NEWS – MONDAY 1ST MARCH 2021
TAX NEWS – MONDAY 1ST MARCH 2021
Chancellor denies tax claim
Rishi Sunak has dismissed claims that he has privately told MPs he wants to raise taxes now so he can cut them before the next election, telling the BBC’s Andrew Marr: “I don’t recognise that”. Speaking ahead of the Budget on Wednesday, Mr Sunak would not confirm newspaper reports he is planning to freeze income tax thresholds or raise corporation tax in a bid to lower debt. The Telegraph reports that the Chancellor is considering freezing the point at which people start paying the basic rate of income tax and the threshold at which they begin paying the higher rate for at least three years, while corporation tax could rise from 19% to at least 22%. Speaking to Sky News’ Sophy Ridge on Sunday, the Chancellor said he “would like to be able to keep taxes low for people in general” but added that he wanted to “be responsible” with people’s money. BBC News notes that the former chancellor Lord Clarke believes Mr Sunak should consider raising VAT, national insurance and income taxes, while Martin Beck, senior economic adviser to the EY ITEM Club, has suggested repairing the public finances could wait and warned that “premature fiscal tightening could undermine recovery”. Writing in City AM, BDO’s Paul Falvey says Mr Sunak faces a “big challenge” to increase the tax take and support the individuals and businesses most severely impacted by COVID-19. Meanwhile, the Mail says the Chancellor could wait until his autumn Budget to deliver tax increases that may include increases to capital gains tax and national insurance for the self-employed, as well as cuts to pension tax relief. Elsewhere, Shadow Chancellor Anneliese Dodds has suggested she would like to see corporation tax raised, saying the UK needs to get “to a better place” on the levy.
MPs: Now is not the time for tax rises
A Treasury Committee report says now is “not the time for tax rises”, warning increases may be needed in the future but in the current climate they could undermine the economic recovery. The cross-party group of MPs says public finances are on an “unsustainable long-term trajectory” and suggests the Government’s “tax lock” manifesto promise not to increase the rate of income tax, VAT or national insurance will come under pressure. The report suggests a “moderate increase” to the corporation tax rate could “raise revenue without damaging growth, especially if balanced with fiscally appropriate measures for business”, while stamp duty is “economically inefficient” and suggests a review of the tax treatment of the self-employed “long overdue”. The MPs have also suggested that businesses should be allowed to offset pandemic losses with a corporation tax refund. Mel Stride, chair of the committee, said: “With our public finances on an unsu stainable long-term trajectory, our clear message is that Budget 2021 is not the time for tax rises or fiscal consolidation.”
MPs call for business rates reduction
A group of northern Conservative MPs have called on Chancellor Rishi Sunak to cut taxes for retailers, saying there is the need for “a bold move to reduce business rates”. Members of the Northern Research Group of Conservative backbenchers have written to the Chancellor saying there is a need for “levelling the playing field between bricks and mortar and online retail”, saying reducing business rates from about 50% of market rent to about 35% will help achieve this.
The Guardian, Page: 1
Think-tank: 20 taxes should be axed
The Institute for Economic Affairs’ (IEA) believes the UK should scrap inheritance tax, stamp duty and almost 20 other taxes to simplify the tax regime. In its pre-Budget report, the think-tank has called for Chancellor Rishi Sunak to “simplify the tax system, reduce the overall burden of taxation, and eliminate many harmful distortions”. Among suggestions, it believes property taxes including council tax, the community infrastructure levy and business rates should be rolled into one “single land value tax”, while corporation tax and the diverted profit tax should be replaced “with a single income tax on capital income administered at the corporate level”.
Poll sees support for wealth and business taxes
A Savanta ComRes poll for the Independent shows 55% of people support a proposed increase in corporation tax, with just 16% of respondents opposed to an increase. The survey also saw 55% of those polled say they would support the introduction of a wealth tax on property or assets in a bid to top up public finances hit by the coronavirus crisis, with 18% against such a move. Around 43% of people said they would accept a 1p increase in income tax rates, with 28% opposed, while respondents were less keen on increases to council tax, VAT or fuel duty, with resistance also seen to the idea of reining in future pension rises.
