NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
TAX NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
Experts savage plans for pensions relief cuts
Various commentators criticise possible reforms to pension tax relief and ideas for a mansion tax that the Chancellor is reportedly considering ahead of his budget next month. Sajid Javid has allegedly been weighing up limiting tax relief on pension contributions to 20% and introducing a “recurring” wealth tax on the owners of expensive homes. George Bull of RSM says a mansion tax in “isolation would be half-baked” because it needs to fit with changes to council tax which brings complications which cannot quickly be resolved. The former pensions minister Sir Steve Webb says halving pension tax relief could cost high earners £10k a year while Tom McPhail of Hargreaves Lansdown says such a move would be an act of “fiscal hooliganism”. Another former pensions minister, Baroness Altmann, says she fears Government could make pension withdrawals tax free to sweeten the relief cut. But this she says “would result in all the cash being taken out and pensioners running out of money in their 80s. It would be the death of pensions.”
Think tank highlights tech giants’ tax arrangements
Calculations by the think tank Tax Watch estimate that the corporation tax bill for Apple, Google, Cisco, Facebook and Microsoft would have exceeded £1bn if profits were paid on UK customers’ bookings made in Britain. The US technology giants paid just £237m in UK corporation tax in 2018. Tax Watch says because most of their sales are directed via overseas firms this meant profits from UK consumers on digital adverts or sales were not recognised in Britain. Tax Watch is backed by Julian Richer, founder of Richer Sounds, who recently launched the Good Business Charter – an accreditation scheme he is funding to urge firms to treat staff, clients and the environment better. Mr Richer has denied accusations he is a hypocrite for having benefitted from a tax break when selling 60% of his shares in Richer Sounds to an employee-owned trust. “It wasn’t a dodgy scheme. I just accepted money the Government gave me,” he said. The Telegraph profiles the self-proclaimed “ethical capitalist” who explains what happiness in the workplace means to him.
The Daily Telegraph, Business, Page: 1, 4
HMRC carries out over 1,000 dawn raids
Figures unearthed by Pinsent Masons reveal that HMRC raided 1,082 homes and businesses last year as part of criminal investigations into tax evasion, a 27% fall from the previous year. Andrew Sackey, partner at the law firm and former head of HMRC’s offshore, corporate and wealthy enforcement division, said: “Thanks to the common reporting standard and a host of additional powers such as production orders and information notices, HMRC now has far more information on taxpayers, whether that taxpayer is a person or a company, than it had just a couple of years ago.” Pinsent Masons said dawn raids usually take place in cases where HMRC suspects serious tax evasion, has a concern that suspects may attempt to destroy evidence of crime, or thinks suspects are a flight risk.
City AM, Page: 11 The I, Page: 40
McDonnell attacks freeport plans
The Labour party has claimed that Conservative plans for a string of freeports around the UK would result in free trade zones being used by the super-rich to hoard assets and avoid taxes. The Treasury says the new zones would create thousands of jobs and “turbocharge” growth. But Shadow chancellor John McDonnell called the plans an “ideological move from a far-right government”.
The Independent The Sun, Page: 2 The Guardian, Page: 31 Daily Express, Page: 6 Daily Mail, Page: 16 City AM, Page: 4
UK’s cities and councils call for fiscal devolution
Councils across the country have joined forces to call on the government to devolve fiscal powers including the ability to introduce a tourism tax, borrow against future revenue and reform business rates and council tax.
Tories irk base with shift to the left
The Telegraph’s Jeremy Warner argues that mooted Conservative plans for a mansion tax and cuts to pension relief are Labour ideas that fail to marry with Government promises to reduce the fiscal burden. Warner suggests Boris Johnson’s administration is shifting to the left in the way Tony Blair dragged Labour to the right – knowing its base had nowhere else to go. In the same paper, Sam Brodbeck claims it will be the young who pay the most for Johnson’s pension tax grab with experts agreeing that scrapping higher the rate relief will be “intergenerationally unfair”. Tom Selby, of brokers AJ Bell, says someone in their early 30s and a higher-rate payer, would lose out on around £140,000 by their 65th birthday, based on £500-a-month contributions. He adds: “Today’s younger workers are less likely to be higher-rate taxpayers or will have had less time benefitting from higher-rate relief. Older workers and pensioners have enjoyed cheap housing, generous defined benefit pensions and, if these reforms happen, a bigger pensions bonus on top.” Melanie Phillips says in the Times that if the PM thinks he can please former Labour voters with HS2 and tax rises he’s missing the point – they are aspirational and deride wasting money – they want policies that chime with their traditional values.
