News Roundup Friday 16th March 2018

NEWS ROUNDUP

TAX NEWS

Tax rises of £40bn needed to cut deficit, IFS says

Annual tax rises of £40bn will be needed if the government wants to keep spending constant and balance its books by 2025, according to the Institute for Fiscal Studies (IFS), which warned that poor productivity, earnings and GDP growth had become the norm. Paul Johnson, director of the IFS, said “nothing much” had changed in the Spring Statement: “If high-paid jobs – and EU citizens, who are well represented among high earners in the UK – relocate elsewhere, the consequences for the Exchequer will be severe,” he added. The IFS said the tax rises would be needed each year to retain public spending and balance the budget by the middle of the next decade, with an extra £11bn required to cover social care, health and pension costs for the ageing population.

BBC News The Daily Telegraph, Business, Page: 3 The Independent, Page: 8 The Guardian, Page: 2 Financial Times, Page: 2 The Times, Page: 2 Daily Mirror, Page: 27 The Sun, Page: 2 Daily Mail, Page: 4 I, Page: 40

Concern over cash-in-hand crackdown

Small businesses have expressed concern over Philip Hammond’s threat to axe cash-in-hand payments. The move would aim to crack down on tax-dodging, but experts claim the plans could create more red tape. Chas Roy-Chowdhury, head of taxation at ACCA, said: “The Government should have no truck with tax avoiders but we don’t want things to become unnecessarily bureaucratic, for instance having to issue receipts for everything.”

Daily Star, Page: 2

States still have capacity to provide for their citizens

The Institute of International and European Affairs’ chief economist says aggressive tax avoidance by multinationals has not yet affected the capacity of states to provide for their citizens.

Financial Times, Page: 10

INDUSTRY NEWS

ICAEW’s Izza: Audit industry needs to evolve

Michel Izza, chief executive of the ICAEW, says trust in audit is under threat but the solution is for the industry to evolve, rather than for the Big Four to be broken up. One reason he gives for the Big Four’s dominance is the risks that smaller firms would face if they scaled up. He points out that auditors carry unlimited liability, which may well deter smaller firms from deciding to tender for a large Public Interest Entity audit. Mr Izza also questions the value of compulsory re-tendering and rotation every decade, introduced as part of the European Union’s revised Audit Directive in 2014. He suggests that as incumbent auditors and some undertaking non-audit services are excluded – albeit for entirely sound and justifiable reasons – this has sometimes led to a reduction in auditor choice. Elsewhere, an FT editorial asks what the public should expect from auditors, and argues that only “radical reform” will bring the Big Four to improve audit quality.

Financial Director Financial Times, Page; 10

SMEs NEWS

SMEs shun bank debt

The latest SME Finance Monitor conducted by BDRC shows Britain’s small businesses are turning their backs on bank debt, deepening concerns over productivity and economic growth. The survey revealed that almost half of businesses now describe themselves as “permanent non-borrowers”, up from one in three in 2012. In 2017 only one in 20 companies reported having made an application for a new loan or overdraft in the previous 12 months, BDRC found. This has more than halved since 2012. The survey also highlights a marked decline in the use of external finance over the past six years. Last year just one in six companies that are not using external finance said they would be willing to do so, down from a quarter in 2015.

The Times, Page: 37

Entrepreneurs strike out at 27

Research by Xero reveals that the average age entrepreneurs decide to go it alone is 27. The survey of 1,000 small business owners also found that eight out of ten start-ups begin life with the help of friends or relatives of the founder. Xero discovered that entrepreneurs are mostly driven by a need for more flexibility (36%) and to take control (35%).

The Scotsman, Page: 33

FCA head must watch for bitcoin, Brexit and small businesses

Outgoing FCA chair John Griffith-Jones has identified Brexit, cryptocurrencies and small businesses as the key areas that his successor should focus on.

Financial Times

CORPORATE NEWS

Mossack Fonseca to shut down after tax scandal

Panamanian law firm Mossack Fonseca has announced it is shutting down due to the economic and reputational damage inflicted by its role in the “Panama Papers” scandal.

Daily Mail The Times, Page: 32 The Guardian, Page: 2

PERSONAL FINANCE NEWS

ISA Special Report

The Telegraph includes an ISA Special Report supplement. It considers how investors and the self-employed can beat the new dividend allowance cut; how savers can avoid paying more than they need to HMRC; and how entrepreneurs can turn a successful firm into a healthy income stream after retirement.

The Daily Telegraph, ISA Special Report, Page: 1-6

ECONOMY NEWS

Growth to bounce back in 2019

Analysts at Fitch Ratings have predicted that Britain’s economic growth will slow from 1.7% in 2017 to 1.4% this year before bouncing back to 1.7% in 2019. They also predict that global economic growth will rise by more than 3% in both 2018 and 2019.

The Daily Telegraph

OTHER NEWS

Dark underbelly of Europe’s financial system exposed

Simon Nixon in the Times warns that Britain’s status as the “global capital of money-laundering” is once again back in the spotlight after the poisoning of the former Russian spy Sergei Skripal. He says the UK’s “remarkable openness to the mysteriously amassed fortunes of oligarchs with links to President Putin” is largely down to the EU, which he argues has created “a single market and single financial system in which capital and people can move freely between member states.”

The Times, Page: 41

Contact Paul Southward if you have any tax queries.

Paul Southward