News Roundup Monday 14th October 2019
News Roundup Monday 14th October 2019
TAX NEWS ROUNDUP
Outrage over Facebook’s tax bill
News that Facebook saw UK sales surge to £1.7bn but paid just £28.5m of tax in Britain last year has led to a chorus of indignation from politicians and tax experts. The social media company recorded profits of £96.6m in the UK last year, up more than 50% on 2017. However, this was after administrative costs of £666.8m were stripped from a gross profit of £763.5m. Experts say Facebook’s UK accounts fail to detail these charges thoroughly. Prem Sikka, emeritus professor of accounting at the University of Essex, said the accounts were “legally compliant but opaque”, adding: “It is clear that without regulatory intervention we will not see transparent accounts.” MP Margaret Hodge, who chairs an all-parliamentary group on responsible tax, called the amount “outrageous”. Steve Hatch, vice-president for Northern Europe at Facebook, said: “Businesses across the country use our pla tforms to grow, and revenue from customers supported by our UK teams is now recorded here so that any taxable profit is subject to UK corporation tax.” The Mirror says EY audits the “tax avoiding tech firms” Facebook, Amazon and Google.
HMRC boosts IHT income with increased checks on property values
The taxman increased its IHT take last year by £22m to £271m after conducting checks on the value of homes that people had inherited. Rupert Wilkinson, a partner at Wilsons, says those who misreport the value of their residential property do so “in some cases by mistake and in others on purpose to reduce inheritance tax bills”. He suggested that the figures did not mean that more people were lying about property values, but that HMRC was investigating more IHT cases because it was easier to check house prices.
Scotland sees rise in R&D tax credit claims
New figures from HMRC show a rise in research and development (R&D) tax credit claims in Scotland, with firms making a total of 2,210 claims over the year so far, up from 1,900 in the previous year. Overall, Scotland-based companies secured 4% of the value of 48,635 R&D tax credit claims made across the UK in the latest period. A total of £4.3bn of tax relief support was claimed corresponding to £31.3bn of R&D expenditure by British businesses.
The Scotsman, Page: 31
Parliamentary support to axe loan charge grows
Over 130 MPs have now called on the Government to suspend all activity related to the loan charge. The All-Party Parliamentary Group on the Loan Charge (APPG) said that Parliamentary support is growing for an immediate suspension of the “draconian” loan charge and associated accelerated payment notices (APNs).
Yorkshire Post, Page: 25
Will Congress vote for a fairer US tax system?
Ira Sohn suggests a move to a consumption tax on all goods and services, which he says would also remove the need for “tax accountants, tax lawyers, tax lobbyists and tax forms.”
“Let’s get beyond the bluster and listen to the experts”
The Sunday Times’ James Coney laments the predictability with which the government seems to reject advice on reforming the finance sector or taxes. Proposals to extend the power of the Financial Conduct Authority were dismissed last week while a series of “rather brilliant” proposals from the Office of Tax Simplification (OTS) “seem to have gone nowhere.” The OTS is backing a campaign by the paper to close a loophole affecting people who earn £10,000-£12,500 with net pay pension schemes, who are denied the benefit of tax relief on their retirement savings. A report from the tax watchdog also suggested topping up the national insurance of mothers who stop claiming child benefit because of a tax charge that affects higher earners, including unmarried partners. The Sun also runs with this story pointing out that children of mothers who do not claim are not automatically issued with a National Insurance number when they turn 16.
McDonald’s sends cash to US and pays higher UK tax bill
The European arm of McDonald’s wired a $2.7bn (£2.1bn) dividend to its American parent last year, the first since Donald Trump’s tax reforms which were intended to persuade US multinationals to repatriate foreign earnings. McDonald’s UK has also increased its corporation tax payments from £64.9m in 2017 to £75m last year after ending an arrangement where it paid millions in “franchise rights fees” to an entity in Luxembourg, reducing taxable profits in the UK.
HMRC called on to probe XR payments to activists
Tory MP David Davies has called for HMRC to investigate Extinction Rebellion (XR) over hundreds of pounds it pays its activists weekly to campaign. Documents seen by the Mail on Sunday reveal protesters have received payments totalling more than £70,000 in four months alone. The paper says XR’s documents raise concerns about the fact that it has paid no tax or National Insurance on these sums and questions the employment status of activists.
