NEWS – MONDAY 21ST SEPTEMBER 2020

PLUS TOP STORIES FROM THE WEEKEND

NEWS ROUNDUP

TAX NEWS – MONDAY 21ST SEPTEMBER 2020

Migrants responsible for UK’s growth of top incomes and taxes

Highly skilled foreign workers contribute 8% of total income tax, according to HMRC data, and their increasing numbers explain most of the increase in income inequality over the past two decades. Almost four in 10 of the UK’s top 0.001% of earners are immigrants, despite being around 15% of the population. Arun Advani, the lead author of a paper by University of Warwick researchers, said he had suspected that migrants would be over-represented among high earners as many non-UK born people work in finance, technology and medicine, but he “was genuinely surprised” at the scale of the imbalance. Advani said the research could have an impact on decisions around a wealth tax as it shows many high earners could leave as they “often have less to tie them to the UK than people who were born here”.

Financial Times, Page: 2 The Daily Telegraph, Page: 2 The Guardian, Page: 27

Oxfam wants increased taxes on high-carbon luxuries

Research compiled by Oxfam and the Stockholm Environment Institute shows the wealthiest 1% of the world’s population was responsible for the emission of more than twice as much carbon dioxide as the poorer half from 1990 to 2015. Oxfam wants more taxes on high-carbon luxuries, such as a frequent-flyer levy, to funnel investment into low-carbon alternatives and improving the lot of the poor.

The Guardian, Page: 10 The Times, Page: 14

EU seeks new powers to penalise tech giants

Brussels wants the ability to break up big tech firms, expel them from the single market and create a rating system illustrating compliance with tax rules and hosting illegal content.

Financial Times, Page: 4

SATURDAY

HMRC’s IHT haul hits four-year high

HMRC pulled in £274m from 5,638 inheritance tax investigations in 2019/20, the highest total in four years. The average yield of almost £50,000 marks an increase of more than a fifth over the past three years. With analysis showing that HMRC now investigates around a quarter of estates that pay IHT, Rachael Griffin of wealth advice firm Quilter said the figures are “shockingly high” and suggest it has become “the norm for HMRC to investigate”. This, she adds, offers “a strong indication that something is amiss” within the “mind-bending complex system”. The Telegraph notes that the Office of Tax Simplification last year proposed sweeping reforms to make IHT easier to understand, while MPs have called for a “radical shake-up” of the levy.

The Daily Telegraph, Money, Page: 3 Daily Express

HMRC set to bolster powers over asset disclosure

Efforts to crack down on tax avoidance and evasion could see HMRC handed powers enabling it to force financial institutions to reveal information about people’s assets without a court order.

Financial Times, Page: 3

Loan charge deadline reignites debate over tax fairness

Campaigners have warned that the loan charge scandal highlights weak points within the tax system, such as inadequate supervision of unregulated agencies, tax advisers and avoidance scheme developers.

Financial Times, Page: 6

SUNDAY

HMRC may see new powers in tax evasion battle

Measures proposed in the next Finance Bill will see HMRC given powers to issue financial institutions notices which force them to provide information about people’s assets. The mooted change will make it easier for HMRC to share information with foreign tax authorities, supporting efforts to tackle tax evasion. Under the current regime, consent is provided by the individual or a tax tribunal must approve the request. The proposed new powers, which would cover banks, investment advisers, fund managers, credit unions, insurance companies and credit card issuers, could come into force in 2021. While HMRC said the new powers would help prevent and uncover tax evasion and avoidance, the Chartered Institute of Taxation has voiced concern over “the loss of independent tribunal oversight, particularly in cases which involve requests for information about UK taxpayers”. Banking trade body UK Finance said the measure s signified a “watering down” of safeguards, saying authorities are looking for an “easy fix” to speed up tax investigations by cutting out the courts.

The Mail on Sunday, Page: 126 City AM

Tax office complaints climb

Formal complaints about HMRC by taxpayers have increased by 54%, climbing from 997 in Q2 2019 to 1,537 this year. Moore notes that the tax office has had to operate with fewer staff during the coronavirus crisis and resulting lockdown, causing delays.

The Sunday Times, Business, Page: 16

CORPORATE – NEWS

SATURDAY

Businesses urge Sunak to offer Budget details

Business lobby groups have urged Chancellor Rishi Sunak to outline what his autumn Budget may hold, arguing that firms need clarity as soon as possible. British Chambers of Commerce co-executive director Claire Walker believes the Chancellor should not wait until November to “deliver the fiscal stimulus our business communities so desperately need”. She adds that expanding the National Insurance Employment Allowance, raising the threshold for employers’ national insurance contributions and extending business rates relief would help businesses to “rebuild, restart and renew.” Tej Parikh, chief economist at the Industries of Directors, says: “The earlier the Government can give some kind of indication about what they plan to do in that November Budget, I think the better”, while Emma Jones, founder of small business support network Enterprise Nation, comments: “Any heads-up on important changes is useful.”

