NEWS FOR THE MIDWEEK TO 15th JANUARY 2020
NEWS FOR THE MIDWEEK TO 15th JANUARY 2020
TAX NEWS FOR THE MIDWEEK TO 15th JANUARY 2020
Time your divorce according to tax year, lawyers urge
Solicitors are urging couples planning on divorcing to wait for a few more months to benefit from tax advantages. Starting proceedings in January leaves you very little time before April 5 to finalise a settlement and transfer assets to your spouse or civil partner free of any capital gains tax liability. You must pay if you transfer assets to your ex-partner once your relationship legally ends and the tax year expires without evidence of co-habitation during that period. Caroline Wright of Helen Pidgeon Solicitors said: “Ideally you would separate at the beginning of a tax year.”
Tax on big tech is just the start, says Cédric O
Cédric O, the French junior minister for digital affairs, has said France’s plans for a tax on multinational tech firms will go ahead regardless of threats of retaliation from the US. Known as the Gafa tax – an acronym for Google, Apple, Facebook and Amazon – the French legislation will impose a 3% levy on the annual revenues of the largest technology firms providing services to French consumers. But Mr O said France would be consider imposing other rules on such monopolies too, to combat hate speech, online commerce and threats to democracy.
The Guardian, Page: 32
Legal loopholes to cut IHT
The Telegraph shares a story of reader who saved himself £400,000 in inheritance tax by rewriting his father’s will. Peter Hollick used a deed of variation to divert a seven-figure inheritance into a trust fund for his children and grandchildren. The device allows you to make alterations to someone’s final wishes within two years of their death, provided all executors agree and you can show the changes would be in line with the deceased best interests and wishes.
Netflix accused of profit shifting
Netflix moved between £250m and £330m of profits to tax havens in 2018, according to TaxWatch. Revenues paid by UK subscribers are sent to the Netherlands, where it then negotiates special tax deals, the think tank says. TaxWatch also says that two UK Netflix entities were given £611,000 tax relief on their productions over 2017-2018.
Daily Mirror, Page: 8
British offshore tax havens to share with Russia
Jersey, Guernsey and the Isle of Man will send details of Russian assets registered in their jurisdictions to Russian tax authorities, the I reports, despite London and Moscow having cancelled an agreement which facilitates the sharing of such financial information.
The I, Page: 41
Five reasons why you may need to file a tax return
BDO partner Dawn Register runs through a checklist of five reasons why people may need to file a tax return, even when they believe they don’t have to.
HMRC set to make £70m from late tax returns
Analysis by SJD Accountancy suggests that HMRC is set to make at least £70m from fines related to late tax returns this year. With the January 31 deadline approaching, the firm has reminded those required to complete a self-assessment that even missing the cut-off by a single day could incur an automatic £100 fine. From each extra day of delays, the fine climbs by £10 to a maximum of £900. After six months, individuals can then receive another fine of £300 – or 5% of the tax they owe. After a year, if the return still hasn’t been submitted, another fine of £300 can be issued. Last year, 93% of tax returns were completed on time, while the number of people missing the deadline has hovered around the 700,000 mark in recent years. SJD Accountancy’s James Foster comments: “We know how hard individuals work in order to earn a living – and having to spend quite large amounts of money on late fees and fines isn’t ideal.” Meanwhile, Dawn Register, partner in tax dispute resolution at BDO, offers advice over tax returns in the Daily Mirror.
Daily Express Daily Mail, Page: 49 Daily Mirror, Page: 37
Mackay: Budget may be revisited
Scotland’s finance secretary Derek Mackay has said he may have to amend his budget if the UK Government sets different tax rates, with the Scottish budget to be announced on February 6, weeks before Chancellor Sajid Javid reveals his tax and spending plans on March 11. He said the UK Government is “leaving it to the last possible minute to do their own budget and that has caused a terrible impact for us.”
The Scotsman, Page: 6
Students targeted in scam
HMRC has warned that scammers are targeting students, with fraudsters pretending to be from the tax office and offering tax refunds via email in an attempt to gain personal information.