The Mail on Sunday, Page: 16
Failed airlines to fly passengers home
Insolvency legislation is set to be reformed to enable bankrupt carriers to be put in “special administration”, meaning their aircraft and crew can continue flying. The collapse of Thomas Cook last month triggered a £100m operation by the Civil Aviation Authority to repatriate almost 150,000 stranded tourists on a fleet of 62 chartered jets. Transport Secretary Grant Shapps said: “I’ve personally spoken with Peter Bucks, the chair of the Airline Insolvency Review, and plan to draw on his expertise and bring in airline insolvency reforms as quickly as possible.” The legislation is expected to be outlined in the Queen’s Speech when MPs return to Parliament on Monday.
The Times, Page: 2 Daily Mirror, Page: 18 The Guardian, Page: 2 Daily Mail, Page: 37 Daily Express, Page: 5 The Sun, Page: 4
Probate fee changes scrapped
Justice Secretary Robert Buckland has said changes to probate fees planned by Theresa May will not go ahead. The current probate fees are £215 for individuals and £155 if applying through a solicitor. But changes to the law announced last November would have meant administrative fees ranging from £250 to £6,000. A Ministry of Justice spokesman said: “Fees are necessary to properly fund our world-leading courts system, but we have listened carefully to concerns around changes to those charged for probate and will look at them again as part of a wider review to make sure all fees are fair and proportionate.”
Daily Mail, Page: 14
CORPORATE NEWS ROUNDUP
Wrightbus rescue back on the cards
A deal between Jo Banford and the owners of Wrightbus is back on after Jeff Wright, son of founder Sir William Wright, rowed back on his opposition to terms related to the sale of the company’s premises. Deloitte is overseeing the administration of Wrightbus.
The Times, Page: 52 The Daily Telegraph, Page: 35 The Guardian, Page: 43 Yorkshire Post, Page: 4
Pizza Express could jettison 150 restaurants
As many as two in five Pizza Express restaurants are loss making, the company’s lenders fear, with sources telling the Sunday Telegraph that bondholders are considering a company voluntary arrangement (CVA) to close those stores. The move could put more than 150 restaurants and an estimated 3,300 jobs under threat. Pizza Express is struggling under a £1.2bn debt pile.
The Sunday Telegraph, Business, Page: 1 The Sunday Times, Business, Page: 12
Customers distressed by unexplained bills from old supplier
The Observer reports on the high level of complaints made by customers of failed energy company Extra Energy. An investigation by the paper reveals that Extra Energy’s administrator, PwC, has been issuing bills to former customers without accurate billing histories or meter readings, leaving many with unexplained three-and four-figure bills months after the company ceased trading.
The Observer, Page: 70
Investor agitates for removal of Babcock CFO
Defence contractor Babcock is under pressure from at least one major shareholder to replace its finance director Franco Martinelli, the Sunday Times reports. Babcock said it had no intention of replacing Martinelli, who has held the role for five years and spent 12 years before that as financial controller.
WEALTH MANAGEMENT NEWS
Wealth managers who are worth their fees
Jonathan Jones in the Telegraph reflects on a report from Citywire which last week unveiled the best performing wealth managers. The list was topped by Wise Funds, with its Multi-Asset Growth fund returning 47.5% over the past three years. Vincent Ropers, co-manager of the fund, said, despite being the winner of the “aggressive” category, it was its defensive assets that had propelled the performance this year. In the “steady growth” category, for those with a slightly lower appetite for risk, P1 Investment Management ranked best. At the other end of the risk scale, Sanlam was ranked best for those investors that are more cautious.
SMEs NEWS ROUNDUP
Small business commissioner sacked over conflict of interest
Paul Uppal, the Government’s small business commissioner, has been sacked after suggestions that his involvement in a scheme to provide redress to small companies represented a conflict of interest. Mr Uppal has been helping the banking industry and small business groups to set up the business banking resolution service. The Federation of Small Businesses said it was a “disappointing development that will put the brakes on our efforts to date”. The Association of Independent Professionals and the Self-Employed called the news “troubling”.
Funding Circle seeks to ease fears over withdrawal delays
Funding Circle has written to investors assuring them that it was “a robust, well-capitalised business” amid concerns over liquidity issues in the peer-to-peer lender’s secondary market.
