News Roundup Friday 26th July 2019
News Roundup Friday 26th July 2019
Johnson prepared to borrow to fund tax break
The Telegraph says that Boris Johnson, if selected as Conservative leader, would look to reverse the tight controls on public spending imposed by Chancellor Philip Hammond as he seeks to honour promises to deliver tax breaks to those earning less than £80,000. The paper cites sources close to Mr Johnson who say he feels increased borrowing in the short-term is a sensible policy to “get the economy moving” by cutting tax. The Institute for Fiscal Studies estimates that Mr Johnson’s pledge to raise the 40p income tax threshold from £50,000 to £80,000 would cost £9bn.
Think-tank: Scrap stamp duty on homes under £500k
Think-tank Onward has published a report which suggest s stamp duty could be abolished for homes worth £500,000 or less, meaning just the most expensive tenth of homes would be subject to the levy. The Reforming Stamp Duty: New ideas to promote home ownership report, which was co-authored by former Parliamentary Private Secretary to the Treasury Chris Philp, also proposes halving stamp duty on all primary residences above £500,000. The report also suggests a 1% annual tax on the value of homes which are left empty for more than six months each year and proposes an increase in the stamp duty surcharge on second homes and investment properties, from 3% to 5%.
Boris’ fiscal policies considered
The policy pledges new Prime Minister Boris Johnson made while campaigning to be named Conservative leader are analysed in the Telegraph and Guardian. These include a plan to raise the earnings threshold for higher-rate taxpayers to £80,000, up from the current £50,000, a move the Institute for Fiscal Studies (IFS) says will cost £9bn a year. Mr Johnson has also pointed to making changes to National Insurance which the New Economics Foundation says would mean wealthier households seeing disposable incomes rise by £1,790 per year, not £6,000, with no increase at all for the poorest fifth of families. Additionally, Mr Johnson has proposed overhauling the stamp duty system, with reports suggesting he plans to increase the threshold for paying stamp duty from the current level of £125,000 to £500,000 while lowering the top rate from 12% to 7%. The IFS says the stamp duty take on housing transactions below £500,000 was £3.8bn in 2017/18, adding that the cost of reform could be higher as some homes would be put on the market beneath the threshold to avoid the tax. The Times says Mr Johnson and his Chancellor will need to “urgently” draw up two sets of tax and spending plans for deal and no-deal scenarios.
The Daily Telegraph The Guardian, Page: 7 The Times, Page: 10
HMRC investigates 23% of IHT estates
A Freedom of Information request by financial planners Quilter shows that HMRC opens more than 5,000 IHT investigations a year, a figure representing 23% of the 22,000 estates that are hit by the tax. The Mail says “notoriously complicated rules” over IHT mean those liable for the levy have a one in four chance of being investigated. Gordon Andrews, tax and financial planning expert at Quilter, said that more often than not, people are not deliberately trying to defraud HMRC, adding that the complexity of the system means the fact there are errors is no surprise. “It can be hard to pinpoint those who intentionally don’t pay any inheritance tax and those who misunderstood the system believing there was no tax to pay,” he added.
Daily Mail Daily Express, Page: 29
HMRC in tax credit reminder
HMRC is urging customers to renew their tax credits, with the July 31 renewal deadline fast approaching. The Revenue says that while more than 1,301,072 customers have already renewed their tax credits, 760,157 have yet to do so and risk seeing their payments stop. HMRC notes that renewals can be done any time, day or night, online or via the HMRC App.
Daily Express Daily Mirror, Page: 12 Press Release
Rebate delays hitting innovation
R&D tax relief specialist Jumpstart has warned that delays in processing R&D tax claims – and the resulting delay in rebate payments – are hampering business’ innovation and expansion. Analysis shows that SMEs face a wait of more than 90 days, while larger companies claiming research and development expenditure credit are having to wait at least seven months. Jumpstart’s report cites HMRC’s claim that its 28 days turnaround time for SME R&D tax credit claims is achieved in 95% of cases.
The Scotsman, Page: 39
Taxman boosted by digitalisation
Philip Aldrick in the Times considers the impact digitalisation is having on HMRC, saying the Revenue is “beefing up its digital muscles” as it turns to technology to improve services and operations. He notes that the Revenue has 600 analysts working on “data exploitation” and to improve compliance. He adds that 15m people use HMRC’s personal tax account and 3m companies use its business tax account, describing these as “the voluntary digital foothills”, while noting that 600,000 companies have signed onto the mandatory Making Tax Digital system for VAT, with HMRC hoping to extend the process to income tax in 2021. Mr Aldrick also details how the growth of digital payments could make life easier for the taxman, saying they leave “a clearer trail than cash, making illegal tax evasion harder and legal tax avoiders easier to trace.” He also notes the further economic potential of digitalisation, pointing to an EY estimate that health data could generate £5bn in savings and licence payments a year for the NHS.
