Monday Morning Mega News Roundup 18th February 2019

NEWS ROUNDUP

TAX NEWS

HMRC pursues overseas residents over Rangers-style tax schemes

New figures released under the Freedom of Information Act reveal HMRC is pursuing almost 2,000 people who live abroad over a series of controversial tax avoidance schemes similar to those once used by Rangers football club. The arrangements, once believed to be legal, involve the payment of individuals via a complex structure involving loans from offshore trusts. The figures show that just over 1,700 of those people live overseas, the majority in Australia or New Zealand. RSM’s Andrew Hubbard said getting the tax owed could prove extremely difficult: “There are international agreements which do allow in very limited circumstances one country to enforce tax debts of another country but these are cumbersome and time consuming and where the amounts due are relatively low the cost of enforcement may be out of all proportion to the debt”.

The Daily Telegraph

More work needed to use blockchain at UK borders

The Government has said further work by HMRC is needed on the use of blockchain at UK borders following a pilot to determine whether the technology could be used to inform a trader’s Authorised Economic Operator status. Financial secretary to the Treasury Mel Stride said: “The proof of concept ran for six weeks and established that Government could use blockchain to securely share the results of sensitive risk checks to improve the efficiencies of certain customs processes. We are working with the cross-government Future Borders programme to progress the pilot as part of their Trusted Trader initiative.”

Computer Weekly Coin News Span

HMRC apologises to homeless man fined £1,600 for tax late return

A judge has overturned £1,600 in fines issued by HMRC to homeless man Krzysztof Pokorowski for filing a tax return late. He did not receive letters from HMRC because he had been thrown out of his home and all his belongings, including tax records, had been lost or stolen. Judge Nicholas Aleksander said: “For HMRC to expect a homeless person to keep them up to date on his address is ridiculous.”

The Times, Page: 23

ECJ overturns commission’s ruling on Belgian corporate tax scheme

The European Court of Justice’s general court has overturned the European Commission’s decision that tax scheme arrangements created by Belgium and used by 35 companies amounted to a systematic state aid scheme.

Financial Times. Page: 6

How marriage tax perk can save up to £190k

Sarah Coles, of pension provider Hargreaves Lansdown, estimates that a typical couple married for 50 years could benefit by as much as £190,000, even accounting for the £27,000 average cost of a wedding, by making use of the marriage allowance.

The Daily Telegraph

Labour joins tussle over ‘unfair’ tax avoidance charge

Labour MP Anneliese Dodds has asked the Government to explain why those who enabled contractors to use disguised remuneration schemes have not been targeted as the 100,000 or so contractors have. Elsewhere, the FT reports on readers’ experiences in dealing with the impact of the loan charge – the retrospective measure used by HMRC to claw back unpaid taxes, which is deemed unfair on contractors and risks mass bankruptcies. The Guardian also talks with those affected, many of whom say they were given little choice whether to participate in such schemes and that they were assured the schemes were legal. HMRC has already contacted 40,000 people with loan charge demands, and in total it expects to pull in £3.2bn in tax. Its official guide to the loan charge says: “These loans are paid to people in such a way that means it’s unlikely that they’ll ever have to be repaid. In other words, the person receiving money from a loan scheme gets to keep it all. And they don’t pay any tax on this money, even though it’s clearly income. It’s highly unusual to receive your salary in loans and is clearly a method used to avoid paying tax.” HMRC has also written to 1,700 freelance workers who now live abroad stating that it will use “mutual assistance” treaties with other countries to allow their tax departments to collect money on Britain’s behalf.

Financial Times, Money, Page: 4 Financial Times, Money, Page: 10 The Guardian, Page: 49-51 The Times, Page: 59

Marxist tax grab will be camouflaged in green ethics

The Times’ Iain Martin warns that complacent Tories risk letting a hard-left Labour party into power. He explains how he has learnt that Jeremy Corbyn is planning to take a leaf out of the US Democrat’s playbook and couch a surprise 20% wealth tax on all assets in a Green New Deal-style policy. This would be presented as a “windfall” for the poor. Martin says: “By then, of course, elementary economics suggests quite a few of the super-rich will have fled abroad with their money anyway, and the levy will have to be set surprisingly low down the scale for those left behind.”

The Sun, Page: 18 The Times

How much could a net wealth tax bring in?

The FT’s Martin Sandbu asks how much a net wealth tax could raise in large western economies. He suggests a 2% annual levy on total private wealth should raise 4 to 5% of GDP.

Financial Times

Victims of bank transfer scams to be reimbursed

A group of UK banks have agreed to compensate victims of “authorised push payment fraud” – where customers are tricked into switching money into accounts controlled by criminals. The banks had been resistant to providing refunds in cases where neither they nor the customer was to blame because the transactions were authorised by customers, but Stephen Jones, head of trade body UK Finance, now says they will offer compensation.

