News Roundup Friday 25th October 2019
News Roundup Friday 25th October 2019
TAX NEWS ROUNDUP
IFS boss: Labour plans likely to push up taxes
Paul Johnson, the director of the Institute for Fiscal Studies (IFS), has said that spending plans outlined by Labour are likely to lead to higher taxes for those on average incomes. In an interview with City AM, he points to the party’s plans to renationalise railways, water and energy companies, and Royal Mail, noting that evidence from other countries suggests the spending necessary for such moves is usually funded through higher taxes. “That’s what you’d probably have to do,” he commented.
IFS criticises entrepreneurs’ relief
The Institute for Fiscal Studies has told the Chancellor that tax breaks for business owners give the rich an unfair advantage, saying the policy allowed wealth to “accrue disproportionately to those at the very top of the income distribution”. The think-tank also said low rates of capital gains tax on business income did not encourage businesses to invest in the UK. It added that entrepreneurs’ relief costs the government about £2.4bn a year in lost income. The IFS said: “We do not find any evidence that tax-motivated retention of profits translates into more investment in business capital”. It added: “If one of the aims of reduced capital gains tax rates on business assets is to incentivise individuals to invest more in their businesses, this evidence suggests they are not working.”
The Times, Page: 40 The Guardian, Page: 33
Think-tanks question Labour IHT proposal
Ben Harris-Quinney, chairman of the Bow Group think-tank, has questioned Labour proposals for reform of inheritance tax, saying replacing it with a lifetime gifts tax “would tax every significant exchange between family members before death.” This, he added, would mean “birthday gifts, Christmas gifts, and help with buying a first property would all potentially be subject to further taxation.” Tim Focas, director of think-tank Parliament Street, has also commented on proposals set out in the independent Land for the Many report, saying the IHT plan “means anyone trying to pass on a family home or business property will face a massive tax bill.” A Labour Party spokesperson said the independent report “does not constitute Labour Party policy.”
Chancellor set to drop tax cuts
Chancellor Sajid Javid is set to opt for public spending over tax cuts in his budget, putting plans to cut tax bills of people earning more than £50,000 a year on hold. A Treasury official said: “Public sector finance figures mean we need to be realistic about how much space we have and whether now is the time for sweeping tax cuts.”
Nobel prize winner points to tax cut myth
Abhijit Banerjee, winner of the Nobel prize for economics, says raising taxes rather than tax cuts drives economic demand. He suggests that reducing taxes to boost investment is a myth spread by businesses, saying: “You are giving incentives to the rich who are already sitting on tons of cash.” He added: “You don’t boost growth by cutting taxes, you do that by giving money to people … Investment will respond to demand.”
The Independent, Page: 54
HMRC doubling resources for tax avoidance
HMRC director general of customer compliance Penny Ciniewicz has announced at a Treasury select committee evidence session that the organisation is increasing its efforts and resources into dealing with promoters and enablers of tax avoidance. Ms Ciniewicz stated: “We have more than 100 current investigations into promoters [and enablers] and we’re keeping a very close eye on the market for avoidance.”
Brexit deal tough for British and Irish trade
Acting head of HMRC, Jim Harra, has said that the Brexit deal put forward by Boris Johnson would see British and Irish businesses subject to “additional administrative costs” and red tape, even if they were to trade only within the UK. Goods going to Ireland would have customs declarations and potential tariffs imposed on them.
The Times, Page: 9
Get your ducks in a row, with 100 days to go
With 100 days to go before the 31 January deadline, HMRC is reminding customers to complete their tax returns early to beat the Christmas and New Year rush. Last year more than 2,000 people sent their tax returns on Christmas Day.
Yorkshire Post, Page: 9
Blockchain tax drawbacks highlighted at conference
Much of the financial services industry could be rendered irrelevant by blockchain technologies such as Ethereum, according to Business 5.0’s John Straw, who told Computing’s recent Cloud and Infrastructure Live event, also in his capacity as an advisor to McKinsey and IBM, that if banks were done away with, there would be no central clearing houses, and therefore no tax. He went on to note that tax generated by financial services would not shift to blockchain-based alternatives, because: “Blockchain makes transactions invisible to the taxman. That’s why France and Germany have basically banned [Facebook’s proposed cryptocurrency] Libra, and quite rightly so.”
