NEWS FOR THE WEEKEND TO 23rd FEBRUARY 2020
NEWS FOR THE WEEKEND TO 23rd FEBRUARY 2020
TAX NEWS FOR THE WEEKEND TO 23rd FEBRUARY 2020
Cutting pension tax relief an ‘own goal’ to be avoided
Both the Telegraph and the Times report on Treasury plans to cut the rate of pensions tax relief for higher earners from 40% to 20% in a move that could raise £10bn a year and affect 3.85m people. The Times’ Mark Atherton suggests a variety of ways people could move their money around to limit the impact while the Telegraph points out that a pensions tax raid would deliver another blow to NHS doctors who are already grappling with punitive rules for higher earners. Some doctors have already been forced to cut hours or retire early because of tax charges. Deborah Cooper of the consultancy Mercer said cutting tax relief on pensions “seems an own goal the Government might want to avoid”. Separately, Patrick Collinson argues in the Guardian that if Rishi Sunak were to be a “truly bold” Chancellor then he would scrap National Insurance. “Sweeping away NI and declaring t he truth about tax would be the boldest and most honest reform a chancellor could make,” he says.
The Times, Page: 57 The Daily Telegraph, Money, Page: 8 The Guardian, Page: 45
Virgin loses £30m VAT claim
Virgin Media has failed to persuade a tax tribunal that a £5 monthly charge levied on customers who did not pay by direct debit should be exempt from VAT. The company was hoping to claim back £30m from HMRC but a judge agreed with the taxman that VAT was due. Alan Pearce, a VAT partner at Blick Rothenberg, said: “HMRC said that because Virgin didn’t actually move the customer’s money the extra charge was all part of the same taxable service – and the court agreed.”
HMRC call delays rise
The Telegraph reports that nearly 4m people called HMRC but hung up before speaking to an adviser as waiting times increased dramatically on last year. The average waiting time rose by nearly 40% to six-and-a-half minutes, while nearly a fifth of callers had to wait more than 10 minutes. The paper says the rise in delays puts more taxpayers at risk of making mistakes on their tax returns, leading to larger fines and more investigations.
The Daily Telegraph, Money, Page: 3
Letter: Sunak has opportunity to rebuild the UK tax system
In a letter to the FT, the ACCA’s Jason Piper says the Chancellor should consider shifting the tax burden on companies from labour to natural resource use to help prompt businesses to make their profits responsibly.
Secretive UK tax unit homes in on rich families
HMRC last April set up a new unit to investigate the use of family investment companies by the very wealthy to avoid inheritance tax, the FT reveals.
Hospitals could face huge VAT bills over parking changes
Accountants are warning that hospital trusts could face huge VAT bills following the Government’s pledge to provide patients with free parking. Hospitals have been claiming back VAT from HMRC on any maintenance works they have undertaken on car parks, under HMRC’s “capital goods” scheme. However, a hospital must keep its car park as a commercial enterprise for the following decade to qualify. Scott Harwood, a tax director at RSM, said: “If the facilities are put to any non-taxable use during a subsequent 10-year period, each year [the hospital] must make a proportional repayment of the VAT originally claimed back to HMRC.” “Many NHS trusts could face a triple financial whammy as a result of the changes being pushed through: the loss of a valuable income stream; new investment costs to control free-to-use parking sites; and now, potentially, large VAT repayments,” said Harwood.
New HMRC unit targets rich families
The Sunday Times picks up on news first reported by the Financial Times that HMRC has created a unit to investigate family investment companies (FICs). The team was put together last April amid concern about how wealthy families were able to reduce their inheritance tax liabilities. HMRC told the FT that the division was created to “do a quantitative and qualitative review into any tax risks associated with FICs with a focus on inheritance tax implications”.
Verhofstadt demands control over taxes
Guy Verhofstadt, the former Brexit Coordinator for the European Parliament, has called for the EU27 to replace national contributions with a new tax revenue stream after EU leaders failed to agree a budget for the next seven-year period. Mr Verhofstadt said the EU needs its “own resources” and proposed the introduction of a tax on “big internet platforms or big polluters”.