Daily Mail, Page: 1, 2 The Sun, Page: 26

Rome stung in wire ruse

Rome city council has been left with a large hole in its accounts after accepting a 200km coil of nickel wire from Giovanni Calabrò in lieu of a $55m debt. The wire was later valued at €40,000. Mr Calabrò was also found to have settled an unrelated €15m debt with a creditor in the Veneto region in 2017 with nickel later valued at €20,000. He has questioned the accuracy of the valuations and denied any wrongdoing.

The Times, Page: 45

CORPORATE NEWS

Patisserie Valerie bought out of administration

Patisserie Valerie is to be bought out of administration by its management team which has secured backing from investment firm Causeway Capital to take over 96 shops. Patisserie Valerie’s parent company, Patisserie Holdings, collapsed in January following an accounting fraud that left a £40m hole in the company’s finances. Administrator KPMG shut 70 unprofitable stores at the cost of more 900 jobs. The firm then ran an accelerated sales process for the remaining stores. The Times points out that Causeway Capital and at least two of the companies it owns are audited by Grant Thornton, which audited Patisserie Valerie for 12 years. The accounting firm is being investigated by the Financial Reporting Council over its audits going back three years.

BBC News The Daily Telegraph, Business, Page: 1 The Sun, Page: 47 Daily Express, Page: 53 Daily Mail, Page: 73 The Times, Page: 37 The Guardian, Page: 40

Legal action pushes InvestUK into administration

Mayfair-based InvestUK has fallen into administration after being ordered to recompense two Russian nationals who filed a legal challenge against the broker. As part of its services, the firm helped secure so-called “golden visas” for wealthy overseas entrepreneurs and Richard Slade and Company, representing the Russian pair, said they sued to recover funds they had invested in a loss-making private member’s club in Covent Garden.

The Daily Telegraph

Six people face arrest over Patisserie Valerie fraud

A report by PwC into the collapse at Patisserie Valerie highlights six individuals alleged to have signed fraudulent cheques and sent emails discussing fabricating invoices. One person has been arrested by the SFO while a further five are under investigation. The café chain collapsed into administration last month, three months after discovering a £40m hole in its accounts.

The Sunday Times, Business, Page: 1

Flybmi ceases trading

British regional airline Flybmi has cancelled all its flights and filed for administration. The airline said it had been badly affected by rises in fuel and carbon costs and uncertainty over Brexit.

BBC News Sky News The Sunday Telegraph, Page: 2 The Sunday Times, Business, Page: 3

HMV progress report due by Thursday

HMV’s creditors will find out how much they are likely to get back from the collapse of the retailer when administrator KPMG publishes its first progress report this week.

Sunday Express, Page: 55

SMEs NEWS

Female entrepreneurs say they struggle to be taken seriously

The latest Aldermore Future Attitudes study, which surveyed more than 1,000 business decision-makers across the UK, found that 17% of female bosses at UK SMEs believe they have had an application for finance denied because of their gender. A further 18% felt their applications had been denied because of personal opinion; 15% felt they struggled to be taken seriously and 18% thought they had pushed themselves too hard because they were a woman. Overall, 46% of female business leaders admitted to experiencing some form of discrimination, compared to 30% of their male counterparts. Carl D’Ammassa, group managing director, business finance at Aldermore, said: “The finance industry should be empowering people to innovate and generate wealth and discrimination of any form is detrimental to this.”

Best Advice Daily Express

PENSIONS NEWS

Accidental lifetime allowance breaches will prove painful

Lloyds Banking Group was recently ordered by a court to comply with regulations to equalise pension payments between men and women. This means British companies are now forced to adjust the pensions of current and former staff. However, those savers who secured special “protection” arrangements in the past to prevent the maximum amount they could hold in their pension being cut will see further pension contributions render that protection void – meaning a penalty charge of up to 55% could apply to sums above the cap. Royal London warned that the fallout from the Lloyds case could cost UK companies a combined £15bn while individuals who have the terms of their protections breached could face tax bills as high as £432,500 each.

The Daily Telegraph, Money, Page: 1-2

Private school pain as Treasury raids teacher pensions

The Government is planning to raid private schools to the tune of £100m to fund teacher pensions, the Sunday Telegraph reports. The schools will either have to pull out of the teachers’ pension scheme, making them less attractive to new staff, or raise fees. The employer’s contribution for teachers’ pensions will rise from 16.48% of their salaries to 23.6% from September following a valuation of the public service pension schemes by the Treasury. The DfE is providing £830m to state schools to help them meet the extra costs for the first year but no funds for private schools. Steve Webb, director of policy at Royal London, said: “It is hard to justify a stealth raid of £110m from independent schools simply because of an obscure change to the accounting rules around teachers’ pensions.”

The Sunday Telegraph, Page: 14

CEO investment in company schemes more likely to ensure their survival

The Telegraph’s Marc Sidwell says Amber Rudd’s plan to make the mismanagement of pension funds a criminal offence is not the best way to persuade CEOs to look after funds. He cites research by academics which shows when CEOs were invested in a company’s pension scheme its prospects improved and they were 77% less likely to close them down.