Contractor sector disappointed with HMRC off-payroll guidance
Reform of the off-payroll working rules from April next year has been greeted with disappointment by the contractor industry, with law firm Lawspeed observing that the note was “not as yet the substantive and detailed guidance that the recruitment industry and its clients want and need.” CWC Solutions, meanwhile, stated: “Bar one or two interesting statements, there’s simply nothing new here.” Bauer & Cottrell, an IR35 advisory, questioned the timing of HMRC’s issuing of the briefing, asking if it is because large and medium-sized firms are “complaining that key talent that they need are likely to walk… due to the risk of retrospective investigation”.
SMEs NEWS ROUNDUP
FSB urges Chancellor to deliver rate reform
The Federation of Small Businesses (FSB) has called for business rates reform, urging Chancellor Sajid Javid to help smaller firms hit by Brexit uncertainty with new measures in next month’s budget. The FSB wants the Retail Discount – which allows retailers whose property is worth up to £51,000 to claim a 33% discount on their rates bills – to be increased to 50%, made permanent and extended to small firms operating in other sectors. The body is also calling for the threshold for small business rates relief to be increased from £12,000 to at least £30,000. FSB chair Mike Cherry commented: “We need to see the Chancellor step up to the mark next month with measures that will reinject optimism into the small business community and enable growth. Otherwise, we’re in for a very bleak winter.”
The Times, Page: 42 Daily Express, Page: 47 The Independent, Page: 13 Daily Mirror, Page: 4 The I, Page: 38 Daily Mail, Page: 75 The Scotsman, Page: 34 Yorkshire Post, Page: 17
Pound slips after Brexit vote delay
The pound slipped against the dollar yesterday as currency markets got their first chance to react to MPs backing a move to delay approval of the Brexit deal. Many banks in London had called in extra staff, expecting volatile trading after the first Saturday sitting in the House of Commons for 37 years but the pound’s reaction was muted, slipping 0.6% against the dollar to $1.29, and down 0.4% against the euro. On Friday, the pound had been trading at its highest level for five months. Jeffrey Halley, senior market analyst at Oanda, said the fall in the currency was limited because “a hard Brexit is now highly unlikely”.
Just 26% agree on tax and public spending balance
A report from Deloitte and think-tank Reform shows that just 26% of Britons believe the balance of public spending and tax is right. This marks a decline on the 33% recorded a decade ago. The state of the state report found that 58% of people want more spending, even if it means taxes could rise, while 13% prioritised tax cuts. Meanwhile, separate Deloitte research suggests that nearly half of all millennials across the world are considering quitting their job within two years.
The Times, Page: 9 Yorkshire Post, Business, Page: 6
Funding Secure fails putting investors at risk
Peer-to-peer lender Funding Secure has appointed administrators from CG & Co after it collapsed after failing to secure repayment of £3.2m in loans to a Mayfair art dealer linked with an alleged money laundering scandal. Funding Secure has been engaged in a legal battle with Matthew Green, an art dealer made bankrupt this year, who is alleged to have sold millions of pounds of artwork used as collateral.
VC into Scottish start-ups rises
Venture capital funding is on the rise in Scotland with over £32m pumped into Scottish start-ups in the third quarter of 2019, according to a new report from KPMG. The figure compares with the £23.8m invested in the Q2. But the figures, compiled by Pitchbook, reveal that deal volume dipped slightly, from 16 deals in the second quarter to 13 in the third. Amy Burnett, manager in KPMG’s enterprise team, said: “Venture capital investment in Scotland’s fast-growth businesses is as robust as ever and it appears Brexit and other uncertainties have failed to slow the appetite for supporting tech-focused industry disrupters.”
The Scotsman, Page: 37
Small companies know how to treat employees
Discussing corporate purpose, Bachu Biswas says in a letter to the FT that large firms should treat their employees like small businesses do – as their most valued asset.
