NEWS FOR THE MIDWEEK TO 26th FEBRUARY 2020
NEWS FOR THE MIDWEEK TO 26th FEBRUARY 2020
TAX NEWS FOR THE MIDWEEK TO 26th FEBRUARY 2020
Sunak scraps plans to cut pension tax relief
Rishi Sunak, the new chancellor, is expected to discard plans to scrap pension tax relief for higher earners following widespread criticism of the proposals, which would have raised £10bn a year. The former Brexit secretary, David Davis, said it would be a “moral disgrace” and “an economic farce” to cut the 40% tax relief offered to higher earners on their pension contributions to the 20p rate offered to basic-rate taxpayers. Separately, Mr Sunak is still considering whether to raise fuel duty and loosen fiscal rules in order to generate more spending power. Fuel duty hikes have also been criticised, however, with Tory MPs arguing that putting up the tax would hurt the blue-collar workers the party is trying to help.
Chancellor urged to reform taxes to save the high street
Rishi Sunak has been urged by 11 of the UK’s business improvement districts (BID) to overhaul the business rates system. The BIDs represent about 128,000 businesses from across the UK and join bricks and mortar retailers among others in calling for change. Addressing the new Chancellor, Chris Turner, the chief executive of British BIDs, said in a letter: “While our economy rightfully evolves, high-street retailers and other businesses are struggling with competition from online retailers […] We would like you to work urgently to level the playing field […] with a fair and transparent digital tax.” VAT, corporation tax, and national insurance should also be reviewed to reflect a changing economy, the letter said.
The UK should embrace the idea of being a tax haven
Mark Littlewood, the director-general of the Institute of Economic Affairs, argues in the Times for the UK to embrace the idea of Britain as a tax haven post-Brexit. As Britain leaves the EU, the country needs to give “serious thought to how we can make ourselves a more attractive business environment than many of our competitors,” he says. Tax needs simplifying and to be lower and post-Brexit Britain needs to be a “haven” for those interested in contributing to a “thriving hub of innovation and cutting-edge technological development”.
Bruno Le Maire urges consensus on digital tax
The French finance minister Bruno Le Maire has warned that failure to reach agreement on how to tax digital companies will result in multiple digital tax regimes across the world. Speaking on the sidelines of the G20 meeting in Riyadh, Saudi Arabia, Mr Le Maire also said “the key question of minimum taxation and the risk of having a race to the bottom on taxation” also needs to be addressed.
The Times, Page: 37 The Daily Telegraph, Business, Page: 6 The I, Page: 24
Rishi Sunak bows to pressure on IR35 tax changes
Rishi Sunak, the Chancellor, has said that tax officials will not be “heavy handed” in enforcing the changes to the off-payroll working rules, known as IR35, for the first year. He did however defend the government’s decision to implement the changes, as some employees were being taxed as if they were self-employed. From April 2020, every medium and large private sector business in the UK will become responsible for setting the tax status of any contract worker they use. But many freelancers complain the rule change has triggered employers to drop them and the uncertainty has left them with mental health issues; moreover, 75% of freelance contractors say they have left or intend to leave their clients by April, leaving companies facing a £2.2bn productivity black hole.
Eamonn Holmes loses tax case
TV presenter Eamonn Holmes has lost a case against HMRC over whether he should be paid as a freelancer through a personal service company. The host of ITV’s This Morning could be hit with a bill of up to £250,000. Mr Holmes said he was a test case for HMRC which he accused of “reinventing the rules”. A spokesman for Mr Holmes said he “has always considered himself a self-employed freelancer and has never knowingly avoided paying taxes.”
Daily Mail, Page: 15
Scrapping the freeze on fuel duty will cost van drivers an extra £272
Van drivers could face a £272 annual tax hike if the Chancellor ends the freeze on fuel duty, according to research by the FairFuelUK campaign. Howard Cox, of the FairFuelUK, warned: “Any hike in fuel duty will have a devastating impact on White Van Man. From plumbers to couriers the beating heartbeat of our economy will have no choice but to pass on any heightened levy to shoppers.”
