NEWS – MIDWEEK TO 3rd MARCH 2020
NEWS – MIDWEEK TO 3rd MARCH 2020
TAX NEWS – MIDWEEK TO 3rd MARCH 2020
Business concerned over plans to scrap entrepreneurs’ relief
Chancellor Rishi Sunak’s plan to scrap entrepreneurs’ relief in the Budget has been criticised by businesses, with it suggested that removing the £3bn of tax breaks could harm start-ups. Mike Cherry, chairman of the Federation of Small Businesses, said cutting the incentive would see the majority of firms who benefit losing around £15,000 each year. He said: “Scrapping entrepreneurs’ relief would make a mockery of the idea that it’s ever sensible to build up a business rather than invest in property, land or secure a gold-plated pension.” Mr Cherry added: “Everyday entrepreneurs throughout the country who are about to retire will be left permanently poorer by this change.” Adam Marshall, director general of the British Chambers of Commerce, said abolishing the relief – which lets entrepreneurs sell parts of their business and pay a 10% tax on any profits instead of the normal 20% levy – would be a “negative signal to businesspeople who take risks and invest upfront to grow a business over time.” He added: “It’s one thing to make the relief more targeted, but quite another to scrap it altogether.” The FT says the issue was raised in WhatsApp groups involving Conservative MPs, with one asking: “If we aren’t backing entrepreneurs, then who are we for?” Matt Kilcoyne, of the Adam Smith Institute think-tank, comments: “The entrepreneurs’ relief is a policy that is based on good, solid Conservative values, so it seems strange for Rishi Sunak to put a tax on ambition.”
Firms would accept tax rise for clearer rules
A pre-Budget poll by BDO shows that two-thirds of businesses would accept a tax rise in exchange for a simpler tax system. Of more than 600 people polled, 66% indicated they would accept a rise in taxes in exchange for simplification of rules – an 18% increase on a poll ahead of the 2018 Budget. The survey saw just 12% of respondents say they did not find tax cumbersome. Paul Falvey, tax partner at BDO, said: “It is promising that businesses are looking to the future and appear to support our view that tax simplification is needed to help organisations tackle the challenging landscape.” The survey also gauged opinion on how best to boost investment, with a third of firms saying making equity investment tax deductible for individuals would help, while more than a quarter said up-front income tax relief could encourage business investment.
City AM, Page: 7
Freelancer rules prompt confusion
James Hurley in the Times looks a forthcoming change to tax rules designed to tackle disguised employment. He notes that while HMRC’s CEST tool is meant to help businesses ascertain whether contractors are genuinely self-employed or not, “it is not trusted.” James Poyser, chief executive of Inniaccounts, says: “We expected the government to announce further updates to the tool, but they have done nothing to resuscitate its reputation. It’s a root cause of so much of the harm being done. It’s a shambles.” Mr Hurley says there is also confusion over IR35, highlighting the cases of TV presenters Eamonn Holmes and Lorraine Kelly, with the former losing an appeal while the latter was successful, despite their cases being similar. Paul Falvey, a tax partner at BDO, said: “For many, it is hard to understand why it appears that a totally different set of tax rules apply to similar cases. ”
UK points to climbdown on tech tax
The Government has suggested it could back down over a tax on large tech firms to help secure a free trade deal with the US, saying it will consider criticism of the mooted digital services tax. The tax, which would see a 2% levy on tech firms with revenue of more than £500m, was expected to be imposed in April in a bid to address concern over foreign tech firms’ low tax bills in the UK. Highlighting the matter in a negotiating mandate for trade talks with the US, ministers said they “note comments regarding digital taxation and will consider this as part of our policy development.” The digital tax, if it does come into force, could raise £275m in its first year. The Telegraph notes that the OECD is currently developing global rules for taxing large digital companies and plans to present them by the end of 2020.
