End of Week News Friday 6th December 2019
End of Week News Friday 6th December 2019
TAX – End of Week News Friday 6th December 2019
Conservatives plan tax cut in ‘Brexit budget’
Boris Johnson has pledged a £200 tax cut for millions of families within days of Brexit. In a statement of intent for the first 100 days of a new Conservative government, the Prime Minister has revealed that a “Brexit budget” in February is among his priorities. This budget, he insists, will allow the party to deliver on a manifesto pledge to cut taxes by raising the National Insurance threshold from £8,632 to £9,500 from April. Such a move will deliver 31m workers an £85-a-year tax cut. The Mail suggests the national insurance threshold increase is viewed as a “down payment” on broader manifesto plans to raise it in line with the £12,500 income tax threshold.
Countries ready for digital taxes despite US threat
The UK, Canada, Austria and Indonesia plan to introduce taxes on internet companies, despite the US suggesting some French goods could see 100% tariffs in retaliation over the hit American firms face from France’s digital services tax. However, David Henig, UK director at the European Centre for International Political Economy trade think-tank, says the need for the UK to secure a post-Brexit trade deal with the US may hit the planned digital sales tax, arguing that Britain may look to scrap the proposed levy in return for the removal of tariffs on British goods.
Financial Times, Page: 8 The Guardian, Page: 5 City AM, Page: 19
Labour promises to save average households £6k a year
Labour says its plans to renationalise parts of the economy while cutting the cost of childcare and rail travel will save average households £6,716 a year without having to put up taxes. The figures are based on the assumption that an average household has two adults who commute to work via train, get no help with childcare and get free school meals for their children. Considering the analysis, independent charity Full Fact said: “Labour’s figures do not reflect an average family or the costs of price inflation over time,” while the Centre for Policy Studies think-tank went as far as to declare the figures “naked deceit”.
The Sun, Page: 8
Main parties pledge to review IR35 tax reforms after election
The Conservatives, Labour, Liberal Democrats and SNP have pledged to review tax changes that could hit contractors, although only the Lib Dem and SNP manifestos commit to reviewing IR35 reforms.
No relief for Scotland’s private schools
Scotland’s private schools will lose their charitable status tax relief, with public finance minister Kate Forbes telling a Holyrood committee that the government intends to change private schools’ tax status from September 2020. Under the current system, private schools are eligible for 80% mandatory rates relief if they are registered as a charity. Loss of the relief could cost the schools £37m between 2020 and 2025.
The Scotsman, Page: 21
Labour: Political donors must prove tax position
Labour is planning reforms to party funding rules that would mean political donors would have to prove they pay tax in the UK. If elected, Jeremy Corbyn’s party would ban donations from anyone not domiciled in the UK or non-resident for tax purposes, as well as anyone not compliant with UK tax laws.
How can I prepare for business tax changes?
BDO ’s Paul Falvey and Zena Hanks of Saffery Champness offer advice on tax changes due to come into force in April, including those related to corporation and capital gains taxes.
Tax burden at 30 year high
Figures from the Organisation for Economic Co-operation and Development (OECD) show that Britain collected more than £700bn in tax for the first time last year. Tax receipts rose by £28.5bn to £710bn in 2018, equivalent to 33.5% of GDP – the highest proportion since 1988. The OECD ranked Britain 20th out of 36 countries on tax-to-GDP, with the average at 34.3%. France is the highest-taxed country, at 46% of GDP. Considering the figures, Tax Justice UK executive director Robert Palmer said: “The table shows that there is plenty of scope for higher levels of tax as a proportion of GDP.” The Times’ Philip Aldrick notes Conservative and Labour tax plans, with the Tories looking to lower national insurance contributions, with this offset by scrapping a scheduled reduction in corporation tax to 17%. Labour, meanwhile, plans to raise £83bn, taking tax receipts to levels not seen since the Second World War at 37% of GDP.
