News Roundup Friday, 11th October
News Roundup Friday, 11th October
TAX NEWS ROUNDUP
PM’s spending plan may mean tax cuts are unaffordable
A report from the Institute for Fiscal Studies (IFS) and Citibank has warned that Boris Johnson’s proposed public spending would see the Chancellor overshooting the Government’s borrowing limit by £5bn in 2020/21 – leaving tax cuts pledged by the Prime Minister unaffordable. Mr Johnson, in pledges made during his leadership campaign, promised to cut income tax by raising the higher rate income tax threshold from £50,000 to £80,000 in 2020/21, a policy the IFS described as a “substantial and expensive tax cut from which only those on high incomes would gain”. IFS director Paul Johnson cautioned the Government against further tax giveaways given the “extraordinary level of uncertainty and risks facing the economy and public finances”. The IFS has also called for reform that would remove a “bizarre” and “arbitrary” income tax quirk that means higher earners pay an effective rate of 60%. The gradual removal of the £ ;12,500 tax-free personal allowance by £1 for every £2 for anyone earning more than £100,000 means that, once national insurance contributions are factored in, the effective rate can be as high as 67%. The IFS and Citi report also said the economy is about £60bn smaller than if the country had voted to stay in the EU, while a no-deal Brexit could mean zero growth for two years.
Opinion: Ministers must look at IHT
Rachel Griffin in the Express says the Government needs to “look closely” at inheritance tax rules and ensure the levy “is taxing those it intends to.” She warns that the system is a “minefield”, noting that the 2018/19 tax year saw more than 5,500 IHT investigations opened by HMRC.
Daily Express, Page: 8
No-deal tariffs outlined as Brexit approaches
The Department for International Trade has published a revised list of temporary tariffs which would apply to UK imports in the event of a no-deal Brexit. Some 88% of goods would be exempt from import tariffs for a year, with around 80% of goods entering the country tariff-free under current trading arrangements. Centre for European Reform trade expert Sam Lowe described the plans as “quite an extensive unilateral liberalisation”, noting that: “The rationale is that they want to keep tariffs low on EU imports. On day one they are still going to be our main market. So you don’t want tariffs to shoot up all of a sudden as prices will just shoot up.”
‘Tax increases could damage UK business’ – Uber
A tax probe which could trigger a 20% VAT charge on all its bookings could cripple Uber’s UK business, the firm has stated as it released accounts showing a 15% rise in British revenues last year to £68m. Profits more than doubled from £2.4m to £5.1m. This follows an announcement by HMRC in May that the company was under investigation over allegations that it owes more than £1bn in taxes. The firm denies it is a transportation provider and therefore is exempt from VAT, a position HMRC disagrees with. Barrister Jolyon Maugham has taken the company to the High Court over an attempt to bring a VAT claim against it for a £6.34 journey.
Lloyds contractors face job loss or pay cuts over tax changes
HMRC’s continued targeting of disguised employment has spooked Lloyds with the bank informing thousands of contractors they face losing their jobs or taking pay cuts of up to 30% after March 2020. Lloyds has told its contractors that they will have to provide work through third-party “umbrella companies”. This most likely would mean contractors taking a pay cut or joining the PAYE system through which direct employees are paid.
Anger over Cadbury’s tax “wheeze”
The Sun reports that Mondelez UK, the parent company of Cadbury’s, paid just £271,000 in UK tax last year despite sales of £1.7bn. Companies House documents show the company posted profits of £35m for 2018 but paid dividends of £200m to its parent firm in tax haven Switzerland. Robert Palmer, of Tax Justice UK, said: “We need to end clever wheezes that companies like Cadbury’s can use to slash tax bills.” Harry Fone, of the TaxPayers’ Alliance, added: “Armies of lawyers and accountants for multinational companies are able to exploit loopholes to reduce tax bills. We need a simpler, more competitive system.”
The Sun, Page: 26
Is getting married tax efficient?
The Telegraph analyses whether getting married for financial reasons is worthwhile, after an investigation by Blick Rothenberg, carried out for Telegraph Money, showed that couples with straightforward tax affairs could end up paying off the £32,000 average cost of a British wedding for 128 years, while those with more complicated tax affairs could do so with a property sale, or upon their deaths. The company’s Stefanie Tremain noted: “Of course there are other reasons to get married than finance, but this shows there are lots of things to think about from a tax perspective and couples should ensure that their financial arrangements are tax efficient.” Other examples using various incomes and scenarios are provided.
Uber’s UK VAT liability confirmed
The FT considers HMRC’s VAT claim against Uber and the danger that time to collect a potential £1.1bn bill could run out unless the tax authority engages a protective assessment as soon as possible.