Britain’s ‘worst tax break’ an easy target
With Chancellor Rishi Sunak said to be considering scrapping entrepreneurs’ relief in the Budget, Philip Aldrick in the Times looks at the tax break, suggesting that as “few giveaways have had worse PR”, the £3bn benefit is “an easy target for politicians on the hunt for savings.” He notes that the Resolution Foundation has branded it the UK’s “worst tax break” and points to official figures showing that the gains are focused among 5,000 people a year, who benefit to the tune of £1m or more each. Mr Aldrick says scrapping entrepreneurs’ relief “does not make the Government anti-enterprise.” Russell Lynch in the Telegraph offers a similar opposition, but says that rather than scrapping it altogether, the Chancellor should cut the relief to a previous level, making it cheaper and “pitching it back at the small businesses it was first aimed at before it barrelled out of control.”
The Times, Page: 37 The Daily Telegraph, Business, Page: 2
Budget can boost business
Tim Wallace in the Telegraph considers ways the Chancellor can offer a boost to UK businesses via his Budget. He suggests a review of business rates would be welcomed, noting that the CBI has warned that the current business rates burden often means certain investments are not economically viable. Mr Wallace cites the Adam Smith Institute, which argues that the tax system discourages investment in building and machinery, saying there is an “effective tax on factories.” He also moots the idea of zero-tax zones where trade duties and tariffs can be deferred, delayed or scrapped in areas around ports or airports.
The Daily Telegraph, Business, Page: 4
CORPORATE NEWS – MIDWEEK TO 3rd MARCH 2020
Insolvency bosses owe taxman £3m
The directors of insolvency firm Wilson Field, which says it can help struggling businesses to “write off company debt and start again”, are being pursued for £3m said to be owed to HMRC. The directors are likely to be sued by liquidators from Grant Thornton on behalf of creditors after it closed one of its own companies, leaving “no assets” to pay its debts. Companies House filings show that Grant Thornton said that legal advice was that “there were good claims against the directors in respect of losses … arising from the operation of the schemes, the sale of the business and the payment of dividends”. The audit firm says it is “likely that it will be necessary” to sue to recover money owed to the taxman.
Account concern over banking app
Pockit, a company that provides financial services to vulnerable people, has been hit by complaints, with some clients saying that they cannot get to their money. Questions have also been raised as to why its accounts are five months late. Pockit said that its accounts were late because its “audit process this year has been more involved than usual”. Grant Thornton says the overdue accounts are expected to be filed this month.
Salary Finance may snap up Neyber assets
Goldman Sachs backed lender Neyber will reportedly sell its assets to rival Salary Finance and is expected to appoint administrators this week. The firm was last month reported to be in talks with BDO about a range of options, including a pre-pack sale.
City AM, Page: 3
Challengers move into marketing
Alex Daniel looks at the climate for the Big Six marketing firms, saying that while “until recently, it was unthinkable that new kids on the block could disrupt the status quo … new challengers are coming from unexpected directions.” He says the consultancy arms of PwC and Deloitte are among those to have “muscled in”, using data analytics to solve business problems which traditional advertising cannot.
City AM, Page: 23
NMC asks creditors not to call in their loans
Private hospital operator NMC has appealed to lenders not to call in their loans while it tries to stabilise the business. The company is facing a major cash crunch having admitted last week to finding discrepancies in its balance sheet. In June, it declared it had £500m of cash, but that figure is now seriously in doubt among analysts and lenders to the group. PwC, financial adviser Moelis and law firm Allen & Overy have been appointed to help the company. Meanwhile, the Times offers an overview of NMC Health, noting that Deloitte was among those who handled its £390m initial public offering.
The Times, Page: 41 The Daily Telegraph, Business, Page: 2 Daily Mail, Page: 70 The I, Page: 42 The Sun, Page: 43 Evening Standard
Amazon fights against $277m tax order
Amazon will on Thursday seek to overturn an EU order to repay about €250m in back taxes to Luxembourg at Europe’s second-highest court, one of a series of high-profile cases marking the bloc’s crackdown on unfair tax deals. The European Commission said in its 2017 ruling that the tax deal, which covered the period from May 2006 to June 2014, meant almost three-quarters of Amazon’s business went untaxed. The EU competition watchdog said the Grand Duchy allowed the online retailer to shift a significant portion of its profits from a subsidiary to a holding company without paying tax, giving the company an unfair advantage.
