Practical Tips for FCA-regulated firms: Furloughs, Royal Mail, Tax Payment Deferrals and Business Interruption Loans

27 March 2020 | Matthew Crisp

As the COVID-19 situation develops further, a number of measures have been announced to provide relief for businesses. We consider below the practical implications for the financial services sector and the impact on firms of the challenges facing the postal service in the UK.

Furloughing

By now, you are probably aware of the Government’s Coronavirus Job Retention Scheme, and the concept of furloughing employees. Regulated firms are unlikely to be able to furlough personnel holding Senior Management Functions without significant re-apportionment of responsibilities, and where considering furloughing of Certified staff and even workers falling outside of the SCMR regime, care must be taken to avoid a that would lead to a firm being unable to meet the FCA’s Threshold Condition 2.4 (Appropriate Resources) or that would jeopardise the firm’s ability to respect the regulator’s Principles for Business.

If you have identified potential candidates for furloughing and are comfortable with the regulatory implications, it is important to follow due process and our HR Advisory team are able to assist: Please contact cloftus@wheelhouse-advisors.com.

Royal Mail

Reliance on hardcopy post is generally low in the internet age, however it is worth noting that Royal Mail no longer observes its traditional next day delivery service standard for first class post and is limiting deliveries to many business premises to 3 times a week. Firms should consider whether workarounds can be deployed where any business processes rely on hard copy post.

In view of a likely long period with no access to business premises, firms should also consider redirection or diversion (taking care to note that these are not identical to each other) from the business premises to the home of an appropriate member of personnel.

Where a redirection is considered appropriate, it will be important to assess any GDPR impact should post include personal data, whether in relation to staff or clients, and, more broadly, any confidentiality issues that may arise. Where such issues are material, business may prefer to make use of Royal Mail’s Keepsafe service.

Tax payment deferrals

Next quarterly VAT payment: Many VAT-registered financial services firms will be in a repayment position, but for those in a payment position in relation to a VAT quarter ended on 29th February 2020 or ending on either 31st March 2020 or 30th April 2020, settlement of amounts due to HMRC in respect of that quarter only is now not required until 5th April 2021. No application is required to benefit from the deferral, however if you have direct debit in place for such payments, this will need to be cancelled otherwise HMRC will attempt to collect the amount due at the usual time.

July 2020 income tax payments for LLP members: LLP members will generally have income tax self-assessment payments to HMRC falling due on 31 July 2020. The deadline for making these payments has been deferred to 31 January 2021. No application is required to benefit from the deferral, however if you have direct debit in place for such payments, this will need to be cancelled otherwise HMRC will attempt to collect the amount due at the usual time.

Business Interruption Loan Scheme

Generally, borrowings by regulated entities are unlikely to qualify as capital for the purposes of compliance with the FCA’s prudential rules. Should you be considering overdrafts and/or loans under the Business Interruption Loan Scheme in respect of a FCA-regulated business (NB for the most part, PRA-regulated businesses are excluded from the scheme), under certain circumstances it may be possible for borrowing undertaken by an associated non-regulated entity to be injected into your regulated entity and qualify as capital for FCA purposes. Our Prudential Advisory team are able to assist: Please contact: mchambers@wheelhouse-advisors.com

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