Government’s freeport launch follows EU crackdown
Port towns and cities won by the Conservatives at December’s general election are among the areas considering bidding to become one of Britain’s ten free ports. The new free trade zones will open in 2021 but the locations of the 10 selected ports or airports will not be revealed until the end of this year. The FT says opinion on the efficacy of free ports is divided with critics saying they can serve to suck jobs and investment from nearby areas. The Independent’s James Moore is sceptical about how much red tape the free zones will allow business to escape and repeats concerns about tax evasion and money laundering. The Government’s consultation launch comes just weeks after the European Commission imposed new rules on 82 free ports after identifying that their special tariff and duty status has aided the financing of terrorism, money laundering and crime, the Guardian reports.
Tax experts slam ‘railroading’ into law of freelance reforms
Representatives from the ICAEW, the ACCA and ICAS told peers yesterday that the government was “railroading” IR35 rules into law with little understanding of the cost to companies.
Corporates probed for failing to stop tax evasion
HMRC has opened nine criminal inquiries under 2017 laws relating to the facilitation of tax evasion and 21 other firms are being assessed for failing to prevent tax evasion, the Times reports. Provisions under the Criminal Finances Act 2017 allow for companies to be prosecuted for failing to prevent the criminal facilitation of tax evasion and HMRC’s head of fraud investigation, Simon York, says “groundbreaking” investigations are taking place “right up to some of the largest corporates . . . across sectors including financial services, construction, labour providers, oil dealers and software developers”. The difference since the new law was introduced means: “We don’t have to establish intent. We don’t have to say it’s deliberate conduct. They are guilty of facilitating tax evasion unless they can show they have strict procedures to prevent it,” Mr York said. The Times add s that HMRC’s fraud unit is also pursuing nearly 200 investigations into professional enablers of tax crime, including accountants, lawyers, tax advisers and cryptocurrency brokers.
The danger of attacking wealth
The Telegraph’s war of words against Conservative plans for tax hikes continues with Matthew Lynn today describing the Treasury’s “war on wealth” as “dangerous and immoral” arguing that if the government wants to rebalance the economy it should start with deregulation and lower taxes. Lynn points out that by attacking wealth, funding for start-ups could be harmed as banks remain poor at financing entrepreneurs. Acknowledging the problem with wealth distribution, Lynn suggests a better solution to grabbing it off those who have earned it and paid tax on it multiple times already is to create more of it.
Chancellor told to cut beer tax
Sajid Javid is being urged to cut to beer tax because Brits pay 11 times as much as some European drinkers. The All-Party Parliamentary Beer Group says Chancellor Sajid Javid should use next month’s Budget to help out the pub industry, which employs almost a million people.
Daily Mirror, Page: 21 Daily Star, Page: 2
EMPLOYMENT NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
Government to resume publicising minimum wage breaches
Businesses will no longer be penalised for using salary sacrifice schemes where participation by employees results in their pay falling below the minimum wage. A series of disputes last year led the Association of Accounting Technicians to accused the government of pursuing technical breaches of pay rules that “involve no form of exploitation”. The change was announced alongside other reforms, including more help for small businesses to comply with minimum wage rules. Kelly Tolhurst, the business minister, says: “We want to make it as easy as possible for employers, especially small businesses and those trying to do right by their staff, to comply.” However, the Government will resume naming and shaming those who breach minimum wage rules but the point at which companies are named rises from £100 of wages owed to £500, and all offenders will still have to make good workers’ pay.
Using levy funds to invest in managers is a sound idea
Writing in City AM, Daisy Hooper, the head of policy at the Chartered Management Institute, comes out in favour of the apprenticeship levy and says those who’ve criticised companies for using it to up-skill managers fail to understand how crucial highly skilled managers are to Britain’s success.
