News Roundup Friday 26th October 2018

NEWS ROUNDUP

TAX NEWS

Hammond urged to simplify taxes and increase investment

Philip Hammond has been urged to simplify Britain’s taxation system in response to Britain leaving the EU. TheCityUK says it is “critical” that taxes on banks are “normalised” to lower levels during the Brexit process. The lobby group also says the chancellor should use next week’s Budget to rebalance the economy by prioritising spending on infrastructure outside London and the southeast. Meanwhile, a report to be published later this week by the Fabian society and the ICAEW says public spending needs to rise by at least four percentage points over the coming years to halt austerity. The Fabian report says there is no clear case for the chancellor to stick to his plan of running a surplus. Elsewhere, the FT claims Mr Hammond may be able to avoid increasing taxes to pay for NHS spending, after the OBR underestimated the recent strength of tax receipts by £13bn.

The Times, Page: 40 The Guardian, Page: 29 Financial Times, Page: 1

HMRC’s digital push must consider vulnerable users

Lauren Davidson, the Telegraph’s personal finance editor, reveals that even she has struggled to access her online HMRC account. HMRC’s roll-out of online self-assessments, part of its Making Tax Digital campaign, has been plagued with hiccups and delays, she says, and if it is to be successful the Revenue must ensure that the system works not just for the “tech-savvy”, but also for pensioners and other less technically-minded, more vulnerable members of society, who might not only struggle to complete assessment forms online – but may also be exposed to scams and bogus websites.

The Daily Telegraph

Online sales tax would be a ‘luddite levy’

Economic policy adviser Max von Thun says that introducing a special sales tax on online companies would be a “huge mistake.” He claims that what is ultimately needed is not for individual countries to act unilaterally, but to work together towards a new international system for taxing profits that reflects the complex nature of value creation in a digital economy.

City AM, Page: 25

Germany proposes global minimum tax for tech giants

Germany’s finance minister Olaf Scholz has suggested a global minimum corporate tax for multinationals such as Amazon, Apple and Facebook. Mr Scholz said the internet economy “was exacerbating” the problem of companies piling their profits into tax havens, and that coordinated mechanisms were needed to force companies to pay domestic taxes in proportion to their profits.

The Daily Telegraph

HMRC ‘fishing’ for footballers avoiding tax

UHY Hacker Young has suggested HMRC is increasingly “fishing” to catch footballers out over image rights payments, after it emerged that tax investigators are looking into the accounts of 44 football clubs and 171 players.

The Sun, Page: 48 Daily Mail, Page: 28 The Guardian, Page: 41

Hammond ‘needs to find £31bn’ to end austerity

The Resolution Foundation says Philip Hammond will need to find £31bn in next week’s Budget if he is to deliver the prime minister’s promise to end austerity. The OBR has forecast a windfall of £13bn for the Treasury thanks to better than predicted tax receipts, and Conservative MPs have urged Mr Hammond to use this to ease the tax burden on households. However, the Resolution Foundation believes £31bn would still be required by 2022-23 to prevent planned cuts to public services, end the benefits freeze and restore the value of work allowances in universal credit. Meanwhile, the Telegraph’s Jeremy Warner suggests Mr Hammond should use the Budget to set out plans for a programme of bold tax cuts, as Brexit is set to “drive Britain naturally towards a low tax future.” Elsewhere, PwC’s Stella Amiss writes in City AM that the Budget is a chance for an long-overdue ov erhaul of the tax system.

The Times, Page: 6 Financial Times, Page: 2 Daily Express, Page: 1,4-5 The Daily Telegraph, Business, Page: 2 The Daily Telegraph, Business, Page: 4 City AM, Page: 23

Tech giants threaten to cut investment

Technology companies have threatened to pull post-Brexit investment from the UK if Philip Hammond goes ahead with a tax on digital sales in the Budget. Multinationals including Facebook, Amazon and Uber have written to the chancellor warning that they will reduce spending if he makes a “smash and grab raid” on their earnings. They have also warned that any attempt to impose a specific tax on mainly American digital multinationals would result in retaliation from President Trump. The CIOT has also urged caution from the chancellor on his suggestion to go it alone with a temporary new sales tax on digital multinational companies. Separately, economist Dr Jeffrey Sachs has told the Guardian that a “tech tax” is necessary if the world is to avoid a dystopian future in which AI leads. He also backed calls for taxation aimed at the largest tech companies, arguing that new technologies were dramatically shifting the income d istribution worldwide “from labour to intellectual property (IP) and other capital income.”