The Sunday Telegraph

WEALTH MANAGEMENT NEWS

Trusts remain out of favour with wealthy families

The latest figures from HMRC show wealthy families are increasingly shunning the use of trusts due to privacy concerns and fears they could be tarred with the “tax avoidance” brush.

Financial Times, Money, Page: 4

Wealthy move to tackle pitiful state of UK philanthropy

The Beacon Collaborative is trying to get the wealthy to give away more. HMRC figures show only 40% of people earning more than £250k donated to charity.

Financial Times, Page: 3

PROPERTY NEWS

Property repossessions ‘lowest since 1980’

New figures have shown that the number of homes repossessed in the UK fell to its lowest level since 1980 last year. There were 4,580 homes repossessed by mortgage lenders from owners who were unable to keep up with repayments on their home loans. Low mortgage rates and a less aggressive attitude from lenders has meant low levels of repossession in recent years. The figures from UK Finance showed that the number of landlords falling behind on mortgage repayments was unchanged in the final quarter of last year compared with the same three months in 2017.

BBC News The Times, Page: 40

ECONOMY NEWS

Rutte’s claim of “diminished” Britain rejected

Dutch PM Mark Rutte has said that Brexit had diminished Britain’s role on the world stage and that the UK “is too small to appear on the world stage on its own.” He told the FT: “Every businessman I speak to from the UK is saying they will cut investments, cut their business in the UK. It will have an insurmountable impact on the UK.” Theresa May’s spokesperson rejected the claims: “I disagree entirely. Employment is at a record high, exports are at a record high, companies are continuing to invest in the UK. Deloitte named the UK as Europe’s leading destination for foreign direct investment and London as the world’s top city for investment just last month.”

The Independent, Page: 10 Financial Times The Guardian, Page: 11

UK economy grows faster than Germany’s and Italy’s

Germany avoided recession by a hair’s breadth last year as activity dived amid a US trade crackdown and Brexit jitters. There was no growth in the final three months of 2018, after a 0.2% contraction in the previous quarter. Italy contracted by 0.1%, tipping it into its third recession this decade. The eurozone as a whole grew by 0.2%, the same as the UK, figures from Eurostat showed.

The Daily Telegraph, Business, Page: 1 Daily Mail The Times, Page: 40

No deal Brexit could prompt interest rate cut

Interest rates could be cut in the event of a no-deal Brexit, according to Gertjan Vlieghe, a member of the Bank of England’s Monetary Policy Committee. Brexit has wiped £40bn off Britain’s annual economic growth since the 2016 referendum, he added, equating to £800m per week of “lost income for the country.”

Evening Standard The Guardian The Independent, Page: 14

UK January retail sales jump faster than expected

UK retail sales grew at a faster rate than expected in January following a 0.7% contraction in December. The ONS said sales were up 1% on the previous month and 4.2% higher than in January last year – the biggest annual rise since December 2016.

BBC News Financial Times The Daily Telegraph The Guardian, Page: 43

Wage growth fastest in a decade

Official figures are this week set to show a 3.5% annual rise in the average weekly wage during the final quarter of 2018 – the fastest rate in more than a decade. Martin Beck, lead UK economist at Oxford Economics, commented: “There’s a bit of a paradox – it was a dismal performance from business investment, but that doesn’t seem to have had much effect on hiring. Firms haven’t been investing in capital equipment but taking on more workers is seen as a less risky option.”

The Sunday Times, Business, Page: 2

Failure to upskill puts millions of workers at risk from robots

A report by the Centre for Social Justice has found that if UK employees were properly “upskilled” with vocational training it would bring a £125bn boost to the economy. The Future of Work study showed employers’ investment in skills training has dropped by 25% in a decade, from £2,000 per year to £1,500 today. The report warns that this “chronically low level of investment” will put millions of workers in the UK at risk from automation. “Upskilling and retraining is the best means of mitigating these risks.”

The Sunday Telegraph, Page: 14

OTHER NEWS

Rare medieval accountancy book on display at Christie’s

A rare 15th century printed book outlining the principles of modern accounting and double-entry bookkeeping, expected to sell for up to $1.5m, is to go on display at Christie’s London.

Financial Times

Victims of bank transfer scams to be reimbursed

A group of UK banks have agreed to compensate victims of “authorised push payment fraud” – where customers are tricked into switching money into accounts controlled by criminals. The banks had been resistant to providing refunds in cases where neither they nor the customer was to blame because the transactions were authorised by customers, but Stephen Jones, head of trade body UK Finance, now says they will offer compensation.

Daily Mail, Page: 1, 2 The Sun, Page: 26

Rome stung in wire ruse

Rome city council has been left with a large hole in its accounts after accepting a 200km coil of nickel wire from Giovanni Calabrò in lieu of a $55m debt. The wire was later valued at €40,000. Mr Calabrò was also found to have settled an unrelated €15m debt with a creditor in the Veneto region in 2017 with nickel later valued at €20,000. He has questioned the accuracy of the valuations and denied any wrongdoing.

The Times, Page: 45

Contact Paul Southward if you have any queries.

Paul Southward

Paul Southward