City AM, Page: 25
PROPERTY NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
IoD calls for extension of rates relief
The Institute of Directors is urging the government to extend business rate reliefs enjoyed by small companies to expanding businesses in order to “provide a vital uplift” to the economy as Britain leaves the EU. “Businesses should not be discouraged from investing in or growing their organisations,” the lobby group said in a submission to the Chancellor Sajid Javid. The institute also called for increased funding for start-ups and a delay to the digital services tax. The CBI is adding to pressure on Mr Javid to overhaul the rates system with director-general Dame Carolyn Fairbairn set to meet the Chancellor next week and urge him to turn Britain’s new-found optimism into a “surge in investment” across the country.
The Times, Page: 36 Daily Mail, Page: 8 The I, Page: 38 City AM, Page: 9
Surveyors face audit-style shake-up
The Royal Institution of Chartered Surveyors is reviewing its ethical standards for the sector following concerns about the potential for conflicts of interest at some valuation firms. Providing valuations and other consultancy services is an accepted practice in the industry with the assumption of “Chinese walls “ between departments. RICS will propose a more frequent rotation of valuers and suggest that valuers report to a different set of directors. The consultation comes as the audit sector faces significant reform to bolster independence and improve audit quality. The Times’ Alistair Osborne suggests the consultation by RICS “may be too much of an inside job to be credible. But at least it’s a start.”
PERSONAL FINANCE NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
Red wall constituencies suffer higher insolvency rates
Research by UHY Hacker Young has found that the average insolvency rate among individuals in the Midlands and northern England is 27% higher than the UK average. Many northern areas have higher unemployment than exists in the south, contributing to above average insolvency rates. Peter Kubik, of UHY Hacker Young, commented: “There are substantial structural imbalances in the economy which need to be addressed. Increased funding from the government for northern areas may be all-important.”
CORPORATE NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
Slight rise in firms going bust last year
Analysis by KPMG reveals the number of companies falling into administration in England and Wales rose by just under 5% in 2019. The study found 1,403 firms went into administration, up from 1,341 in 2018. Building and construction firms were the hardest hit and real estate companies were also badly affected, but the number of retailers entering administration fell from 170 to 133.
The Daily Telegraph, Business, Page: 6 City AM, Page: 11
Deloitte warns European firms of increased activist attention
European firms could be about to see increased attention from activist investors, according to analysis by Deloitte, which suggests that although the number of companies targeted by activist investors has doubled in Europe over the last five years, the gap between such activity levels in the US and Europe indicates that there could still be some way to go. The research shows 4.2% of London Stock Exchange businesses have been the target of an activist campaign, compared to 6.7% of companies on Euronext Amsterdam, 5.3% on Deutsche Boerse and 6.2% on Euronext Paris.
Former Google CFO quits as chair of Oxford university spin-off arm
Patrick Pichette has quit as chairman of Oxford university’s commercial spin-off arm Oxford Sciences Innovation. He is the third chairman to leave since OSI was launched in 2015.
Boom in deals activity in Scotland forecast
Deal activity in Scotland is expected to gather pace this year, according to PwC, as confidence slowly returns to the investment market north of the Border. The firm predicts 2020 will see an increase in the sale of owner-managed businesses, while standout firms across all sectors are likely to be more attractive. Separately, a report from KPMG indicates that 21% of businesses in Scotland are financially stressed. Across the rest of the UK, 24% of businesses are suffering financial stress and 4% of businesses are facing acute financial distress, compared with 3% in Scotland.
The Scotsman, Page: 34 The Press and Journal, Page: 29
M&S appoints Tonge
Greencore CFO Eoin Tonge has been appointed as Marks & Spencer’s new finance chief, replacing Humphrey Singer who left at the end of last year. Tonge will be welcomed with a golden hello worth up to £2.5m.
REGULATION NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
Box ticking is bad for corporate governance
Melanie Wadsworth considers the idea of introducing a new corporate governance regulator. She says it would be good to see the FRC’s successor giving greater priority and increased resources to the corporate governance function.
