NEWS – MONDAY 4TH JANUARY 2021
NEWS – MONDAY 4TH JANUARY 2021
TAX NEWS – MONDAY 4TH JANUARY 2021
Think-tank calls for tax rethink
Arguing that the nation’s coronavirus crisis bill and an ageing population will cause health and welfare spending to rise by £38bn a year by 2030, the Resolution Foundation suggests wealth taxation “will need to play a bigger role” in the economy. The think-tank has urged the Chancellor to restrict relief on capital gains tax and inheritance tax, arguing that the Government should introduce a council tax supplement of 1% on properties worth more than £2m. The foundation says calculations show that the wealthiest 1% of households hold 23% of wealth in the UK, with previous estimates suggesting the figure was around 18%. Jack Leslie, an economist with the Resolution Foundation, said: “With the country facing a decade of mounting fiscal pressures, now is the time for Britain to do a better job of taxing its record levels of wealth by reforming our capital gains, inheritance and property taxes.” Professor Philip Booth, director of the Vinson Centre for the Public Understanding of Economics and Entrepreneurship, says that while it is “easy to assume that wealth is just a free lunch available for taxing”, wealth taxes are “of questionable morality and fail to produce significant amounts of revenue.”
Chancellor may target pension tax perks
Analysis suggests that Rishi Sunak may be set to reduce tax relief on pension contributions. With the Chancellor set to deliver a budget on March 3, a report from Over50smoney suggests pension assets may be targeted as Mr Sunak looks to balance the books following the economic blow delivered by the coronavirus crisis. Paul Green, CEO at Over50smoney, said the Chancellor is “clearly keen” to introduce tax rises as he looks to the address the increase in public spending, saying this could include “certain tax perks associated with pension contributions”. Mr Green added: “Pensions are complex, and their tax treatment has been under discussion for years … It looks highly likely that the Chancellor will reduce the amount of tax relief on pension contributions.”
What does Brexit mean for tax?
Ben Chapman in the Independent reflects on suggestions that Brexit could see the UK become a tax haven. While the new UK-EU trade agreement does not include much detail on taxation, Mr Chapman says experts have noted some passages which might be indicative, with accounting professor and tax campaigner Richard Murphy suggesting the deal may be welcomed by tax-dodging firms and individuals, pointing to a clause which removes obligations for the UK to comply with the EU’s Code of Conduct on Business Taxation. Lord Sikka, a professor of accounting and co-founder of the Tax Justice Network, notes that taxation was barely mentioned in parliamentary debates on the trade agreement, commenting: “Tax will become a point of friction with the EU because we are going to diverge.” He adds: “We have reduced corporation tax and capital gains tax. If we are then going to further reduce corporation tax the question will be whether that is seen as state aid,” with Mr Chapman suggesting that the EU has had difficulty in taking countries to task over low tax rates on corporations. Mr Chapman also warns of concern over freeports, with critics arguing that the designated economic zones “simply take many of the tax breaks and light-touch regulations associated with the offshore world and bring them onshore.”
The Independent, Page: 27
HMRC in scam warning
HMRC has warned taxpayers to be aware as fraudsters attempt to take advantage of the impending deadline for self-assessment tax returns. With the January 31 cut-off approaching, the Revenue has reminded people to be cautious of copycat websites and phishing scams offering tax rebates as a lure in an effort to harvest information. HMRC’s interim director general for customer services, Karl Khan, says criminals are looking to take advantage of the deadline to “panic customers into sharing their personal or financial details and even paying bogus tax due.”
Christmas, a time for filing your tax return
HMRC has revealed that more than 2,700 taxpayers filed their self-assessment tax returns online on Christmas Day, with 20,200 doing so on Christmas Eve and 8,500 submitting their returns on Boxing Day.
WFH relief reminder
With the self-assessment tax return deadline coming at the end of the month, the Guardian reminds people who have been working remotely amid the coronavirus crisis that they can apply for tax relief for working from home, noting that for basic-rate taxpayers the relief is worth £1.20 a week.
The Guardian, Page: 38
Q&A: Maximising an inheritance
Stefanie Tremain of Blick Rothenberg offers a Telegraph reader advice on how to maximise the amount they leave to their son, highlighting the potential inheritance tax and capital gains tax liabilities.
