Rethinking the tax system

Writing for This is Money, Paul Falvey of BDO looks at the pressure on Government finances brought about by the coronavirus pandemic, saying there is a need to “strike a new financial settlement as the usual incremental approach is unlikely to be sufficient.” He argues that a rethink of the tax system through simplification and digitisation “would be a great next step”, noting that there are early signs that reform is underway. Mr Falvey says Making Tax Digital “won’t be pain-free” but should prove more efficient if there is adequate investment in HMRC’s systems. He also considers the possibility of rethinking business rates, noting a BDO poll showing 84% of businesses support replacing the levy with an online sales tax. On employment taxes, Mr Falvey says a merger of income tax and NIC would make tax filing simpler and more transparent, although headline rates of tax would be higher. With the Chancellor asking the Office of Tax Simplification to review capital gains tax, Mr Falvey says he hopes any change will “go hand in hand with a rethink of inheritance tax so that all our taxes could operate coherently going forward.”

This is Money

Economic ‘rollercoaster’ yet to come

Ed Conway in the Times says the economy is set to see some “critical adjustments” in the wake of the coronavirus crisis and warns that the tax system “is ill-prepared for them”. Pointing to business rates, he says: “They are predicated on the idea that having a physical premises is an advantage for a company. But now that physical premises might just as well be considered a liability, does it really make sense to tax them so much?” Mr Conway says analysis of the economic impact of COVID-19 should not focus on “lurches in GDP” in the last quarter or this, arguing that the “real rollercoaster has yet to come.”

The Times, Page: 26


Net pay anomaly sees tax inequality

Phil Brown, director of policy at The People’s Pension, has voiced concern over a “stark tax inequality”, saying an estimated 1.5m lower-paid workers are being deprived of pension tax relief due to a net pay anomaly. He highlights that members of pension schemes that use the “relief at source” mechanism and who do not earn enough to pay income tax are granted 20% tax relief on up to £2,880 of pension contributions, meaning that HMRC will top up their contribution to £3,600. However, where a pension provider operates a “net pay arrangement”, the lowest-paid members will miss out because they do not earn enough to receive the relief.

The I, Page: 51


New Look seeks rent shake-up

Fashion retailer New Look is to ask store landlords to agree to a shake-up that will see rents based on how much each shop takes in sales. New Look is proposing the move to turnover-based rents through a CVA as it looks to reduce the rent bill on its almost 470 stores. Nigel Oddy, chief executive, said that the CVA was being launched “out of absolute necessity” because of the impact of coronavirus on the chain’s finances. New Look, which will inject £40m of new funds to help drive growth and cut debts from £550m to £100m through a debt-for-equity swap deal, has also launched a sale process as it looks to determine interest from investors for its shares and assets.

The Times, Page: 43 The Guardian, Page: 35 Financial Times, Page: 12 The I, Page: 53 Daily Mail, Page: 71 Daily Mirror, Page: 48

Landlords question Select rescue plan

Landlords have criticised retailer Select’s bid to cut rents and break leases on stores. The fashion retailer has proposed paying no rent for 49 stores via a CVA that would also give the chain the power to break leases early. Select has proposed moving 99 stores to turnover-based rents and terminating a further nine leases. Melanie Leech, chief executive of the British Property Federation, said: “It is deplorable that the business is again attempting to exploit the CVA process,” describing the suggestion that Select should be given new rights to break leases on stores that have benefited from rental discounts as “outrageous”.

The Times, Page: 42

Bagel firm bought out of administration

Bagel Nash, which produces and sells artisan bagels, has been bought out of administration by Golden Acre Bakery. BDO managed the accelerated merger and acquisition process.

Yorkshire Post, Page: 18


Repossessions down 93%

Figures from UK Finance show that property repossessions have fallen by more than 90%, with homeowners opting for mortgage holidays amid the coronavirus crisis and banks banned from seizing homes amid the pandemic. There were just 90 owner-occupied homes repossessed in Q2, a 93% decline on Q2 2019, while 130 buy-to-let properties were repossessed, an 80% dip. The Financial Conduct Authority has said that mortgage lenders should not start or continue court action for repossession until at least October 31.

The Daily Telegraph


Which?: Extend loan repayment freezes

Consumer group Which? has urged the Financial Conduct Authority (FCA) to extend loan repayment holidays and interest-free overdrafts until January 2021, saying demand for support will surge after the job retention scheme ends on October 31. Which? head of money, Gareth Shaw, said: “The regulator has acted quickly and effectively to help those struggling financially due to the pandemic, but it must be prepared to take further bold action to prevent millions of people from being hit by a perfect storm of financial pressures in the coming months.”

Daily Mail


Firms ‘bombarded’ with applicants

Analysis by CV-Library shows that in the wake of the coronavirus crisis, firms are seeing thousands of applications for jobs which would previously have attracted far fewer applicants. Among positions drawing a large number of applicants was a trainee accountancy job for which 3,272 people applied. CV-Library received a record number of applications last month as a number of professional workers were made redundant or were furloughed. The jobs website’s CEO Lee Biggins said the jobs market “has done a complete 180”, adding that while companies may have struggled to recruit before the pandemic, “they’re now being bombarded with applications from professionals who are desperate for a new job”.

The Independent

West End warning

Business leaders have warned that more than 50,000 jobs are at risk in the West End of London if there is not a notable increase in shoppers and commuters, with visitor numbers down by close to two thirds in July compared to the same period last year. Business leaders fear that close to one in four of the 216,000 jobs in the shopping and hospitality district could be lost in a wave of failed businesses and redundancies. West End businesses are being hit by a steep fall in the number of foreign tourists, who usually spend £4.3bn in the district each year, according to data from PwC.

Daily Mail, Page: 70 The Guardian, Page: 8


Wirecard shows why German business needs a cultural shift

Stephan-Götz Richter considers possible regulatory reform in Germany following the accounting scandal at Wirecard, with regular rotation of accountancy firms and the separation of advisory and accounting business mooted.

Financial Times, Page: 23


REC predicts rapid recovery

The Recruitment and Employment Confederation (REC) has revealed that a rapid “V-shaped” economic recovery appears more likely, with Office for National Statistics figures showing that online adverts for vacancies in the UK are now at 62% of their 2019 levels. Figures show that there are 1.1m positions available, with around 125,000 new postings added in the past week. Neil Carberry, chief executive of the REC, has called for a cut to employers’ National Insurance tax to boost hiring and help firms keep on existing workers. He commented: “It’s important to remember that we are not just passengers in all of this – we have tools available that can minimise the unemployment increase that is coming.”

The Daily Telegraph

Contact Paul Southward

Paul Southward