The Sun, Page: 6 Daily Mail, Page: 2
Chancellor encouraged to boost manufacturing
Industry lobbyists Make UK are urging Rishi Sunak to introduce fresh tax breaks for R&D in next month’s Budget to turbocharge the UK manufacturing sector. The Chancellor should also set out policies that will cut energy costs and encourage investment after a period of stagnation following the referendum, the group said.
The Daily Telegraph, Business, Page: 7 The Times, Page: 40
Sunak could close IHT “loopholes”
The Chancellor is considering closing a tax loophole that enables wealthy families to invest in farmland to cut their children’s inheritance tax bill. Agricultural Relief can protect between 50% and 100% of money invested. Rishi Sunak is also mulling the end of Business Property Relief which can also result in IHT being reduced if the deceased has an interest in a firm or shares in an unlisted company. Experts say scrapping the two reliefs could raise £800m a year.
Daily Mail, Page: 10 The Sun, Page: 4
Raise taxes or cut spending, IFS says
The Institute for Fiscal Studies has repeated claims made by the Resolution Foundation on Monday that if the Chancellor wants to meet the government’s spending promises he will have to either break his fiscal rules or raise taxes.
The Times, Page: 47 City AM, Page: 2 The Guardian, Page: 33
Budget: Chancellor to cut red diesel subsidy
Rishi Sunak is expected to cut subsidies for red diesel as he cools on the idea of ending the 10-year freeze on fuel duty. Allies say the Chancellor is shifting more of the cost of meeting climate change targets from consumers to business as he finalises the budget.
CORPORATE NEWS FOR THE MIDWEEK TO 26th FEBRUARY 2020
Cash rolls in to UK’s fintech sector
Data released by KPMG today show British fintech companies attracted £37.4bn ($48.5bn) of investment in 2019, up 91% from a year earlier while the number of deals in the UK reached a six-year high. The UK accounted for half of the top 10 deals across Europe and netted more than 80% of the continent’s record-setting total of $58bn. Eileen Burbidge, partner at Passion Capital, commented: “The UK is currently the leading fintech hub in the world, thanks to extensive financial services experience, digital technology talent, and progressive regulators and policy makers supportive of increasing and accelerating innovation in such a crucial sector.”
City AM, Page: 1
ABF says coronavirus threatens clothing supplies
Primark owner Associated British Foods has warned that the coronavirus outbreak could cause “supply shortages” at the retailer later this year. John Bason, finance director at ABF, said clothes, homewares and accessories could all be affected. ABF added that it was working closely with its suppliers in China to assess the impact of the virus on their factories and supply chains and their ability to fulfil its current orders. “If delays to factory production are prolonged, the risk of supply shortages on some lines later this financial year increases,” the firm said.
The Guardian The I, Page: 38
Blackstone brings infrastructure fund to London
The US private equity giant Blackstone Group is setting up a 10-person team in London to focus on infrastructure investments in the UK and Europe. Its Blackstone Infrastructure Partners fund has a $14m war chest with hopes to raise as much as $40bn.
The Times, Page: 40 Daily Mail, Page: 75
Ted Baker set to sell its London HQ
Ted Baker is in talks with the British Airways’ pension scheme over the sale of its HQ in London. The retailer, which is nursing a £58m accounting gap, could raise tens of millions of pounds from the disposal.
City AM, Page: 4
SIG chiefs leave
The chief executive and the finance director of SIG have left the roofing and insulation group, sending shares down nearly 18% yesterday. Sources said Meinie Oldersma and Nick Maddock were ousted following shareholder concerns over strategy. The pair will be replaced with turnaround expert Steve Francis and Kath Kearney-Croft.
SMEs NEWS FOR THE MIDWEEK TO 26th FEBRUARY 2020
New terror training law planned for employees
The Home Office has said new laws would be introduced requiring owners and operators of public spaces to train employees on how to respond to terror attacks in their workplace. The so-called “Protect Duty” legislation would protect the public without putting “undue pressure” on businesses, security minister James Brokenshire said. However, the Federation of Small Businesses said that while businesses were keen to see any measures to prevent or deter terrorism, ministers must consider carefully any cost implications for smaller venues.
