Wealthy pay less tax than official rates

Analysis of HMRC records shows a number of the UK’s richest individuals pay less tax on earnings than official headline rates, with the discrepancies amounting to £20bn in lost tax revenue. The study shows that those receiving £10m a year paid an effective average tax of just 21%, while one in ten people taking home more than £1m paid a lower rate than a worker on £15,000. Researchers at the University of Warwick and the London School of Economics say the Government could introduce a version of the US “alternative minimum tax” to stop the rich gaming Britain’s overly complex system. Andy Summers, assistant professor of law at the LSE, and Arun Advani, an assistant professor of economics at Warwick, propose a 35% effective tax rate for people earning more than £100,000 on all income, whether it is taken from wages, dividends or capital gains. Currently, someone earning £100,000 has an effective average rat e of 35%, those on £150,000 see a 40% rate, someone on £500,000 pays 45% and those on more than £2m are subject to a 47% rate.

The Times, Page: 36 Financial Times, Page: 2

Tax rethink may tempt shoppers

The Times’ Chris Smyth says ministers will be monitoring consumer activity as shops across England reopen today, “to see whether faltering consumer confidence will require emergency VAT cuts.” He says Chancellor Rishi Sunak is considering either a blanket or a targeted reduction in consumption taxes as retailers demand emergency stimulus. Helen Dickinson, chief executive of the British Retail Consortium, comments: “The reopening of non-essential shops from today is unlikely to deliver immediate relief. The Government should consider options to stimulate demand, such as a short-term reduction in VAT or a temporary income tax cut for lower-income workers.” Elsewhere, the Mail looks at the reopening of the retail sector, with Paul Martin of KPMG noting that some stores “may not reopen at all,” while PwC’s Lisa Hooker says: “’If queues for recently reopened retailers have shown us anything, it’s possible that pent-up consumer demand may in fact lead to good news for retailers trying to preserve margins.” Meanwhile, Yorkshire Post analysis cites KPMG’s Sue Richardson, who warns: “Aggressive discounting in order to get stock moving again will be a temptation, but retailers need to avoid putting their margins under further pressure.”

The Times, Page: 1 Daily Mail, Page: 8 Yorkshire Post, Page: 12

Manufacturers call for business rates break

With a survey from Make UK and BDO showing manufacturing output hit a record low in Q2, manufacturers have called for a stimulus package that would include a business rates holiday. The study shows output fell to -56% in Q2, with domestic and international orders falling to -52%. Just 12% of businesses in the sector said they were operating at full capacity, while 36% said they were running at between zero and half capacity.

The Daily Telegraph, Business, Page: 4 The Times, Page: 31 Financial Times, Page: 2 Yorkshire Post, Page: 11

Firms urge tax break for start-up investors

A group of businesses have written to the Chancellor urging tax breaks for investors pumping money into start-ups, saying it will encourage investment. The 87 signatories want temporary tax relief to encourage private investors to match funding provided by the Government’s £500m Future Fund.

The Times, Page: 32


Landlords may reject Travelodge CVA

Landlords to Travelodge say they may reject its restructuring plan unless they get clarity about a £40m investment by its owners. Travelodge has warned that should its proposed CVA be rejected, it would be “likely to enter into administration or liquidation”. The hotel chain wants to cut its rent by more than a third. Viv Watts, managing partner of landlord Oasis Holding, who is co-ordinating the Travelodge Owners Action Group, said that a “lack of transparency” leaves landlords no choice “but to demand total clarity on key provisions in the CVA proposal or join together in opposition to it”.

The Times, Page: 31

France leads on inward investment

A survey by EY shows that Britain lost its crown as Europe’s top destination for foreign investment last year, attracting 1,109 projects compared to France’s 1,197.

The Times, Page: 34

Insurers watch and wait as rusty drivers return to the roads

The FT looks at the insurance industry and a fall in motoring-related claims amid the COVID-19 lockdown, with Deloitte forecasting a 29% decline over the full year.

Financial Times, Page: 11


UK businesses seek swift return to work

Analysis from Growth Intelligence shows that around a quarter of UK SMEs halted trading amid the lockdown, with more than a third of these having already reopened.