Sajid Javid to push for ‘permanent equivalence’ for City in Brexit talks
The UK will reportedly demand the EU provide the City of London with a “permanent equivalence” regime for financial services in any FTA. Current equivalence agreements can be swiftly revoked by the EU. Writing in City AM, the Chancellor explains how a reliable equivalence process “would provide the certainty on which internationally mobile businesses can depend” and sets out his vision for the financial sector in the decades to come. Mr Javid says the future will see the UK “at the forefront of technological innovation and efforts to tackle climate change, with a strong, resilient, and competitive financial sector, underpinned by world leading regulatory standards and open to global markets.” He adds: “All of this must deliver real benefit for people and businesses in every part of our great country.”
Financial Times City AM, Page: 18
Fake advisers exploit loophole in regulations
Insolvency practitioners could face a regulatory crackdown after fake advisers on the web persuade thousands to enter individual voluntary arrangements they cannot afford.
WEALTH MANAGEMENT NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
Advisers must focus on opportunity from women
The panellists on the latest Diversity Debates series from Investment Week have said that advisers must shift their attention to the huge opportunity of wealth controlled by women – many of whom require tailored financial advice. A recent survey by YouGov found that only one in five women currently hold an investment product, and 52% have never owned an investment product. EY associate partner David Hilton said that whilst there are many products available in the market, few are tailored to any specific or niche part of the population or market, and in particular women continue to be missed out. Kathryn Pinner, head of UK marketing at Aberdeen Standard Investments, added that a more holistic approach was needed in the market when it comes to targeting women investors in particular.
PENSIONS NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
Pension savings risk being discredited by relief changes
Simon Harrington, of Pimfa, a trade body for financial advisers, tells the Telegraph that cuts to pension tax relief for higher earners could drive savers to ISAs, a move that would be favoured by the government as ISAs are liable for IHT on death while pensions are not. The paper also points out that if the relief was cut as has been mooted, savers would lose out by paying income tax at their highest marginal rate on withdrawals after having lost the highest rate of tax relief on the way in. Steven Cameron, of pension provider Aegon, warned the changes could see people dramatically change behaviour and perhaps cease to use pensions at all.
Pension plans come under more pressure on climate risks
The impact of climate change on savers’ pension pots will need to be better explained by trustees, the government has said, with schemes now required to disclose their strategies to manage risk.
SMEs NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
Early-stage deals drop despite rise in investment
James Cook in the Telegraph looks at how, despite an increase in venture funding in general in the UK, early stage start-ups are struggling to attract financing between £25,000 and £500,000. Explanations seem to be that angel investors have much of their capital tied up and are waiting to exit current investments before ploughing the proceeds back into the market. The other is that start-ups are still raising seed funding but simply aren’t talking about it anymore. Elsewhere, the FT reports that despite a record £12bn equity funding for UK-based start-ups in 2019, the amount secured by university spinouts declined with experts fearing large investors are letting high-potential firms slip away to foreign buyers.
The Daily Telegraph Financial Times
REGULATION NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
Calls grow for licensing of hand car washes to protect workers
The interim director of labour market enforcement, Matthew Taylor, has called for a new licencing system for hand car washes, arguing the sector is rife with underpayment, mistreatment and H&S problems.
ECONOMY NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
Business activity leaps in the capital
New purchasing managers’ index figures from NatWest and IHS Markit show London businesses recorded the strongest output growth of any region in the UK in January, rising from 51.6 in December to 56.5 – the sharpest rise in private sector output for 33 months. “London businesses turned on the taps at the start of 2020,” said Stuart Johnstone, a managing director at NatWest. “With the path to Brexit made all-but-certain by the election result, much of the previously pent-up demand was released.” Elsewhere, BDO‘s optimism index showed that business confidence across the manufacturing and services sector rose for the first time in 18 months during January. Sentiment for manufacturing was up 0.05 points, while the services optimism index gained 0.13 points. Finally, KPMG’s tech monitor shows the sector suffered its worst quarter since 2012 at the end of 2019 due to a combination of political uncertainty and subdued global trade.
