News Roundup Friday 23rd August 2019
News Roundup Friday 23rd August 2019
IDS: Loan charge must be suspended and reviewed
Former Work and Pensions Secretary Iain Duncan Smith has called for the “regressive, retrospective” loan charge to be suspended, urging ministers to conduct a review into the backdated tax demands which seek to claw back unpaid taxes from as far back as twenty years ago. Writing in the Mail, the former Conservative leader says the charge, which targets those who avoided tax using disguised remuneration schemes, is causing businesses to close, has forced people to lose their jobs and pushed many into bankruptcy. He adds that more than 50,000 people are affected, with many facing tax bills of more than £100,000. Many people, Mr Duncan Smith argues, “genuinely believed these loans to be a perfectly acceptable practice”. He notes that Prime Minister Boris Johnson previously spoke out over the charge and suggested a review is required. The Mail’s Victoria Bischoff also looks at the loan charge, saying that the philosophy behind it is sound but questions the fact it is retrospective, suggesting that the opportunity to pull in an extra £3.2b n in backdated tax proved “just too tempting” for HMRC.
Daily Mail, Page: 44, 47
HMRC’s tax avoidance take up by a quarter
New rules on offshore assets, along with the loan charge crackdown, have helped HMRC increase its income from tax investigations by 27% in just one year. While HMRC claimed its tax avoidance work led to £34bn being collected last year, Hacker Young noted that just £13bn of this was actually cash – the rest made up of projections of “avoided losses”. Clive Gawthorpe from Hacker Young commented: “Overall, almost two thirds of HMRC’s yield from investigations isn’t actual cash, it’s purely hypothetical and could just be a figure plucked out of thin air.” An HMRC spokesman said: “This is money that would have gone unpaid without our intervention. This figure is a record high, and more than 10% higher than in 2017/18.” On the part the loan charge played in increasing income from investigations, HMRC said that some taxpayers have settled and paid some, or all, of what they o we already, accounting for an additional £1bn – with the charge due as part of the tax returns due in January next year.
Corbyn adviser: Tax the real concern
Writing in the Independent, James Mills, a former strategic adviser to Jeremy Corbyn, looks at Iain Duncan Smith’s proposals to raise the state pension age to 75 and the economic thinking behind the move. He says that while Office for Budget Responsibility estimates suggest public spending on the state pension is expected to rise by less than 1% of GDP between 2017/18 and 2022/23, the “real concern is that of taxation”. He points to Conservative proposals around corporation tax that would reduce the headline rate to 17%, foregoing around £6bn in tax revenue annually, adding that as a share of GDP, corporation tax receipts are forecast to fall by 0.1% of GDP over the next five years.
The Independent, Page: 33
Older taxpayers pay more and receive less benefits
A study by the Office for National Statistics shows that 55-to-64-year-olds are paying far more in tax than they take out of the system. This age group pay the highest levels of tax and receive the lowest levels of benefits, the report shows. On average those born in the 1950s paid £3,000 a year more in tax than they received in benefits at ages 25 to 34, while those born in the 1980s paid £1,100 a year more in taxes than they received in benefits. People now aged 20-24 were net beneficiaries when comparing taxes and benefits, receiving £4,124 more than they paid in. Statisticians looked at annual surveys to gauge the disposable income of the highest earner in 5,000 families to compare the tax contributions and beneficiaries of public spending across the generations.
The Times, Page: 8 The Daily Telegraph, Page: 7 Daily Express, Page: 10
Pay boost the cure for doctors’ pension tax fears?
The Times’ Rosie Taylor reports that some NHS trusts are increasing doctors’ salaries in response to concern over the large tax bills some medics are facing due to Government changes to pensions rules. The change has seen some senior doctors facing tax bills of £80,000 after they paid too much into their pension. This has prompted some to refuse to work extra shifts in fear that it will push them above the threshold. A recent survey suggests three-quarters of GPs and consultants are planning to cut their hours to avoid penalties. With this in mind, some trusts are allowing doctors to opt out of the NHS pension and receive employer contributions as additional salary instead.
HMRC to enrol firms for export licences
The Treasury says HMRC will auto enrol VAT-registered small businesses for Economic Operators Registration and Identification export licences to the EU so they can present the vital paperwork at border control, with concern previously raised that large numbers of firms had not applied for the documentation that will be required if Britain exits the EU with no agreement in place. About 240,000 British companies trading solely with the EU will require the code to carry on importing and exporting, but only 72,000 have applied. The Federation of Small Businesses welcomed “a vital intervention” for many companies, while Adam Marshall, director-general of the British Chambers of Commerce, said the “common sense step” is long overdue and “will prompt more traders to prepare for change and consider what else they need to do to be ready for an unwanted no-deal scenario.” Confederation of British Industry head of EU negotiations Nicole Sykes, however, said that it was “no silver bullet” and is “just one of hundreds of things that need to be done if the very worst effects of a no-deal are to be mitigated.”
