News Roundup Friday 18th October 2019
TAX NEWS ROUNDUP
Moulding slams demand for digital tax
Matthew Moulding, chief executive of online retailer The Hut Group, has hit out at high street rivals for calling for internet-only businesses to pay more tax. He said: “If you want to tax digital businesses, then you should be taxing the electric engine for replacing coal, and all the other progressive industries. If it’s a case of managing the decline on the high street, well, the biggest closures have been bank branches, so there should then be a tax on every digital financial transaction and the likes of Monzo. The pubs are closing because people are leading healthier lifestyles, so I’d argue gyms should be taxed. If you’re going to tax one area of progress, then you have to tax them all, by that logic.” Mr Moulding added that an online tax would “protect businesses that have ripped out dividends left, right and centre rather than investing.”
Johnson warned not to copy Corbyn’s spending plans
Boris Johnson has been warned by the Taxpayers’ Alliance not to copy Labour’s spending plans in an embarrassing attack from the pro-Conservative think tank. The PM is accused of “pursuing a fiscal policy that plays to that of his left-wing opponents” and which will ultimately leave him exposed”. The criticism follows comments from the IFS last week which said Johnson’s spending plans would bring day-to-day government outgoings to levels similar to those implied by Labour’s 2017 election manifesto. John O’Connell, chief executive of the Taxpayers’ Alliance, says that the IFS analysis “laid out in stark terms how far the Tories had moved from their platform of fiscal prudence”. Writing in the Times, he says the Tories need to ease the growing tax burden to win back voters.
Tax dodging sentences increase
Prison sentences for tax evasion rose by 10% on average last year as HMRC pushed for tougher punishments. The average sentence for the deliberate non-payment of tax rose to two years and seven months in 2018 – an increase of two months on 2017’s figures.
City AM, Page: 15
Tax evasion sees longer prison sentences imposed
Tax evasion increased by 10% on average in 2018, while the average sentence for deliberate non-payment of tax increased to two years and seven months. Steven Porter, partner at law firm Pinsent Masons remarked: “Longer prison sentences are a clear message from HMRC – it will not tolerate tax evasion.” This comes as HMRC’s latest ‘tax gap’ figure reached £35bn, up £2bn on 2017’s figures. Campaign group Tax Watch UK said official methodology was likely to “seriously underestimates” the true scale of tax avoidance, with a 2016 report by members of the Public Accounts Committee advising that HMRC “needs to increase the number of investigations and prosecutions, including wealthy tax evaders, and publicise this work to deter others from evading tax and to send out a message that those who try will not get away with it.”
HMRC registers traders for new import procedures
HMRC has automatically registered 95,000 businesses for its simplified import procedures allowing most traders up to six months to pay import duties and submit customs declarations, if the UK leaves the EU without a deal on 31 October. The scheme, known as Transitional Simplified Procedures (TSP), will make importing after Brexit on 31 October much simpler, particularly for businesses who would be completing customs processes for the first time. Up to now, businesses have had to apply for it – over 25,000 had previously registered.
Press Release The Times, Page: 46
Uber is a test case for taxing digital platforms
HMRC’s VAT claim against Uber will prove a test case for digital platforms which gain an advantage over traditional businesses by shifting responsibility for paying VAT on to contractors or merchants.
HMRC in scam warning
HMRC has warned of a scam that sees victims receive letters claiming there has been an underpayment of “tax” in relation to their salary, with the letter prompting them to call a number and pay up to £150 over the phone to rectify the shortfall. HMRC says it would not refer to this as “tax”, as it would be either PAYE or National Insurance – adding that it does not issue such letters.
Daily Express, Page: 14
Road toll would plug tax shortfall
The Committee on Climate Change (CCC) has recommended the introduction of a toll that would see drivers pay for every mile travelled, with the levy designed to replace declining revenue from taxes on petrol and diesel which are being lost due to increasing uptake of electric vehicles.
The Times, Page: 15 The Scotsman, Motors, Page: 8
SMEs NEWS ROUNDUP
BBRS at risk of failing to provide a credible resolution platform
The Times’ James Hurley says plans for a business banking resolution service (BBRS) may fall flat after groups representing business owners threatened to walk away over eligibility criteria which would exclude any business that has been through formal legal action or even a previous bank redress scheme. Kevin Hollinrake, co-chairman of the All-Party Parliamentary Group on Fair Business Banking and Finance, which is among the bodies represented on the BBRS steering group, said it would “be a fundamental error to exclude complaints that have clear grounds to believe that they have been the victims of a terrible injustice. Indeed, it would risk undermining a principle premise of the scheme, the restoration of trust between [SMEs] and banks”. However, Nikki Turner, director of SME Alliance, is more confident: “Only in the last few weeks we have started to make some real progress, especially in regard to eligibility. The model w e have is far from perfect, but it is a moving feast and we believe it is heading in a positive direction.”
