Apple’s victory raises questions over EU’s digital tax

Experts have warned that Apple’s successful appeal against a €13.1bn fine from the European Commission (EC) may deliver a blow to the EU’s digital tax strategy. Laurence Field, corporate tax partner at Crowe, said the case was “seen as key in trying to stop tax competition between member states, which the EU frowns upon and member states get away with what they can.” Jason Collins, head of tax at Pinsent Masons, says Apple’s victory “shows that European courts are unwilling to call beneficial tax regimes state aid, even when designed to attract foreign investment – provided they apply the rules consistently”. Meanwhile, the EC has announced fresh plans to clamp down on tax regimes seen as unduly beneficial to big corporations. It plans to expand its 1997 tax code of conduct to tackle member states’ corporate tax regimes that have broadly harmful effects.  Elsewhere, a report from Moody’s warns that the impact of a Europe-wide digital tax would be “limited”, given smaller companies would likely be harder hit than the large ones it is aimed at.

City AM Financial Times, Page: 4

MPs to conduct tax inquiry

A Treasury Select Committee inquiry is set to examine taxation in Britain, looking into the long-term pressures on the tax system, how the UK can protect its tax base from globalisation and technological change and whether tax reforms are needed. Committee chair Mel Stride commented: “Tax will play a major role in restoring the public finances and ensuring a recovery which is balanced across the UK and fair to all.”

The Times, Page: 48

Opinion: Tax system needs ‘innovative verve’

With the Chancellor ordering the Office of Tax Simplification to conduct a review into capital gains tax, Ed Conway in the Times considers the tax system. He suggests a number of taxes should be abolished and replaced with a progressive consumption tax, arguing that policymakers are “taxing the wrong stuff”. Noting that 55% of tax revenues collected by HMRC over the past five years came from income tax and national insurance, while corporation tax accounted for a further 9%, Mr Conway questions taxes on earnings, suggesting taxing what people spend may offer a simpler option. Pointing to support measures the Treasury rolled out amid the coronavirus crisis, he calls for “some of that innovative verve” to be applied to the tax system.

The Times, Page: 30

Millionaire in tax-the-rich call

Former trader Gary Stevenson, one of 83 millionaires who has signed an open letter calling on governments to raise taxes on the wealthy, says a greater tax for such people “will be the only way to provide support to struggling people in a time of desperate need”. Writing in the Express he says an increased levy should target “a class of people who pay considerably lower tax rates”, namely “the super-rich … who accumulate wealth through capital gains and trusts, building up huge piles of millions and billions that will never be taxed, and never be spent.”

Daily Express, Page: 12


EY warned NMC Health over inconsistencies

EY auditors uncovered issues linked to verification of bank balances at NMC Health a year before it collapsed. EY initially believed that £220m worth of loans and overdrafts had been omitted from the balance sheet, but later discovered that India’s Bank of Baroda had confused bank accounts belonging to the hospital operator with those of its founder BR Shetty. EY signed off on the accounts after the discrepancy was clarified but warned NMC’s audit committee that deficiencies in its controls relating to bank balances should be addressed as a “high priority”.

The Daily Telegraph, Business, Page: 7 Financial Times

FCA appoints BDO to work on Wirecard

The Financial Conduct Authority (FCA) has appointed BDO to work on its response to the Wirecard crisis, according to Sky News. The regulator reportedly appointed the firm to ensure the now insolvent German firm complies with a series of restrictions. The FCA locked accounts related to Wirecard’s UK operations last month after an alleged accounting fraud at its parent firm, lifting the freeze three days later. Wirecard filed for insolvency last month after disclosing a €1.9bn black hole in its cash balances that auditor EY said was a result of a sophisticated fraud.

The Times, Page: 48 City AM

Pizza Express mulls CVA

Pizza Express is to close up to 75 of its restaurants as part of a rescue plan. The restaurant chain is reportedly lining up a CVA, while investment firm Hony Capital may lose control of Pizza Express to bondholders under a debt-for-equity swap. Meanwhile, Azzurri, which owns the Ask Italian and Zizzi restaurant chains, is in advanced talks over a sale to Towerbrook Capital Partners via a pre-pack administration.

The Guardian, Page: 35 Daily Mirror, Page: 12 Daily Mail, Page: 11 The Times, Page: 39

Rileys appoints administrators

Rileys Sports Bars has appointed FRP Advisory as administrators and closed four of its 21 sites with the loss of 44 jobs.