Action needed on late payments
Patrick Hosking in the Times comments in the “scourge” of late payment, saying that while it is “in the DNA of every finance director to pay bills as late as possible”, late payments tips thousands of small firms into insolvency each year and “ties up countless others into the time-wasting distraction of invoice-chasing”. He calls on the Small Business Commissioner to continue to name and shame culprits, adding that the commissioner needs additional powers that would enable him to hand out fines and award at least a portion of that fine to the victim. Mr Hosking adds that “tolerance for the invoice-dodging, excuse-spouting finance chief needs to end.” His comments come after Small Business Commissioner Paul Uppal ordered Bupa to stop “manipulating” small businesses after an investigation found that the healthcare group settled a supplier’s invoice 75 days late.
Stamp duty abolition call
Tim Worstall, a senior fellow of the Adam Smith Institute, welcomes the fact that Chancellor Sajid Javid is considering reforms to stamp duty, suggesting that “the reform should be to abolish the system.” He says that with money made via taxing property through rates and council tax, it is the taxation of property transactions “that needs to go”. He points to a study by the Economic and Social Research Council which found that stamp duty discourages people from moving, with a visible reduction in the rate of mobility when house values cross the threshold of a higher tax rate.
Holiday homes now a good ‘tax hack’
With the Government discouraging buy-to-let investments, Mike Warburton describes how furnished holiday lets are currently a good investment. Normal business expenses incurred in the running your property attract tax relief, he says, and also costs including insurance, repairs, cleaning, management charges, mortgage interest, utility bills and even travel expenses to and from the property. Take care if you buy several properties because it is possible that the combined income could exceed £85,000, Mr Warburton notes, which would mean that one would need to register for VAT.
Persimmon’s profits dip
Persimmon, the UK’s second largest housebuilder, has posted a 1.4% decline in pre-tax profit, to £509.3m, for the six months ending June 30. Julie Palmer of Begbies Traynor commented that CEO Dave Jenkinson, who replaced Jeff Fairburn in the wake of a pay scandal, “faces a recovery operation that’s going to be more than just a quick fix”.
The Daily Telegraph, Page: 28 Financial Times, Page: 18 The Guardian, Page: 27 Daily Mail, Page: 67 City AM, Page: 8
Home sales slip 8.5%
HMRC data shows that July saw 86,630 residential property sales, an 8.5% dip on June’s total and a 12.4% decline on June 2018. The volume of monthly transactions was lower than at any time in six years except April 2016 – the month stamp duty changes were introduced. Lawrence Bowles, research analyst at estate agency Savills, commented: “Brexit has undoubtedly played a role in housing market confidence, but there are other factors which add to this political uncertainty, chiefly what our new Prime Minister will mean for Brexit, the economy and tax policy.”
The Times, Page: 43 The Sun, Page: 47 The Scotsman, Page: 5
London accounts for 40% of stamp duty
Property agent Benham and Reeves has looked at the amount of stamp duty being paid in different locations across the UK, with data from 2018 showing that residential property transactions in London accounted for 11.3% of all transactions, with stamp duty receipts across the capital hitting £3,635m – 39.2% of all receipts. The South East accounted for 16.1% of transactions and 21.5% of all receipts. Benham and Reeves’ finance director Vidhur Mehra said of the findings: “Stamp duty is a tax penalty disproportionately aimed at London.” He went on to describe the levy as “an outdated, archaic practice” that is “a tax on aspiration”.
Wrightbus moves closer to rescue deal
Chinese engineering company Weichai, part of state-owned conglomerate Shandong Heavy Industry, has emerged as the frontrunner in the race to save bus maker Wrightbus, which hired Deloitte to find a buyer last month.
The Daily Telegraph, Page: 29
Souter hops off NZ buses
Souter Investments has agreed a deal to sell New Zealand-based bus businesses Howick and Eastern Buses and Mana Coach Services to France’s Transdev for an undisclosed sum. KPMG provided tax advice for Souter Investments while Deloitte provided vendor due diligence services.
The Scotsman, Page: 34
Hammerson names new finance boss
Chartered accountant James Lenton, a former partner at EY, is to take over as finance leader at retail landlord Hammerson. He will succeed Timon Drakesmith, who announced in May that he would be leaving the firm. Mr Lenton recently left AIG, where he was chief financial officer for its European business.
