News for mid-week to 17th December 2019
News for mid-week to 17th December 2019
TAX News for mid-week to 17th December 2019
UK IHT double EU average
Inheritance tax rates in the UK are more than double the average EU rate, according to research by UHY Hacker Young. The analysis shows that people in the UK pay an average of 23.9% in inheritance tax when passing on an estate worth £2.4m compared to 10.3% in the EU.
The I, Page: 43
Taxes could help drive regeneration
Roger Bootle, chairman of Capital Economics, looks at the likely economic policy of the new Conservative government, saying you cannot boost “economic dynamism” by continuing with a “punitive and inefficient” tax system. On encouraging businesses to contribute to the regeneration of formerly depressed areas, Mr Bootle says reduced tax rates could help. He adds that “if things go well, there is the scope for both a substantial increase in public spending and judicious tax cuts.”
The Daily Telegraph, Business, Page: 2
Relief at risk?
Jill Walker of Anderson Anderson & Brown looks at entrepreneurs’ relief, saying the “holy grail of tax reliefs” has seen the qualifying conditions become more stringent since it was launched in 2008 and suggests it could be “subject to significant change if not withdrawn altogether” in the next Budget. She adds that investors’ relief could also be at risk.
The Press and Journal, The Business, Page: 5
OBR report hits tax plans?
The Office for Budget Responsibility (OBR) says government borrowing will increase by around £20bn a year due to accounting changes. Its updated forecasts show that the budget deficit will be £33.3bn by 2023/24, up from a previous estimate of £13.5bn. Much of the difference between the new total and one issued in March stems from changes to the way student loans are assessed, with them treated as spending now where they had been treated as such when they failed to be repaid. The OBR has also rectified a £4bn a year error that underestimated corporation tax receipts. Experts have warned that the public finance forecasts have reduced the scope for significant tax cuts in the new government’s budget. Jack Leslie, of the Resolution Foundation, said: “Even a small deterioration to the economic outlook or plans to cut taxes would see the Chancellor at serious risk of breaking his brand new fiscal rules”. “Looking ahead, tax rises rather than tax cuts will be needed if those fiscal rules are to be combined with rolling back the impact of austerity over the course of the new parliament,” he added. Thomas Pugh, an economist at Capital Economics, said: “The recent deterioration in the economic and fiscal backdrop will all but eliminate any remaining headroom, preventing Boris Johnson from announcing any unfunded tax cuts in the budget.”
LEGAL News for mid-week to 17th December 2019
Ex-Serco directors charged over false accounting
The Serious Fraud Office has charged former Serco executives Nicholas Woods and Simon Marshall with fraud by false representation and false accounting over representations made to the Ministry of Justice (MoJ). Mr Woods, the former finance director of Serco Home Affairs, has also been charged with false accounting in relation to the accounts of Serco subsidiary Serco Geografix. Serco was fined £19.2m in July as part of a deferred prosecution deal after it overcharged the MoJ for an electronic tagging contract. The Financial Reporting Council fined Deloitte £4.2m in July over misconduct in relation to its audit work on Serco Geografix in 2011 and 2012, finding that the firm and audit partner Helen George had failed to act in accordance with the principle of professional competence and due care.
Fraudsters must repay £20m
Five fraudsters have been ordered to pay back more than £20m after conning investors in Britain’s biggest tax fraud. The men, who were jailed for fraud in 2017, stole at least £20m and laundered it via bank accounts and secret trusts – and also failed to pay about £6.5m in tax. Failure to repay the money could see them face further time in prison.
The Times, Page: 19
CORPORATE News for mid-week to 17th December 2019
How the wheels came off at Eddie Stobart
The FT looks at Eddie Stobart, highlighting a “troubled” relationship with former auditor KPMG and claims the haulage company has yet to supply replacement PwC with key financial documents.
Buyer: Steel deal not set to collapse
Jingye Group, the Chinese company that agreed to buy British Steel has denied reports that the rescue deal is on the brink of collapse, saying it is confident that it will secure regulatory approvals for the deal in the new year. EY is working with the official receiver to manage the sale of British Steel.
The Times, Page: 41 The Guardian, Page: 37 Daily Mail, Page: 70 Daily Mirror, Page: 12 City AM, Page: 4
Auditor issues distracted Sports Direct mangers
Looking ahead to Sports Direct’s interim report, Tom Rees in the Telegraph says the attention of its management team has been diverted in recent months by the exit of long-term auditor Grant Thornton.