The Times, Page: 39

Pub sales down 40%

Pubs and restaurants that have reopened as lockdown measures were eased have yet to see a surge in sales. Pubs open in the week beginning July 6 posted a 39% decline in sales compared with the same period last year, while bars were down 43% and restaurants declined 40%, a tracker from RSM, consultancy firm CGA and The Coffer Group shows. Considering the sales figures, CGA director Karl Chessell said: “Trading at almost 60% of pre-coronavirus norms is actually a better performance than many other markets internationally.” The analysis also shows that 70% of pubs or pub restaurants surveyed had reopened their doors, compared with 42% of bars and 17% of restaurants.

The Guardian, Page: 33

Petropavlovsk investor calls for probe into deals

Shareholder Nikolai Lioustiger has called for an examination of deals and transactions involving gold miner Petropavlovsk. He has also voiced concern over Deloitte’s decision to stop auditing the company.

Financial Times, Page: 12

Turning to technology

Writing in the Press and Journal, Ian Marshall of Anderson Anderson & Brown looks at the increasing use of technology and how the coronavirus lockdown has accelerated the use of digital services. He notes that businesses operating in areas such as cloud computing, fintech and IT support services are likely attract interest and focus from an M&A perspective in the coming months.

The Press and Journal, Business, Page: 4


Investor group lambasts ‘earnings before coronavirus’

Investor advocacy group Credit Roundtable has questioned the use of ebitdac – earnings before interest, tax, depreciation, amortisation and coronavirus – criticising firms that ignore losses resulting from the coronavirus pandemic.

Financial Times, Page: 13


Banks fear bad debt as demand for loans rises

A Bank of England (BoE) survey suggests demand for loans is set to increase at a time when banks start to slow down lending and prepare for a wave of bad debts. Lenders told the BoE’s Credit Conditions Survey the availability of mortgages and unsecured debt is likely to decrease in the coming weeks, with concerns over borrowers’ ability to repay. The poll saw banks and building societies flag worries over customers who have opted for payment freezes on mortgages, credit cards and other loans, with lenders seemingly concerned that customers will have to restart payments in a period when jobs are increasingly at risk as the furlough scheme stars to wind down.

The Times, Page: 45 Daily Mail, Page: 76


Self-employed warned over support cash

HMRC guidance has warned self-employed workers they could face prosecution if they have incorrectly or illegally claimed payments from the Government’s coronavirus financial support scheme. The Revenue says it will not seek to punish “innocent error or small mistakes”, but will come down hard on cases of “deliberate non-compliance”. Fiona Fernie at Blick Rothenberg said: “HMRC has issued guidance to the self-employed that if they have been ‘overpaid’, or claimed a grant in error, or were not eligible for the grant in the first place they should pay the money back immediately.”

The I, Page: 9


Loan deferral call

Banking lobby group The City UK says recapitalisation of government-guaranteed loans is “essential” to protect small businesses, warning that if repayments cannot be deferred, up to 3m jobs and 750,000 SMEs will be at risk. It called for the creation of a student loans-style scheme, where businesses could convert loans into means-tested tax liabilities.

Daily Express, Page: 9


Payrolls shrink by 649k jobs in lockdown

Official figures indicate that the number of workers on UK company payrolls fell by 649,000 between March and June. The overall jobless rate was unchanged but there are 47,000 more young people unemployed than there were a year ago. Unemployment has not surged amid the COVID-19 crisis because large numbers of firms have put employees on the government-backed furlough scheme. Yael Selfin, chief economist at KPMG, said Government measures had shielded the labour market from the “worst of the immediate crisis … but as the job retention scheme unwinds in coming months, the full impact of the recession on unemployment is likely to be revealed.” The Office for National Statistics (ONS) said that since the start of the pandemic total weekly hours worked in the UK had fallen by a record 175.3m, or 16.7%, to 877.1m hours. Job vacancies fell to 333,000 between April and June – almost two-thirds lower than in the same period last year and the lowest level since the ONS began collecting comparable data in 2001.

The Daily Telegraph Financial Times, Page: 3 The Independent, Page: 14 The Guardian Daily Express, Page: 8 BBC News

Contact Paul Southward

Paul Southward