JLR rejects bigger tax bill claims
Jaguar Land Rover has rejected claims that it has taken a blanket approach to new rules on the tax status of contractors, insisting it has followed HMRC guidelines on IR35 legislation.
PROPERTY NEWS – MIDWEEK TO 3rd MARCH 2020
Mortgage approvals hit four year high
UK banks approved 70,900 mortgages in January, according to the Bank of England, up 4.4% from December’s 67,930 figure to the highest number in four years. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “As a result, we now think that the Bank of England will cut bank rate to 0.5% this month, from 0.75%. The recovery in approvals likely has further to run.”
PENSIONS NEWS – MIDWEEK TO 3rd MARCH 2020
Big employers will be given six years to clear pension deficits
A consultation document from the Pensions Regulator has suggested that defined benefit pension schemes backed by stronger employers may be required to clear any deficits within six years.
EMPLOYMENT NEWS – MIDWEEK TO 3rd MARCH 2020
More employers offer mental health support
A study by jobs site indeed.co.uk shows an increase in the number of jobs offering mental health support. Nearly one in 200 jobs advertised in January provided support, compared to nearly one in every 5,000 five years ago. A recent report from Deloitte suggested that poor mental health costs employers up to £45bn a year, up 16% since 2016. Deloitte also said that for every £1 spent on mental health support, firms make £5 by cutting absenteeism, presenteeism and employee turnover.
The Times, Page: 10 The Daily Telegraph, Page: 6 Financial Times, Page: 16
INTERNATIONAL NEWS – MIDWEEK TO 3rd MARCH 2020
Italy unveils €3.6bn stimulus to tackle coronavirus
A look at how different countries are responding to coronavirus notes that EY last week asked employees in Düsseldorf and Essen to work from home after an employee tested positive.
ECONOMY NEWS – MIDWEEK TO 3rd MARCH 2020
Coronavirus threat may require Budget plan B
Experts have suggested that Chancellor Rishi Sunak will have to rethink his Budget over concerns that the spread of the coronavirus will trigger a global economic downturn. Paul Johnson, director of the Institute for Fiscal Studies, said economic forecasts drawn up by the Office for Budget Responsibility (OBR) may not paint a true reflection of the climate, saying: “Whether the OBR has had time to include the likely impact of the virus into its forecasts or not, the Chancellor will need to say how it creates further uncertainty.” Former Treasury minister David Gauke comments: “Given the uncertainties, the OBR is likely to qualify its economic forecasts,” adding that the “health crisis … makes all short-term economic forecasts a matter of guesswork.” Lord Wood, who worked on six budgets as an adviser to Gordon Brown, offers that the Treasury “may have to rip up the plans its budget has been based on and hastily assemble a new plan B, to ensure the Chancellor’s statement on 11 March fits the situation we are in.”
Global growth may halve
The Organisation for Economic Cooperation and Development (OECD) has warned that an escalation in the coronavirus outbreak could cut global economic growth in half and plunge several countries into recession this year. The OECD said that global GDP growth could plunge this year to as little as 1.5%, almost half the 2.9% rate it forecast before the outbreak took hold. The reduction in demand and world trade could “push several economies into recession, including Japan and the euro area,” the OECD’s report added.
Manufacturing grows but coronavirus disrupts supply chain
IHS Markit has reported that whilst manufacturing continued to grow in February, supply chains have been hit by the coronavirus outbreak. The IHS Markit/CIPS purchasing managers’ index measured 51.7 last month, well above the 50 mark separating growth from contraction but slightly weaker than the previous “flash” reading of 51.9 for February, after supply chain disruptions emerged. However, the index showed orders increasing at the fastest pace in eleven months and business optimism hitting a nine-month high.
Contact Paul Southward.