City AM, Page: 2, 9
Ten ways to improve Britain’s productivity
Roger Bootle shares his ten-point plan for raising Britain’s productivity in a piece for the Telegraph. It includes cutting corporation tax; adjusting corporate governance to encourage longer-term investment; reducing personal taxation; moving the UK’s regulatory system away from the “safety-first bureaucratic approach of the EU”; a push for apprenticeships and schemes for work-based learning; a crackdown on crime, reform of the NHS and the introduction of road pricing – a radical move Bootle concedes, but one he argues would reduce traffic jams and make the road network more efficient.
Shoppers spend as post-election confidence returns
The value of retail sales rose 0.4% in January compared with the same month last year, according to the latest figures from the BRC and KPMG. The data marked an improvement on the 0.1% contraction for 2019 as a whole. Paul Martin, UK head of retail at KPMG, said that “although static sales might not appear triumphant, at least it is no further deterioration. Consumer confidence has started to return, but we have not experienced any major leaps for the sector yet.” Helen Dickinson, chief executive of the BRC, commented: “Recent political uncertainty and a decade of austerity appear to have ingrained a more thrifty approach to shopping among consumers. Furthermore, as sustainability continues to rise up the agenda, many customers are switching to more environmentally friendly products or simply choosing to buy less.”
Coronavirus could cut global GDP to zero this quarter
Capital Economics estimates that the coronavirus could cost the world economy over $280bn in the first quarter of this year meaning zero growth in global GDP for the first time since 2009.
Economy flatlines in Q4 2019 but exports jumped
The UK economy ground to a halt in the last quarter of 2019, according to the latest data from the Office for National Statistics (ONS), as political uncertainty driven by Brexit and the December General Election weighed heavily on the nation. Britain’s services sector rose just 0.1%, while manufacturing production fell 1.1% quarter on quarter, as the UK economy grew 1.4% in 2019 as a whole. “The underlying picture for production was one of weakening throughout 2019, with nine months of the year showing negative rolling three-month growths,” the ONS said. However, UK companies sold £689bn of goods and services overseas last year, up 5% on 2018, according to the ONS. Goods exports to outside the EU rose 13.6% while sales into the bloc fell by 0.9%. China is now Britain’s third largest export market behind the US and Germany having leapfrogged France, the Netherlands and Ireland.
The Daily Telegraph, Business, Page: 5 City AM, Page: 3 The Guardian, Page: 41 Daily Mail, Page: 69 The I, Page: 38
Mark Carney applauds plans for levelling up
Outgoing Bank of England Governor Mark Carney has hailed Boris Johnson’s infrastructure and skills spending plans as a means of levelling up the economy, arguing that the “prize in social and also in economic terms is great.” He added that if the productivity of greater London could be replicated in the rest of the UK “the economy would be one-third bigger”. His comments follow the PM’s announcement that HS2 will go ahead, which business groups also applauded. But the Federation of Small Businesses urged HS2 contracts to be broken down to “increase competition, drive down costs, and protect taxpayers from the risk”.
OTHER NEWS – MIDWEEK TO WEDNESDAY 12TH FEBRUARY 2020
Cut taxes on those living remotely, researchers say
Researchers at University College London suggest people should be taxed less if they live in remote locations. This would encourage them to stay and boost ailing regions. Norway abolished such a system in 2004 to comply with EU rules which led to decline in employment in previously low tax areas, the academics point out.
The Sun, Page: 21
Canada the best place for Harry and Meghan tax-wise
The Times’ Valentine Low talks to tax experts about how the Duke and Duchess of Sussex could use creative tax planning to improve their finances following their move to Canada. Matthew Pannell, an associate director at Frank Hirth, said whatever they decide Prince Harry should avoid spending too long in the US and thus become resident for tax purposes. This would be the most expensive outcome.
Radical new approach to monetary policy needed
Standard Life Aberdeen CEO Keith Skeoch says in a piece for the Telegraph that a “new government, a new Bank governor and a new life outside the EU is an opportunity to take a radical new approach to monetary policy”.
The Daily Telegraph, Business, Page: 2
Corruption at the heart of African football
A leaked report by PwC has described the official accounts of the Confederation of African Football as “unreliable and not trustworthy”. The firm accused leading African bosses, including confederation president Ahmad Ahmad, of plundering up to £18m since 2015.
The Sun, Page: 50
Contact Paul Southward.