Financial Times, Page: 2 The Independent, Page: 8
Coronavirus impact spreads down the supply chain
The Times considers how some of the UK’s retailers are bracing themselves for stock shortages due to factory shutdowns in China as a result of the coronavirus. Small businesses reliant on Chinese production believe they will have to close if supply problems aren’t resolved soon. Martin McTague of the Federation of Small Businesses said. “The longer the situation goes on, the greater impact it will have further down supply chains here in the UK.”
Small businesses upbeat about the year ahead
Barclaycard’s inaugural Small Business Barometer has found SMEs across the UK are optimistic about the year ahead, forecasting a 6.3% rise in revenue over the next 12 months. Businesses in the North East, Yorkshire and The Humber were the most upbeat – forecasting quarterly revenue growth of 5.3%, and an annual uplift of 7.9%. Additionally, 10% of those surveyed said they intended to start trading internationally in 2020.
The Sun, Page: 43 City AM, Page: 2
FRC’s coronavirus guidance a lifeline for lenders
A blog post by UK Finance’s Nick Jardine considers the impact of the coronavirus and suggests the guidance issued by the Financial Reporting Council last week – recommending that businesses include disclosures regarding exposure to coronavirus in their year-end accounts – will prove vital to lenders. Banks, particularly those serving affected SMEs, will be able to take the disclosures and offer advice on diversifying supply and logistics operations. Lenders should be seeking to understand how the outbreak will impact their loan loss provisions.
Investing in start-ups
City AM runs a feature on Enterprise Investment Schemes, with Alex Daniel providing a guide to using EIS to invest in start-ups; Sophie Dworetzsky outlines how the Chancellor could help both start-ups and investors, refencing both EIS and SEIS (the Seed Enterprise Investment Scheme). Elsewhere, Alex Davies, the founder of Wealth Club – the UK’s largest non-advisory broker of VCTs and EIS – lists the VCTs and EIS that he would buy today.
City AM, Page: 19-24
Small business group aims to shrug off Brexit concerns
A new group aiming to promote small business and work with the government to “shrug off” negativity over Brexit has been launched. Small Business Britain has been set up by entrepreneur Michelle Ovens.
INDUSTRY NEWS FOR THE MIDWEEK TO 26th FEBRUARY 2020
Redundancy payouts rise by 16%
A total of £346.1m was paid out by the Insolvency Service to former employees of businesses which ran into trouble last year, a rise of 16%, according to figures obtained by Altus Group. In 2019 the number of retail insolvencies in England and Wales rose by 3.9%, while insolvencies at food and beverage establishments were up by 10.4%.
The I, Page: 38 Daily Express, Page: 45
Financial transparency pays off for all
Thom Townsend, the executive director of OpenOwnership, writes in City AM on how anonymous companies are central to 70% of grand corruption cases – where politicians or their associations misappropriate and use public funds for their personal benefit. Mr Townsend says things are gradually changing with more countries now following the UK’s lead and disclosing beneficial ownership data online. But not only does greater transparency help fight corruption, says Townsend, but also “helps build business and market confidence, improves governance, and tackles corrupt and criminal activities.”
Landlords should put cash elsewhere from April
The number of buy-to-let investors has fallen to a record seven-year low, according to Hamptons International, and the Telegraph’s Harry Brennan warns that many more will leave before it becomes more costly in the new tax year. Brennan suggests that investors instead look to property funds and the Enterprise Investment Scheme (EIS) – high-risk venture capital funds that channel money into small and emerging UK businesses. The Government offers generous tax breaks as an incentive to support smaller, growing business, he notes, including 30% income tax relief and the ability to defer CGT.
Land value tax ideas miss the point
Treasury proposals to scrap business rates and replace them with a land value tax have been dismissed by business leaders as a distraction from thorough reform. Jerry Schurder, head of business rates at Gerald Eve, commented: “By the time a land value tax or any other alternative that might be considered could be delivered, many retailers will have gone to the wall and some high streets will no longer be there to be saved.” Elsewhere, Ed Cooke, chief executive of Revo, said that the proposal “misses the point entirely that rates and rent are related and therefore the incidence of the tax is shared between owner and occupier”.