CORPORATE NEWS FOR THE WEEKEND TO 23rd FEBRUARY 2020
Concerns raised over future of Aquascutum
Auditors have refused to sign off Aquascutum as a going concern, the Sunday Times reports. The company reported liabilities exceeding the value of its total assets by £27.6m in a delayed set of accounts at Companies House last week. Grant Thornton was informed by Aquascutum’s directors that it would receive sufficient funding from its Chinese owner to meet its liabilities, but Shandong Ruyi Technology Group is struggling to repay debts. The paper believes the issues facing the company are likely to have been compounded by disruption from the coronavirus. Also under pressure on the high street is lingerie chain Boux Avenue, whose boss Theo Paphitis has appointed experts at Deloitte to help with restructuring. Elsewhere, Leonard Curtis has been hunting for a buyer for the bathroom retailer Soak.com.
British Steel sale going to the wire
The deadline to agree the sale of British Steel to Chinese firm Jingye is on Thursday and the Government and advisers from EY have been locked in talks over the weekend. But industry sources say disquiet in France and the UK over the Chinese controlling such an important steel producer could derail the sale. British Steel has plants in Britain, France and the Netherlands. The Hayange plant in northern France may well be the jewel in the company’s crown and Jingye are likely to walk if the French say no to its sale. If the deadline is breached and the Government declines to offer an extension, the door could be reopened to other bidders.
The Sunday Telegraph, Business, Page: 1 The Observer, Page: 62
Downing Street monitors Kier amid fears over debt
The Government has hired Deloitte to help monitor the health of contracting firm Kier in the hope of averting any repeat of the collapse of Carillion, which failed two years ago. Kier is well-placed to prosper from HS2 but its market capitalisation of £230m is dwarfed by debts of about £500m. The company has hired EY as its financial adviser amid concern over its finances.
WEALTH MANAGEMENT NEWS FOR THE WEEKEND TO 23rd FEBRUARY 2020
Demand for discretionary services growing
The Sunday Times’ Ali Hussain details how discretionary portfolio services are becoming more popular, with savers now holding a record £608bn in them, in contrast with £314bn held in cheaper, do-it-yourself services and £104bn held in so-called advisory services. Mr Hussain says the attraction for customers is that they can benefit from the management skills and experience of investment experts, albeit for a higher fee. James Brown of the analyst Compeer, which provided the data, commented: “Clients are progressively being moved out of advisory services into discretionary services, with higher margins available for firms with the latter.” Elsewhere in the paper Mr Hussain suggests people negotiate with financial advisers as it could save them a fortune, especially with the cost of advice under such scrutiny at the moment.
PROPERTY NEWS FOR THE WEEKEND TO 23rd FEBRUARY 2020
Housing market set for spring surge
New figures from HMRC show the number of homes sold rose to 102,810 in January, a 5.2% rise on the year before, a 4.1% rise on December and the highest figure since July 2017. North London estate agent and former RICS residential chairman Jeremy Leaf said: “The increase in transaction numbers is particularly striking as they reflect sales which were agreed mainly in September and October. If they are like this now, numbers are set to be even stronger as we approach the peak spring-buying season.” Commercial property sales were also up in January, by 10.7% on the year before.
Tories consider land tax to replace business rates
The Times reports that the Conservatives are considering replacing business rates with a land value tax in a bid to relieve the burden on high street retailers. The Chancellor, Rishi Sunak, will announce a review of the rates system in his Budget with sources saying the land value tax plans would be considered over the “medium to long term” while a separate package of measures will be included in the budget to provide more short-term relief.
Stamp duty costs drive equity release boom
A £14bn equity release boom over the last six years has been driven by changes in stamp duty introduced by George Osborne in 2014, according to Key’s Market Monitor. Some 270,000 homeowners have borrowed against their properties using equity release, put off selling up by the high costs of moving. But advisers warn the equity release option is “easy on the surface” but could leave owners without a house to pass on to family.