A third of senior medics could be hit by tax rules
Health officials have warned that NHS pensions rules could hit one in three senior medics. Treasury rules mean that high earners can end up paying tax rates of more than 90% on earnings over £110,000 a year – which include rises in the value of pensions. This has led a number of senior doctors to refuse to work overtime so as to avoid passing the threshold. Ministers have opened a consultation in a bid to address the matter, with proposals outlined including a solution that would see consultants and GPs halve their pension contributions in exchange for halving the rate of pension growth and a scenario where doctors could choose the size of their pension contribution in a bid to avoid tax thresholds. The consultation document also outlines ways doctors can defer tax bills so they come out of their pension. Health Secretary Matt Hancock has vowed to help deliver a solution, saying: “We want to make it easier for ou r hardworking senior doctors to balance their workload, their pension pot and their tax bill.”
Pension fine warning
Steve Webb of Royal London has called for greater awareness of little-known pension tax relief rules that see savers who fail to tell providers of pensions they pay into that they have begun withdrawing taxable cash from another plan fined. The fine, which starts at £300, increases by £60 a day.
Daily Mail, Page: 47
£34bn withdrawn from pensions
Figures released by the Pensions Regulator show that savers moved £34bn out of final salary pension schemes in 2018/19. The total, which was transferred out by 210,000 savers, is more than double the £14bn withdrawn by 100,000 savers in 2017/18. The data shows that since rules enabling savers to access their pension pot from the age of 55 without having to buy an annuity were introduced in 2015, £60bn has been transferred out of defined benefit schemes by 390,000 savers.
Levy fails to boost apprenticeship spend at most firms
The Chartered Institute of Personnel and Development (CIPD) says ministers made an “empty promise” when they said the apprenticeship levy would boost workplace training. The levy sees every employer with a wage bill of £3m or more paying a 0.5% tax on their payroll. This can be reclaimed via Government vouchers to be spent on apprenticeships. The CIPD analysis shows that only 31% of levy-paying employers have increased spending on apprenticeships because of the tax, while almost one in ten had reduced investment in workplace skills because of the burden of the tax.
The Independent, Page: 58
Banks assess no-deal threat
Banks are assessing the risks a no-deal Brexit poses to small businesses, according to KPMG and EY, with the firms having been advising banks on their preparations for Britain leaving the EU without a deal in place. Richard Bernau at KPMG said lenders have a “renewed focus” on identifying and understanding risks among clients and in supply chains, while EY’s Andrew Pilgrim said banks’ planning centred on a no-deal Brexit has been accelerated, suggesting “the noise has increased very much in line with the political expectations”. The Telegraph notes that while the Bank of England believes the banking sector is well-prepared, a sudden downturn could hit SMEs and their access to credit.
The Daily Telegraph, Page: 31
Start-up investment dips in Q2
Figures from KPMG‘s Venture Pulse Survey show that Scottish start-ups received almost £17m less from investors in Q2 than in the first three months of the year. In total, more than £23.8m of venture capital (VC) was invested during Q2, around £16.8m down on Q1. While the overall value saw a decline, deal volume rose, with the number of businesses attracting funding support climbing from 14 to 16. James Kergon at KPMG said: “While it’s reassuring to see such a wide range of Scottish businesses attracting VC investment, the dip in funding levels is slightly concerning.” He added: “The future success of the Scottish economy relies on a diverse ecosystem led by entrepreneurial companies.”
The Scotsman, Page: 34 The Press and Journal, Page: 33
FSB urges Boris to deliver SME support
The Federation of Small Businesses (FSB) has called on new Prime Minister Boris Johnson to deliver an overhaul of the “regressive” business rates system, adding that there is a need for uprating the £3,000 employment allowance and delivery of a rebate for statutory sick pay. Commenting on what the new Conservative regime’s priorities should be, Mike Cherry, the FSB’s national chairman, said: “Securing a pro-business EU withdrawal agreement that can command a majority in the House of Commons is task one for this new administration.”