CORPORATE NEWS ROUNDUP
Bell settles claims with liquidators
The Guardian reports that City investor Paul Bell, who was arrested in 2015 in connection with an alleged £21m tax fraud, has secretly agreed to settle claims of £67m with the liquidators of his former companies. Documents relating to the liquidation of his former businesses filed at Companies House by the insolvency firm RSM show deals were agreed in May. The filings point to claims of £67m which could be pursued against Mr Bell, noting that following mediation, all claims against Mr Bell and the underlying dispute “were compromised by way of a confidential settlement agreement”.
The Guardian, Page: 25
Private deal value trebles
The value of private equity deals taking UK-listed companies private has more than trebled over the past year, analysis by BDO shows. The total valuation of deals taking UK-listed firms off the stock market rose to £14bn in 2018/19, marking a 278% increase on the previous year’s total of £3.7bn.
Ashley no longer targeting Goals
Sports Direct has abandoned plans to take control of Goals Soccer Centres, in which it already holds a 19% stake. Mike Ashley’s retailer had been considering a takeover of the firm which has been hit by an accounting scandal that left a £12m black hole in its accounts. However, Sports Direct says it has opted against the move due to poor access and a lack of co-operation from Goals’ board.
Daily Mail, Page: 69
Winding up plans backed
Leonard Curtis ’ plans to wind up collapsed broker SVS Securities have been approved by creditors and clients. Eleven brokers have showed interest in taking on accounts – and Leonard Curtis has narrowed this down to three.
Daily Mail, Page: 68
Taxman homes in on Airbnb
Home rental website Airbnb is facing a HMRC investigation, with the firm saying the probe is related to how it calculated its tax bills and payments it made to other parts of the business. Airbnb Payments UK, which handles money paid by hosts and guests, had revenue of £273m in 2018, £1.2m profit and paid £235,000 tax
Daily Mail, Page: 73
British Steel deal in doubt
Talks relating to the rescue of British Steel will be opened out as a 10-week period of exclusive talks between the Official Receiver and Ataer Holding ends today. Although talks with Ataer will continue, rival suitors can now also enter the sale process. Ataer is an arm of Turkey’s military pension fund. Reports have claimed a rescue is in danger of failing because some British Steel suppliers were refusing to accept price cuts. EY is supporting the Official Receiver.
The Daily Telegraph, Business, Page: 1 Daily Mail, Page: 74 Daily Express, Page: 49 The Guardian, Page: 37 The Times, Page: 45
Bell Pottinger partners forced to repay profits
BDO , administrators to Bell Pottinger, have pursued an “aggressive” strategy to recoup about £4m in “excess profit drawings” from former partners, the FT reports.
Financial Times, Page: 19 City AM, Page: 7
PROPERTY NEWS ROUNDUP
Property listings dip
Figures from Rightmove show that the average number of new property listings each week this month has been 24,539, the lowest October figure in a decade and down 13.5% on last year. The figures also show that the price of property coming to market has seen its lowest monthly rise in an October since 2008, climbing 0.6%. The number of sales agreed in October is down 0.5% year-on-year. Rightmove’s Miles Shipside said a “Brexit-induced paradox” means it is a good time for sellers, saying: “Those who are ignoring the Brexit disruption have less competition from stay-away sellers, and their prospective buyers have less negotiating power, with a reduced choice of suitable alternatives”.
Commercial rental values climb 0.4%
Rental values in the UK prime commercial property market rose in Q3, CBRE figures show, with the increase driven by a strong performance in the industrial sector. Commercial property values were up 0.4%, with industrial and office rental values rising 1.7%. Wwhile retail rental values continued to fall, there was a slowdown in the decline, with values down 0.8% compared to 1.1% in Q2. Robin Honeyman, senior research analyst at CBRE, said: “Third quarter results across the main sectors continued the trends seen in 2019 so far.”
More homes sold in September
HMRC figures show that the number of homes sold in Britain rose in September, with 101,740 transactions recorded. This was 5% up on August and 2.3% higher than September 2018. Jeremy Leaf, a former chairman of the Royal Institution of Chartered Surveyors, said the increase showed the “relative resilience of buyers and sellers” despite “political distractions”.