City AM

FINANCE NEWS – MONDAY 21ST SEPTEMBER 2020

Sunak to extend business support loans as COVID-19 spread worsens

The UK Chancellor, Rishi Sunak, is set to extend the Treasury’s UK-wide programme of business support loans to help companies affected by the coronavirus pandemic. Mr Sunak is this week expected to unveil plans to extend the Treasury’s four loan schemes, which have already backed £53bn in lending to companies through government guarantees. Meanwhile, the Times reports that Innovate Finance has written to Mr Sunak to warn of a potential collapse in access to capital for small businesses when state-backed lending schemes end, as non-bank lenders struggle to secure finance and banks retrench as they consider the risks of bad debts from COVID-19. Separately, the Treasury has told the Business Banking Resolution Service (BBRS) – which is set to launch in mid-November – to prepare for an influx of grievances over government-backed Covid loans, according to the Guardian.

Financial Times, Page: 1 The Times, Page: 40 The Guardian, Page: 26

PROPERTY – NEWS

SUNDAY

City centres see tenant exodus

Private rents in some parts of London have fallen by up to 20% in the wake of the coronavirus outbreak. With renters quitting the capital, fewer international students seeking accommodation near places of education and firms putting relocation plans on hold, the dip in demand has resulted in an oversupply that means rents have come down in some areas. While average rents in London are down by around 4% on a year ago – and 6% or 7% in prime areas – agents say rents in and around the Barbican have fallen by 20%, while rents in Bloomsbury and Clerkenwell are down by around 10%.

The Observer, Page: 27

SMEs NEWS – MONDAY 21ST SEPTEMBER 2020

BBB chief vows to address funding gaps

The British Business Bank’s new boss Catherine Lewis La Torre has said she wants to double down on the development bank’s levelling up focus, and use the BBB to help the UK become a “science superpower”. The bank handed £8bn of finance to almost 100,000 firms in the last financial year – a 21% rise – and administered the emergency state-backed loans handed to businesses to ensure they survived the COVID-19 crisis. Ms Lewis La Torre said small business may need “bespoke solutions” and “hybrid” debt and equity rescues as they emerge from the crisis. The Telegraph notes that over 90% of finance supported by the BBB was delivered by non-traditional lenders.

The Daily Telegraph, Page: 5

SATURDAY

Small business recovery stalls

NatWest’s small business purchasing managers’ index shows the recovery among small firms slowed in August, with the lender saying there is a “widening gap” between big businesses and smaller firms. The index, on which a figure above 50 indicates expansion, fell to 50.6 in August, down from a two-year high of 53.3 in July. Stephen Blackman, NatWest’s principal economist, said small firms have been hit by a “mix of sector, place and distribution”. He added: “We know small firms tend to favour services, which have been slower to recover. But larger firms are also more likely to operate in national and even international markets, where places of uneven demand tend to average out.”

City AM

SUNDAY

FSB calls for support amid local lockdowns

Small businesses have called for support to ensure firms do not collapses and jobs can be saved amid tighter coronavirus restrictions. Mike Cherry, national chair of the Federation of Small Businesses, has called for local authorities and government to offer clear guidance to small firms in areas hit by local lockdowns. He has also urged ministers to roll out help to cover the hole left when the furlough scheme ends on October 31, expressing a desire to see cuts to business rates and National Insurance contributions carry into 2021.

Sunday Express, Page: 46

EMPLOYMENT NEWS – MONDAY 21ST SEPTEMBER 2020

Companies hand back £215m in furlough cash

HMRC figures show over 80,000 employers have returned furlough money that they were given to cover the salaries of their workers. The voluntary payments amount to more than £215m, according to data obtained by the PA news agency. It is a fraction of the up to £3.5bn that officials believe may have been paid out in error or to fraudsters – about 10% of the cost of the scheme overall. HMRC said: “HMRC welcomes those employers who have voluntarily returned CJRS grants to HMRC because they no longer need the grant, or have realised they’ve made errors and followed our guidance on putting things right.”

Daily Express, Page: 44 The Scotsman, Page: 9 Yorkshire Post, Page: 5

SATURDAY

5m workers on furlough in July

HMRC data shows that up to 5.3m people remained on the furlough scheme at the end of the July, while close to 1m people returned to work on a part-time basis. HMRC, which says the number of furloughed workers peaked at 8.9m in early May, found that the total had fallen to 4.8m by the end of July – but noted that the final count could be up to 10% higher, potentially lifting the figure to around 5.3m. The analysis shows that about 950,000 people went back to work part-time in July, with this representing around 20% of furloughed workers. With the job retention scheme due to come to an end on October 31, Daniel Tomlinson, senior economist at the Resolution Foundation think-tank, said some hard-hit sectors are still hugely reliant on the furlough and “will need further support after October”. Annie Gascoyne, the CBI’s director of economic policy, said the need for further support was “absolutely critical”, with the business group calling for a more permanent short-time working scheme.