Financial Times, Page: 11


Property sales rebound

Figures from Rightmove show that estate agents in England have seen a rebound in house sales since coronavirus lockdown restrictions were eased on May 13. While sales during the lockdown fell by 94%, by June 5 sales were just 3% below their level a year earlier and averaged two thirds of their previous level over the three previous weeks. The data also show that typical asking prices on the platform were 1.9% up on pre-lockdown averages. Rightmove director Miles Shipside comments: “There are signs of high pent-up demand and upwards price pressure, rather than downwards”.

Daily Mail

Landlords shed 150k homes

Landlords sold more than 150,000 residential properties last year, with most facing an average £22,000 tax bill. Estate agent Hamptons International found that 84% of sellers made a profit, with 16% seeing a loss.

The Daily Telegraph, Business, Page: 6


Chancellor urged to support workers who have ‘fallen through the gaps’

The Treasury Select Committee says the Treasury should move to help those who have fallen through the gaps in the Government’s COVID-19 income support schemes, saying more than a million people have been unable to benefit from initiatives designed to support salaried employees and the self-employed. MPs on the committee have called on Chancellor Rishi Sunak to address gaps in his Coronavirus Job Retention Scheme and Self-Employment Income Support Scheme. The committee identified five specific groups in need of greater support: those newly in employment; the newly self-employed; self-employed people with annual trading profits in excess of £50,000; directors of limited companies who take a large part of their income in dividends; and freelancers or those on short-term contracts. Mel Stride, chair of the committee, said that while Mr Sunak had “acted at impressive scale and pace” in delivering support, mi nisters should “urgently enact our recommendations to help those who have fallen through the gaps.”

The Daily Telegraph, Business, Page: 4 The Guardian, Page: 27

CMI: A third of firms could cut jobs

A survey by the Chartered Management Institute (CMI) shows that 34% of managers are set to make staff redundant due to the impact of coronavirus, with 26% saying the job cuts could come this year. The poll shows that 6% of companies expect to lay off more than 500 workers, while 18% will fire more than 100. The CMI analysis found that just 22% of managers expect their businesses to be back to normal by the end of the year.

Daily Mail The Times

Graduates brace themselves for an uncertain market

The FT considers the employment climate for graduates, with Anna Purchas of KPMG saying it is difficult to predict how the jobs market will shift for Masters in Finance graduates.

Financial Times, Business Education, Page: 5


BoE set to launch more QE

Economists expect the Bank of England (BoE) to announce at least another £100bn of quantitative easing (QE) amid efforts to boost an economy hit by the coronavirus crisis, with the Bank set to act in the wake of data showing GDP fell by a record 20.4% in April. Experts do not foresee the BoE cutting interest rates, which already sit at an all-time low of 0.1%, with it deemed unlikely that the Bank will take official interest rates to below zero for the first time in its 326-year history. The Bank announced £200bn of QE in March, taking its total to £645bn, while two of the nine members of the Bank’s Monetary Policy Committee (MPC) voted for another £100bn of QE in May – a move analysts expect to be unanimously approved at this week’s meeting. Samuel Tombs at Pantheon Macroeconomics said more QE was “inevitable”, adding that a “key question” is whether the MPC continues to green light “fairly small sums” or opts to announce a long-term programme stretching beyond the third quarter, like the European Central Bank. “In other words, will it opt for a machine gun or a bazooka?” he asks.

ITV News

Economy set to contract 8% in 2020

A forecast by the EY Item Club suggest Britain’s economy will shrink by 8% this year, having previously suggested a 6.8% contraction was on the cards. It said that “the gloomier forecast figures reflect a poor economic performance in April due to the lockdown and deeper than expected contraction in Q1”. While figures show output fell 2% in Q1, some commentators say a 20% decline is likely for Q2. However, EY Item Club says a 15% dip is more likely – up from the 13% fall it forecast in its previous report. EY Item Club analysts expect GDP to climb 5.6% in 2021. Howard Archer, chief economic advisor to the EY Item Club, said: “After a challenging first half, our forecast shows that the UK economy is expected to start to recover in Q3 on the assumption that the Government continues to gradually relax lockdown restrictions.”

The Daily Telegraph, Business, Page: 4 The Times, Page: 31 Yorkshire Post, Page: 11

Contact Paul Southward