CORPORATE NEWS ROUNDUP
Ashley dismisses HoF closure claim
Sports Direct owner Mike Ashley has refuted reports that he is planning to shut most of House Of Fraser’s 53 shops after Christmas, insisting he is renewing leases and investing in the chain. The Mail says Mr Ashley is “desperately trying to keep his ailing retail empire on the straight and narrow,” with the retailer seeking an auditor after Grant Thornton stood down. If the firm cannot find one, its future as a listed company could be at risk.
Daily Mail, Page: 72
Red tape bill for UK-EU trade under no-deal Brexit set to hit £15bn a year
HMRC has warned that a no-deal Brexit could see businesses facing an extra £15bn in admin costs related to customs paperwork, with the total excluding any new VAT costs.
Ikea could face EU tax repayment order
Millions of euros in back taxes could be paid by Ikea by the end of the year, with the European Commission preparing to complete an investigation into Inter Ikea, the brand owner of the furniture chain. Ikea stated: “Just like all other companies working under the Ikea trademark, Inter Ikea Systems BV is committed to paying taxes in accordance with laws and regulations wherever we operate.”
The I, Page: 39 City AM
Pizza Express set for talks over £1bn debt pile
Pizza Express has reportedly hired financial advisers ahead of a meeting with lenders to review its debt situation, with the restaurant chain understood to have brought on board restructuring experts Houlihan Lokey to discuss options. The firm’s net debt stood at £1.1bn in 2018, with £465m due to be repaid in less than two years’ time.
IPOs see quietest quarter in a decade
EY ’s tracker of initial public offerings shows that just four listings took place in the UK between July and September, the quietest quarter for UK listings in a decade.
Daily Express, Page: 51
Pub chain creditors get 2p top up
Pub operator SFI Group, which was liquidated in 2005 paying unsecured creditors 28p in the pound, is to be restored to the register of companies due to the discovery of an account containing £241,000. Liquidators from PwC say the move may be worth only another 2p in the pound to creditors.
Poor corporate financing to blame for Thomas Cook collapse
The CEO of the Association of British Travel Agents (Abta) has said the collapse of Thomas Cook was “more a failure of corporate finance than a failure of travel” claiming the company “paid £1.2bn in finance charges over the past six years, plus goodness knows how much in advisory fees to the City.” Mark Tanzer added: “Those were profits from its holiday business, money that in a more balanced financial model would have been available to invest and develop the business. It has ended up killing the milk cow they [the lenders] were feeding off.”
The Independent, Page: 16
Links of London appoints administrators
Deloitte has been appointed as administrator to Links of London, which has collapsed with hundreds of jobs put at risk. Matt Smith, joint administrator, stated: “We intend to continue to trade the business and will be exploring any options for a sale. If this cannot be achieved, then we will seek to realise stock and other assets over a period of trading for the benefit of the company’s creditors.”
The Daily Telegraph, Business, Page: 8 The Guardian, Page: 37 The Times, Page: 35 Daily Mail, Page: 78
Thomas Cook’s shops bought by Hays Travel
Hays Travel has bought all 555 Thomas Cook shops in a move that could save 2,500 jobs. Hays has 190 shops, 1,900 staff, and last year had sales of £379m, reporting profits of £10m. Jim Tucker, partner at KPMG, which assisted with Thomas Cook’s insolvency process, said the Hays deal was “an extremely positive outcome”.
Toys R Us case goes to court next month
Toys R Us administrator Moorfields has revealed a November court date for its fight with a group of American investors to determine how much cash the pensions lifeboat can recover from the retailer. The court case will determine whether the hedge funds rank ahead of other creditors, which would reduce the sums available to unsecured creditors, including the Pension Protection Fund and HMRC.
Cost of pension tax relief rises
Latest data from HMRC shows income tax relief on pension contributions is expected to cost the government more than £21bn this year, with national insurance relief to hit £18.7bn. Income tax relief on pension contributions is estimated to cost £21.2bn in 2019/20, up 4% from £20.4bn in the previous year.
FT Adviser Daily Mirror, Page: 51
EMPLOYMENT NEWS ROUNDUP
Vacancies rise at slowest pace since 2012
Job vacancies rose at their slowest pace since January 2012 in September, a report from KPMG and the Recruitment and Employment Confederation shows. James Stewart, vice-chairman of KPMG, said: “The Brexit impasse continues to affect the jobs market, with employers stuck, unable to make informed decisions, and people unwilling to risk seeking new roles.”