Brexit fears hamper SME investment
Research from Bibby Financial Services (BFS) and trade credit insurer Euler Hermes found almost a third of UK SMEs (29%) said they did not plan to invest in their business during the rest of 2019, with 66% citing uncertainty over Brexit as their greatest concern.
City AM, Page: 14
Entrepreneurs issue rallying cry for independent Britain
Nearly 300 business leaders have written an open letter to Boris Johnson urging him to ensure that Brexit is not delayed further because “this rank uncertainty is crippling British business and it cannot continue”. The letter, organised by the Alliance of British Entrepreneurs, warns an extension will result in another hung Parliament “with more delay and more damaging uncertainty”. It adds that “the UK is the centre of world finance and a leader in the industries of the future. We are an immense global power. It’s time to start acting like one.” One signatory, Matt Taylor, the founder of investor Rockpool Investments, said: “Our businesses are prepared for no deal. With Government and Britain’s entrepreneurs working hand in glove, we can create a hyper competitive, business-friendly powerhouse of an economy – a true alternative to the sclerotic, backwards looking and lobbyist-riddled EU.&rd quo;
Poor broadband hinders business expansion
A survey by the Federation of Small Businesses has found that poor broadband and mobile connections holds businesses back with a third blaming poor connectivity for preventing them from contacting or being contacted by existing customers. Some 26% said that poor mobile coverage had led to a loss of business. Separately, a study on productivity, efficiency and general sentiment of UK small business by website platform Wix found two in five businesses still don’t have an online presence, while one in three that do have a website are not fully digital. Nine in 10 businesses that are completely digital – using tools for tasks such as invoicing and payments, customer service, chat and other automations – revealed their revenue had increased by an average of £35,000 a month.
The Times, Page: 42 Daily Mirror, Page: 37
FINANCIAL SERVICES NEWS
British financial services lead automation charge
UK financial services companies are integrating robo-advisers into their ranks faster than their global competitors, according to a new report from PwC. It shows that while 37% of UK firms surveyed have implemented robotic processing automation, only 28% of global firms in the sector have adopted the innovation. The research also revealed the dilemma presented by automation of how to balance “the need for human interaction with the digitally enhanced offerings customers also expect”, said PwC partner Rav Hayer. Some 27% of UK firms do not think they are meeting customer expectations with the right balance of digital and direct human contact. A fintech skills gap exists, and Hayer says firms need to prioritise technology at executive level, highlighting the finding that only 34% of UK firms have a C-suite level executive responsible for leading the company’s tech or digital strategy.
City AM, Page: 2
CORPORATE NEWS ROUNDUP
Questions MPs should ask Thomas Cook bosses
The Guardian’s Rob Davies proffers some questions he thinks MPs should ask Thomas Cook directors tomorrow when they appear before the BEIS committee, such as how were successive directors allowed to borrow so much. Mr Davies adds that the committee will also want to know why auditors, “already under intense scrutiny in the wake of a series of high-profile business failures, such as Carillion and BHS, signed off the accounts as the debt piled up.”
The Guardian, Page: 35
April tax crackdown sees landlords sell up
With owners leaving the rental sector before a new tax crackdown beginning in April. This has led to the number of “accidental landlords” falling to 7.1%, the lowest level in five years. The new regulations will reduce the amount owners can offset against their annual tax bills, while lettings relief, under which landlords receive a £40,000 tax break when they sell, will only apply to those who lived in the property with their tenants as of April. Research by Hamptons International shows that London, the South East and the East of England regions have seen the biggest percentage falls in the numbers of “accidental landlords” in the last 12 months, with the estate agent’s Aneisha Beveridge noting: “The tax changes being introduced in April 2020 will increase the capital gains tax bill for some accidental landlords who choose to sell after that date.”
First-time buyers at highest levels since 2007
The number of first-time buyers in August reached the highest level since just before the financial crisis, according to the latest mortgage trends data by UK Finance, with 35,010 mortgage completions for new buyers – an increase of 0.7% on August last year. During the month there were 18,640 new remortgages with additional borrowing, down 2.9% on 2018, while the number of remortgages without additional lending slumped 2.3% to 18,100. There were also 5,900 new buy-to-let mortgages completed, down 2.2%. Andrew Montlake, managing director of mortgage broker Coreco, said: “First time buyers are absolutely flying. They are being driven on by a combination of reduced competition from landlords, once-in-a-lifetime mortgage rates, high employment and the buyer’s market we’re in.”
