdraft facility to £53m
Working with GIBA, GSCCA and Commercial Bar Association to enable business to access free critical business advice
£53m
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Guernsey - measures announced by GFSCOne month extension for annual returns and no requirement for audited accounts
Audited accounts to be filed by 31st October 2020
Simplified procedures for appointing alternate directors
Extended timelines for responding to GFSC queries
Relaxation of timing for notification of formation of insurance cells
Tax measures
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Guernsey – upcoming tax issues
Quarterly ETI and social security payments
30th June tax payments for 2020
Meeting substance requirements
Impact of staff working in other jurisdictions
Upcoming tax issues
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Jersey – tax measures to support business
Social security contributions payment deferral for employers and self-employed— Applies to A and B 2020 quarters— Automatic where 80 employees or
less, otherwise apply for deferral— Continue to submit contributions
schedules – important for employees’ record and entitlement to social security benefits
— Next quarterly schedule due 15 April
GST payment deferral relating to (quarterly and monthly) returns ending 31 March, 30 April, 31 May and 30 June— Deferral of up to 12 months— Continue to charge GST to
customers in the normal way— Continue to submit GST returns –
payment deferral conditional on submission
— Deferral does not appear to apply to ISE fees – due on 31 March
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Jersey – tax measures to support business
No deferral of ITIS –next return/payment due 15 April –expect employees to be changing their “effective rate”
No deferral of 2019 corporate income tax POA –“large companies” due by 31 March; non-large companies due by 31 May
No blanket deferral of 2019 personal income tax POA due 31 May –deferral can be applied for on a case-by-case basis
Limited service in Revenue Jersey – file electronically wherever possible
Economic substance requirements – particularly “directed and managed” element
Recognition of personal tax residence issues
Liquidity / cashflow
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Liquidity /Cashflow
Cash is kingyou can never do too much work on liquidity management
Receipts and payments forecast is the key tool –17 weeks is the new 13
17 weeks
Key considerations when forecasting— Revenue— Expenses— Assumptions— Stress testing
Prioritise cash outgoings using Green, Amber, Red
View frombanks
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Document Classification: KPMG Public
© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Finance will take time to arrange and may require additional security and / or personal guarantees. Ensure you have considered other options such as creditor forbearance and deferring utility payments
Bank financing It may be appropriate to draw facilities sooner rather than later, financing is likely to be harder to obtain in the immediate post crisis landscape
If you believe new financing will be required speak to your bank as early as possible
Your normal relationship manager should be the first point of contact or in the case of smaller businesses, the general contact number
Preparation is key, banks will expect a detailed cash flow forecast showing requirements for 13 – 20 weeks
Wrap up and questions
Thank you
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© 2020 KPMG Channel Islands Limited, a Jersey company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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