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Questions about Virgin Atlantic and British Airways as the Bank of England publishes its bailout list

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The Bank of England has published the list of businesses which have received a taxpayer-funded bailout under the UK Government’s Coronavirus Corporate Finance Facility (CCFF).

You can download it as an Excel spreadsheet here.

This is the list of companies who have applied for AND DRAWN funding from CCFF.  It does not include, for example, Jet2 which we know has applied and been accepted but has not yet asked for the money to be paid.

easyJet, Ireland’s Ryanair and, erm, Hungary’s Wizz Air are on the list as you can see, as is British Airways.

(Before we go on, I accept that not everyone defines taking CCFF money as a ‘bailout’.  That’s up to you.  It depends if you see lending up to £1 billion of taxpayers money to struggling companies, with no security, for as little as 0.2% interest as a ‘bailout’ or not.)

The reason I am looking at this is because of the inconsistencies in the Virgin Atlantic and British Airways positions.

Let’s look at Virgin Atlantic first.

Virgin Atlantic is unable to access the CCFF for technical reasons.  There are rules about how your existing debt should be structured and Virgin Atlantic does not meet those requirements.  This is despite the fact that the company is hampered by Government restrictions – most recently the new quarantine requirements – which stop it trading as it would like.

You may or may not feel that Virgin Atlantic should receive a virtually interest free loan from the UK Government.  However, let’s look at some of the companies which HAVE been given your money via the CCFF – is Virgin Atlantic any less deserving than any of these?

BASF – German chemicals group employing just 800 people in the UK – £1 billion, which is being used to part-fund a €3 billion dividend payment to shareholders on 23rd June

Bayer – German pharmaceutical group – £600 million, which was used to part-fund a €2.6 billion dividend payment to shareholders on 4th May

Chanel – French maker of luxury goods – £600 million

CNH Industrial – an Italian / Dutch / US maker of agricultural machinery which is UK-domiciled for tax only – £600 million

Tottenham Hotspur – £175 million

Take a look at the full list which also includes Burberry and shopping centre owner Westfield.  It’s hard not to feel sorry for Virgin Atlantic, its employees and its suppliers when you see so much taxpayer money being handed out to companies with few (in some case virtually no) UK employees or activities.

The British Airways position is confusing too ……

There is something odd, on the face of it, about the way that British Airways is included on this list.

On 7th May, when BA’s parent IAG published its 1st Quarter results, it was announced that it had taken £300 million from the Coronavirus Corporate Finance Facility.

It was vague about which group entity had taken this money.  We assumed that it was IAG at the parent company level.  British Airways has been constantly pushing the fact that it is refusing to take Government money and so must force through its redundancy programme, including cuts in pay and conditions for those staff who remain.

Even the Bank of England is being vague about who actually took the money.  The spreadsheet released shows that £300 million was taken by:

“British Airways PLC (International Airways Group PLC)”

This is as clear as mud.  Was it BA that took the £300m?  Or was it International Airways Group PLC?

International Airways Group PLC doesn’t even exist.  The immediate and ultimate parent company of British Airways plc is International Consolidated Airlines Group S.A, which is incorporated in Spain.  On the balance of probability, it does seem that it was British Airways plc that took the £300 million.

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Comments (92)

  • Chrish says:

    Good to see Virgin is “Not” on the list, lets hope they can’t access a bailout without losing 60% of Virgin to the Government
    Also lets hope the Government passes Legislation soon to take 60% of BA’s HR Slots of it hopefully 2021 due to BA’s diabolical shenanigans

  • Bobby says:

    Magic money trees a plenty it seems

  • Pareet Shah says:

    The government’s financial support packages during the pandemic have been full of inconsistencies, from individuals right to large companies.
    Eg the huge disparities between the CJRS and the self-employed scheme are massively unfair.
    Just another example of how this government is clueless and the UK is a shambles at present.

    • Nick_C says:

      They have rules. Virgin don’t meet the criteria. How is that inconsistent?

      I would be a lot more worried if the Government was giving out cheap loans (that might not be repaid) on an entirely discretionary basis, and they would be rightly criticised if they did so.

    • Nick_C says:

      Oh, and some would say that the huge disparities in taxation between the employed and the self employed are massively unfair!

      You can’t have it both ways.

      • Pareet Shah says:

        Explain how it’s fair that someone on 60k PAYE qualifies for help but someone who’s self employed on 51k gets zero?

        • Nick says:

          Explain how it’s fair that the self-employed person has paid less tax and NI for decades? As (the other) Nick said, you can’t have it both ways. People chose to be self-employed, this comes with certain consequences. Tax disparity in lieu of certain state support is one of them, and always has been.