The Times, Page: 43 City AM
Manchester City FC backs plan for music venue next to Etihad
Manchester City are looking to build an entertainment venue next to the Etihad Stadium. Research from Grant Thornton suggests the rival venue could put the future of the Manchester Arena at risk.
Reliance on partners’ pensions leaves spouses vulnerable
Over a tenth (12%) of married women plan to rely on their partner’s pension in retirement, according to a new report from Fidelity, which also warns that 17% of women have no pension of their own at all. The average divorced woman over the age of 50 will have a pension worth £131,000, according to figures from a Wealth and Assets survey published earlier this year, compared to £454,000 for the average married couple. Helen Morrissey, pension specialist at Royal London, says early action on pension saving is vital to protect spouses being overly-reliant upon others’ pensions.
ONS: Economy £26bn bigger than previously thought
Calculations by the Office for National Statistics (ONS) have added an extra £26bn to annual GDP. The analysis, which looks at data going back to 1997, reveals that the economy was 1.3% bigger at the end of 2016 than previously estimated. This comes after the ONS identified that Government departments and charities replace buildings, machinery and other capital more frequently, businesses develop more software in-house, and services exports are larger. The findings, which add an average of 0.1 percentage points to annual growth over the 20 year period, also show that the financial crisis was less severe than previously thought, with the economy shrinking 6% rather than the 6.3% previously calculated. On the impact of the new calculations, it is noted that national debt is now smaller as a proportion of GDP and that the new totals plug a productivity gap between the UK and other countries, having identified output that was not previously recogni sed.
Government finances weaker than expected in July
UK public finances broadly underwhelmed in July, with Government receipts down 0.5% on last year – to £67.9bn. Increased outlay on wages and increased spending on goods and services saw July’s surplus total £1.3bn, falling short of last year’s £3.6bn and an analyst estimate of £2.7bn. Borrowing so far this year has grown to £16bn, an increase of 60% on last year. Tax payments reached £9.4bn last month, with the corporation tax take dropping by £100m while VAT increased only marginally. Howard Archer, chief economic adviser to the EY ITEM Club, commented: “Central government revenues were down 0.5% on a year earlier, reflecting a combination of weak activity and the generous increases in income tax allowances which came into force in April,” adding: “At the same time, current expenditure has continued to run at a pace well ahead of that implied by the full-year plans.” John Hawksworth, chief economist at PwC, said the public finance data provides “a further indication that the long period of falling budget deficits in the UK since 2009/10 is likely going into reverse in 2019/20,” adding that this “partly reflects a slowing economy and partly government action to cut taxes from April and ease off on austerity as we approach Brexit.”
Scottish figures point to ‘union dividend’
Figures from the Government Expenditure and Revenue Scotland report suggests Scots have benefited from a ‘union dividend,’ with public spending north of the Border £1,661 higher per person than across the UK as a whole in 2018/19. Public-sector revenue north of the Border was £11,531 per person last year, £307 less than the UK average, while total expenditure was £13,854 per person, £1,661 higher than the UK average. The report shows that the Scottish deficit was £12.6bn in 2018/19, compared with £23.5bn for the UK as a whole.
UK’s largest firms spend £2bn on ‘key management personnel’
A report from the High Pay Centre think-tank and the Chartered Institute of Personnel and Development shows that FTSE 100 businesses spent £2bn on pay for 1,394 individuals described as “key management personnel” last year. The figures show that the median pay for CEOs fell 13% to £3.46m as chief executives shared a pot of £465.4m, meaning a pay ratio between FTSE 100 CEOs and their employees of 114:1. The report also highlights the gender gap across large firms, with only six female bosses across FTSE 100 companies in 2018, down from seven in 2017. The analysis also looked at FTSE 250 companies, noting that pay averaged £1.58m in 2016 and 2018, climbing 2% to £1.61m in 2017.
Stephens outnumber women at the top of big firms
Analysis by the CIPD shows that there are more FTSE 100 CEOs called Stephen than there are female bosses at the top band of firms. While only six chief executives at top 100 firms are women, seven are named Steve or Stephen – and six are named either Dave or David. The report also highlights that female CEOs are paid 32% less than their male counterparts and, despite making up 6% of CEOs at FTSE 100 firms, the female bosses account for 4.2% of the pay handed to chief executives, with just one woman – GlaxoSmithKline’s Emma Walmsley – among the 25 highest paid CEOs in the FTSE 100. Across FTSE 250 companies, only 8 of the 250 CEOs are women. The report also shows that 42% of firms meet a Government target that 33% of board members should be women by 2020, with just 8% of women on boards currently in executive roles.
Contact Paul Southward.