News Roundup Friday 19th July 2019

NEWS ROUNDUP

TAX NEWS

Glaxo, Vodafone and BT challenge EU tax clawback demand

More than a dozen companies have challenged an EU order forcing the UK to claw back millions in tax breaks after EU Antitrust Commissioner Margrethe Vestager claimed in April that some corporations had received unfair tax subsidies. GlaxoSmithKline, Vodafone Group and BT Group are among the companies to have brought a challenge and the UK government last month also sued the European Commission seeking an annulment of the regulator’s April order. The April decision relates to a 2013 UK exemption allowing companies to pay little or no tax on income from interest payments on loans received from a foreign unit through an offshore subsidiary. Ms Vestager considered the exemption illegal when the financing income stemmed from UK activities but the EU has said the exemption was modified at the end of last year in a way that no longer raises concerns.

Bloomberg

Small business and those on low incomes will pay

Paul MacDonnell of the Global Digital Foundation claims digital services taxes levied on US platforms will hurt small businesses and people on low incomes through higher costs for goods and services. Meanwhile, the Sun reports that Philip Hammond will try and thrash out a solution to the international tax system when he meets finance chiefs in France tomorrow.

Financial Times, Page: 10 The Sun, Page: 4

MTD leniency

As the deadline for Making Tax Digital approaches, HMRC has said that it will be lenient with companies that encounter problems registering for the service providing they act in good faith. “During this first year we won’t be issuing filing or record keeping penalties to businesses doing their best to comply,” Theresa Middleton, Director of Making Tax Digital at HMRC says.

Accountancy Daily

Security services stymie HMRC fraudsters

Attacks by criminals pretending to be the taxman have fallen by 58% in a year as GCHQ becomes more adept at stopping them. The security services said a total of 140,000 cyber-attacks were blocked by the agency in 2018. It said pensioners were vulnerable because they can be less suspicious about emails and texts.

Daily Mail, Page: 20

Laffer Curve claims disputed

The Guardian’s Polly Toynbee disputes what she calls myths about the Laffer Curve – the theory that revenue increases as taxes come down. She says this only stands when taxes are above 75% and that until then, higher taxes produce higher revenues.

The Guardian, Page: 3

Jesse Norman accused of “sleight of hand” over loan charge concession

Treasury minister Jesse Norman told the House of Lords’ Economic Affairs Committee yesterday that contractors who used loan-based tax avoidance schemes will be exempt from the controversial “loan charge” if they told the tax office they were using a scheme and were subsequently investigated with no action taken. Some 50,000 contractors have been targeted with the loan charge which has been criticised for being “retrospective”. In the Lords session Mr Norman said: “HMRC will not apply the loan charge to a tax year where an inquiry was closed on the basis of fully disclosed information.” But Steve Packham, of the Loan Charge Action Group, said: “It makes virtually no difference and it’s a sleight of hand to give the impressions of listening and doing something.” He added: “The reality is that all closed years where HMRC raised no concerns and signed off on people’s tax returns will still be purs ued and many such people ruined.”

The Daily Telegraph Financial Times

Bruno Le Maire urges G7 global corporate tax deal

France’s finance minister Bruno Le Maire has urged the G7 economies to reach a deal over a global minimum corporate tax rate, a move he said would “give a very important impetus for a decision at the OECD.” Mr Le Maire said if an agreement in principle can be secure Paris would withdraw its own tax on digital giants. He said he hoped France and the US would find compromise over the digital tax, which the US says unfairly targets American companies. The FT points out that the US has accepted the idea of a minimum tax rate for all companies and agrees with France on the threat from cryptocurrencies. Mr Le Maire echoed Donald Trump’s warnings on Facebook’s Libra currency, saying that it could have a “systemic impact” on the world’s financial system.

Financial Times The Guardian, Page: 24 Yahoo! News

Neville-Rolfe calls for business tax reform

Former Tory Treasury minister Baroness Neville-Rolfe has told the House of Lords that the tax system is dampening business growth, with the length of the tax code doubling in ten years along with growing regulatory burdens in every sector. She called on Government to increase the proposed rate of digital services tax and use the proceeds to ease the burden of rates on the high street. Stamp duty increases had put the brakes on the housing market and had a “deleterious effect” on the movement of labour, she added, while small businesses struggle under the burden of administering PAYE, NICs and auto enrolment pension systems. During the debate, Lord Cavendish called on the Government to change its attitude towards the SME sector, noting that the proportion of them citing tax and regulation as a burden to growth had increased over recent years.

economia

IoD: Devolve powers to regions for post-Brexit boost

The Institute of Directors has said that Britain’s industrial strategy could help UK regions compete after Brexit through the radical devolution of powers over skills and training, business taxes and incentives, and infrastructure. “Our towns and cities need more autonomy to respond to economic shifts,” said Tej Parikh, the IoD’s chief economist.