Tax rises needed but not yet
Looking ahead to Wednesday’s Budget, Hamish McRae in the I says the UK “will probably need some tax increases, but now is not the time to bring them in.” Saying that the books will need to be balanced due to the nation’s coronavirus bill, Mr McRae says taxation may be the way to go but believes there are two reasons to delay doing so, saying: “You don’t want to add to the fiscal burden before the economic recovery is secure”, and warning that “we do not know the scale of the tax increases needed to get the deficit under control.” In the Independent, James Moore considers the options open to Mr Sunak, saying tax rises “can clearly wait until such time as the economy can bear them.” Elsewhere, Roger Bootle, chairman of Capital Economics, argues that tax increases may hurt the recovery by dampening optimism, saying: “To clobber people and companies now with a raft of tax increases, before the recovery has even begun, would be tone deaf to the importance of confidence.”
The I, Page: 8 The Independent, Page: 30, 45 The Daily Telegraph, Business, Page: 2
Sunak to delay IR35 announcements?
Matt Fryer, head of legal services at Brookson Legal – the only Solicitors Regulation Authority accredited specialist IR35 law firm, believes it is unlikely that IR35 will be mentioned in Rishi Sunak’s upcoming Budget. Noting that reform has been delayed due to the pandemic, Mr Fryer said ministers are “keen to press on” with changes. He expects the Chancellor to wait until March 23 to confirm the reform, saying that the Budget is set to focus on stimulating short to medium term growth in the economy.
Britain should follow Ireland on corporation taxes
Sir Paul Marshall, chairman of hedge fund Marshall Wace and a member of the Government’s industrial strategy advisory council, suggests that Britain should take a page out of Ireland’s book on corporation tax, calling for the UK to “establish a clear, stable regime for corporation tax that is globally competitive and likely to attract rather than repel inward investment.”
INSOLVENCY NEWS – MONDAY 1ST MARCH 2021
Insolvency Service pays £453.4m in missing wages and benefits
Figures show that the Insolvency Service paid out £453.4m in missing wages and benefits to workers at firms that went bust last year, the highest total in a decade. The data, compiled by real estate adviser Altus Group, shows that payouts included £297.5m in redundancy pay. The analysis also shows that Government support rolled out amid the pandemic meant the number of firms going insolvent fell 27% compared to 2019. Calling for further support, Altus Group has urged the Chancellor to extend the business rates holiday.
INDUSTRY NEWS – MONDAY 1ST MARCH 2021
Buyout started Big Four break-up
The Telegraph interviews Andrew Coles, saying that in leading KPMG‘s pensions division through a £200m management buyout, he “fired the starting gun on a partial break-up of the Big Four”. It highlights that KPMG was the first of the Big Four firms to ban its consultants carrying out work for audit clients as part of an effort to avoid conflicts of interest, while Mr Coles says constraints around auditor independence were making it difficult for his part of the business to flourish within KPMG. The Telegraph notes KPMG is reported to be in advanced talks with buyout firm HIG Europe over a possible £400m sale of its insolvency and restructuring business, while Deloitte confirmed the sale of its own restructuring unit to consultancy Teneo for an undisclosed sum in February.
The Daily Telegraph, Business, Page: 4
CORPORATE NEWS – MONDAY 1ST MARCH 2021
30 pubs and restaurants close a day while distillery numbers jump
Research from CGA shows that an average of 30 pubs and restaurants a day have closed in the past 15 months. The report shows that 4,170 new sites have been recorded since December 2019 but the loss of 11,894 venues means three closures for every opening, with a net loss of 7,724 licensed premises. Meanwhile, the number of distillery businesses has risen by nearly a third amid the pandemic, with UHY Hacker Young saying the total jumped from 272 in 2019 to 351 last year, with this likely to have been fuelled by people using the lockdown to start craft spirits businesses.