The Daily Telegraph, Business, Page: 7
Sports Direct working with Belgium over tax bill
Sports Direct says it is working with Belgium tax authorities over a €674m tax demand, the disclosure of which delayed the release of its full-year results earlier this year. The retailer said it did not expect the potential bill to lead to “material liabilities” after it brought in accountants from PwC to carry out a review, saying neither the accountants or Belgian lawyers “found any evidence that VAT had been underpaid”. The firm made the statement in an update that saw it confirm RSM as its new auditor, having parted ways with Grant Thornton. Sports Direct owner Mike Ashley used the meeting to warn that more House of Fraser stores will be forced to shut unless the Government undertakes a fundamental review of the business rates system, which he described as “broken and unworkable”. Mr Ashley said the rates system is “clearly helping to kill much of what remains of the UK high street.”
The Guardian, Page: 35 Financial Times, Page: 19 The Times, Page: 40 The Independent, Page: 55 Daily Express, Page: 48 Daily Mail, Page: 69 The Sun, Page: 45 City AM, Page: 9
Thomas Cook went bust with liabilities of £9bn
An Insolvency Service report on the failure of Thomas Cook shows it collapsed with total liabilities of £9bn, owing £585m to customers and £45m to employees, with £5.7bn owed to other group companies and £1.7bn owed to banks and other lenders. The report refers to 26 Thomas Cook Group companies which were wound up on September 23, with a second report to focus on a further 27 UK companies in the group which were wound up on November 8. The notice to creditors shows that between £176m and £244m has been recouped through selling off Thomas Cook assets.
Daily Mail, Page: 71 The Times, Page: 44 The Guardian, Page: 33 Daily Express, Page: 48 The Sun, Page: 29 City AM
Beales in refinancing talks
Department store chain Beales has reportedly drafted in advisers as it looks to explore potential refinancing options, with KPMG to lead a review that could see the retailer negotiate rent reductions with some of the owners of its 22 stores.
City AM, Page: 13
SMEs News for mid-week to 17th December 2019
PM urged to offer clarity to businesses
Dr Adam Marshall, director general at the British Chambers of Commerce, says the Government must seek to “reduce uncertainty, reinvigorate our stagnant economy, build new infrastructure, boost skills and lower the cost of doing business.” In a letter to the Prime Minister carried in the Telegraph, he says the Conservative manifesto was not clear on how these aims would be met, insisting that businesses want clarity on the “concrete action” ministers will take to do so. Calling for “action to move beyond the Brexit impasse,” Dr Marshall says there must be a “clear commitment to boosting business here at home.” Noting that almost three quarters of SMEs report they are experiencing recruitment difficulties, he calls for “proper funding” for educational routes to employment, incentivising of job-related training, and an immigration system that prioritises the economy.
Pizza boss calls for rate reform
David Page, executive chairman of pizza chain Franco Manca’s owner Fulham Shore, has urged the Government to reform business rates in a bid to save the high street. He says there is need for greater clarity in the rates system and urged ministers to clear the backlog of complaints over bills. He said: “We’ve got rate appeals going on all over the place. It can take years. It can’t be right. I am not sure that smaller businesses can wait that long.”
The Daily Telegraph, Business, Page:
PROPERTY News for mid-week to 17th December 2019
House prices to climb 2% in 2020
Analysis by Rightmove suggests house prices will climb by 2% next year, with a lack of choice for potential buyers likely to drive the increase. Miles Shipside, director at the property portal, said: “Rightmove measures the prices of 95% of property coming to market, and we predict that buyers and sellers will on average see a 2% rise in those prices by the end of 2020.” Data from the property website shows that the number of sales agreed so far in 2019 is down by 3% on 2018, while the number of properties coming to market has fallen by 8%. The typical asking price of a UK home is currently £300,025 – 0.9% down on November’s average.
Daily Mail The Independent
EMPLOYMENT News for mid-week to 17th December 2019
UK trails rivals on AI patents
A new report suggests that while Britain is a leader in academic research related to AI, it falls short of rivals in converting this into intellectual property. Britain is the fourth-largest producer of published AI research papers, submitting more conference papers than any other European country between 2015 and 2018, but ranks just sixth for AI patents published. Considering the findings of the 2019 AI Index report, the Telegraph cites PwC research showing that 46% of people think they will see their jobs change due to automation in the next 10 years, with 36% saying their job will be “significantly impacted”.
The Daily Telegraph, Business, Page: 4
Letter: Ministers must boost workforce’s skills
In a letter to the Evening Standard, Andrew Harding, chief executive – management accounting, at the Chartered Institute of Management Accountants, says the Conservative government’s pledge to establish a right to retrain must be taken as an opportunity to boost productivity and social mobility. Citing an Industrial Strategy Council estimate that 20% of the workforce will lack the skills needed for their jobs by 2030, he calls for investment in digital transformation and creating a “well-trained and tech-savvy workforce able to leverage emerging technologies.” Mr Harding, who notes a Tory commitment to establishing a £3bn national skills fund, urges ministers to review national education and skills policies, in particular the apprenticeships programme.
