NEWS – FRIDAY 16TH OCTOBER 2020

NEWS ROUNDUP

TAX NEWS – FRIDAY 16TH OCTOBER 2020

MPs in tax gap call

The Commons Public Accounts Committee has called on HMRC to offer greater detail on the gap between tax that should be paid on the UK’s economic activity and the tax actually collected. While HMRC said the tax gap was estimated to be £31bn in 2018/19, the committee said the figure has a wide margin of error as HMRC does not include sophisticated tax planning by the wealthy and large businesses in its estimate, with legal avoidance methods thought to cost the public purse billions of pounds each year. The committee said HMRC is not sufficiently clear about levels of uncertainty when publicising the tax gap and suggested that the Revenue does not know the relative size of tax gaps in the four nations of the UK or across different industries. Jim Harra, chief executive of HMRC, has written to committee chair Meg Hillier, saying: “HMRC is the only revenue authority in the world that compiles and publishes a comprehensive measure of the tax gap … we believe it’s important to be transparent in our work.” Noting that HMRC’s methodology has been intensively reviewed by the International Monetary Fund, Mr Harra added: “With this in mind, I find the committee’s characterisation of our work in this area to be wholly unfair and unsubstantiated.”

The Times, Page: 42 The Independent, Page: 50

Paul Southward suggests that it would be more enlightening to measure the amount of money lost to fraud during this crisis, that is a national scandal.

Considering the case for upping corporate tax

Oliver Kamm in the Times considers the case for increasing corporate taxes. He notes that of the £825bn in Government revenues in 2019/20, corporate tax receipts stood at £52bn. He also points to a Centre for Policy Studies report suggesting that an increase in corporation tax would see UK international tax competitiveness “plummet” – but says he is “not persuaded.” Mr Kamm argues that down the line the Government will need to raise taxes to restore public finances in the wake of the coronavirus crisis, commenting: “A rise in corporate tax rates ought to be part of that longer-term strategy.”

The Times, Page: 41

REGULATION NEWS – FRIDAY 16TH OCTOBER 2020

Skeoch appointed FRC interim chair

Business Secretary Alok Sharma has appointed Keith Skeoch interim chair of the Financial Reporting Council (FRC). Mr Skeoch – who was previously a non-executive director at the FRC – will take on the role while a permanent replacement for former chair Simon Dingemans, who stepped down in May this year, is recruited. Mr Skeoch takes on the role at a time when the regulator is pushing for reform of the sector due to a number of corporate collapses and scandals that have raised concern over audit quality. The FRC itself is set for reform, with the watchdog set to be replaced by a more powerful regulator, the Audit, Reporting and Governance Authority.

The Daily Telegraph, Business, Page: 7 The Times, Page: 46 Daily Mail

EMPLOYMENT NEWS – FRIDAY 16TH OCTOBER 2020

HMRC probes 24k freelancers over support grants

HMRC is contacting 24,000 freelancers who applied for state support grants amid the coronavirus crisis, checking to ensure they met the criteria for self-employed income support grants when they applied. Those that made claims after they were forced to stop trading during the pandemic will be told to hand back any funds, with the scheme designed to save freelancers intending to continue operating. Those who did stop trading before they applied must inform HMRC by November 20 and hand back any money received so as to avoid penalties. HMRC says that 100,000 freelancers that have stopped trading were sent information about the scheme. Of these, 30,000 went on to apply for support. The Revenue has determined 6,000 were trading at the time they applied and therefore qualified. As part of its post-payment compliance checks it is now looking into whether the remainder were eligible.

The Daily Telegraph

CORPORATE NEWS – FRIDAY 16TH OCTOBER 2020

Lookers accounts remain on hold

Car dealer Lookers will offer a trading update today but is still to finalise annual accounts originally due in March after uncovering potential fraud. An issue with its figures saw shares suspended in July, with the firm saying it hoped accounts would be released in August. Lookers warned of a potential £19m hit to its accounts to correct overstatements of profits and called in Grant Thornton to investigate in March.

