NEWS – MIDWEEK TO 5TH FEBRUARY 2020

NEWS ROUNDUP

TAX NEWS – MIDWEEK TO 5TH FEBRUARY 2020

MONDAY

IHT ‘not fit for purpose’ says IFS head

Paul Johnson, director of the Institute for Fiscal Studies, writes in the Times that inheritance tax is in urgent need of reform. An all-party parliamentary group on inheritance and inter-generational fairness has proposed that the current 40% rate of inheritance tax should be replaced by a tax of just 10% levied on receipts of gifts and inheritances, rising to 20% on sums over £2m. Mr Johnson agrees that the current system is highly inequitable, noting that “if most of your wealth is tied up in your home, there is relatively little you can do to avoid inheritance tax.” By contrast, those with serious wealth “find all sorts of ways of paying nothing like 40% tax on their bequests.” He adds that on average, those leaving estates valued between £1m and £8m pay 20% of what they leave in tax, while those with estates of around £10m pay just 10%. “Maybe following the all-party group’s recommendations would amount to throwing in the towel. But maybe it is the best we can do,” concludes Mr Johnson.

The Times, Page: 39

Will digital tax see the light of day?

The Telegraph’s Matthew Field and Hannah Boland write that Britain’s planned digital services tax (DST) is shaping up to be a key battleground in relation to forthcoming US/UK trade talks. Chancellor Sajid Javid recently told an audience at Davos that the UK still intends to go ahead with the tax in April. But Steven Mnuchin, US Treasury secretary, warned Mr Javid that if “people want to arbitrarily put taxes on our digital companies, we will consider arbitrarily putting taxes on car companies”. A similar warning by the US to France over the taxation of cheese and wine ultimately saw Emmanuel Macron place his own version of the digital tax on pause. According to the Telegraph, the UK is expected to take a similar route, only collecting tax nine months and a day after the accounting period – falling, at earliest, in January 2021. “This gives the Chancellor a brief window in which the legislation would be there in place, before he would have to act in relation to it,” says Chris Sanger, global head of tax policy at EY. One potential reason for the UK delaying the DST is the Organisation for Economic Co-operation and Development’s proposals for overhauling global tax laws on tech giants. Even if the UK passes the DST, it is slated to be a temporary measure until the OECD sets out rules on a digital tax, with a Treasury spokesman saying the UK has a “strong preference for an appropriate global solution.”

The Daily Telegraph, Business, Page; 4

Netflix tax questioned

Netflix’s tax affairs in Britain are coming under increasing scrutiny amid claims the American streaming company generated more than £1bn in revenues from its UK subscribers last year. Analysis by Tax Watch suggests Netflix may have made annual pre-tax profits of £68.5m on revenues of £1.08bn from its British customers in 2019. This would result in a tax liability of £13m if the profits were declared here, according to the think-tank. However, subscriptions paid by the company’s British users are booked through a business based in the Netherlands, a lower tax jurisdiction, and are therefore not reflected in the accounts for its main British subsidiary.

The Times, Page: 36 Daily Mail, Page: 72

TUESDAY

Record breaking 10.4m customers filed online

Figures from HMRC have revealed that a record breaking 11.1m taxpayers made their contribution to the UK’s public services by the January 31st deadline – with the number filing online reaching a record 10.4m. About 11.7m customers were required to file their 2018-19 tax returns by the deadline. HMRC said that more than 700,000 submitted their tax returns on deadline day. Angela MacDonald, HMRC’s Director General for Customer Services, said: “It’s great to see that the majority of customers have submitted and paid their tax returns before January 31. While few people enjoy the process it’s good to get it out the way and know you have contributed towards our vital public services. I’d like to thank everyone who filed and paid on time, but anyone yet to file or pay should contact HMRC straight away because we are here to help.” Dawn Register of BDO said taxpayers who missed the deadline could be hit with a “triple whammy of penalties”. She said: “Late filing penalties, late payment penalties and penalties for errors are all possible if the tax return process is not correctly completed.” Experts suggested that the increase in the number of people filing their taxes was due to an uptick in self-employment, with online platforms helping workers to top up their income by running businesses on the side.

The Daily Telegraph, Page: 7 BBC News Financial Times, Page: 2 Press Release City AM, Page: 12 Daily Mirror, Page: 38

A windfall for the tax man!

It is interesting to note that the above tax return filing figures indicate that the taxman will be due a stonking £130m in fines for tax returns filed late this year! PS

Were you late with your Tax Return?