The Daily Telegraph, Business, Page: 31

Government urged to extend Gift Aid to higher-rate taxpayers

A report from the Charity Tax Commission (CTC) calls on the Government to allow higher-rate taxpayers to pass their tax relief on to good causes, a move it claims could be worth £250m a year. Charities can boost donations by claiming back tax the donor has paid from HMRC – via the Gift Aid scheme – but only at the basic rate. Higher rate taxpayers are able to claim the difference themselves but the CTC wants all the higher-rate tax relief to be automatically redirected to charities, with an opt-out if the donor wants it.

The Daily Telegraph

G7 nations struggle to reach compromise on digital tax

Although G7 finance ministers struggled to come to an agreement on how to tax digital companies, consensus on a minimum corporation tax was growing, the FT reports.

Financial Times, Page: 4

INSURANCE NEWS

UK deals blow to insurers with change to discount rate

Britain will change the so-called ‘Ogden Rate’ used to calculate compensation for personal injuries to minus 0.25% from minus 0.75%. The move is a blow for insurers, who had been expecting a rate of around 0.5% and had moved to setting their reserves based on a rate of 0%. The system determines pay outs based on the returns an accident victim can expect to see from investing the money. But insurers said it did not go far enough and was still overgenerous to victims. PwC warned the move would push up the average motor insurance premium by between £15 and £25, with younger drivers facing a hike of between £50 and £75.

Financial Times, Page: 18 Daily Mail, Page: 14 Daily Express, Page: 25 The Daily Telegraph, Page: 9 The I, Page: 39

EMPLOYMENT NEWS

Managed automation could lead to a more gender-equal future

Without Government intervention the rise of automation will only widen the gender pay gap, according to a report from the IPPR. The think tank claims that working women are more than twice as likely as working men to hold jobs with a high potential for automation. However, the research shows that, if managed well, an accelerated drive to automate sectors of the UK economy could present an opportunity to reduce gender inequalities by reshaping how people work and share the economic benefits. Carys Roberts, IPPR chief economist, said: “A more gender-equal future will not happen spontaneously. Realising this opportunity will require a managed acceleration of automation, led by those who could be affected by it.”

Yorkshire Post, Business, Page: 4

SMEs NEWS

Tim Ward: Political uncertainty has gone on too long

Tim Ward, the CEO of the Quoted Companies Alliance, says in the Yorkshire Post that small companies are suffering a fall in optimism that is putting the economy at risk. He argues that with any trade agreement with the EU likely to take years, and therefore an element of political uncertainty continuing, the next chancellor needs to maintain the confidence of British growth companies, on which 3m people and £26bn in taxes depend.

Yorkshire Post, Business, Page: 6

Goldman backs loan start-up Lendable

British personal-loan start-up, Lendable, has struck a £200m deal with Goldman Sachs in a sign of investor confidence in the UK despite the growing prospect of a no-deal Brexit.

Financial Times, Page: 18

BBB increases support of small companies

The British Business Bank backed more than 89,000 companies with £6.6bn of support in 2018-19 – a 27% increase from £5.2bn a year earlier. Keith Morgan, chief executive of the national development bank, said he would seek extra capital from the Government to cover the absence of EU regional development funds after Brexit.

The Times, Page: 36 Financial Times, Page: 3

Late-payers face ban from government contracts

New rules coming into effect on Sept 1st require firms to pay 95% of their invoices within 60 days or face a ban on applying for public sector contracts worth more than £5m. The crown representative for small businesses Martin Traynor said the Government wants to “set an example” for private businesses as well as reminding schools, hospitals and government departments of their duty to pay their own suppliers within 30 days.

The Daily Telegraph, Page: 28

Loch Ness cruise firm wins FSB award

Cruise Loch Ness has been named UK Small Business of 2019 at the Federation of Small Businesses’ (FSB) annual awards. The Fort Augustus-based family firm was congratulated for its continued investment over more than 50 years in operation, customer service focus and adoption of new technology.

The Press and Journal, Page: 13

Late payers shamed

BT, British Gas owner Centrica and parts of defence giant BAE Systems are among 18 large companies named and shamed for paying suppliers late. Prudential and BAT are also on the list. All have been suspended from the voluntary Prompt Payment Code as a result. Paul Uppal, the Government’s small business commissioner, said: “Large companies not meeting the code standards need to note their unethical payment practices will not be tolerated.” Mike Cherry, national chairman of the FSB, added: “This second wave of suspensions indicates that the government is serious about tackling the late payments crisis in the UK.”