The Times, Page: 6
CORPORATE NEWS FOR THE MIDWEEK TO 15th JANUARY 2020
Controversial law firm goes bust
A law firm has gone bankrupt owing £6.3m to about 70 creditors, including barristers’ chambers used to fight its cases. Public Interest Lawyers also owes HMRC almost £152,000 in unpaid tax. The firm, led by solicitor Phil Shiner, attracted criticism from making millions from using legal aid to sue the Ministry of Defence over alleged war crimes by troops in Iraq. Mr Shiner was named solicitor of the year but was struck off three years ago after the Solicitors Regulation Authority found him guilty of professional misconduct of a “criminal standard”.
The Sun, Page: 35
Beales on verge of collapse
Beales, one of Britain’s oldest department stores, has warned that it could collapse into administration putting 1,000 jobs at risk. The company is in talks with landlords about reducing its rent and is also in talks with a rival and a venture capital firm about a possible sale. Beales brought in advisers at KPMG to lead a strategic review and explore different refinancing options last month.
BBC News Daily Mail The Guardian, Page: 12 City AM, Page: 6
Fintech drives up value of Aim deals
A total of £2.9bn was spent on Aim firms last year, up 32% on 2018, according to UHY Hacker Young. The increase was driven by investors’ appetite for fintech firms, which accounted for nearly a third of the deals.
The Daily Telegraph, Business, Page: 5 City AM, Page: 13
Flybe in rescue talks
EY is said to have been put on notice to handle an administration process for Flybe which is reportedly locked in rescue talks. More than 2,000 jobs are rat risk if additional financing cannot be arranged.
City AM, Page: 1
Flybe in last-ditch talks to avoid collapse
Flybe is in talks with the government to defer a £106m air passenger duty bill for three years amid reports the airline is attempting to secure a rescue deal. Flybe is facing mounting losses and has put EY on alert to handle any administration process should the airline run out of cash. The company was rescued last year by a consortium led by Virgin Atlantic which paid £2.8m for the airline. More than 2,000 jobs are at risk if Flybe fails to strike a deal to secure funding. But its collapse would also be a blow to regional airports and the government’s hopes of improving regional connectivity.
Government agrees Flybe rescue deal
The Government has agreed a rescue plan for airline Flybe, with a repayment plan for a tax debt that is thought to exceed £100m agreed. Business Secretary Andrea Leadsom said the deal would keep the company operating. Flybe’s shareholders, which include Virgin Atlantic and Stobart Group, have agreed to put more money into the business. The Government also announced that taxes on domestic flights would be reviewed as part of the rescue deal.
Netflix responds to tax report
Netflix insists it “has always paid the taxes required” in the countries in which it operates. This comes after a report from TaxWatch suggested the firm moved between 250m-£330m in profits from international operations outside the US, including the UK, to low-tax jurisdictions such as the Netherlands. The analysis also shows that Netflix UK received a £51,000 rebate from the Government in 2018 and claimed £924,000 in tax relief as part of incentives designed to ensure Britain remains a competitive location for making productions. Shadow chancellor John McDonnell said the report shows “Netflix is ripping off our public services by channelling profits through tax havens.” He added: “What’s even worse is that Netflix is claiming tax reliefs in the UK at the same time as it’s channelling profits overseas.”
The Guardian, Page: 21
LOG ‘overstated’ value of holdings
Judge Clive Jones has said that London Oil & Gas (LOG), a firm at the centre of the London Capital & Finance scandal, “overvalued” a major asset on its balance sheet. The judge rejected former LOG director Elten Barker’s attempt to remove administrators Smith & Williamson from his old company. His lawyers argued that LOG should not be in administration since it could sell its shares in London-listed Independent Oil & Gas and pay off its debts, but Judge Jones said LOG’s valuation of the shares of £135.65m was “unsustainable”. In his High Court judgement he added: “The evidence leads to the conclusion that the balance sheet is unreliable because assets have been over-valued.”