The Times, Page: 37 The Guardian
Firms act over late payments
The Chartered Institute of Credit Management (CICM) says the decision to suspend 18 large businesses from the prompt payment code has had swift results, with almost all of the firms named and shamed putting plans in place to ensure they meet a requirement to pay suppliers within a maximum of 60 days. Mike Cherry, the chairman of the Federation of Small Businesses, has welcomed efforts to make late-paying firms accountable, saying: “Late payment is bad for small businesses, bad for public services and bad for the taxpayer.” Philip King, former chief executive of the CICM, has suggested reform of the prompt payment scheme may be required, with the Times saying this will see it taken over by the Small Business Commissioner “to change decisively the culture of payment.”
Bathstore saved by Homebase
Bathstore has been bought out of administration by Homebase. The company will take over 44 branches, however the deal leaves 91 remaining stores employing 200 staff at risk of closure. Administrators at BDO said the remaining stores will only stay open until stock is sold off. BDO’s Ryan Grant said: “In a difficult situation, we have been able to secure the future of the Bathstore brand and the transfer of 44 stores to Homebase to maximise realisations for creditors and protect as many jobs as possible.”
Daily Mail, Page: 67 The Times, Page: 41 Daily Mirror Daily Express, Page: 51 The I, Page: 41 The Scotsman, Page: 35 Yorkshire Post, Page: 5 City AM
Ashley bankrolls CVA fight
Sports Direct has pulled out of a challenge to store closure plans at Debenhams, but Mike Ashley’s firm is continuing to fund a challenge to the department store chain’s CVA by Combined Property Control Group.
The Times, Page: 42 The Scotsman, Page: 38
Administrators for LC&F issue warning over stud farm deals
Collapsed bond company London Capital & Finance’s administrators, Smith & Williamson, are cautioning against buying horses from a stud farm, now called FS Equestrian, that borrowed millions from the firm.
Metro Bank to replace chairman
Metro Bank, which has been under pressure to overhaul its leadership and improve its reputation following an accounting error, has announced that chairman Vernon Hill is to leave the role. He will still hold a non-executive director role and take a position as president.
The Guardian, Page: 31 The Times, Page: 38 Daily Mail, Page: 77 The Sun, Page: 51
Manufacturing group H.Docherty, which traded as Docherty Group, has collapsed, with Andrew Sheridan and Raj Mittal, partners at FRP Advisory, appointed joint administrators.
The Birmingham Post, Page: 61
Funds prepare for future with pitch to millennials
Deloitte analysis suggests millennials will represent $15tn in assets in the US within two decades, making them a vital clientele for fund managers.
Home sales dip in June
Monthly HMRC statistics show that British residential property sales fell to 84,490 in June, 16.5% down on the same period last year, with 101,150 sales recorded in June 2018. The figure represents a 9.6% monthly drop between May and June. Non-residential transactions were down 7.2%, month-on-month.
Daily Mail City AM, Page: 9
Banks set for biggest mortgage lending period since 2007
High street banks agreed more than £50bn of mortgages to homebuyers in the first half of the year, up 10% on the first six months of 2018 and setting up lenders’ biggest year since 2007, according to data from UK Finance. The loans were offered to almost a quarter of a million homebuyers in the first six months, up 6% on the first half of 2018. Howard Archer, chief economic adviser to the EY Item Club, said that an “unsettled” political situation and uncertainty over Brexit “will weigh down on the economy and hamper the housing market,” adding: “Consumers may be particularly cautious about committing to buying a house, especially as house prices are expensive relative to incomes.”
PERSONAL FINANCE NEWS
Coastal areas face insolvency shock
Insolvency trade body R3 has warned that people living in coastal areas are more vulnerable to economic shocks that can trigger insolvency. Having analysed annual personal insolvency statistics from the Insolvency Service, an R3 spokesman said: “Looking at the geographical spread in the statistics, coastal towns throughout England and Wales typically had the highest concentrations of personal insolvencies, following the pattern established in recent years.”
Yorkshire Post, Business, Page: 3
Insolvency numbers rise but business failures dip
Figures from Accountant in Bankruptcy show an increase in the number of Scots being declared insolvent, with 12,788 people facing bankruptcy or protected trust deeds (PTD) in 2018/19 compared to 10,602 the year before. Separate figures from the Scottish government agency show that the number of Scottish business failures dipped in the three months to June, with 239 firms becoming insolvent in Q1 of the 2019/20 financial year. This is 15% down on the previous quarter and 2% down on the 245 recorded in Q1 2018/19.