PENSIONS NEWS FOR THE MIDWEEK TO 26th FEBRUARY 2020
Health groups call for pension reform
The Royal College of GPs and the British Medical Association are among prominent health bodies calling on the Government to reform pension rules, so doctors are not penalised for working long hours. Senior health staff have been receiving huge tax bills for unintentionally exceeding savings thresholds after working additional shifts, with some consultants reportedly receiving bills of well over £50,000. The charges have led to doctors cutting back on hours leading to staff shortages. In a letter to the Chancellor, the health bodies call for a reform of pension taxation “as soon as possible”.
The I, Page: 13 Daily Mail, Page: 2
Savers warned about retirement poverty
The Association of British Insurers (ABI) is warning that middle-aged savers risk poverty in retirement because they are drawing on their pensions too early. The pension freedoms introduced in April 2015 allow people to cash in their entire pension from the age of 55 or take it in regular instalments. The ABI says the number of savers cashing in their entire pension in 2018/19 was 355,000, the highest since the freedoms were introduced, while four in ten flexible income withdrawals were at an “unsustainable annual rate” of 8% and over. The ABI is also calling for a review of the Financial Conduct Authority’s rules on financial advice arguing that Brexit provides the UK with an opportunity to move away from the EU’s restrictive regulations.
Tories urged to rethink state pension age increases
Following news that life expectancy is falling for some and health inequalities are widening, the UK government is coming under pressure to scrap plans to increase the state pension age.
EMPLOYMENT NEWS FOR THE MIDWEEK TO 26th FEBRUARY 2020
FSB warns of business closures due to new immigration rules
The Federation of Small Businesses (FSB) has warned that without special help many businesses will close as a result of the Government’s new immigration policy. Four in ten companies have been struggling to hire staff over the past year, the FSB says, with many citing the unwillingness of UK citizens to work in their sector as a reason. Visa costs would also be a barrier to hiring staff and the FSB said visa fees needed to be reduced to below £1,000.
Income inequality worse than thought
Analysis of tax records by the ONS shows income inequality in the UK is worse than previously thought. The ONS said the UK’s Gini coefficient – a scale on which 0% is absolute equality and 100% is pure inequality – should have been 34.5% in the financial year ending in 2018, rather than 32.5% as official records show. Adam Corlett, senior economist at the Resolution Foundation, said: “Poor data on the incomes of the very richest households has meant that the UK’s inequality story has often been incomplete.” George Eaton in the New Statesman contends that “the UK’s problem is less that inequality has risen but that it hasn’t fallen. The country is still living with the consequences of the 1980s when inequality surged as the earnings of the rich rose and tax rates were slashed (the top rate of income tax was reduced by the Thatcher government from 83% in 1979 to 40% in 1989). The Gini coefficient r ose from 25% in 1979 to 37% by the end of the 1980s.”
INTERNATIONAL NEWS FOR THE MIDWEEK TO 26th FEBRUARY 2020
Sanders concedes plans will cost $50trn
The frontrunner for the Democratic party’s nomination, Bernie Sanders, has release calculations for his policies after being criticised for not knowing what they cost. He claimed his schemes would cost over $50trn. However, this does not include his pledge for a universal healthcare plan, Medicare for All, despite telling CBS that it would cost $30trn over a decade.
ECONOMY NEWS FOR THE MIDWEEK TO 26th FEBRUARY 2020
Sunak must raise taxes or bend fiscal rules
New research by the Resolution Foundation predicts that total government expenditure will rise to 40% of GDP as the Government looks to spend big on infrastructure and other projects to level-up the country. The think tank said that if the Chancellor wants to increase spending on day-to-day public services either taxes would need to be raised or his fiscal rules would need to be watered down. The Resolution Foundation estimated that the Conservatives’ scheduled spending increases would lift the Government’s total managed annual expenditure above £1trn within four years.