Two fifths of SMEs forced to take legal action over late payments
A survey by Hitachi Capital Business Finance found the proportion of SMEs that were taking legal action chasing late payments from clients had grown from 31% to 40% over the past year. A fifth of SME owners did not pay themselves when they were left with unpaid invoices. Over 60% of SMEs are affected by late payments according to Hitachi, with 35% having to seek short term loans to stay afloat, it said.
Sunday Express, Page: 43
Top earners get 7.6% rise
Pay for the top 1% of earners increased by 7.6% in real terms over the past two years – faster than for any other income group, according to a report from the TUC. By comparison, typical workers saw their earnings increase by just 0.1%. TUC general secretary Frances O’Grady said: “Boris Johnson’s promised tax giveaway to high earners would only make things worse. The prime minister is focused on helping his wealthy mates and donors, not working people.”
The Guardian, Page: 45 The I, Page: 19 Daily Mirror, Page: 7 Yorkshire Post, Page: 4 The Press and Journal, Page: 16
PENSIONS NEWS ROUNDUP
OTS urges review of pensions allowances
The Office for Tax Simplification has said the government should consider applying different pension allowances to taxpayers depending on whether they are saving into a defined contribution scheme or a final salary plan. A report by the OTS highlights the issues many defined benefit members have been facing with the annual allowance and the tapered AA. It states: “As the legislation produces distortions in behaviour that have negative effects such as those in the NHS, it seems sensible this legislation should be reviewed with a clear focus on its wider impact.”
Majority of self-employed not saving into pension
Calls are growing for a change to pension rules for the self-employed after a poll revealed just 24% are saving into a pension. A survey of 2000 self-employed people by Nest, found 55% want more guidance on how to best save for their retirement. In addition, 56% said they favoured the idea of automatically diverting a proportion of their income to saving for retirement, which is already available via auto-enrolment for those who are employed by a business.
Pensions rules bring windfall for locums
Hospitals are paying locum doctors nearly £4,000 a shift to plug a growing staffing crisis made worse by pension tax rules which encourage medics to cut their hours to avoid onerous penalties.
The Daily Telegraph, Page: 1, 2
Shops fear worst winter in a decade
Retailers fear this will be the worst Christmas since 2008 as high street stores struggle with consumer concerns over the economy and crippling business rates. One executive told the Mail on Sunday: “The rates system is broken. The high street is in continual decline. But this tax is based on 2015 property values, when the world was very different. When is the Government going to wake up?”
The Mail on Sunday, Page: 96
ECONOMY NEWS ROUNDUP
Sterling rallies on hopes of a late deal
The pound surged on Friday to a three-month high amid investor optimism about a last-minute Brexit deal between Britain and the European Union. Against the dollar the pound rose 1.9% to $1.2682, and against the euro was up 1.67% at €1.1489. The currency has rallied more than 3% since Thursday, its biggest two-day gain since before the June 2016 referendum on leaving the EU. Mike Cherry, national chairman of the Federation of Small Businesses, said: “After months lost in the Brexit uncertainty that has hit many of our small businesses, there finally appears to be a glimmer of hope at the end of the tunnel.”
Autumn sales see record price cuts
High street stores are slashing prices by up to 90% in a desperate bid to win customers. Jason Gordon, of Deloitte, said this autumn’s sales are “the deepest we have seen historically”.
Daily Mail, Page: 5
Investors could reap £240bn Brexit deal dividend
Data giant MSCI predicts that the pound would claw back 8% against the dollar if Boris Johnson secures a deal with the EU while London stocks would rise 10% bringing investors a £240bn “deal dividend”. Peter Garnry, head of equity strategy at Saxo Bank, commented: “Tactically UK stocks could become one of the best equity markets next year if we avoid an ugly global recession and the UK can kick-start growth again.” However, MSCI also forecast that a no-deal Brexit would trigger a 15% plunge in London-listed stocks.
Facebook’s Libra cryptocurrency abandoned by payments firms
Mastercard, Visa, eBay and payments firm Stripe have pulled out of Facebook’s cryptocurrency project, Libra, amid intense regulatory scrutiny. Last week, PayPal also announced it was also pulling out of the project. Politicians and regulators have voiced concern that Libra could be used for money laundering and may harm wider financial stability.
Contact Paul Southward.