          And don’t even get me started on tax-dodging dividends from personal companies. These people have some cheek begging for state help now, given they’ve deliberately avoided tax for so long.

          • Nick_C says:

            I agree with Nick

          • Pareet Shah says:

            Some people/industries only have work options as self employed.
            They pay their fair share of tax and abide by the rules. The tax boundaries are the same and set by government so I don’t see how it’s okay to penalise someone who follows the rules?

            We’re obviously not going to agree so I’ll move on with my day.

          • Ken says:

            I agree with Nick

          • mark2 says:

            You are obviously unware that dividends are paid out of profits on which the company has already paid tax so the effective tax rate is the same.
            NIC is lower.

          • JP_MCO says:

            I’m don’t agree with the “deliberately avoided tax” argument that’s being made here. It is up to Governments to design the taxation policies required to deliver their budget. If taxpayers operate within the confines of those policies then they are not ‘deliberately avoiding tax’. HMRC is quite clear about what constitutes a tax avoidance scheme and remuneration through a mixture of PAYE and dividends is not classed as this, therefore there is no avoidance of tax that is taking place. Your argument centres around the idea that owner managed businesses should willingly offer to pay more tax even when the law does not require them to do so. Unless you’re willingly offering to pay more tax on your PAYE income then I’m afraid it is disingenuous to argue that limited company directors are somehow “avoiding” tax by not willingly offering to pay more tax than is required under the law.

          • Genghis says:

            @mark2. “ so the effective tax rate is the same.”
            Erm, no.
            Here’s an example I found without me having to crunch any numbers myself
            https://listentotaxman.com/uk-tax/news/how-to-pay-less-tax-for-small-business-owners.html

          • Arnie Lord says:

            Nick – as a self employed individual I will try and explain why its fair. In the 80’s the company I worked for was taken over..I was told I was no longer needed. I had some experience and talent so I rented myself out on a daily and sometimes hourly rate advising companies in the specific areas within which I had experience. I had very little income at first but I became known in the industry I was in and started to pick up work. I was self employed. I had no holidays, I was paid often by the hour, the clients would often call and say they could not make it and I had driven 300 miles to see them. There were no paid sick days, and no compensation when cancellations came in at the last moment. I enjoyed however the flexibility and ability to work for long periods and then take down time. I all of that time I paid NI at the rate I was asked, I was able to claim for mileage allowance and travel, some allowance for office space at home and the rest I paid tax on. Since the 90’s I have always paid higher rate tax. What is it that you feel is unfair in all of that and you feel gives me a greater advantage over someone employed and paying PAYE?

          • Craig W says:

            Mark2 I’m not taking a view as to whether it is right or wrong, but that is factually inaccurate. it works out much cheaper from a tax perspective for the self employed even when you take account of the Corp tax paid – that is why some people structure it that way

          • JP_MCO says:

            @Craig W Just for the abundance of clarity, owner managers (directors of limited companies) are not self employed. It is important to make this distinction because the HMRC definition of ‘self employed’ does not apply to them. They are simply ’employed’.

          • J says:

            As I understand it (but very happy to be corrected) Sole Traders pay the same tax rate as someone Employed. They pay a little less in National Insurance, but this is because they aren’t eligible for the same benefits as someone employed, eg. No access to JSA. Hardly seems like something to hold a grievance over, both are pretty much treated the same.

          • Craig W says:

            Jc_MCO – fair point I was referring to small business owners where it is a one man band. But agree the distinction you make is important

          • TGLoyalty says:

            Agree with the Nicks

            And just because you must be a ltd company doesn’t mean you can’t put yourself on full PAYE and not leave the majority as dividends to withdraw at a lower tax rate.

            Also the marginal tax rate is lower hence the advantages of ltd companies for sole traders/small businesses.

          • JP_MCO says:

            @TGLoyalty So is whether an individual has voluntarily paid extra tax now the measure with which we decide whether individuals are under paying tax? You seem to be advocating for individuals to offer to pay more tax voluntarily rather than pay the amount which the Government’s tax policy demands. How many times in the last year have YOU offered to pay more income tax than you are required to? The argument that limited company directors are some how engaged in tax avoidance just because they follow the taxation policies of the country in which they reside is farcical to the extreme. Following the tax code as determined by legislation means they pay every penny that they are required to do so – exactly the same as any employee who is paid via PAYE. Put simply, if they didn’t they would be prosecuted which seems like the appropriate measure for determining whether an individual has avoided tax.