Daily Mail, Page: 73 City AM, Page: 10
London floats hit decade-low
London’s initial public offering (IPO) market saw the quietest year for a decade in 2019, with a 56% year-on-year dip in listings, according to research by EY. Figures show 35 companies floated raising £5.9bn, down from 79 listings raising £9.5bn in 2018. The number of admissions to the junior Aim market also fell, from 35 in 2018 to 11 in 2019. IPOs registered globally fell 10% to 1,127 in 2019, with proceeds of $202bn (£155bn), a 2% decrease. Scott McCubbin of EY said that IPOs “remain an exit route for private equity”, highlighting that 53% of all IPO proceeds raised in London were from private equity backed companies, compared to a global average of 29%.
1 in 5 firms financially stressed
Research from KPMG shows that a fifth of businesses are financially stressed, with more than 1,000 at risk of insolvency. The analysis looked at factors such as profitability, cashflow and debt leverage at 27,000 businesses with revenues above £10m over the past five years, finding that around 5,400 were stressed. KPMG’s Blair Nimmo commented: “Without action, stress can very quickly turn into distress. ”
The Sun, Page: 45
All eyes on Future FD’s pay vote
Publishing firm Future is bracing itself for shareholder criticism at its annual general meeting next month after influential proxy adviser Glass Lewis urged investors to vote down the firm’s executive pay policy. Future’s remuneration report outlines a base salary increase of more than 27% for finance director Penny Ladkin-Brand, who is set to take home £3.9m overall in 2020. Almost a third of shareholders voted against last year’s pay report.
SMEs NEWS FOR THE MIDWEEK TO 15th JANUARY 2020
Small businesses wary of open banking
A survey by the Federation of Small Businesses has found that two-thirds of smaller firms would not consider sharing banking data with other financial service providers, with 40% thinking it is unsafe and 37% “unsure of the benefits” it could bring. The FSB said although such reticence is understandable, it was holding up progress in open banking and depriving those firms of the benefit of having invoices, cash flow, payroll, utilities and tax data in the same place. Elsewhere, Paul Galligan, the chief executive of bills switching service Bionic and the former boss of Comparethemarket.com, has called on the Government to allow energy, insurance and telecoms firms to share customer information so small firms can significantly reduce their bills. Galligan said an open banking-style system across the sectors would “help SMEs cut the red tape and fight the faff”. Research by Bionic showed SMEs are overpaying by almost £9bn a year on ove rheads and unnecessary administration.
City AM, Page: 10 The I, Page: 40 Daily Express, Page: 49 Daily Mail The Press and Journal, Page: 29 Yorkshire Post, Page: 15
P2P funds will trim investor’s profits when contingency funds dry up
The Sunday Times’ Kate Palmer reports that peer-to-peer funds have nearly emptied their safeguard funds – used to reduce investor losses by covering bad debts on loans. RateSetter and Zopa have paid out nearly £30m between them and Ms Palmer says when the funds run dry investors who have earned a return on their loans will have their profits trimmed in order to refill the pot. Ms Palmer points out that Funding Circle is the only major peer-to-peer lender that has never had a provision fund, claiming that its model spreads the risk.
New company formations hit record levels in 2019
The Centre for Entrepreneurs will this week release data gleaned from Companies House showing a record 681,704 new businesses started in 2019, up 2.8% on the previous year. London was the No 1 place for starting a business, while Leicester, Glasgow and Bristol all saw sharp increases in the number of companies formed. The number of new tech start-ups was 43,765 while 14,259 takeaway food shops and mobile food stands were established.
Taxpayer cash pumped into aimless business aid
The National Audit Office (NAO) says taxpayers have contributed £17bn a year into business support schemes which are often poorly designed, badly monitored and not well co-ordinated. The NAO said: “Most of the schemes we assessed lacked measurable and time-bound objectives.” It noted that of almost 1,500 criteria used by the Department for Business, Energy and Industrial Strategy (BEIS) to monitor schemes, only 136 were used by more than one programme – making it difficult to compare. The NAO said the British Business Bank, which was set up by BEIS to support small businesses with access to finance, has run its programmes effectively, successfully boosting financing for small firms by £13.9bn since its launch in 2014.