The Daily Telegraph, Business, Page: 3

Chemists’ concerns

The National Pharmacy Association has warned that local chemists could be forced to cut services unless the Government pumps cash into the sector. Chairman Andrew Lane said chemists are bracing themselves for a second wave of coronavirus and the extra pressure and costs it will bring them. Analysis by EY published last month shows that 72% of independent pharmacies will be losing money within four years if things go on as they are, with community chemists underfunded by £497m a year.

Daily Mirror

PROPERTY NEWS – FRIDAY 16TH OCTOBER 2020

Banks expecting spike in mortgage defaults

Banks are bracing for a spike in the rate of defaults on mortgages during the final three months of this year, the Bank of England’s (BoE) latest credit conditions survey has found. The BoE’s quarterly report also shows that lenders expect demand for mortgages to stabilise in the fourth quarter, after rising in the previous three months. Lenders are expected to restrict loan products in Q4, though not by as much as in Q3. It was also found that banks raised the cost of loans in the third quarter and plan to continue increasing average interest rates in the fourth. Mark Harris of mortgage broker SPF Private Clients said concerns about the impact of the coronavirus crisis on earnings “and what will happen to property prices, particularly for those borrowing at high loan-to-values” is driving increasing caution in the sector.

The Daily Telegraph, Business, Page: 1 The Guardian

INTERNATIONAL NEWS – FRIDAY 16TH OCTOBER 2020

Dubai offers tax-free remote-working visa

In an effort to attract overseas workers, Dubai is offering a remote-working visa that would allow them to pay no tax on their salaries. The one-year programme allows international employees to keep their job and take advantage of the United Arab Emirates’ zero income tax policy. Steve Asher of Moore Kingston Smith suggests that “split year” tax rules may cause issues for UK employers in terms of payroll administration.

The Daily Telegraph, Page: 8

ECONOMY NEWS – FRIDAY 16TH OCTOBER 2020

Cash managers concerned over negative rates

The Association of Corporate Treasurers (ACT) has warned that negative interest rates would be a “very bad idea”. Caroline Stockmann, chief executive of the ACT, said her members are “very worried” about negative interest rates. The body, which represents 90% of the FTSE 100, said businesses may refuse to pay interest fees on their deposits if the Bank of England cuts rates below zero, adding that negative rates could also cause “systems and IT issues.” Elsewhere, NatWest chairman Sir Howard Davies has warned that lenders are not ready for negative interest rates. With Sir Howard citing possible technical issues, the Telegraph notes that PwC earlier this year warned bankers that there was a “Y2K” aspect to getting ready for sub-zero rates, referring to the Millennium Bug that saw a need to update systems to cope with dates beyond 1999.

The Times, Page: 43 The Daily Telegraph, Business, Page: 1

OTHER NEWS – FRIDAY 16TH OCTOBER 2020

Jet could boost economy by £25bn

The Tempest project, the UK’s proposed new fighter jet programme, could support thousands of jobs and boost the economy, according to initial estimates by PwC. The report says the programme could support around 20,000 jobs every year between 2026 and 2050 and add £25.3bn to the UK’s economy by the middle of the century. The analysis does not include the potential benefit of export sales.

The Daily Telegraph, Page: 3 The Times, Page: 44 Daily Mail, Page: 81 The Sun, Page: 49

Contract costs in COVID fight

The Guardian reports that the bill for private consultants hired by the Government amid the coronavirus pandemic has climbed to £175m, noting that Deloitte has been awarded contracts worth £22.7m, while PwC’s contracts are worth £24.4m. The FT also looks at Government contracts linked to the crisis, noting that Deloitte was appointed to manage personal protective equipment procurement for hospitals and testing sites.

The Guardian, Page: 11 Financial Times, Page: 2

Contact Paul Southward