City AM Daily Mail
House prices face steep fall if no deal reached
Standard & Poor’s (S&P) predicts that in the event of a no-deal Brexit UK house prices will end the year 1.7% lower than in 2018. Over the course of 2020 prices will fall a further 10.2% and another 6.1% in 2021. House values will rise again in 2022 by 5.9%, S&P said. Last month, KPMG said prices could fall by around 6% in 2020 without a Brexit agreement, “with a drop of 10-20% not out of the question” if the market reacts more strongly than the consultancy projects.
The Independent, Page: 50
House prices edge up
Property values in Britain increased 1.3% in the year to August 2019, Office for National Statistics data shows, despite the continued uncertainty surround the UK’s departure from the European Union. The average UK house price was £235,000, up £3,000 on a year earlier. London saw prices slide 1.4% annually, closely followed by the South East where they fell 0.6%, although the areas remain the most expensive in the country to purchase a property, at an average of £473,000 and £326,000 respectively. Growth was strongest in Wales, increasing 4.5% to an average of £168,000; in Scotland sale prices grew 1.6% to £155,000, in Northern Ireland they were up by 3.5% to £137,000, and values rose 1.1% in England, to £168,000. Howard Archer, of the EY Item Club, commented: “Should UK leave the EU with a deal on October 31 – or early next year – we believe reduced uncertainty could see house prices rise by around 2% in 2020.”
The Daily Telegraph, Business, Page: 5 Daily Mail City AM
Companies encourage transfers out of pensions
Analysis by pensions consultancy Barnett Waddingham has estimated that about one in ten large companies have tried to persuade their employees and former workers to transfer out of traditional pension schemes over the past five years. About 20% to 30% of pension fund members aged over 55 were taking up transfer offers, Barnett Waddingham said. For under-55s, who cannot access their pensions immediately, the take-up rate was much lower.
New pensions dashboard announced in Queen’s Speech
Included in the Queen’s Speech yesterday were Government plans for a new pensions dashboard that will allow people to see all their retirement arrangements in one place for the first time. The legislation will also see executives who plunder schemes or run them into the ground face up to seven years’ imprisonment. However, the bill did not contain any legislation to help the launch of “pension superfunds”, vehicles intended to consolidate legacy pension funds.
Removal of 25% tax-free lump sum would be own goal
A proposal from the Institute of Economic Affairs that the tax-free lumpsum which savers are allowed to withdraw from their pension is scrapped has been roundly rejected by pensions experts. Mark Littlewood, the group’s director-general, explains that removing the ability to withdraw 25% tax free from a pension would provide an opportunity to reduce or scrap inheritance tax altogether. But Andrew Tully, technical director at insurance giant Canada Life, says: “The ability to withdraw 25% of your pension, tax free, is probably the most valuable perk of pension savings and certainly the best understood. You diligently save for many years and are likely to have clear ideas on how you want to use your tax-free cash lump sum. Many people use the money to pay off their mortgage, make home improvements or go on the holiday of a lifetime. No one is planning for this or expects the rules to change.”
Daily Mirror, Page: 34
Savers rush to top-up pensions
HMRC figures show savers are topping up their pensions in record numbers with people paying £119.3m in voluntary contributions last year, compared with just £12.8m in 2016/17. The surge is likely to reflect the introduction of the new state pension in 2016, which gave people the opportunity to plug gaps in their NI record through voluntary contributions.
Daily Mail, Page: 47
New probate fee ‘death tax’ abandoned
A major increase in probate fees, which would have increased the cost of applying for a grant of probate by up to 3,770%, has been abandoned by the Ministry of Justice after being criticised as a backdoor “stealth tax” and “abuse of power” by MPs and others. The Government was accused of trying to add a new death tax to existing inheritance taxes, with a spokesman for the MoJ noting: “Fees are necessary to properly fund our world-leading courts system, but we have listened carefully to concerns around changes to those charged for probate and will look at them again as part of a wider review to make sure all fees are fair and proportionate.” Simon Davis of the Law Society stated: “The Government should bear in mind that it is a false economy to impose charges that go beyond cost recovery. Equal access to justice is a fundamental part of the rule of law.”
Only prudence can keep bank accounts honest
Jonathan Ford says IFRS 9, requiring banks to make a provision when they make a loan, allows too much leeway when provisioning future losses and auditors must apply prudence to keep bank accounts straight.