The Scotsman, Page: 9, 39
Britain could already be in recession, economists warn
The National Institute of Economic and Social Research (NIESR) has warned that Britain may already be tipping into recession due to the effects of Brexit. It believes there is around a 25% chance that the economy will have shrunk from April to June and will continue to do so in the following quarter, while putting the likelihood of a no-deal exit from the EU at 40%. NIESR forecasts GDP fell by 0.1% in Q2, with a 25% chance that GDP declines again between July and September. However, the think-tank’s central forecast is for growth of 0.2% in Q3. NIESR has cut its forecasts for economic growth in 2019 and 2020 to 1.2% and 1.1%, down from 1.4% and 1.6% previously.
Record low for retail on the cards
The KPMG/Ipsos Retail Think Tank has warned that the retail sector is on track to hit a record low this year, saying factors including dented consumer confidence and Brexit uncertainties mean there is “little hope of improvement”. Its index, which monitors the health of the sector, declined from 77 to 76 in Q2, the joint lowest level since late 2012, but the think-tank warns that it could dip a point further in Q3.
The Daily Telegraph City AM, Page: 7
Global growth forecast cut by IMF
The IMF has cut its growth forecasts for the global economy for this year and next. It predicts growth of 3.2% in 2019, down from its April forecast of 3.3%. Growth next year is set to pick up to 3.5%, although that is below its earlier forecast of 3.6%. The IMF has raised its growth forecast for the UK this year to 1.3% from 1.2%. The revision for the UK reflects what the report calls a stronger-than-expected first three months of the year, boosted by pre-Brexit stockpiling. However, the IMF’s World Economic Outlook analysis has named a no-deal Brexit among the chief threats to the world economy.
The Daily Telegraph, Page: 33 The Guardian BBC News
Manufacturing output lowest since financial crisis – CBI
The Confederation of British Industry has published figures showing that British manufacturing output shrank at the fastest pace since the financial crisis over the last quarter. With 19% of manufacturers reporting that output increased and 30% saying it fell, this gave output a minus 11% balance for the three months to July. CBI chief economist Rain Newton-Smith remarked that the sector is “being hit by the double-blow of Brexit uncertainty and slower global growth.” Daily Mail, Page: 68 City AM The Times
Javid named Chancellor as Hammond exits with no-deal warning
Boris Johnson has named Sajid Javid his Chancellor, with the FT suggesting that the former Home Secretary is expected to oversee an expansion of public spending that will prepare the economy for the “turbulence” of Brexit. The Times notes that the Treasury has been drawing up plans for an autumn budget and spending review, with these based on the promises that Mr Johnson made during his leadership campaign, offering that “problems are likely” if the department is instructed to pursue an “economically damaging” no-deal Brexit. Meanwhile, Mr Javid’s predecessor Philip Hammond used his resignation letter to warn of the economic risk of a no-deal Brexit. Saying the “headroom” built up in the public finances could only be used for tax cuts and spending boosts if a Brexit deal was negotiated. He wrote: “We bequeath to our successors genuine choices, once a Brexit deal is done: the ability to choose, within the fiscal rules, between increased public spending, reduced taxes, higher investment or progress towards faster debt reduction – or some combination of all four.”
Scandinavia leads on labour market performance
A report from PwC suggests that Britain’s economy would receive a £250bn boost, with GDP rising 12%, if its labour market performed as well as that of Iceland and Sweden. These two countries topped the firm’s composite labour market performance index, while Britain ranked 19th out of 33, despite record levels of unemployment and wages growing at their fastest pace in a decade. PwC chief economist John Hawksworth comments: “Realising these potential gains will require policies to overcome age and gender discrimination, to boost vocational education and training for all age groups, help with retraining older workers, to improve childcare provision and promote flexible working.”
The Times, Page: 40
Banks cautious due to laundering laws
A survey by BDO and the Association of Foreign Banks shows that 22% of banks are not taking advantage of simplified background checks on low risk clients, with lenders concerned they might fall foul of money laundering legislation.
City AM, Page: 11
Athletes’ prep on track
Looking ahead to the 2020 Olympics in Japan, the Telegraph details some of the preparations being made by Team GB, noting that the British team is working with Deloitte to produce immersive technology that will give athletes and staff an idea of what to expect in Tokyo.
The Daily Telegraph, Tokyo 2020, Page: 4
Soaring temperatures turn up the heat on dress codes
The Times’ Ashley Armstrong says the heatwave has left City workers “navigating a dress code minefield”, highlighting how a senior partner at a Big Four accountancy firm ditched his collared shirt and tie. She says this has “become the new power play in just how far you can push it.”
The Times, Page: 42
Contact Paul Southward.