The Times, Page: 44
PERSONAL FINANCE NEWS ROUNDUP
Seaside sees the most insolvencies
Analysis by UHY Hacker Young shows that seaside regions dominate a list of areas with the highest levels of bankruptcies in the past year, with Scarborough, Torbay, Plymouth, Hull and Blackpool all in the top ten. Peter Kubik, a partner at UHY Hacker Young, commented: “People in seaside towns continue to fall into bankruptcy as the coastal economy fails to keep up with the rest of the country. Many are in need of further investment.” Overall, Stoke saw the most personal insolvencies in 2018 with just over 51 per 10,000 adults compared to a national average of 25.
Daily Mirror, Page: 7 The I, Page: 2 The Guardian, Page: 28 Yorkshire Post, Page: 1
FCA deserved criticism over consumer scandals, admits Bailey
Andrew Bailey has conceded criticism of the FCA over recent personal finance scandals was justified but argued the regulator is not required to prevent risk taking. The watchdog has faced criticism for its response to RBS’ Global Restructuring Group scandal, the collapse of London Capital & Finance and more recently the collapse of former star fund manager Neil Woodford’s investment empire. Mr Bailey pledged to invest more in the FCA’s data analytics team to help spot problems sooner.
Financial Times City AM The Daily Telegraph, Business, Page: 3
Employers back mental health at work scheme
Thirty large employers have signed up to the mental health at work commitment, a promise to improve the standards of mental wellbeing among the workforce. Deloitte is among those which have agreed to adopt six standards which have been developed with mental health charities, large employers and trade organisations. In a letter to the Times, signatories to the scheme say: “If every employer in the country signed up and took action, we could have a meaningful impact on millions of employees across the UK”.
A record 75% of British mothers are in work
Figures from the Office for National Statistics show the proportion of working mothers has hit a record high with 75% having jobs – up from 66% in 2000 and 70% in 2014. Research also shows over a quarter of new mothers return to full-time work or self-employed jobs within three years of having a baby.
People confused by pensions
Money and Pensions Service research shows that over six out of 10 people are unaware that they could receive tax relief on their pension savings if they are unemployed, and more than a third do not know that workplace pension savings are protected from an employer collapsing.
Daily Mirror, Page: 36
Doctors dismiss government pensions solution as ‘sticking plaster’
The British Medical Association has said the Government’s solution to the NHS pensions crisis is a “sticking plaster” and stops far short of fundamental tax reforms that are needed.
HMRC rule change on redundancy pay
Savers could deposit redundancy payments into their pensions via salary sacrifice, under new regulations from HMRC. David Everett, partner at LCP, commented: “Individuals sometimes want to use taxable termination payments to make contributions to their pension scheme. Once the changes are in place it might be attractive to arrange this by way of sacrifice for an employer pension contribution because of the consequent employer NI saving.”
ECONOMY NEWS ROUNDUP
King: UK neglecting economic challenges
Former Bank of England (BoE) governor Lord Mervyn King has warned Britain is failing to address problems with the economy because there is too much focus on Brexit. Speaking on the fringes of the International Monetary Fund’s annual meetings in Washington DC, the former BoE boss said: “We’re not looking at the underlying economic challenges for the UK.” He also suggested that opting to exit the EU is “not likely to have a major impact on the UK economy in any way,” suggesting: “there’s an awful lot of bogus quantification going on to justify positions held for other reasons.” Lord Mervyn also pointed to the risk of a “great stagnation” that could hit the global economy and leave incomes “paralysed.”
Consumer confidence slips
The latest consumer tracker by Deloitte shows weakening consumer confidence, with a reading of -9% in Q3. This marks a one percentage point dip on Q2 and a two point year-on-year decline. Confidence in job security fell three percentage points year-on-year to -8%. Deloitte’s measure gauging overall confidence in the state of the British economy generated a net balance of -55. Ian Stewart, chief economist at Deloitte, said: “A decline in consumer confidence this quarter, combined with a fall in official unemployment figures, show that the period of remarkable resilience in jobs and earnings is coming to an end.”