The Times, Page: 38 The Scotsman, Page: 35
Recruiters warn profits will be dented by global political uncertainty
Global political uncertainty from Brexit, Hong Kong protests and US-China trade friction, will hit profitability this year, two of the UK’s biggest recruiters have warned. PageGroup downgraded its profit outlook, while rival Robert Walters said its full-year profits would be flat compared with last year. Robert Walters insistent the turmoil was simply political adding that continued Brexit uncertainty would be worse than no-deal.
Employers PAYE Settlement Agreements
HM Revenue & Customs have admitted that their systems may have failed to issue payslips to all employers notifying them of the amounts they owe under PSA. Employers are warned that despite the HMRC failings, they are still responsible for ensuring that the appropriate tax and NI is paid on time. Late payers may be exposing themselves to penalties and interest.
Think-tank says bosses should have legal duty to increase pay
Company directors should be put under a new legal duty to turn rising profits into increased wages and training for staff, according to the Social Market Foundation. Corporate governance laws should be tightened to increase pressure on bosses to help workers increase their pay over time, the think-tank said. in a report supported by the Joseph Rowntree Foundation, the SMF also called for pension funds and other big investors to support socially-responsible approaches to capitalism.
The Times Yorkshire Post, Page: 18
Halifax says house price growth at six-year low
Mortgage lender Halifax has said house prices increased 1.1% in the year to the end of September, the slowest rate since April 2013, and asserted that for as long as economic uncertainty in Britain continues price growth would remain “subdued”. The cost of the average home in September was down by 0.4% compared with August, at £232,574.
Brexit preparation grants released
The Government is to release £10m in grants to a host of trade associations and business organisations to help them prepare the firms they represent for Brexit. The grants will be issued by the Business Readiness Fund with the Federation of Small Business and the British Chambers of Commerce among the organisations to have received grants through the scheme.
City AM, Page: 11
Judge tells Trump to hand over tax returns
A judge has ordered US President Donald Trump to hand over his tax returns to investigators, saying Manhattan’s district attorney could subpoena eight years of Mr Trump’s personal and corporate tax returns from his accountants, Mazars USA. Lawyers for the President immediately appealed to the US Court of Appeals for the Second Circuit, which issued a temporary stay of the judge’s order.
US billionaires now paying less tax than the working class
A study by economists Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley has found that America’s richest billionaires paid a lower effective tax rate than the working class for the first time. In 2018, the average effective tax rate paid by the richest 400 families in the country was 23%, a full percentage point lower than the 24.2% rate paid by the bottom half of American households. In 1980, by contrast, the 400 richest had an effective tax rate of 47% . In 1960, their tax rate was as high as 56%. The effective tax rate paid by the bottom 50%, by contrast, has changed little over time.
The Independent, Page: 29
Retail sales fall in September
The latest report from the British Retail Consortium (BRC) and KPMG shows that retailers last month had their worst September since records began in 1995. Total retail sales fell 1.3% year-on-year. Online sales climbed but by just 0.7%, the slowest growth on record. Lower spending is attributed to “the spectre of a no-deal Brexit”, with the BRC’s Helen Dickinson stating: “With four months of negative sales growth since March, the ongoing political gridlock surrounding Brexit is harming both consumers and retailers.” Paul Martin, UK head of retail at KPMG, commented: “Ongoing Brexit uncertainty is clearly having a material impact on the consumer psyche.”
The Daily Telegraph, Business, Page: 5 The Guardian, Page: 31 The Independent, Page: 48 Financial Times, Page: 3 The Times, Page: 35 The I, Page: 38 Daily Express, Page: 51 The Sun, Page: 43 City AM, Page: 4
Retailers brace for tough Christmas as confidence slumps
Consumer confidence has slumped to a five-year low, pointing to a challenging Christmas trading period for retailers. A survey by PwC shows only 21% of shoppers think they will have more disposable income in the coming year, while 28% expect their amount of extra cash to decrease, marking the lowest autumn sentiment levels since 2014.
City AM Daily Mail, Page: 69
JMW Turner features on new £20 note design
The new design of Britain’s £20 banknote has been unveiled by the Bank of England. Security features on the next £20 note, featuring artist JMW Turner, will include two see-through windows on the note and a metallic hologram. In the first half this year, 88% of detected banknote forgeries were £20 notes, the Bank’s statistics show. The new design, which the Bank describes as its most secure, enters circulation on 20 February next year. The Federation of Small Businesses (FSB) welcomed the new, more secure design. “The introduction of this new £20 note is a great step to cutting down on fraud which is a thorn in the side of small firms,” said FSB national chair Mike Cherry.
Contact Paul Southward.