Rivals question PM’s tax pledge
Boris Johnson has promised to cut taxes within weeks of the UK leaving the EU. He says a post-Brexit budget will deliver on an existing Conservative pledge to raise the threshold for national insurance contributions. The PM notes that increasing the threshold to £9,500 would result in a £2.5bn tax cut, adding that a subsequent shift would eventually see the threshold raised to £12,500. Liberal Democrat deputy leader Sir Ed Davey has branded the plan “pure fantasy”, saying the Prime Minister “is once again lying to the British public by pretending he can actually deliver on any of these promises.” Labour’s shadow communities secretary Andrew Gwynne also questioned the plan, suggesting that the Tory government has failed working people and that “it’s clear that more of the same failed austerity, privatisation and tax giveaways for the few is not the answer.”
The Independent Daily Mail Daily Express Daily Mirror The Scotsman
Johnson refutes tax increase claims
The Prime Minister has insisted his party will not increase taxes, despite Conservative manifesto costings showing that taxes would climb over the course of the next parliament. Boris Johnson said he was “not aware of the data” described when told the manifesto would, overall, raise tax. The costings show tax cuts would amount to £3.195bn in 2020/21, compared to tax increases of £3.3bn. When the figures were put to him, the PM said: “I don’t know what you’re talking about – we’re cutting taxes on business rates, we’re cutting national insurance contributions for everybody in the country.”
Daily Mail Financial Times, Page: 2
Freelancers miss out on £24m in tax cuts
Analysis shows that freelancers are missing out on at least £24m a year in tax breaks, with the majority of the 5m self-employed people allowed to deduct certain work-related costs from profits before paying income tax failing to take advantage of the benefits. The study, by accounting software firm Freeagent, shows that almost 80% do not claim business expenses that could be refunded. Around two in three freelancers do not claim back expenses of less than £10, while a third do not deduct the cost of food when travelling for work and nearly a fifth fail to declare money spent on accommodation. Ed Molyneux of Freeagent advises that small purchases can soon add up, calculating that if a self-employed person buys a coffee a day when visiting clients it equals an unclaimed £49 a month, adding “all of a sudden you have lost out on £585 in one year.”
CORPORATE – End of Week News Friday 6th December 2019
Accounting scandal deepens at M&C Saatchi
M&C Saatchi has admitted that an accounting scandal was much worse than previously thought and issued its second profit warning in less than three months. The group said that following an external review by PwC that identified the “misapplication of accounting policies”, it would be taking an £11.6m hit – up from an initially reported figure of £6.4m stemming from internal investigations. The company would not rule out any potential additional charges. Chief executive David Kershaw said a “robust” review has been undertaken and the firm has, under its new group finance director, “started implementing processes and procedures to prevent such issues arising again.” The Times’ Ben Martin says the issue “is an embarrassment” for KPMG, which had been M&C Saatchi’s auditor but tendered its resignation in Septemb er due to a clash over fees, while the paper’s Alistair Osborne notes that “M&C isn’t blaming KPMG for its blooper”. The Mail’s Alex Brummer also highlights KPMG’s role.
Stobart lines up administrators
Trucking company Eddie Stobart has lined up Deloitte to prepare it for insolvency if investors reject a rescue led by DBay Advisors. It is understood that if investors fail to back the deal, Eddie Stobart’s holding company will be put into administration shortly afterwards, enabling the firm’s operating entities to continue trading while an alternative rescue plan is devised.
The Daily Telegraph, Business, Page: 3 City AM, Page: 5
Clintons seals rescue deal
Clintons has been bought out of administration in a deal that safeguards 2,500 jobs. The greetings card retailer will be salvaged through a complex transaction that allows it to be sold back to its existing owners. KPMG said the deal means Clinton’s 334 stores can keep trading throughout the crucial Christmas season.
Buzzfeed issued strike-off warning
Companies House has lodged a proposal to strike Buzzfeed from the official register as its 2018 accounts, which were due by 30 September this year, have yet to be submitted. Pointing to concern over the firm and pre-tax losses recorded in 2017, City AM notes that auditors Blick Rothenberg received assurances of continuing support from Buzzfeed’s US parent company.
City AM, Page: 17
Numis falters in plodding equity conditions
Analysis of stockbroker Numis’ performance notes PwC figures showing that only five companies listed their shares in London in Q1 2019 – a low not seen since the financial crisis in 2009.