The Times, Page: 8 The I, Page: 45
PROPERTY NEWS – MONDAY 1ST MARCH 2021
Dodds: Mortgage plan will further inflate property bubble
Shadow Chancellor Anneliese Dodds will today warn that a Government scheme to help first time buyers onto the housing ladder by encouraging banks to issue 95% mortgages will inflate the property bubble. Labour believes the initiative will make houses more expensive by increasing demand, with Ms Dodds set to say the plans “will do little to help more than a tiny proportion of Generation Rent – and look set to raise house prices even further beyond the reach of the rest.”
VAT cut on home repairs could boost economy
The Federation of Master Builders and the Royal Institution of Chartered Surveyors say cutting VAT on home repairs could give the economy a £50bn boost. The bodies, which are calling for a temporary cut from 20% to 5%, cite analysis from CBI Economics showing a five-year reduction would increase economic output by £51bn and create 345,000 jobs in construction and related sectors. They note that such a move would see the Treasury pull in £2.8bn less in tax receipts.
EMPLOYMENT NEWS – MONDAY 1ST MARCH 2021
Jobless rate around airports above average
Parliamentary data shows that unemployment rates are higher around major airports. While the number of people claiming unemployment benefits went up 112% across the UK between January 2020 and January 2021, in areas around the UK’s top 20 airports it rose 145% on average. In the constituency which contains Heathrow the number of people claiming unemployment benefits has increased 221%, while around Gatwick it has increased 224% and near Stansted the rate has increased by 228%. The All Party-Parliamentary Group for the Future of Aviation said the data shows that airport communities are being hit hard by the pandemic and is calling for more support for the industry.
A mutual support network pays dividends
The FT looks at work-based stress, citing a Deloitte report from January 2020 which found that the poor mental health among workers could cost firms £45bn a year.
Businesses draw up plans for hybrid working
With many firms launching reviews of working practices, preliminary findings from a poll of PwC staff show many favour working three or four days in the office.
ECONOMY NEWS – MONDAY 1ST MARCH 2021
Sunak set to extend support
Chancellor Rishi Sunak has indicated that his Budget will see a range of emergency coronavirus support measures extended, with the furlough scheme, bounceback loans, targeted VAT cuts and stamp duty reductions set to remain in place until June. Speaking ahead of his upcoming Budget, Mr Sunak said: “We went big, we went early and there’s more to come next week”. He suggested that support would be extended in line with the roadmap out of coronavirus restrictions set out by the Prime Minister, saying: “I want to support people and businesses along that path.” Mr Sunak told the BBC’s Andrew Marr that while the Budget will seek to provide support, he wants to “level with people” about the “shock to the economy” caused by pandemic, adding that he wants to “be honest” with the public about the pandemic’s impact on the economy and “clear about what our plan to address that is”. The Chancellor said making public finances sustainable “isn’t going to happen overnight”, warning that debt could “rise indefinitely” if borrowing continued after the recovery.
Labour fears Budget ‘triple hammer blow’
Labour has urged Chancellor Rishi Sunak not to raise taxes, cut welfare or freeze public sector pay in this week’s Budget, saying this would be a “triple hammer blow” that could undermine the UK’s recovery from the coronavirus crisis. Shadow Chancellor Anneliese Dodds is calling for a plan to protect jobs and businesses, urging Mr Sunak to maintain business rates relief and the reduced rate of VAT for at least six months to September; provide clarity on the future of support for the self-employed; and extend the furlough scheme. She will today insist the Budget should be about “rebuilding the foundations of our economy” with a “responsible plan that puts us on the path to a better, more secure future”.
Economic growth to miss predictions
Britain’s GDP is expected to fall 4% in the first quarter of the year according to the EY Item Club, a downgrade on the 1.9% Q1 growth predicted by the Office for Budget Responsibility (OBR) in November. EY expects the OBR to revise down its forecasts after non-essential high street retail and hospitality were closed amid the latest nationwide restrictions in January. While the coronavirus vaccine rollout is expected to boost growth in the second half of 2021, EY expects overall growth for the year to be down on earlier predictions, forecasting 5% growth against official predictions of 5.5%.
Contact Paul Southward