          • mark2 says:

            I should have been more specific. I was referring to people who are forced by HMRC regulations to work through a limited company. They then have a choice whether to take a small salary and the rest as dividends or to pay out all the profit as salary. Of course the relative tax and NIC payable varies according to the profit figure.
            I worked this way for 27 years and have been retired for seven.

        • Rob says:

          You have your £10k ‘non repayable’ small business grant, as long as you pay business rates.

          • TGLoyalty says:

            Think you got that as long as your were eligible for small business relief on rates (so technically don’t pay your business rates 🙂 )

          • Nick says:

            Maybe I wasn’t clear. I wasn’t suggesting that self employed people weren’t paying the tax required by law – clearly no one would pay more than they were requested to. My point was that the amount requested is itself lower than for everyone else – which means in turn that it’s right that less help should be available at times like this. ‘Have cake and eat it’ and all that. If you want more state support, then yes (as a group) you should be willing to pay the same tax as everyone else. Otherwise stop whingeing.

          • JP_MCO says:

            @Nick No, you were pretty clear – you’re just wrong. Tax codes don’t come with financial assistance conditions attached and the amount offered is nothing to do with the amount of tax paid (companies like Amazon, Starbucks and Apple are clear examples of that). Lower taxation of dividends is compensation for a lack of holiday entitlement, sick pay, job seeker’s allowance and all the other costs associated with running a limited company (payroll, accountants, pensions) but even if I tell you that it’s not going to change your mind partly because it’s nice in your ivory tower but mainly because you haven’t got a clue how a business is run and that’s what is more worrying.
            What do you think will happen to all the employees of limited companies who are currently furloughed when the owner manager (director) of that company runs out of money and shutters the business because they can’t pay their mortgage? I’ll tell you – they’re all made redundant. That’s how shortsighted the policy is. I’m one of the lucky ones – my company is completely unaffected by the pandemic but I’ve got empathy for all those people who will lose their homes and families go hungry through no fault of their own and because of flawed Government policy. And here’s me thinking we’re all in this together?

  • BJ says:

    Good article, I hope some of the mainstream press pick it up and run the story. Happy to admit I’m out of my depth here so please go easy on me. My gut instinct is that these funds have been much to easy for large companies to access, and as a taxpayer I feel there should have been greater oversight to provide scrutiny and impose conditions on how it could be used. For example, I seem to recall IHG took money from this. If so, what are they using it for? Clearly not to keep UK hotels in business given the story on Edinburgh and Glasgow hotels on Thursday. Have no problem with free market, absence of State interference etc so long as it is the shareholders that foot the bill. But this is taxpayer money, therefore I feel we have a right to transparency, control and accountability. And what of SME? I’ve seen stories in the press that they are having difficulty accessing support, not least from those same banks the taxpayer had to bail out in 2007/8. It seems to me that support offered to SME would much more likely be used at the sharp end to protect those companies and their employees as opposed to large corporations where the money will disappear into their books to do who knows what, where and when.

    • Chris Heyes says:

      BJ @ Good post but you are both correct & incorrect if that’s possible lol
      It’s relatively easy for both small & large company’s to access the grants/loans providing you meet the qualifying criteria that’s the problem.
      Firms can & do apply whether they actually “Need” it or not (there is no checks & balance)
      Most (not all) are greedy & will & have applied for one or another regardless of needing it
      (you could say why not it’s free money) or morally why are you applying if you don’t need it
      That’s a matter of personal opinion
      I’M not judging just writing it as it is
      BYTHEWAY i believe Rob applied for a small loan/grant perhaps he will say if he needed it or not
      Please correct me if I’m out of order Rob

      • Mr(s) Entitled says:

        If you are very small you can get a Bounce Back Loan up to £50,000 in minutes. If you are very large, with tradeable debt of sufficient standing, you can get a large loan very easily. It is not greed to apply for either. It is good business sense if a) you can pay down debt with higher interest b) invest the capital at a rate of return above the interest c) want additional liquidity to be available at short notice.

        I have to disagree however that there is much for companies in the middle. It is very difficult to get government help as a SME. The basic criteria is that you only qualify if you are a business with insufficient assets that the banks would not otherwise lend to. If banks will lend you are then trapped in their normal systems with high interest and exhorbitan fees. Banks tried, and did, impose carry personal guarantees from the Directors to cover the 20% not guaranteed by the Government.

        In short, this gave banks free reign to either try and stuff you with a traditional loan at a high interest or, only if they really didn’t want the debt, pass it on to the Government. If you give this power to the banks it will be abused. Or put another way, they will exercise good business judgement and look after their own interest first.