Ted Baker appoints consultancy to review operations
Ted Baker has appointed AlixPartners to review its operations after a stock overstatement of up to £25m, while forensic accountants and law firm Freshfields Bruckhaus Deringer are looking into the issue.
Police probe tourist agency
West Yorkshire Police says a probe into expenses claims by tourist agency Welcome to Yorkshire is ongoing. A BDO report earlier this year identified around £26,000 worth of expenses had been claimed for personal items with no business justification.
Yorkshire Post, Page: 11
SMEs – News
Labour vows SME support
Labour says it will create a state-run business support agency if elected, vowing a number of policies designed to help SMEs that include creating two state banks, scrapping quarterly reporting for businesses under £85,000 and “stamping down” on late payments. The mooted Business Development Agency would help smaller firms to access business advice, finance and large scale government contracts. Shadow Business Secretary Rebecca Long-Bailey said: “Small businesses, the lifeblood of our economy and our communities, are being stretched to breaking point by global corporations which evade their taxes and fail to pay their suppliers on time. This inequality scars our country.”
City AM, Page: 7 Yorkshire Post, Page: 4
EMPLOYMENT – News
Permanent job placements at decade low
Research by KPMG and the Recruitment and Employment Confederation shows that the number of permanent job appointments fell in November as growth in the demand for staff fell to a 10-year low. The dip marked the ninth consecutive fall, with political uncertainty cited as a contributing factor. However, demand for temporary staff remained strong.
The Times, Page: 48 City AM, Page: 2
Charter seeks to close tech gender gap
An initiative to address gender balance in technology roles in Scotland has been launched, with PwC, Royal Bank of Scotland and Morgan Stanley backing the Tech She Can Charter. The initiative was created following PwC research which found that only 23% of people working in Stem jobs were female. Claire Reid, regional leader of PwC Scotland, said: “This is an important societal problem and the charter will see industry in Scotland working together to tackle the root cause of the lack of females in technology roles.”
The Scotsman, Page: 32 The Press and Journal, Page: 27
LEGAL – End of Week News Friday 6th December 2019
City braced for tax scandal
Lawyers predict that London could be caught in the fallout of an alleged tax evasion scheme that is understood to have cost European treasuries €55bn. British investment bankers Martin Shields and Nicholas Diable are on trial in Germany accused of helping to facilitate the cum-ex trading scheme, which took advantage of the differing tax treatment of dividends in different countries, allowing multiple tax credits to be claimed. Lee Adams, partner at JMW Solicitors, says tax lawyers in the UK will “undoubtedly” come under increased scrutiny, adding: “This could be the next Libor scandal.” Rachel Cook of Peters & Peters says HMRC may find a probe challenging, as it is difficult to “discover or undercover this sort of sophisticated tax evasion scheme, with its complex transactions and jargon”.
FINANCIAL SERVICES – End of Week News Friday 6th December 2019
New climate for stress tests
Writing in City AM, Rob Smith, a banking partner at KPMG, looks at the impact climate change may have on financial sectors. With results of UK bank stress testing due soon, he notes that in 2021 these tests will include a scenario on climate change.
City AM, Page: 36
PROPERTY – End of Week News Friday 6th December 2019
Homeowners could face Christmas mortgage penalty
Research by MoneySavingExpert has calculated that homeowners whose mortgages expire over the festive period could be left more than £100 out of pocket, even if they have remortgaged to a new deal with a low interest rate. The consumer website said that in the worst instances homeowners could be paying £130 in extra interest payments this Christmas. A borrower with a typical outstanding loan of £350,000 would pay £70.98 in extra interest if their loan expired on Christmas Eve. This would rise to £131.78 for a homeowner with a £650,000 mortgage outstanding. This issue only affects those switching to a different lender, rather than to a new deal with the same provider.