The Daily Telegraph, Business, Page: 3
PERSONAL FINANCE NEWS FOR THE MIDWEEK TO 15th JANUARY 2020
Little incentive for banks to raise SEARs
With the Financial Conduct Authority propos ing that providers could be forced set a new Single Easy Access Rate (SEAR) across their easy access accounts and cash Isas to give savers a better deal, PwC’s financial services risk and regulation director Sarah Nield has said that while this will give long-standing customers a rate uplift, customer loyalty gives banks little incentive to increase SEARs. She comments: “Savvy rate chasers will be able to switch between introductory rates, but must do this annually. Even the most proactive would find that hard graft. ”
Daily Express, Page: 30
PROPERTY NEWS FOR THE MIDWEEK TO 15th JANUARY 2020
Frasers Group urges PM to reform business rates system
Mike Ashley’s Frasers Group, formerly known as Sports Direct, has written a letter to Boris Johnson urging the Government to reform the business rates scheme, claiming it results in some stores “paying the incorrect amount of rates”. The letter from Frasers Group finance chief Chris Wootton added that the company is not “seeking an instantaneous revision of rates” but said if retailers could see “light at the end of the tunnel” they could subsidise loss making stores until changes are made. The letter follows a warning by Mr Ashley which warned that more House of Fraser stores will be forced to close unless the “broken and unworkable” business rates system is tackled, saying his company can wait “months, not years” for reform.
PENSIONS NEWS FOR THE MIDWEEK TO 15th JANUARY 2020
Pension funds could boost SME investment by £12bn a year
The Mail on Sunday interviews Business Growth Fund (BGF) chief Stephen Welton who is calling on Boris Johnson’s government to help spur the entrepreneurial spirit. BGF believes at least £5bn extra – and possibly as much as £12bn – could be invested in small, growing companies every year. But the only way to unlock this amount of cash is to change the rules to allow pension funds to invest in small companies not listed on stock markets. Unlike the Woodford scandal, pension fund money would be long-term, says Welton, who adds that the saga will have made wealth managers wary.
The Mail on Sunday
Hundreds fail to report pension tax charge
Royal London has published advice for people completing their tax return this January. It follows a freedom of information request by the firm which reveals that just over 1,004 people in the 2016/17 financial year failed to report that a pension tax charge had been paid on their behalf by their occupational pension scheme. Royal London said that, as the number of people affected by ‘scheme pays’ has grown since 2016/17, it is likely that thousands of people are now failing to report this information. Steve Webb, director of policy at Royal London comments: “Filling in your tax return can be challenging enough, but the complexity of the rules around pension tax relief for higher earners is a particular nightmare. The good news is that some higher earners can claim additional tax relief provided that they put the right information on their tax return. But others need to make sure they report contributions in excess of their annual al lowance and pay the tax due now.”
Daily Express Actuarial Post International Adviser Pensions Age
Low-paid workers at risk of losing full state pension
Steve Webb, director of policy with Royal London, predicts that up to 1m workers could lose their eligibility for state pension credits if the lower earnings limit is increased.
ECONOMY NEWS FOR THE MIDWEEK TO 15th JANUARY 2020
Optimism increases among British financial firms
A survey carried out by PwC and the CBI reveals optimism among the UK’s financial services companies has risen for the first time in almost three years. Sentiment in the sector improved at the end of last year, for the first time since March 2017, while a positive balance of 8% of firms said they were more optimistic than three months ago. A balance of 14% of businesses expect volumes to grow in the opening three months of 2020, the strongest result since 2018. However, a balance of 19% warned of falling volumes in the final quarter of 2019, the worst since 2012. Separately, BDO’s Optimism Index showed no significant change in business confidence. Partner Peter Hemington said: “We’ve seen in the past that post-election changes in optimism take a while to feed through, even where the result is decisive as this.” Finally, a survey from trade finance provider Stenn found just under half of UK firms think the country will go into recession this year.