Daily Mirror, Page: 48 The Times, Page: 40

HSBC under fire for not signing up to code

Women’s rights groups have criticised HSBC after the bank failed to sign up to the Investment in Women Code, which aims to support female entrepreneurs. The bank is the only large British lender not to support the code, which has RBS, Lloyds, Santander, TSB and Barclays among the signatories. A spokesperson for HSBC said: “We support the spirit of the code and the ambition to support female entrepreneurship; we look forward to signing up once final details have been agreed.”

Daily Mail The Daily Telegraph, Page: 31

PROPERTY NEWS

Average house price in Scotland to soar

PwC ’s latest UK Economic Outlook report states that a decade of wage stagnation and population growth has resulted in rental affordability ratios deteriorating significantly in parts of the country, with key public workers in many areas spending more than 30% of their monthly salary on rent. The firm also said that the average house price in Scotland is predicted to rise by 14% over the next four years to £170,000 – but only if a no-deal Brexit is avoided.

The Times, Page: 45 The Guardian, Page: 17 The Scotsman, Page: 11 The Press and Journal, Page: 29

PERSONAL FINANCE NEWS

UK suffering recession-level squeeze on living standards

Household incomes have been squeezed more tightly in recent years than during the 1990s recession, according to the Resolution Foundation’s annual Living Standards Audit. The think tank estimates that typical household incomes have fallen by 0.5% over the past two years, weaker than the 0.3% growth recorded between 1991 and 1993. The report argued that while households had managed to boost incomes by working more and curtailing leisure time, they might be “running out of road” when it came to improving their situation in this way.

The I, Page: 38 The Guardian, Page: 31

Insolvencies worst among women, and in the north

The annual report from the Insolvency Service shows the number of people becoming financially insolvent in England and Wales has risen for a third year in a row. The overall insolvency rate in 2018 hit 25 for every 10,000 adults – an increase of 3.6% on the previous year. A marked regional split was highlighted in the report, with the highest number of insolvencies in the northeast and the lowest in London. Additionally, the insolvency rate for women was 26.6 per 10,000 adults against 23.3 for men. Mark Sands of the insolvency and restructuring trade body R3 said: “The gender split in insolvency is a sober reminder that women are more likely to be economically disadvantaged than men.”

The Guardian, Page: 35

WEALTH MANAGEMENT NEWS

Family office numbers soar

Advisory group Campden Wealth says the number of family offices worldwide has increased by 38% from two years ago to 7,300. The companies, which manage investments exclusively for ultra-rich families, now look after £4.7trn on behalf of wealthy investors.

Daily Mail, Page: 71

PENSIONS NEWS

Landmark pension ruling to apply to all UK public sector schemes

Responding to a recent Supreme Court ruling on changes to firefighters’ and judges’ pension schemes, the Government has confirmed that the ruling will apply to members of all the main public service pension schemes.

Financial Times

Regulator probes concerns employers are avoiding pension duties

The Pensions Regulator is investigating concerns that some SMEs have been using “shape-shifting” tactics to deny pensions to staff, and whether “rogue” advisers are suggesting employers use the tactic.

Financial Times, Page: 2

CORPORATE NEWS

McCoo artwork firm plunges into liquidation

Liquidators from FRP Advisory were called in after Ayr-based Steven Brown Art Limited got into financial difficulties. The company behind the “McCoo” brand of artwork collapsed with the loss of 21 jobs.

The Scotsman, Page: 5

Arcadia faces legal battle over restructuring

Arcadia faces a court battle with New York-based property group Vornado over its plans to reduce rents through a restructuring process. The legal challenge concerns two of the retailer’s seven Company Voluntary Agreements (CVAs), relating to Topshop and Topman stores. Arcadia chief executive Ian Grabiner described the challenges as “without merit” and said Sir Philip Green’s company would “vigorously defend” itself.

The Daily Telegraph, Business, Page: 31 Daily Mail Financial Times, Page: 18 The Times, Page: 40

Number of mega-funding venture capital rounds hits record

A report from CB Insights and PwC shows how wealthy venture capital firms fed $100m or more in cash to private companies last quarter, delaying their arrival on public markets.

Financial Times, Page: 16

Creditors of failed ski firm likely to lose out

Firms owed cash by Cairngorm Mountain Ltd, the failed operator of Cairngorm ski resort, may not receive the full amount, a progress report from Renfrew-based administrators Campbell Dallas into the collapse has revealed.

The Press and Journal, Page: 5

Money Shop sets aside £18m for compensation

EY and Freshfields are to oversee plans to compensate Money Shop customers who were sold loans they could not afford to repay. The pawnbroker, which is owned by Instant Cash Loans, is preparing to set aside £18m for redress under arrangements supported by the FCA.