Workers concerned by automation but look to adapt
Research from PwC shows that 45% of Scottish employees are worried about being replaced by technology compared to a rate of 38% across the UK. The study found that many workers are keen to reskill and adapt to a move toward automation. Stewart Wilson, head of government and public sector of PwC in Scotland, said: “It is reassuring to see that so many people working in Scotland today both recognise the role that automation is going to play, and that they are keen to develop new skills in response to this.”
The Scotsman, Page: 13 The Press and Journal, Page: 33
INTERNATIONAL News for mid-week to 17th December 2019
Charity and the super-rich
Ahmed Twaij in the Independent looks at charity pledges made by the wealthy following reports that Jeff Bezos, CEO and founder of Amazon, pledged to donate $98.5m to support homeless people across the US. He considers issues including whether a progressive taxation system should be implemented to redistribute wealth to support certain causes via more than just handouts. On US tax policy, Mr Twaij says tax breaks for the wealthy have shifted inequality from “a wealth gap to a full-on abyss”.
The Independent, Page: 41
ECONOMY News for mid-week to 17th December 2019
BoE set to hold interest rate
The Bank of England is this week expected to hold interest rates at 0.75%. The nine-member monetary policy committee will announce its decision on Thursday and is not expected to alter the rate, despite pressure from some quarters for a further quarter-point cut. Last month’s meeting saw committee members Michael Saunders and Jonathan Haskel call for a 0.25% cut, with it suggested that they will reiterate this stance at Thursday’s meeting.
Manufacturing output dips
Overall UK manufacturing output dropped to 48.5 in December, according to IHS Markit’s composite purchasing managers’ index (PMI), down from 49.3 the previous month to a 41-month low. Any reading below 50 on the index indicates a contraction. The fall in manufacturing output was the fastest since July 2012. Services data also fell short of forecasts, coming in at 49 compared to an expected 49.5. The decline follows a fall in November, with the sector seeing consecutive monthly declines for the first time since 2009. “December’s PMI survey data sadly lacked festive cheer, indicating that the economy contracted for the third time in the past four months,” said IHS Markit chief business economist Chris Williamson.
Daily Mail, Page: 69 City AM Financial Times
Global economy set for modest growth
PwC estimates that the global economy will grow by 3.5% next year. Its latest economic outlook report suggests US economic activity is likely to expand by about 2%, with the eurozone expected to grow at half that rate, while China’s economy will expand by 6%. Barret Kupelian, senior economist at PwC, said: “In 2020 we expect to see continued integration of the global economy but at a significantly slower pace.” Globalisation, he adds, “will give way to ‘slowbalisation’.”
Shoppers boosted by bargains
Deloitte analysis shows that clothing retailers are offering bigger than ever pre-Christmas discounts, with the study suggesting average price cuts could exceed 50% by Christmas Eve for the first time. Deloitte looked at more than 800,000 products online and in store and found that pre-Christmas discounting is currently at 43.8%. Jason Gordon, lead consumer analytics partner at Deloitte, said: “Retailers have faced a challenging year as consumer confidence has continued to fall amidst macroeconomic uncertainties,” adding that the introduction of Black Friday in recent years means consumers have come to expect an increasing amount of pre-Christmas discounting.
The Guardian, Page: 14 The Times, Page: 5 Daily Mirror, Page: 11 Daily Express, Page: 10 City AM, Page: 3
OTHER News for mid-week to 17th December 2019
Liquidity, Brexit and job cuts spell tricky 2020 for fund groups
A feature in the FT looks at the prospects for the fund management industry next year, with PwC’s Oliver Weber and David Yim, a partner at KPMG, among those offering insight.
BoE: Banks could withstand economic crisis
UK banks are well-equipped to withstand recessions and a decline in GDP, with all major lenders passing the Bank of England’s (BoE) stress testing. The BoE report says banks could keep lending even if UK GDP dropped by 4.7%, global GDP declined by 2.6%, bank rates hit 4% and unemployment rose to 9.2%. While the analysis found that losses on corporate exposures are higher than in previous tests – “reflecting some deterioration in asset quality and a more severe global scenario” – the BoE said the banks and building societies assessed “remain above their hurdle rates.” The central bank is increasing capital requirements for banks by doubling the size of the countercyclical capital buffer from 1% of risky assets to 2%. Rob Smith, a partner at KPMG, said the test results “will no doubt be reassuring for UK banks, their customers and shareholders” but added: “Investors won’t miss the warning that in order to survive these stresses dividends dropped to near zero.”
Contact Paul Southward.