M&G suspension highlights property concerns
Investors withdrew £31m from Standard Life Aberdeen’s Aberdeen UK Property fund on Wednesday, close to the total for the previous four months combined. This came after the suspension of a rival M&G product. Andy Bell, boss of investment platform AJ Bell, suggests that it is only a “matter of days” before other property funds with small cash holdings follow M&G and block investors from accessing their money. Figures show ordinary investors pulled a net total of more than £1.7bn from open-ended UK property funds in the 12 months to October, with some concerned over falling property prices. Meanwhile, data shows Columbia Threadneedle and Kames Capital property funds have sold off more than £156m of property in the past two months.
ECONOMY – End of Week News Friday 6th December 2019
Services sector shrinks
The services sector in the UK has seen its sharpest fall in eight months, with the final IHS Markit/CIPS purchasing managers’ index for services dropping to 49.3 in November from 50 a month earlier. A sub-50 figure marks contraction in the sector. Ruth Gregory, senior UK economist at the consultancy Capital Economics, said services seemed to have “done no better than flatline” in the month, while IHS Markit economics associate director Tim Moore said the sector was “falling back into decline after a brief period of stabilisation”. The UK economy is “staggering through the final quarter of 2019,” he added. Duncan Brock, group director at CIPS, said Brexit nerves have “descended over European clients,” leaving them “reluctant to commit until there is more clarity in the UK’s future direction”.
Lending set to slow
EY Item Club ’s latest outlook for financial services suggests bank lending to businesses and consumers will slow next year, climbing by just 2.1%. This would mark the weakest increase since 2015. The analysis forecasts that consumer credit growth will slow to 3.8% – a low not seen since 2013 – while mortgage lending growth will be stable at 3.7%.
The Times, Page: 50
Household debt climbs
Figures from the Office for National Statistics (ONS) show that debts are climbing, with average household financial debt rising 9% to £9,400 in the two years to March 2018. Median financial debt grew 12% to £4,500. In total, debts excluding mortgages have risen 11% to £119bn. The analysis shows that personal loans account for £35bn of total household debts, £32bn is from student loans, £25bn is hire purchase, and £22bn is on credit cards, while the remainder includes £3bn of overdrafts. The ONS study, which is published every two years, shows the poorest 10% of households have debts three times bigger than the value of assets they own, while the top 10% have total wealth worth 35 times their debt. Britain’s total wealth increased by 13% in the two years to 2018 to reach a record £14.6tn.
Sales fell ahead of reductions
Like-for-like sales fell 17.1% in the week before Black Friday, BDO figures show. However, the week of Black Friday saw instore and non-store sales soaring by 24% and 28% respectively. Data adjusted to take account of the fact that Black Friday fell a week later than in 2018 this year showed that bricks and mortar sales were up 3% in November, while non-store sales were up 8% year-on-year. Sophie Michael of BDO comments: “Shoppers simply weren’t willing to part with their pounds until hefty price cuts took place, as the steep decline the week before Black Friday illustrates.”
The Independent, Page: 55 Daily Mail, Page: 85 City AM, Page: 2 Daily Star, Page: 2 Yorkshire Post, Page: 1
OTHER – End of Week News Friday 6th December 2019
Sol puts the boot in on Macclesfield
Former Macclesfield Town manager Sol Campbell wants the football club wound up and is supporting a court application from HMRC. Judge Catherine Addy, who heard that the club owed a “very large” amount of tax, was told that Mr Campbell is owed around £182,000. The judge said Macclesfield should get time to clear debts and said the case would be reconsidered on December 18.
The Times, Page: 71 The Guardian, Page: 63 Daily Express, Page: 51 The Sun, Page: 7 Daily Star, Page: 4
Regulators call for new rules
Regulators have proposed rules to make banks and payment firms more resilient to major problems after MPs called for regulatory changes on the back of technological failures by some lenders. The Bank of England and Financial Conduct Authority say banks and payment firms should have to identify their most important businesses and set the maximum level of disruption they would accept. Simon Chard, IT financial services partner at PwC, said firms will “need to show that they understand their business and the impact that an operational shock could have on customers and the system as a whole”. He added: “This could well be the regulatory challenge that impacts organisations’ operations the most, and no firm can afford to ignore it.”
Contact Paul Southward.