The Times, Page: 41

ECONOMY NEWS

Wage growth at highest rate since 2008

Wage growth in the UK rose to 3.6% in the year to May 2019, the highest growth rate since 2008, according to ONS figures. Wages have been outpacing inflation since March 2018. A record high of 32.75m people were in employment up to the end of May, while 1.29m were out of work, the lowest since at least 1992. However, James Reed, chairman of Britain’s biggest recruiter Reed, has revealed that the company saw the biggest fall in job vacancies since 2010 in June, an indication that “worrying storm clouds are forming around the UK’s job market.” Finally, a survey by Johnston Carmichael has found that almost three-quarters of Scottish farm businesses are finding it difficult to recruit staff. Employers blame uncertainty over freedom of movement rules after Brexit.

BBC News The Daily Telegraph Financial Times The Daily Telegraph The Press and Journal, Page: 35

Increased chance of no-deal sends the pound down

Demands from Jeremy Hunt and Boris Johnson that the Irish backstop be cut from any deal with the EU helped send the pound to its lowest level in more than two years. The increased likelihood of a no-deal Brexit saw Sterling hit a 27-month low of $1.2409.

Daily Mail Financial Times, Page: 1 The Times

OBR warns of no-deal recession

The Office for Budget Responsibility is expected to warn today that a no-deal Brexit will push the UK into a recession next year and lead to an economy 3% smaller than if it leaves with a deal. The OBR’s analysis is based on a relatively “soft” scenario that was modelled by the International Monetary Fund in April, the Times reports. Meanwhile, the Chancellor has hit back at Jacob Rees Mogg after he dismissed Treasury forecasts as “silly” saying it was “terrifying” to think he could soon become part of government. But Stephen Barclay, the Brexit secretary, joined in the criticism of Philp Hammond saying his claim that a no-deal would cost £90bn was a prediction for 2035 and assumed there would be no government intervention.

The Times, Page: 1, 2

Pound could hit parity with dollar in no-deal Brexit

Morgan Stanley has predicted that the pound could fall to parity with the dollar in the event of a no-deal Brexit. The bank said the fall to historic lows would come under the market’s worst-case scenario – the UK leaving the European Union without a deal – a risk that the bank says is growing.

The Daily Telegraph

Inflation remains steady

Data from the ONS shows consumer prices rose 2% in June compared with a year ago, the same rate of inflation as in May and in line with the Bank of England’s target.

The Independent

OTHER NEWS

Accountant had 1,700 upskirting images

A court has heard that an accountant who was caught trying to take upskirt films of female shoppers at a London store had 1,700 similar clips and images on his mobile phone. Leon Chan admitted to making 97 sample images of upskirting. Michael Magarian QC, representing Chan, said: “He can be described as a high flier . . . he will now face professional disciplinary proceedings as a result of this conviction.” Chan has been released on bail until a sentencing hearing on a date to be set.

Evening Standard US treasury chief fears Facebook’s Libra could be misused

Facebook’s planned Libra cryptocurrency is facing further opposition after the US treasury secretary warned about its potential criminal use. Steven Mnuchin told a press conference it could be used by “money launderers and terrorist financiers” and said it was a national security issue. The views were echoed by Philip Hammond, who said Libra is “potentially a positive, transformative step. But it also has the potential to deliver great risk into the system.”

BBC News Daily Mail
Accountant had 1,700 upskirting images

A court has heard that an accountant who was caught trying to take upskirt films of female shoppers at a London store had 1,700 similar clips and images on his mobile phone. Leon Chan admitted to making 97 sample images of upskirting. Michael Magarian QC, representing Chan, said: “He can be described as a high flier . . . he will now face professional disciplinary proceedings as a result of this conviction.” Chan has been released on bail until a sentencing hearing on a date to be set.

Evening Standard

UKSA has failed to protect the quality of official figures

MPs have called for the UK Statistics Authority (UKSA) to be broken up arguing that it has failed to protect the quality of official figures. A report by the public administration and constitutional affairs committee recommended splitting it into two separate bodies, one as provider of statistics and one as regulator. Sir Bernard Jenkin, chairman of the committee, said: “In a time of growing concern about disinformation, the public needs access to trustworthy national statistics.”

The Times, Page: 40

UK financial system is ready for Brexit

Writing in the Yorkshire Post, Juliette Healey, the agent for the Bank of England in Yorkshire and Humber, claims the UK’s financial system is prepared for the risks of Brexit, whatever form it takes.

Yorkshire Post, Business, Page: 6

Contact Paul Southward [TAX CONSULTANT].

Paul Southward