Poll suggests wealth tax support
With Chancellor Rishi Sunak believed to have tax reform high on his agenda, a poll of Times and Sunday Times readers shows that 45% would be willing to pay a wealth tax as long as it did not include the value of their main home. The poll of 2,000 people saw 36% say they would not support a levy on personal wealth, describing it as double taxation. Overall, 18% of respondents were definitely in favour of a wealth tax, 26% probably were, 18% probably opposed the tax and 21 definitely did – with 17% unsure. Two-thirds of those who support a wealth tax feel the gap between the rich and the poor has become too wide amid the coronavirus crisis. They also believe that a tax on wealth is the best method to address the issue. While some respondents said a levy on wealth would help reduce national debt, which has passed the £2trn mark, around half said such a tax would be an effective way to fund social care and the NHS. The London School of Economics estimates that a 1% tax on the wealthy would raise £260bn over five years, with the criteria set out in the report – which included the main home excluding mortgage debt – meaning 16% of British adults would be liable. Meanwhile, the poll saw 55% of people say they were probably or definitely against an increase in inheritance tax. Considering the poll’s findings, Blick Rothenberg chief executive Nimesh Shah said: “Whether or not to tax the family home has always been one of the main frictions created by a wealth tax. It is an emotive asset and taxing it would create all kinds of problems.”
Treasury boosted by targeting big firms over tax
A study by law firm Pinsent Masons suggests chasing large companies over taxes is far more worthwhile than targeting small businesses and individuals. HMRC collected £107 for every £1 spent on investigations into the UK’s largest 2,000 businesses last year while investigations into individuals and small businesses brought in £14 for every pound spent. Stephen Porter, a partner at Pinsent Masons, said: “For the Treasury there is no such thing as a magic money tree but the returns from investigations into large corporates are as close as it gets.” The analysis also found that fraud investigations produced £19 for every pound spent.
The Sunday Times, Business, Page: 12
Chancellor urged to target wealth with taxes
The Resolution Foundation has correlated an Office for National Statistics assets survey with data published in the Sunday Times Rich List and says almost £800bn of assets held by Britain’s richest households has been missed. Urging the Chancellor to reform inheritance and property taxes so as to help foot the nation’s coronavirus bill, the think-tank said: “The UK’s undergone a boom in recent decades, even while incomes have stagnated … official data has struggled to capture the gains.” “Now is the time to do a better job of taxing this record wealth,” it added.
Tax a turn-off for small EU retailers
A number of specialist retailers across the EU have stopped selling goods to the UK due to post-Brexit tax rules, reports the Sunday Times. While some say the move is temporary while they navigate new tax laws, others have stopped to avoid customs declarations and registering for VAT. Simon Baxter, VAT expert at EY, says: “EU retailers may now have to register for VAT in the UK and there are going to be customs declarations to be done.” He adds: “They may decide it is simply more straightforward working within the 27 EU countries.”
Wealth tax fear for the Rich List
Robert Watts, compiler of the Sunday Times Rich List, says the billionaires at the top of rankings would have “plenty to fear” from a wealth tax. Noting that the suggested one-off levy would target property, business interests, pensions and any other assets with a value of more than £3,000 on a single assessment day, he says the chosen day “would be crucial” for many as the bulk of their wealth lies in business and the value of stakes in companies constantly changes. He also notes the potential for some billionaires to be hit by wealth taxes by two countries, saying that while there are cross-border structures to minimise double taxation, it is unclear whether they apply to a one-off wealth tax.
CORPORATE NEWS – MONDAY 4TH JANUARY 2021
Solvent businesses being wound up
Business owners are increasingly winding up solvent companies, with members’ voluntary liquidations nearing record levels in the three months to the end of September. The 3,126 such liquidations in Q3 mark the highest third quarter total since 2000 and represent a 52% jump on Q3 2019. James Hurley in the Times says experts have warned that owners have voiced concern over possible tax changes, with fears that the Chancellor will act on Office of Tax Simplification proposals to reform capital gains tax so as to help cover the costs of the coronavirus pandemic. Lucinda Coleman of PKF says concern over CGT reform has helped drive an increase in owners stepping away, while Nicky Fisher of insolvency and restructuring trade body R3 says she is not convinced the mooted reform of CGT has ” had much of an impact”. Bobby Lane, chief executive of business advisory service Factotum, believes the challenges brought about by 2020 saw entrepreneurs “lose the energy to keep building their businesses.”