The Times, Page; 40 Daily Mail, Page: 70 The Scotsman, Page: 24 Yorkshire Post, Page: 15 City AM, Page: 12
Another BoE rate setter backs a cut
Gertjan Vlieghe, an external member of the Bank of England’s Monetary Policy Committee, has joined Silvana Tenreyro, another policy setter, in saying that a cut in the cost of borrowing may be required if economic data fails to improve. The Bank’s next decision on interest rates is due on 30th January. Separately, figures from NatWest and stats firm IHS Markit reveal London was the only British region where output grew in December, with firms hiring at the fastest rate since July.
Central-bank easing triggers record corporate bond issuance
Companies across the world sold over $2.5tn of corporate bonds in 2019, encouraged by central banks lowering interest rates, but policymakers are now concerned about the soaring levels of debt.
UK economy contracted in November
Figures from the Office for National Statistics (ONS) show that the UK economy shrank 0.3% in November on the previous month, less than the 0% growth forecast by economists, while in the three months to November GDP grew by just 0.9% on the same period the year before – its weakest pace of annual growth since the spring of 2012. The ONS figures show that November’s manufacturing output was down 1.7% while services were also down 0.3%. However, construction grew by 1.9% compared with October. The UK’s trade balance hit a record high surplus of £4bn in November and the three months to November saw the surplus stand at £1.1bn – the second consecutive quarter in the black. The next two weeks will see the release of key survey data which will be crucial to Bank of England policymakers as they consider whether to cut rates. Howard Archer, chief economic advisor to the EY Item Club, said the survey findings would be “highly influential”.
Credit card spending hits £6.6bn over Xmas
TSB research shows that Britons spent £6.6bn on credit cards over the festive period – an average of £435 each. Analysis shows that one in five people with a loan or card are concerned about meeting their repayments, while just over half worry about money at least monthly. TSB’s Craig Bundell urges those with debt problems to create a budget, saying: “If your credit card interest is too high, look at the best balance transfer offers, or consolidate debts with a personal loan.”
Daily Express, Page: 29
Scottish sales up 0.4%
The Scottish Retail Consortium-KPMG Scottish Retail Sales Monitor shows sales north of the Border grew by 0.4% last month compared with December 2018. Looking at the year-on-year change over November and December, sales declined by 0.9% year-on-year and, when adjusted for deflation of 0.4% over the two months, the real-terms decline was 0.5%.
The Press and Journal, Page: 31
SPORT NEWS FOR THE MIDWEEK TO 15th JANUARY 2020
Barcelona tops football’s rich list for first time
Arsenal have fallen out of the world top ten for earnings for the first time in nearly 20 years, according to financial analysis from Deloitte, while Manchester United are expected to be overtaken by either Liverpool or Manchester City at the end of the season for revenue. Barcelona were the biggest earners last season, topping Deloitte’s Money League for the first time, with Real Madrid second and United third.
Financial Times, Page: 13 The Times, Page: 63 Daily Mail, Page: 86 The I, Page: 55 The Guardian, Page: 51 Daily Express, Page: 56
OTHER NEWS FOR THE MIDWEEK TO 15th JANUARY 2020
Gender pay transparency could drive down wages
Economists studying gender transparency laws in Denmark suggest laws designed to encourage companies to reduce the wage gap between men and women appear to have hit productivity and overall average pay. A paper from the Centre for Economic Policy Research found legislation did very little to help narrow the gender pay gap, but productivity did fall compared with control firms, possibly driven by reduced morale after learning about the pay gap and the subsequent fall in wages for male workers. The impact of lower productivity on profits was offset by squeezing wages, which fell 2.8% on average.
Harry, Meghan and Canadian tax
BBC News considers the Duke and Duchess of Sussex’s plans to step back as senior royals, noting the tax implications if they opt to assume permanent residency in Canada. If they do – or they spend 183 days in a tax year in the country – then Canada will consider them resident for tax purposes.
Contact Paul Southward.