You may be able to challenge a penalty for a late tax return if you have a reasonable excuse for missing the filing deadline.  You need to appeal the penalty setting out the reason for missing the deadline; you also need to file the tax return ASAP.  Contact us if you need assistance. PS

Readers share how they are dodging IHT

The Daily Telegraph hears from three readers on how they are using legal tax loopholes to avoid paying IHT. John Hibben has been gradually shifting his property investments to vehicles that promote the growth of Britain’s fledging firms. He has put about £200,000 into the Enterprise Investment Scheme. Meanwhile, Peter Hollick used a “deed of variation” to divert a seven-figure inheritance into a trust fund for his children and grandchildren when his father passed away. Lastly, Michael Green explains that he uses his £3,000 annual gift allowance every year and pays into a life policy that will produce a £100,000 lump sum for his children when he dies.

The Daily Telegraph

More like legitimate IHT avoidance

With reference to the above, It is important to understand that the cases highlighted by the article use legitimate tax planning steps to achieve IHT tax efficiency, these aren’t some ‘dodgy’ schemes that the taxman is going to challenge.  If you want to know more contact us. PS

Time to revamp IHT

Paul Johnson, director of the Institute for Fiscal Studies, has called for IHT to be revamped as the super-rich can easily avoid it. Mr Johnson said that millionaires are able to dodge the levy by ensuring most of their wealth is not tied up in their home. He explains: “Those with serious wealth find all sorts of ways of paying nothing like 40% tax on bequests. On average, estates of between £1-8m attract 20% tax; those around £10m pay 10%. He calls for an inheritance or gifts tax system that is more effective and equitable.

Daily Mail, Page: 32

Hodge turns on Netflix

Dame Margaret Hodge has criticised Netflix, accusing the firm of “superhighway robbery” over its tax affairs. She is set to tell the Commons that the digital services tax should be extended to cover streaming services like Netflix, so that “tax abuse” will stop. Dame Margaret claims that Netflix does not pay tax in the UK and has pocketed nearly £1m in tax reliefs in the past two years.

The Daily Telegraph, Page: 9 The Scotsman, Page: 19 Yorkshire Post, Page: 7 The Sun, Page: 14

WEDNESDAY

Digital tax reforms have failed, claim experts

Tax experts have warned that digital tax reforms, known as Making Tax Digital (MTD), which were designed to reduce the number of errors made by self-employed people on their tax returns have failed. A report by the Association of Tax Technicians (ATT) said that in 70% of cases MTD has not reduced errors. In some cases, using the new software has actually increased mistakes. The new system has also turned out to be more expensive than expected. HMRC said that the average cost of MTD would be £109 for each affected business, but the ATT found that almost half (45%) of firms said they paid between £109 and £500, while 12% claimed implementation had cost them more than £5,000. Tina Riches, who chairs a tax industry working group, said: “Far from bringing benefits to businesses and the Exchequer, Making Tax Digital for VAT has so far created additional, costly obligations for most businesses beyond what was predicted by HMRC. ” The ATT and the Chartered Institute of Taxation have jointly called for a comprehensive review into the digital reforms.

The Daily Telegraph

Sadiq Khan reveals tax returns

Sadiq Khan has revealed that he has paid more than £150,000 in income tax as Mayor of London, as he challenged his rivals to disclose their own finances. He had no outside earnings in addition to his City Hall salary, for which he earned £149,740 in 2018-19, on which he paid £52,996 income tax and £6,620 in National Insurance. In 2017-18 he earned £146,804 and paid £52,021 tax and £6,457 in NI, while in 2016-17 he earned £130,112 as Mayor — having been elected in May — and £7,464 as MP for Tooting, for which he paid £48,630 in tax and £6,126 in NI.

Evening Standard

Married women win the right to pay tax in Jersey

Politicians on the island of Jersey have backed scrapping an “archaic” tax law that in effect deems that a wife’s income belongs to her husband. Going forward, married women will always be able to talk to Revenue Jersey on tax matters without the permission of a husband. The change will also mean that younger partners in same sex marriages and civil partnerships will have equal rights.

Financial Times, Page: 2 The Guardian, Page: 8

SMEs NEWS – MIDWEEK TO 5TH FEBRUARY 2020

MONDAY

Survey suggests third of small firms are ready to leave UK

The Independent reports that a third of small business leaders are ready to quit the UK in the wake of Brexit. A survey carried out among just over 1,000 small business owners, freelancers and entrepreneurs by the research company Censuswide found 60% of respondents were dissatisfied with the government’s approach to protecting British businesses from the Brexit fallout. And one third said they would consider moving either their businesses or themselves across the Channel to remain part of the EU. Respondents were quizzed in mid-December, mostly after the general election, on behalf of e-residency, the Estonian government’s programme enabling firms to create “virtual companies” to trade in the EU from the UK.