The Times, Business, Page: 5
Restrictions hit retail
Laura Onita in the Telegraph considers the climate for retailers amid the ongoing coronavirus restrictions. Erin Brookes of Alvarez & Marsal notes the importance of January for retailers looking to clear stock ahead of the spring-summer season, saying: “Having stores shut is a logistical nightmare and another month of lost income.” Ms Onita notes Centre for Retail Research analysis showing that high street retailers shed 177,000 jobs in 2020 with a further 200,000 expected to be lost this year, but goes on to say the sector has a “brighter outlook” in the second half of the year, with the KPMG/Ipsos Retail Think Tank expecting sales growth to come in flat to 3% over 2021.
Sugar not sweet on coffee chain’s CVA
Lord Sugar has joined a bid to block a turnaround plan for Caffè Nero, with his commercial property business Amsprop Investments one of seven parties behind a legal challenge to the coffee chain’s CVA. The chain has been working with KPMG on a CVA for its estate of about 660 Caffè Nero-branded outlets. Amsprop has joined the challenge in its capacity as a Caffè Nero landlord.
Tax fears trigger rise in solvent businesses closing
Analysis shows 3,126 businesses voluntarily appointed liquidators during Q3 – 52% up on Q3 2019 – with experts attributing the increase to potential increases in CGT, upcoming changes to IR35 and ongoing economic uncertainty.
Firms claim £68bn in emergency loans
Businesses have been handed more than £68bn in emergency coronavirus loans. Analysis shows that banks have lent a total of £24.6bn to 83,293 firms under the Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Loan Scheme. Lenders have also handed out £43.5bn in Bounce Back loans to more than 1.4m smaller businesses.
£17.5m pension hole at EWM
A report from administrator FRP show s retailer Edinburgh Woollen Mill went into administration owing more than £50m to creditors, including a £17.5m hole in its defined benefit pension scheme. The documents reveal that unsecured creditors include suppliers, HMRC, landlords and a defined benefit pension scheme.
The I, Page: 72
Arcadia bid deadline
Potential bidders for collapsed retail group Arcadia have been given a deadline of January 18 to make final bids, with administrator Deloitte prompted to accelerate the sale due to the latest coronavirus restrictions. It is understood that Deloitte has received thirty expressions of interest, with this reduced to a group of around five frontrunners.
M&C Saatchi sees rebellion over executive pay
M&C Saatchi investors have revolted over executive pay, with almost 21% voting against the advertising group’s pay report. Meanwhile, 10% of investors rebelled over the company’s 2019 report and accounts, with this coming after the firm was found to have overstated its accounts by £14m and PwC finding irregularities dating back to 2014.
Investors demand more boardroom diversity
Large investment groups have vowed to vote out UK boards that fail to make progress on ethnic diversity, with BlackRock, Goldman Sachs Asset Management and Federated Hermes set to increase pressure on firms and vote to remove directors failing to back greater diversity.
Weak energy firms criticised
David Byers and Ali Hussain in the Sunday Times look at the energy sector and providers, saying more than 4m energy customers were forced to move suppliers last year after weak firms went bust and others were taken over. They note that administrator PwC found that Extra Energy’s billing system was so poor that it had to buy a new IT platform to work out how much customers should be billed and refunded, while a Grant Thornton report on Robin Hood Energy, which was run by Nottingham City Council and collapsed leaving a £60m black hole in the council’s finances, said: “This is not how local authorities should look after large amounts of public money.”
Four Seasons set for sale
Administrators to Four Seasons Healthcare are preparing to launch a sale of the care home provider. Alvarez & Marsal, which has been overseeing Four Seasons since its collapse in April 2019, is understood to be preparing an auction – with BDO expected to oversee the process. A deal would involve the sale of 140 of Four Seasons’ 184 homes across the UK – with the rest tied to a separate sale process for the group’s Northern Ireland business. Any transaction would need the approval of H/2 Capital, the hedge fund that is Four Seasons’ principal creditor.
Gym chain’s finances not looking healthy
Auditors for David Lloyd Leisure have issued a warning over its financial strength, with Deloitte saying the impact of the coronavirus pandemic means there is now a material uncertainty over the fitness chain’s ability to continue as a going concern.