ECONOMY NEWS ROUNDUP
Finance chiefs looks to cut costs as demand weakens
The latest quarterly survey of CFOs by Deloitte found 65% of finance chiefs said their businesses faced high or very high levels of external financial and economic uncertainty, with only 7% arguing that now was a good time to take risk. Some 58% of those surveyed citing cost control as a strong priority for the next 12 months, the highest level for a decade, and 70% said that they expected hiring to be reduced in the next 12 months. Ian Stewart, chief economist at Deloitte, said: “Perceptions of uncertainty are elevated and corporate risk appetite is vanishingly low. The priority appears to be curbing costs, not expansion. With Brexit cited as the biggest risk businesses face, the last quarter has also seen heightened concern over slowing growth in the UK and eurozone and CFOs are tightening their purse strings in response.”
The Times, Page: 37 City AM, Page: 10
Ramsden cautious over growth potential
The deputy Governor of the Bank of England, Sir Dave Ramsden, has warned that Brexit uncertainty has hampered the UK’s potential for growth to the extent that the Bank’s ability to help with interest rate cuts has been weakened. In a world of “entrenched uncertainty, I see less of a case for a more accommodative monetary position,” Sir Dave told the Telegraph. He blamed a fall in investment and productivity for the UK’s lower growth potential along with the global trade war.
Javid to hold pre-election Budget in November
Sajid Javid has announced a Budget for November 6th. The Chancellor said it would detail the Government’s plans to “shape the economy for the future”. The Treasury said that if Britain left the EU without a deal on Halloween, Mr Javid would make a statement before November 6th to outline the government’s approach to supporting the economy and businesses. A Budget would be held a few weeks later. If the UK leaves with a deal, a Nov 6th Budget is expected to showcase pre-election pledges including investment in infrastructure and tax changes.
Business groups call for Brexit certainty
Boris Johnson’s promise yesterday to “get the gears on our national gearbox working again” was welcomed by the CBI and the British Chambers of Commerce, but both groups warned that the threat of a no-deal Brexit still overshadowed investment decisions.
The Times, Page: 40
UK jobs market slows
Office for National Statistics figures show that the unemployment rate unexpectedly increased to an estimated 3.9% in the June-to-August period, as the number of people working declined by 56,000 to 32.69m. The ONS’s deputy head of labour market statistics, Matt Hughes, noted: “The employment rate is still rising year-on-year, but this growth has cooled noticeably in recent months.” Meanwhile Thomas Pugh, UK economist at Capital Economics, suggested that labour market activity is being restrained by underlying weakness in economic growth, but suggested: “However, it could also be evidence that the uncertainty around Brexit is starting to impact firms’ hiring decisions.”
Inflation remains at lowest level for three years
Data from the Office for National Statistics shows that the consumer prices index (CPI) held steady at 1.7% in September. This comes despite analysts predicting a modest rise in the inflation rate. The figures mean families are better off because pay packets are growing much faster than prices, with average wages up by 3.8% in the 12 months to August. With next year’s business rate increase based on September’s CPI, accountants say the latest inflation reading means a rise in business rate costs worth a total £536m.
The Guardian, Page: 43 The Daily Telegraph, Business, Page: 5
Bury set for liquidation
Bury FC are set to be liquidated tomorrow after the club’s last hope of a rescue disappeared. The team, which was kicked out by the EFL last month, were set to contest a winding-up petition from HMRC but a potential buyer has pulled out. The Forever Bury fans’ group said it “will not now be putting forward a legal defence against the HMRC winding-up petition.”
The Sun, Page: 51
Corbyn’s renationalisation will cost £200bn
Labour’s plans for nationalisation would cost at least £196bn, according to the CBI, £6bn more than the total income tax take for the last financial year. The increase in public ownership would raise the Government’s total debt to 94% of its GDP, the highest level since the 1960s, and cost around £2bn a year in interest payments, the CBI said. Labour disputed the figures describing the study as “incoherent scaremongering”. But Rain Newton-Smith, the CBI’s chief economist, described the cost of Labour’s renationalisation plans as “beyond eye-watering”, adding: “That’s only the starting point. It doesn’t take into account the maintenance and development of the infrastructure, the trickle-down hit to pension pots and savings accounts, or the impact on the country’s public finances.”
The Times, Page: 9 City AM, Page: 1 Daily Express, Page: 5 Daily Mail, Page: 4 The Daily Telegraph, Page: 4
Bank of England is a captive of groupthink
Former MPC member David Blanchflower says the BoE could have foreseen the financial crisis and it is its continued homogeneity and adherence to consensus that means it will fail again.
Price faces more bankruptcy proceedings
A judge has given the go-ahead for Katie Price to be served with another bankruptcy petition after her creditors returned to court seeking £12,000 a month in payments. Judge Sally Barber, sitting at a specialist insolvency and companies court in London, said Price can be served with the petition by post, after lawyers representing her creditors said she had failed to attend an appointment to receive it in person.
Daily Star, Page: 9
Contact Paul Southward.