The Independent, Page: 7

Apprenticeship levy ‘failing small firms’

A poll by the Federation of Small Businesses suggests the apprenticeship levy is not providing enough support for smaller companies and has made it harder to access entry-level training. More than one in four small companies that employ apprentices say that changes introduced three years ago have been counterproductive. In 2017 when the levy was introduced there was a 24% drop in apprenticeship starts, with a further drop last year. Big employers are using more of their levy funds than expected because of a sharp rise in more advanced “higher” and degree-level apprenticeships, while many employers are finding it hard to transfer levy money to smaller businesses.

The Times, Page: 38 The I, Page: 41 The Guardian, Page: 28 The Daily Telegraph, Business, Page: 1

Glitch delays business rates relief

Hundreds of companies due to receive business rates relief will have their discount delayed after a problem with local councils’ IT software. Some 75 local authorities have been told by their software provider, Civica, that changes to bills cannot be made until after the new financial year.

The Times, Page; 41

WEDNESDAY

SMEs want more funding for apprenticeships

The Federation of Small Businesses, along with senior figures from the further education and training sectors, have written to the Chancellor calling on him to increase the apprenticeship levy “to address the shortage of funds available for apprenticeships offered by SMEs”. The letter’s signatories said SMEs are “only receiving half of the apprenticeship funding that they were before April 2017”. A Department for Education spokeswoman said: “The apprenticeship levy means more money is available than ever before for training, giving employers of all sizes the freedom to invest in the skills they need.”

The Daily Telegraph, Business, Page: 8

PERSONAL FINANCE NEWS – MIDWEEK TO 5TH FEBRUARY 2020

MONDAY

Insolvency rate among women rises

New analysis of data from the government’s Insolvency Service shows the number of insolvencies among women aged 65 and over rose from 1,109 in 2008 to 2,082 in 2018 – an increase of 88%. Rest Less – a jobs, volunteering and advice site for the over 50’s – found that insolvencies among women rose for every age group over the same period but the jump was biggest in the over-65’s, followed by women aged 45-54 (69%).

The Guardian, Page: 11 The Times, Page: 37 Daily Mail, Page: 31

TUESDAY

Credit card firms cautioned over indebted customers

The Financial Conduct Authority has told credit card providers to cut or stop fees for those who are caught in a cycle of persistent debt. In a letter to the chief executives of credit card firms, the financial watchdog said lenders must either cut, waive, or cancel fees if customers are unable to make payments. FCA executive director Jonathan Davidson says: “If a customer cannot afford the firm’s proposals for how to do this, the firm must offer forbearance, potentially including reducing, waiving or cancelling any interest, fees or charges.” The measures could potentially help save customers up to £1.3bn per year in lower interest charges.

City AM Financial Times

Challenger banks lend record amount

Figures from BDO show that challenger banks lent a record of £115bn in the UK last year, although growth was slower than previous years. BDO partner Leigh Treacy said: “Brexit uncertainty and the economic slowdown seems to be causing some of these banks to temporarily slow down their lending growth”.

The I, Page: 40

CORPORATE NEWS – MIDWEEK TO 5TH FEBRUARY 2020

MONDAY

Lunch is off for bankrupt Mayfair restaurant

A lunchtime service came to an early end at a Michelin-starred Mayfair restaurant when administrators shut the establishment down. The Square, which is owned by Lebanese tycoon Marlon Abela, has been closed after repeated rumours of financial difficulty. In the last available accounts for Mr Abela’s main business Marc Ltd, auditors said that they were unable to reconcile the bank statements in a number of subsidiaries “nor could we verify any of the transactions throughout the year”. The auditors at Haysmacintyre said that as a result it was unable to “obtain significant appropriate audit evidence” to perform an audit.

The Times, Page: 15

HS2 landed with £500m VAT demand

HS2 Limited, the company responsible for delivering HS2, has been forced to repay more than £500m to HMRC after an investigation found that it had been wrongly reclaiming VAT. Revenue & Customers ruled that HS2 Limited should not have reclaimed £569.1m incurred on design and construction between 2014 and 2019.

