News Roundup Wednesday 28th November 2018
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Accidentally rich’ face ‘unfair’ IHT
Experts have said that IHT should be cut for “accidental millionaires” as they are being forced to pay a bigger chunk of their inheritance than the ultra-rich. The Office for Tax Simplification found that in 2015-16, bequeathed estates worth between £2m and £8m paid a rate double that paid on estates greater than £10m. Someone who inherited a sum of £2m – now the value of many houses in the South East – would pay an average of 20% of the total in IHT, compared to just 10% of a £10m estate. Despite a new “family home allowance” introduced in April 2017, providing added protection for those passing on their home to direct descendants, experts described the effect of the reliefs as unfair. Andy Butcher, a tax expert at Raymond James, said: “In light of the figures that show wealthier estates are paying a lower effective rate of tax, I would be in favour of a tiered approach to inheritance tax re ducing the rate for estates that fall into the accidental-rich category. IHT is a tax on assets that have already been taxed so is already unfair”
OTS proposes raft of IHT changes
City AM’s Katherine Denham reports on the recommendations from the Office of Tax Simplification for reform of IHT. One key recommendation is to move to a fully integrated digital system similar to the self-assessment process. Clearer guidance is also suggested along with better communication from the tax office. Denham hopes that, although nothing is likely to be implemented any time soon, the hefty body of recommendations should eventually lead to an IHT shake-up.
Rush of probate applications expected ahead of fee hike
The ICAEW has warned that courts could be overwhelmed by a rush of probate applications as people hurry to arrange their affairs before the Government’s proposed new fee structure is introduced. The changes, expected to come into force in April 2019, will see estates worth £2m or more pay £6,000 in probate fees, up from £155 currently. Estates worth less than £50,000 will pay nothing. Jane Berney of the ICAEW said: “When the MoJ first consulted on these changes in 2016, 97% of respondents were against them, yet the department is still going ahead. Probate offices will need to gear themselves up for an influx of applications in advance of the planned increases as executors rush through the process to try and beat the price hike.”
The Daily Telegraph Daily Express Daily Mail, Page: 46
FRC stays formal complaint against Autonomy CFO
The Financial Reporting Council (FRC) has announced that the formal complaint against Sushovan Hussain, former CFO of Autonomy, has been stayed, pending the outcome of his intended appeal against his conviction on 16 counts of fraud in the US District Court for the Northern District of California. Mr Hussain has consented to an order suspending him from membership of the ICAEW until the formal complaint against him can be heard.
Financial Reporting Council The Times, Page: 41
Aim deals slowdown ahead of Brexit
Dealmaking on London’s AIM has dropped 28% in a year as investors adopt a wait-and-see approach ahead of Brexit. Research by UHY Hacker Young shows 21 M&A deals took place on Aim in 2017-18, down from 29 in 2016-17. The value of transactions also fell, dropping 65% to £1.32bn, down from £3.74bn in 2016-17.
City AM, Page: 7
Danske Bank scandal spurs UK crackdown on limited partnerships
The UK is to tighten rules on limited partnerships and Scottish limited partnerships requiring them to maintain a link to the UK and be registered via an official supervised agent.
Forensic audit hit Thomas Cook for £30m
The Standard‘s Jim Armitage reports on how a forensic examination of Thomas Cook’s accounts by EY after CEO Peter Fankhauser’s profit warning in September wiped an unexpected £30m off the travel company’s profits for the year. Separately Disclosed Items had been parked to one side without accounting for them in profits.
UK Government in Funding Circle deal to boost SME lending
The British Business Bank has agreed to fund £150m worth of small business loans through Funding Circle in an attempt to encourage firms to continue investing in the face of economic uncertainty.
Small businesses overpaying for mobiles
A lack of competition in the mobile phone market means small businesses are paying £1bn too much for mobile services, according to a report from price comparison website Billmonitor. The firm estimates 49% of UK businesses pay more than twice what they should for mobile services from EE, Vodafone and O2.
City AM, Page: 17
Minimum wage rises have not led to job losses
Employment levels have been sustained despite increases in the minimum wage, according to the Low Pay Commission. Business had raised concerns over the costs of rising wages, but most have absorbed them and restructured workforces. The National Living Wage for those aged 25 and over stands at £7.83 an hour and is due to rise to £8.21 from next April. The Guardian reports that about 23% of all of those over the age of 25 who are covered by the national living wage were underpaid this year. Meanwhile, ONS data show one in three new jobs created in the UK over the past decade has been in London. The north-east of England saw the lowest percentage increase in new jobs of any UK region or nation.
Brexit GDP claim disputed
A pro-Brexit economist has criticised research that claims the Prime Minister’s Brexit deal could reduce the UK’s GDP by up to 5.5% over the next 10 years. Researchers at the London School of Economics, King’s College London and the Institute for Fiscal Studies said the withdrawal agreement could shrink UK GDP per person by between 1.9% and 5.5%. According to the think tank The UK in a Changing Europe’s report, the cost to public finances would be between 0.4% and 1.8% of GDP over the same timeframe. It comes the day after a separate report said the economy would be £100bn worse off under Theresa May’s deal. However, Arbuthnot Banking Group economic advisor Ruth Lea said that both studies were flawed, leaving many questions unanswered. “These ‘studies’ are barely worth the paper they are printed on, it is difficult to forecast 12 months ahead never mind 12 years,” she said. “So many assumptions have to be made. Will we have Thatcherite or Corbynite policies? How successful will our trade deals be? Will there be radical tax and regulatory reforms or not? How is the world economy going to grow?”
Contact Paul Southward if you have any queries.