Financial Times, Page: 2 The Guardian, Page: 25 The Daily Telegraph, Page: 6 Daily Mail, Page: 14 Daily Mirror, Page: 2 The Sun, Page: 2 The Independent, Page: 10 Yorkshire Post, Page: 4 The Scotsman, Page: 8
Global stock markets plunge as coronavirus panic sets in
A rise in coronavirus cases in Iran, South Korea and Italy sparked a sell-off in the US and Europe yesterday with investors shifting from equities to safe havens such as gold and bonds. US stocks had their worst day in two years with the S&P 500 falling by 3.4%; the Nasdaq Composite by 3.7% while the Dow Jones Industrial Average closed the day 3.6% lower. Transport stocks were among the worst performers. UK stocks had their worst day for five years with the FTSE 100 ending the day 3.3% lower while the Stoxx 600 fell 3.8%. EasyJet shares fell 17% and Ryanair were down 13%. Italy’s MIB index dropped 5.4%. The price of oil slumped to just over $55 a barrel with traders concerned that a global pandemic will cripple travel and trade.
New approach needed if ‘levelling-up’ to succeed
A report by EY examining the prospects for regional economic growth in the UK has said the imbalances between the north and south of England will widen further over the next three years unless greater action is taken. The study found that employment in the country’s biggest cities was poised to grow at twice the rate as in towns. Mark Gregory, chief economist at EY, said the UK was one of the most regionally unbalanced developed economies in the world. He added: “If we are to succeed in ‘levelling-up’ the economy, a more radical and segmented approach is now urgently required.”
The Times, Page: 40 The I, Page: 40 The Guardian, Page: 33
Markets fall again on coronavirus fears
Tuesday saw investors sell off shares for the second day as fears of the economic impact of the coronavirus continued to grow. The Dow Jones was down 3.1%, the Nasdaq 2.7% and the S&P fell 3%. In London, the FTSE 100 closed down 1.9% – its lowest level in a year – while Germany’s Dax fell 1.8% and in France the CAC fell 1.94%. In Japan, the Nikkei 225 index fell 3.3%. The sell-off continued after new cases were reported in Europe and the Middle East and the Center for Disease Control and Prevention warned that the coronavirus will impact the US. “We are asking the American public to prepare for the expectation that this might be bad,” said Nancy Messonnier, director of the National Centre for Immunization and Respiratory Diseases.
Weak economy and coronavirus threaten UK spending pledges
Growth forecast downgrades and the coronavirus outbreak will lead to Budget decisions on tax, spending and borrowing being delayed until later in the year, Chancellor Rishi Sunak has said.
OTHER NEWS FOR THE MIDWEEK TO 26th FEBRUARY 2020
CBI wants PM to avoid creating red tape for businesses
The Confederation of British Industry (CBI) has appealed to the Government to ensure red tape for businesses is limited in the trade deal it seeks with Brussels. Carolyn Fairbairn, CBI director general, said: “All efforts must be made in these talks to save exporters time and money, avoiding new paperwork, costs and delays.”
The Independent, Page: 3
Financial firms quarantine staff returning from China
Goldman Sachs and Standard Chartered have told London-based staff returning from China to stay at home as the City fights to prevent an outbreak of the coronavirus. Goldman has reportedly told staff to “self-isolate” and work from home for up to 14 days after returning from the worst-affected regions. Standard Chartered has instructed workers living with anyone who has recently returned from mainland China to stay away from the office. Meanwhile, EY has restricted or banned staff outright from travelling for business to mainland China, Hong Kong and Macau. Firms have also stepped up disinfecting and deep cleaning in offices. Hand sanitisers have been made available in buildings across the City and Canary Wharf.
Gang ringleaders jailed for running UK’s largest illegal tobacco factory
The masterminds behind a £10m fraud have been jailed after they were caught running the UK’s largest illegal tobacco factory, which could produce 140 packs of cigarettes a minute. John Watson Snr, who was a director of Doncaster Greyhound stadium, Terence Jacques and security guard Russell Haywood led a 12-man gang that made millions of counterfeit cigarettes which were distributed across the North of England.
Daily Mail Yorkshire Post, Page: 6
Contact Paul Southward.