The Times, Page: 37

Lycamobile embroiled in tax dispute

Mobile phone company Lycamobile is embroiled in three disputes with the UK tax authorities over at least £60m in allegedly unpaid tax. The disputes relate to corporation tax, VAT, PAYE and national insurance stretching back eight years.

The Guardian, Page: 28

WEDNESDAY

Lendy investors crowdfund to finance legal challenge

People who lent money via failed peer-to-peer platform Lendy have turned to crowdfunding to finance a legal challenge against what they believe is the “injustice” in how the insolvency of the company is being handled. Investors are seeking advice on how they can oppose administrators’ plans for the distribution of recoveries from the estate of Lendy. The administrators from RSM Restructuring have conceded that their approach appears to conflict with that Lendy told investors when it took their money, but have argued that their hands are tied because of how Lendy’s directors structured loans.

The Times, Page: 47

Aberdeen hotel saved

The Carmelite hotel in Aberdeen has been bought of administration in a pre-pack deal which will safeguard more than 50 jobs. The sale to Concordia Hospitality took place immediately after Carmelite appointed administrators at Leonard Curtis Business Rescue & Recovery in Glasgow.

The Scotsman, Page: 36

M&S Food FD quits

Nick Hewitt has stepped down as finance director of Marks & Spencer’s food division. His role will be filled on a temporary basis by Adam Dobbs, an executive in the retailer’s finance team.

PENSIONS NEWS – MIDWEEK TO 5TH FEBRUARY 2020

WEDNESDAY

UK regulator waters down new pension transparency measures

The FCA has watered down proposals for full fee disclosure on workplace pensions. Providers, trustees and IGC’s will now only be required to disclose fees and charges initially on default options.

Financial Times

City AM, Page: 10

PROPERTY NEWS – MIDWEEK TO 5TH FEBRUARY 2020

TUESDAY

Fewer cranes at work

Deloitte’s annual crane survey has revealed that construction activity in Britain’s biggest regional cities has fallen from record levels last year as developers cooled on office schemes and student housing. A total of 57 office, residential, hotel and student housing developments were started in Britain’s biggest regional cities last year, down from 97 the previous year. Simon Bedford, of Deloitte Real Estate, said: “There is still quite a healthy amount of construction activity in the regional UK cities, but we’re seeing challenges arising in the need for infrastructure investment to keep up with real estate.”

The Times, Page: 40

WEDNESDAY

HMRC reveals record stamp duty refunds

HMRC took £3.3bn from stamp duty receipts in the last three months of 2019, despite refunding a record amount of overpayments. In total, 314,700 transactions took place in the last three months of the year – of which 285,700 were home purchases – while stamp duty receipts for home purchases reached £2.3bn. Some 11,100 refunds, valued at £155m, were issued to buyers who had been charged the additional homes levy of 3% for a buying a new home before selling their old property.

Mortgage Solutions

Sales of £1m-plus homes jump in final half of 2019

Figures from HMRC show that sales of £1m-plus homes reached a 10-year high over the last six months of 2019, with a total of 5,300 transactions.

Financial Times

INTERNATIONAL NEWS – MIDWEEK TO 5TH FEBRUARY 2020

TUESDAY

Germany and Austria at odds over finance tax

Germany and Austria are at odds over the introduction of a new financial transactions tax. German finance minister Olaf Scholz has proposed a levy of 0.2% on share purchases and wants to use the proceeds to help top up the pensions of low-paid people in Germany. However, Austrian chancellor Sebastian Kurz believes the plan would spare highly speculative financial instruments and derivatives, and would instead hit small investors.

The Independent, Page: 51

WEDNESDAY

How coronavirus could disrupt the auditing of companies

Travel restrictions related to the coronavirus outbreak could limit the work of external auditors, possibly leading to incomplete reports, late corporate filings or last-minute scrambles for deadline extensions, securities lawyers and former regulators say. Governments around the world have imposed entry restrictions on visitors from China, while major airlines cancelled flights to China. The Big Four accounting firms, which conduct audits for many of the biggest U.S. public companies, have also imposed travel restrictions on employees. The SEC is monitoring the potential effect of the coronavirus outbreak on companies and other market participants to determine what guidance or assistance may be appropriate, a spokeswoman for the regulator said.

Wall Street Journal

ECONOMY NEWS – MIDWEEK TO 5TH FEBRUARY 2020

MONDAY

Manufacturers expect Brexit hit

A majority of manufacturers believe the UK’s exit from the EU will have an impact on their business. Research by Crowe and the Confederation of British Metalforming highlighted barriers to growth including a shortage of skilled workers. Future tariffs and global economic conditions were the main concerns of manufacturing firms for 2020. But despite uncertainty over the impact of Brexit, three out of five of the 50 companies surveyed said they expected their turnover to grow this year.