The Times, Page: 43 The Scotsman, Page: 34
Government borrowing climbs
Office for National Statistics data shows that public sector borrowing rose by a fifth during the first half of the financial year, hitting £40.3bn in the six months to September. This marks a £7.4bn increase on the same period in 2018. For the month of September, borrowing stood at £9.4bn, exceeding the £8.8bn recorded in September last year. John Hawksworth, chief economist at PwC, said the figures show public finances “heading further into the red”, adding: “This borrowing overshoot will not make the chancellor’s choices any easier as he heads towards his first Budget on 6 November.” Thomas Pugh, UK economist at Capital Economics, commented: “September’s better-than-expected public finance figures do not change this year’s overarching themes of higher spending and borrowing.” He added that the data “will only encourage the Chancellor to loosen fiscal policy at the Budget next month.” Sumita Shah at the ICAEW offered: “We are on course for a bigger deficit and higher debt this year than originally expected, with the half-year deficit only £1.1bn short of the deficit for the whole of last year.”
Moody’s cautions on Brexit delay
Ratings agency Moody’s has warned that the UK’s creditworthiness could be damaged by the latest Brexit delay, after a House of Commons vote against the Prime Minister’s rapid timetable for passing the EU Withdrawal Bill. Moody’s managing director Colin Ellis said the likelihood of Britain leaving the EU with a deal is higher than it has been recently, but added: “Significant uncertainties remain around the timing and eventual outcome of Brexit, which is likely going to weigh on spending, investment and hiring decisions in the UK for some time, a clear credit negative.” This follows research earlier this month which found that business investment has fallen by 11% since the 2016 referendum.
Retailers cut 85,000 jobs this year
The past year has seen retailers cut 85,000 jobs with businesses under increasing pressure from weak consumer demand, rising costs and the switch to online shopping along with uncertainty over Brexit. Job losses could increase due to automation too – retail IT bosses expect one in five jobs in their businesses to be replaced by artificial intelligence or automation in five years, according to a survey by the recruitment business Harvey Nash and KPMG.
The Guardian, Page: 35 Daily Mail, Page: 2
UK rises up World Bank business rankings
The UK has climbed to eighth place in the World Bank’s annual rankings, up from ninth a year ago. The report tracks regulations, administration and barriers to establishing and running businesses. The UK has made it easier to start a business, with it now quicker and cheaper for a business to get connected to electricity supply, for example. However, business costs have increased due to a more onerous pensions regime and the extra time required to administer taxes. International trade secretary Liz Truss said the report showed the UK is one of the best places to do business in the world and was why Britain continued to be the number one destination for attracting foreign direct investment in Europe, and third globally after the USA and China.
Britain has fourth highest number of dollar millionaires
Credit Suisse’s tenth annual Global Wealth Report reveals Britain has the fourth highest number of dollar millionaires in the world, despite the impact of Brexit on the pound and the softening of the high-end property market. The UK has 2.46m dollar millionaires this year — down from 2.49m last year, but up from 750,000 in 2010. There are a total of 46.8m worldwide.
HMRC in scam message warning
HMRC has published guidance on the correspondence people may receive from the tax office, advising on how to spot scam attempts. HMRC says it will never ask for personal or financial information in text messages. HMRC’s guidance on phishing emails and bogus messages advises people who receive them to forward the material to a special HMRC phishing email address or phone number before deleting it.
PwC’s purrfect employee
The Times says Graham, a rescue cat employed by PwC to deal with rodents at its London office, is competing with Downing Street cat Larry to be the capital’s top mouser. Graham’s Twitter account describes him as a “Chartered Animal Trapper (CAT)”.
Climate concern climbs
A poll of 1,300 people commissioned by Deloitte and public services think-tank Reform saw 51% say they are worried that climate change and other environmental problems will get worse – up from 37% a year ago.
The I, Page: 11
Six years for BA club fraudster
Fraudster Carole Farr has started a six-year jail sentence after being found guilty of stealing more than £1m from the British Airways staff club. Farr faked her CV in order to win promotion from secretary in 2012 to finance director in 2014 and then chief executive financial director, even entering false details of her accountancy qualifications at Companies House. She spent £500,000 living the high life and sent over half a million to her Nigerian internet boyfriend. Had BA checked Farr’s background they would have discovered she was a convicted fraudster who had served a community order.
The Times, Page: 17 The Daily Telegraph, Page: 2 Daily Express, Page: 33 Daily Mail, Page: 20
Budget scrapped because of election call
Sajid Javid has announced that he is pulling his planned November 6 Budget because of the decision to push for an election on December 12.
Contact Paul Southward.