The Sunday Telegraph, Business, Page: 3
SMEs NEWS – MONDAY 4TH JANUARY 2021
Challenges ahead for small firms
Anna Menin warns that while 2020 was the hardest-ever year for many small firms, 2021 could be worse. Writing in the Sunday Times, she notes that while Government support has helped shield firms from the economic impact of the coronavirus crisis, it has also loaded small firms with debt. The support, she adds, has limited the number of business failures, with company insolvencies down 41% year-on-year in November and Insolvency Service data showing a 51% dip in the number of firms entering administration. Richard Fleming of Alvarez & Marsal expects this to change, however, saying: “In 2020, we had a health crisis. In 2021, it’s going to turn into a financial crisis.” Colin Haig, president of R3, says the insolvency and restructuring trade body is “quite sure that it’s still a question of when, not if, in 2021 there will be the uptick i n insolvencies we are expecting.” Geoff Rowley, chief executive of FRP Advisory, said the firm is receiving inquiries from small business owners who are dreading the year ahead.
PROPERTY NEWS – MONDAY 4TH JANUARY 2021
House price predictions
The Telegraph looks at the movement house prices may see in 2021. While Capital Economics and the Centre for Economics and Business Research both predict a 5% drop over the coming 12 months, Halifax expects prices to slip between 2% and 5%, with JLL saying there will be a 1.5% fall. In more optimistic forecasts, property portal Zoopla predicts a 1% increase, as does estate agent Hamptons. Fellow agent Chestertons says a 1.5% climb is on the cards, while Jackson-Stops thinks prices will rise by 2% and Rightmove expects a 4% jump in asking prices. Savills and Hamptons International foresee prices remaining static.
The Daily Telegraph Paul Southward comments that it will all depend on Rishi’s decision on Stamp Duty, if the rates revert back as planned, there will be a negative impact on house prices.
FINANCIAL SERVICES NEWS – MONDAY 4TH JANUARY 2021
UK to start EU financial services talks
The Government will this week start talks designed to secure an agreement that will give financial services firms access to EU financial markets, with City Minister John Glen and senior Treasury civil servant Katharine Braddick to lead talks for the UK. With no EU-wide arrangement for financial services in the post-Brexit trade deal between the UK and EU, some firms have had to move assets and staff to the continent to avoid disruption. EY estimates that more than £1trn of assets have been moved from London to the EU since 2016.
Daily Express, Page: 45
Financial services agreement would fix trade deal hole
The Guardian’s Business Leader says the UK-EU trade deal is not a “comprehensive, neatly tied bundle of tariff and quota arrangements”, arguing that it is “shot through with holes”. Ministers and the Treasury, it suggests, will in the coming months look at how the financial services industry “can mend one of these holes” – the fact no arrangements are in place to cover the broader services sector. The column notes that Chancellor Rishi Sunak hopes a planned memorandum of understanding on the issue will persuade Brussels to give the City access to EU markets.
FCA relaxes derivative trading rules
The Financial Conduct Authority has relaxed rules on cross-border derivative trading, allowing many UK trading floors to deal in derivatives at EU venues as long as they are working for clients in the bloc. The move, designed to ease concern over disruption to the trading market amid the UK’s exit from the EU, is a temporary one and will be reviewed by the watchdog by the end of March.
Officials seek City Brexit deal
The Mail on Sunday reports that officials will this week launch talks designed to secure a Brexit deal for the City by March, with City Minister John Glen and Katharine Braddick, director general of financial services at the Treasury, set to play key roles in drawing up a memorandum of understanding with the EU. The paper says the Treasury will engage with lobby groups such as UK Finance, TheCityUK and the City of London Corporation, as well as big banks and insurers, with senior officials from the Bank of England expected to hold talks with financial lobby groups about plans for the City. The Mail notes EY analysis showing that more than 7,500 jobs have moved from London to EU cities over concerns Brexit could hit access to EU markets, with this fewer than originally feared.
The Mail on Sunday
Brexit and the City
The Sunday Times’ Jill Treanor considers the post-Brexit climate for the UK’s financial services sector, saying it has seen the equivalent of a no-deal scenario as the UK-EU trade deal does not provide British firms in the sector access to the EU. With UK-based financial firms losing their passporting rights, their fate, she says, “lies in the hands of the EU”, with Brussels to decree whether Britain’s rules are robust enough to secure access to the bloc. She says the future of the City and its relationship with Europe hinges on whether Brussels grants equivalence. Ms Treanor also looks at what the UK may gain, suggesting “nimbleness” and citing Andrew Pilgrim of EY who says that no longer needing to co-ordinate closely with 27 EU countries delivers an advantage for innovative sectors such as climate change finance and fintech.