Yorkshire Post, Page: 4

TUESDAY

Manufacturing industry begins to stabilise

UK manufacturing enjoyed its best performance in nine months in January, according to the IHS Markit/Cips manufacturing purchasing managers index (PMI), which rose to 50 last month as new orders and business confidence recovered. Duncan Brock, group director at the Chartered Institute of Procurement & Supply, commented: “It was home-grown orders that provided the fuel for manufacturing to move out of contraction territory as businesses returned to a little more normality.”

City AM Financial Times The Guardian, Page: 36 Daily Mail, Page: 71

Slide in UK private equity market

New data from KPMG has showed that UK private equity deals have fallen to their lowest level in five years as the economic downturn and global uncertainty restrained the market. KPMG found that private equity firms completed 978 deals in 2019, a 19% drop from 2018, when 2,017 deals took place. The value of transactions last year totalled £86.5bn, down from £106.6bn the previous year.

Yorkshire Post, Page: 8 The Sun, Page: 43

WEDNESDAY

Construction industry showing signs of life

The construction industry is seeing signs of improvement, following the Conservative Party’s decisive general election victory. The monthly IHS Markit/ CIPS Purchasing Managers’ Index (PMI) for January recorded a score of 48.4 – anything below 50 is seen as a sector in decline – but this was a boost from December’s score of 44.4. Tim Moore, economics associate director at IHS Markit, commented: “Measured overall, the latest dip in construction output was much shallower than in December, with survey respondents often commenting on improved willingness to spend among clients since the General Election.” He added that the best-performing part of the construction industry was the housebuilding sector, with output only falling slightly.

The Times, Page: 42 Financial Times City AM

BREXIT NEWS – MIDWEEK TO 5TH FEBRUARY 2020

WEDNESDAY

Frictionless trade with the EU is possible

Writing in the Telegraph, the Conservative MP Michael Fabricant says that ‘frictionless’ trade with the EU is an achievable goal. He says that Boris Johnson is keen that tariffs between the UK and the EU remain at zero adding that it would hardly be in the EU’s best interests to initiate a trade war. Fabricant also dismisses concerns about other forms of friction, including a possible build-up of lorries in Dover, and says a senior HMRC official has told him “he feels like kicking the TV” every time he hears ill-informed journalists commenting on what the loss of frictionless trade might mean. Fabricant says the official was clear: the only cause for queues of lorries would be if there is another strike in Calais.

The Daily Telegraph

OTHER NEWS – MIDWEEK TO 5TH FEBRUARY 2020

MONDAY

Brady’s glass ceiling call

Karren Brady has called on women in business to “speak up and be heard” after a Deloitte study revealed just 17% of boardroom positions are held by women and 4.4% of chief executive positions are female.

Daily Star, Page: 19

CEOs at home down south

Research by UHY Hacker Young has revealed the top 10 locations in the UK where the highest number of company chief executives live are all in London and the South-East. Westminster topped the list, with 6,010 chief executives living there.

Daily Express, Page: 47 Yorkshire Post, Page: 4

TUESDAY

BoE role failed to attract female candidates

In a letter to the Treasury Select Committee, Sajid Javid has revealed that a total of 23 people applied for the role of the next Governor of the Bank of England, but only two of them were female. The revelation emerged despite the Treasury hiring a specialist recruitment firm aimed at diversifying its list of candidates. Both women who applied to be governor made the shortlist, alongside seven male candidates, with Andrew Bailey ultimately chosen as Mark Carney’s successor. A Treasury spokesman said: “Our aim was always to appoint the best possible candidate, which is what we have done. And it was right to take steps to run as open a recruitment process as possible. We will continue to support that agenda in the future.”

The Guardian, Page: 13 The Times, Page: 36

WEDNESDAY

Former accountant and mercenary ‘Mad Mike’ dies aged 100

Michael “Mad Mike” Hoare, widely considered as the world’s best known mercenary, has died aged 100. Born in India to Irish parents, he led campaigns in the Congo in the 1960’s that earned him fame at the time, and a controversial legacy years later. After the war Mike trained as an accountant but was later expelled from the Institute of Chartered Accountants. He later joked: “If there’s one thing that bloody hurts, it’s that.”

BBC News Daily Mail The Sun

Contact Paul Southward.

Paul Southward's News Roundup