        On many different levels when the story of this outbreak is written by history this Government will not come out of it favourably on many different levels. They have been handed a near impossible task but they got nowhere near a managed solution.

        • Pareet Shah says:

          Agreed

        • Chrish says:

          Mr(s) [email protected] In your opinion it’s not Greedy lol But in a lot of peoples view if you apply for something you don’t need especially if there are limited resources to go round
          it’s like for example someone going to a food bank just because they know someone who volunteers there and would turn a blind eye.
          i worked for a firm who actually employed someone to “Dig” out grants as soon as they was available before the grants run out of allotted funds (and i mean large Grants limited funds)
          The company would of cause say it’s good business sense
          regardless of whether they needed them

      • Rob says:

        Depends what ‘needed’ means. Our income is down 80% but HFP has no debt and we can (just about) pay the staff.

    • Doug M says:

      Agree with what you say.
      How could they not have put a simple rule in place saying no dividends until repayment.

  • Bagoly says:

    I see one Housing Trust, but only one.
    Presumably hundreds more could have applied, but did not.
    Can anybody shed light on that?

    • ChrisC says:

      Perhaps they did but this list is only for those that have drawn down the money not a list of who applied.

      They may not have applied yet or if they have not yet been approved or If approved they need the cash at the present time.

    • Mr(s) Entitled says:

      Do hundreds of housing trusts have tradable debt?

      Away from this scheme, they also have assets. As per my comments above, they are most likely to get stuffed with traditional loans because that favours the banks.

  • Bagoly says:

    I completely agree that there should have been a requirement for immediate repayment if any group company paid a dividend to external parties.

    • ChrisC says:

      Yes I agree on that. If you can pay dividends then you really don’t need financial support.. If you don’t have the cash then you should delay paying until you can generate it yourself.

  • Bagoly says:

    Classic to see Excel illiteracy:
    E.g. Numbers are text (so sorting by size does not work)
    No Print Titles.

    Is this due to being Civil Servants, inability of senior staff to review junior work, being UK rather than say China, or general low level of relevant knowledge in the world?

    • Simon says:

      Bank of England staff are now civil servants

      • Simon says:

        Sorry, should be “not” not “now”. All credibility as a pedant destroyed by a typo…

    • Adam says:

      More likely there was a functional spreadsheet underlying this, but it was ‘cleansed’ prior to publication, including converting to basic text, potentially by cutting and pasting, to minimise the chance of data inadvertently being shared that they didn’t want.

    • Nick_C says:

      If you lack the skills to sort a list treating text as numbers, then you are Excel illiterate 😉

      • Bagoly says:

        Ah, but what I am calling out is “senders” making things unnecessarily more difficult for “receivers”.

        As I came in the top 50 of the 2019 Global Modeloff competition 🙂 I can certainly do that, and I regularly untangle much worse garbled data.

        • Nick_C says:

          Then you will know that outputs from proprietary systems often come out in report format and need cleaning up of you want to do further analysis on them.

    • RussellH says:

      I expect it is quite deliberate – to stop those with little understanding of spreadsheets from being able to do a quick sum of the total?
      🙂

      PS I include myself among those who have little understanding of spreadsheets, but I do have a little.
      I have never used Excel – far, far too complex and far, far too many functions for my needs, but every other SS I have used all have a simple method of changing text into numbers, and vv.

    • Nick_C says:

      Having just looked at the file, I agree it was compiled by a junior member of staff (a PA with less than 5 years work experience who lacks the skills to protect her identity!)

    • AJA says:

      I think it depends on your Excel skills. I have the latest version of Excel and was able to sort by “Nominal value of CP held by the CCFF” in under a minute by removing the mn at the end of the figures. BASF SE was the largest recipient with £1,000mn and Alliance Automotive Investment Limited the smallest recipient with £20mn.

      Alternatively with no data manipulation and using a simple filter it is easy to find out that there are 12 companies that have each received £600mn; including EasyJet, Ryanair, and Intercontinental Hotels of relevance to a travel focussed website among them.

      • Nick_C says:

        It took your a minute? Ctrl+h. Global replace “mn” with “”. Any part of field. Replace all. Takes seconds.

  • Andrew (@andrewseftel) says:

    Correction to the definition in the article: it is companies with outstanding paper. Those who have applied and drawn and already repaid are not on the list.

    • Rob says:

      Apparently a few did take the money and then, when the PR or CEO found out, were told to pay it back instantly due to the bad publicity that would happen when the list was published. Turns out this was good advice!