EMPLOYMENT NEWS – MONDAY 4TH JANUARY 2021
Reed chair expects jobs boost
James Reed, chairman of recruitment firm Reed, believes the jobs market will bounce back in 2021, having taken a hit from the coronavirus crisis. He points to a shortage of skilled workers in key areas such as health, technology and social care, which will push up wages in those sectors. He also believes Brexit offers “scope to modernise and improve labour market rules” so that more jobs can be created in the UK.
Work from home truths
The Sunday Times looks at the methods employers are utilising to keep tabs on staff working remotely amid the shift to home-based work driven by the coronavirus pandemic. It notes research from Deloitte showing that 50% of the global workforce have been working remotely since the pandemic began.
The Sunday Times, Magazine, Page: 50
ECONOMY NEWS – MONDAY 4TH JANUARY 2021
UK economy set to be one of the last to recover from pandemic
A majority of economists believe UK GDP will not hit pre-pandemic levels until at least H2 2022, lagging behind international peers as unemployment, weak business investment and Brexit slow the recovery. Howard Archer, EY Item Club’s chief economic adviser, expects the economy to regain levels recorded before the coronavirus crisis by mid-2023, with growth of around 6% in 2021.
CEBR: Recovery to be ‘quicker and stronger than people think’
The Centre for Economics and Business Research (CEBR) expects the UK economy to grow at its fastest rate since the Second World War this year, saying national income could rise by 8% in 2021. The CEBR says the UK could see the biggest climb in GDP since 1941 as Britons start to spend the £200bn that has been saved during the coronavirus crisis. CEBR deputy chairman Doug McWilliams commented: “Our tendency to splash out once we are let out of lockdown is greater than in many other countries,” adding: “If you give money to Germans or Singaporeans, they will save it, or think about it for a while. Brits will just spend it.” Professor McWilliams said he believes the economic recovery “will be quicker and stronger than people think.” While the CEBR says global output is likely to rise by 5.3% this year, the British economy is set to grow by around 8%.
Daily Mail Metro
The economic outlook for 2021
The Guardian considers the UK’s economic prospects for 2021. It notes that while the Office for Budget Responsibility (OBR) in November suggested GDP would climb by 5.5%, the Resolution Foundation think-tank has said tougher coronavirus restrictions announced in December could mean growth of 4.3% over 2021. Meanwhile, with emergency spending and falling tax receipts amid the pandemic, the UK is set to record a budget deficit of £394bn for the financial year to March 2021, with the national debt now above £2tn – more than 100% of GDP. On inflation, the Guardian notes that the consumer price index has fallen to 0.3%, while the OBR has forecast that inflation will remain below the Bank of England’s 2% target rate until at least 2025.
Truss sees ‘world of opportunity’ for Britain
International Trade Secretary Liz Truss believes 2021 will see “Global Britain take flight”, saying that with the country agreeing a number of post-Brexit trade deals, “there is a world of opportunity out there.” She notes that UK has secured trade deals with 63 countries plus the EU, accounting for £885bn worth of trade annually, adding that it is “working towards gold-standard deals with allies such as the US and Australia.”
OTHER NEWS – MONDAY 4TH JANUARY 2021
Climate driving change for firms
The Telegraph’s Rachel Millard looks at firms’ efforts to reduce carbon emissions, noting that globally, corporate pledges to cut emissions to net zero tripled last year to 1,541. A poll by KPMG and Eversheds Sutherland saw 78% of executives say that “managing climate-related risks will likely or highly likely be an important factor in keeping their job over the next five years”. Bridget Beals, co-head of climate risk and decarbonisation strategy for KPMG, says climate change is among the top risks for most organisations but adds that there is “a huge opportunity as well for businesses to pivot to new ventures.”
The Daily Telegraph, Business, Page: 4
Pandemic puts car sales in the slow lane
With new car sales down by a third to just over 1.5m in 2020, Peter Matthews at EY says that with the possibility of further lockdowns and the economic challenges such restrictions bring, “anything above 2m sales in 2021 would be a very good outcome”. Considering the sector, Michael Woodward of Deloitte notes the “sharp upward trajectory” in battery electric and plug-in hybrid sales, which took 10% of the market in 2020 compared to less than 3% the year before.
The Times, Page: 51
Contact Paul Southward