Treasury accused of “dithering” over business rates reform
The retail industry has not responded well to the suggestion that the Treasury will launch another review of business rates, including whether to introduce a tax on land values. Ed Cooke, chief executive of the retail property lobby group Revo, said “exploring a land value tax will just delay things further” and that change needs to happen quickly.
EMPLOYMENT NEWS FOR THE WEEKEND TO 23rd FEBRUARY 2020
New immigration rules will increase logistics costs
The UK’s new points-based immigration regime will force Amazon to curb its recruitment of low-skilled workers from the EU and could push up prices for consumers as the logistics industry comes under pressure to pay Britons more. Amazon employs around 30,000 people across the UK and reports indicate as many as half of its entry-level packing staff come from the EU. The UK Warehousing Association warned consumers will either have to pay more or accept the end of free and immediate deliveries.
SMEs NEWS FOR THE WEEKEND TO 23rd FEBRUARY 2020
Stamp price rise another burden for small businesses
The Federation of Small Businesses has warned that the increase in the cost of stamps announced by the Post Office will undermine efforts to support small businesses. National chairman Mike Cherry said: “This latest rise in stamp costs for letters and for parcels is just another expense that small businesses will be forced to carry.” The price of a first-class stamp will increase by 6p to 76p next month while a second-class stamp will rise 4p to 65p.
Daily Mail, Page: 3 The Times, Page: 39 Daily Express, Page: 5 The Sun, Page: 8 Daily Mirror, Page: 11
Unaffordable flood cover punishing small firms
The cost of insurance to cover flooding is forcing small businesses to close down, the Sunday Times reports. Some brokers are said to be demanding more than £100,000 for cover in new policies following successive storms this month. The Federation of Small Businesses (FSB) is calling for small companies to be permitted to join Flood Re, a government-backed initiative to make flood cover more affordable. The FSB warned that up to 75,000 companies would not be able to find the money for flood insurance, costing the economy over £1bn.
PENSIONS NEWS FOR THE WEEKEND TO 23rd FEBRUARY 2020
‘A few pounds’ of compensation could trigger pension tax charge
Guidance from HMRC on how schemes should equalise pension payments for men and women could see millions receive an uplift which causes them to breach their lifetime allowance, triggering a fresh tax charge.
ECONOMY NEWS FOR THE WEEKEND TO 23rd FEBRUARY 2020
Rishi Sunak faces tough balancing act
New figures show Britain had a budget surplus of £9.8bn in January, down almost £2bn on the year before and missing estimates of £11.4bn. Although tax receipts on income were up 3.4% on the year before, spending was higher and income from other taxes fell. This meant government borrowing for the first 10 months of the fiscal year was £44.8bn, £5.8bn more than in the same period the previous year. Yael Selfin, economist at KPMG, commented: “If the chancellor intends to stick to the current fiscal targets, he will have relatively limited room to increase spending compared to the ambitious objectives the government has set.”
Business surveys paint positive picture for Q1
The latest IHS Markit purchasing managers’ index indicates that the services, manufacturing and construction sectors are all now expanding with a flash estimate putting the index at 53.3 – any score above 50 indicates growth. The figure is the joint-highest reading since September 2018 and above the 52.8 forecast by analysts. Tim Moore, associate director at IHS Markit, said: “The recent return to growth provides a clear indication that the UK economy is no longer flat on its back.”
OTHER NEWS FOR THE WEEKEND TO 23rd FEBRUARY 2020
Chief cashier signals support for official cryptocurrency
The chief cashier of the Bank of England, Sarah John, has said it would be right for central banks to consider launching digital currencies to ensure “society still has a broad range of payments that it can use with confidence”. With the private sector streaking ahead with cryptocurrency developments such as Facebook’s Libra, Ms John said: “It is absolutely right that central banks think about whether a public sector or private sector would be best to provide a digital currency going forward.”
New Treasury hub set for the north
The Treasury is to transfer a number of key posts to the north of England, the Chancellor will announce in his first budget. Rishi Sunak will create an “economic decision-making campus” to prove to northern voters that the government takes their concerns seriously.
Contact Paul Southward.