The Daily Telegraph City AM

SUNDAY

Bosses voice fears over second lockdown

Business leaders have voiced concern over reports that the UK could see a second national lockdown as coronavirus cases increase, saying remote working hurts productivity and would deal a heavy blow to an already wounded UK economy. Jamie Dimon, chief executive of JP Morgan, says he has noted a lack of “creative combustion” in the firm’s largely empty office, while former Virgin Money boss Dame Jayne-Anne Gadhia said working-from home “prevents those sparks” that come from in-person interaction. Lindsell Train co-founder Nick Train pointed to concerns over mental health and being alone, while former Marks & Spencer chairman Robert Swannell bemoaned the loss of “chance conversations, social interactions and snippets overheard that allow networks to flourish”. Paul Manduca, chairman of insurance group Prudential, warned that it is very hard to get to know and assess new employees r emotely. Andy Golding, chief executive of OneSavings Bank, noted that it is difficult for managers to carry out performance observations online. A Chartered Institute of Personnel and Development survey of 1,000 employers saw 29% say working from home had helped productivity, while 28% said productivity had been harmed.

The Mail on Sunday

Home-working may hit the economy

A Sunday Times piece on remote working cites PwC analysis suggesting home working will cost the economy £15.3bn a year – equivalent to 1% of GDP – as people will be less likely to go out to buy lunch or a coffee. The report adds that the spending power of cleaners, security guards and workers whose livelihoods depend on other staff entering city centres will also be squeezed.

The Sunday Times, Business, Page: 10

ECONOMY NEWS – MONDAY 21ST SEPTEMBER 2020

Manufacturers slash investment

Research by trade group MakeUK and BDO shows manufacturing companies’ spending plans dropped to a balance of minus 32% in the third quarter, down from minus 26% in the previous period. Pre-Covid investment intentions were running at plus 20% in the first quarter of 2020. Tom Lawton, head of manufacturing at BDO, said: “While the industry has managed to claw back some lost ground from a dismal second quarter, the continued collapse in investment intentions is a real cause for concern.” Make UK said it expected manufacturing output to fall by almost 11% this year, and downgraded its forecast for recovery in 2021 from 6.2% to 5.1%.

The Daily Telegraph, Business, Page: 3 The Guardian, Page: 27 Yorkshire Post, Business, Page: 1

Fresh Covid lockdowns will cost economy £250m a day

A report from the Centre for Economics and Business Research (CEBR) indicates that the UK economy could take a £250m per day hit if Covid lockdowns reverse the increase in people going to pubs and restaurants and returning to work. The think tank warned that GDP could fall by between 3 and 5% in the last three months of the year compared with the third quarter.

The Times, Page: 37

SATURDAY

Retail sales up 0.8% in August

Figures from the Office for National Statistics (ONS) show that retail sales were up 0.8% in August, meaning sales volumes are 4% higher than they were in February. The increase for August marks a dip on the 3.6% recorded in July. PwC’s Lisa Hooker commented: “After the stellar recovery in retail sales we saw in the past three months, it’s no surprise that the monthly rate of growth slowed in August.” With online sales up 46.8% on the level seen before the coronavirus lockdown, Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “Overall, the switch to greater online sales means the high street remains under pressure.” Helen Dickinson, chief executive of the British Retail Consortium, said: “It is clear that the retail industry is entering a period of fragile recovery, with August showing the third consecutive month of growth”;

The Guardian, Page: 39 Daily Mail The Independent, Page: 36

SUNDAY

BoE economist: Rebound faster than anticipated

Bank of England chief economist Andy Haldane says the economy is recovering faster than anyone had expected from the coronavirus crisis. He says that while the economy is 12% smaller than at the start of the year, GDP had recovered around half of its pandemic-related losses by July. This, he adds, represents a rebound that has gone “further and faster” than had been anticipated. Writing for the Mail on Sunday alongside Be The Business chairman Sir Charlie Mayfield, Mr Haldane suggests that improving levels of technology adoption among businesses will help “ensure this bounce-back continues”. Mr Haldane’s comments come just days after a Bank of England policy statement which noted that the economy is recovering faster than the Bank had forecast in August.

The Mail on Sunday, Page: 123 Reuters

Double-dip warning over second wave

With analysis suggesting that local lockdowns have stalled the economic recovery of areas where they have been put in place, economists have warned that a second wave of coronavirus could result in a double-dip recession or W-shaped recovery. Deutsche Bank economist Sanjay Raja warned that tightening restrictions is “economically important”, saying stricter rules “will weigh on the UK’s recovery”. This, he adds, is “one reasons we expect the recent GDP surge to be short-lived.” While GDP is expected to rebound from the 22% dip seen in H1 and record a record climb in Q3, economists at ING estimate it could slip back 2% in Q4 – and almost 8% if there is a second national lockdown. Capital Economics’ Andrew Wishart says that if restrictions are re-imposed, “we definitely could get that double-dip recession”.

The Sunday Telegraph

OTHER NEWS – MONDAY 21ST SEPTEMBER 2020

Sunak told to reverse duty-free error

Rishi Sunak is being urged to reverse a decision to scrap tax-free shopping for all tourists visiting the UK after Brexit with business leaders warning the Chancellor the move could lead to the loss of 70,000 jobs and write off £5.6bn from the economy.

The I, Page: 2

Contact Paul Southward

Paul Southward