The Times, Page: 6 The Guardian, Page: 29 Politics

London tops IHT league

Families in west London pay an average of £390,000 inheritance tax per estate – more than people anywhere else in Britain. A freedom of information request by Direct Line shows that 118 estates in the area paid £46m of inheritance in total tax between 2015 and 2016. Estates in northwest London postcodes were liable for the second-highest bills at an average of £381,546. This was followed by southwest London at an average of £346,565. HMRC said that rising house prices contributed to a £17bn increase in the value of estates between 2009-10 and 2015-16.

The Times, Page: 12

HMRC victorious in £79m tax avoidance case

HMRC has won a £79m tax avoidance case against Goldman Sachs and Cargill. The case, one of the biggest corporate tax wins for HMRC in recent years, relates to a tax avoidance scheme set up in 2006-07 when the US giants owned the now-defunct Teesside power station. Teesside Power successfully claimed through US bankruptcy proceedings for hundreds of millions of pounds that were owed to the plant. Teesside Power then set up a Jersey-based company to try to avoid paying corporation tax on about £200m of the money it claimed by converting it into shares.

The Times, Page: 38

Banks looking for Budget boost

UK Finance has, in a detailed submission to the Chancellor, suggested that “the time may be due for a strategic review of government policy toward bank-specific taxes”. It has commissioned two reports on the matter, with one looking at UK banks’ total ta x contribution and another at how the UK compares with other countries. UK Finance’s focus is said to be on the bank levy introduced in the aftermath of the financial crisis and the corporation surcharge tax on banks.

The Times, Page: 39

ACCA’s Roy-Chowdhury previews Budget possibilities

Chas Roy-Chowdhury, head of taxation at ACCA, previews the forthcoming Budget. It is likely that the Chancellor will cut the £40,000 annual allowance for pension savers to about £35,000, he begins, and may also target those taking on work through private firms when they should be treated as employees. Corporation tax could be lowered further, from the 17% already anticipated by 2020, he suggests, adding that income tax personal allowance will likely rise to £12,500 within the next two years. It’s unlikely that the Chancellor will touch IHT, he adds, though some form of Digital Sales Tax could appear.

City AM

BBC should pay presenters’ tax bills, say MPs

A report by the Commons culture committee has labelled the BBC’s pay policies as disgraceful and recommended that it pay tens of millions of pounds to presenters it forced off staff contracts. MPs said it was deplorable that the corporation had forced employees to set up personal service companies, which has left many with hundreds of thousands of pounds of debt following tax changes.

The Times, Page: 7 Daily Mail, Page: 12

IHT cuts ‘could pay for themselves’

The Times’ Ian King argues that Philip Hammond should radically reform IHT by sweeping away all reliefs and exemptions while at the same time cutting the rate from the present 40% to a flat rate of 5%, on all estates worth more than £50,000. He says cutting to such a low rate would raise yields because there would be little point in going to the trouble of avoiding the tax.

The Times, Page: 41

Budget blueprint

The Times’ Ed Conway offers some suggestions to Philip Hammond ahead of the Budget. He says the chancellor should introduce more wealth taxes, abolish stamp duty and council tax and replace them with a property tax based on actual house prices. In an ideal world, he says Mr Hammond would also merge income tax with national insurance. He might also consider abolishing inheritance tax and replacing it with a lifetime gift allowance. Finally, says Mr Conway, the chancellor should scrap corporation tax and replace it with a local business levy.

The Times, Page: 31

Labour to tax and spend to end austerity

Shadow chancellor John McDonnell has told the BBC that a Labour government will end austerity, partly by raising income tax on the top 5% of earners, increasing enforcement of tax avoidance and evasion, and raising corporation tax.

The Guardian, Page: 35

SMEs NEWS

Hammond may raise rates relief

Philip Hammond is said to be considering raising the threshold at which firms start paying business rates in next week’s Budget. The Treasury is reportedly looking at raising the small business rate relief (SBRR) threshold to £20,000. The move would cost £1.4bn in lost revenue but experts say it is vital as business rates are forecast to rise by £730m in April. The chancellor is also considering changing the planning system to accelerate the conversion of empty shops into homes, as part of efforts to boost high streets and tackle the housing crisis.

Daily Mirror, Page: 5 The Sun, Page: 6 Financial Times, Page: 3 Daily Mail, Page: 2

Tribunals not the answer to bank disputes

An independent review has concluded that the Financial Ombudsman Service should be overhauled to give it stronger powers to help SMEs that are wronged by their banks. However, the report by Simon Walker, former head of the Institute of Directors, also warned the government against adopting proposals for a new tribunal system to help small companies resolve disputes with lenders. Mr Walker said a tribunal system would be “expensive for government and for participants” and might do little to address an inherent imbalance in power between small businesses and banks.

The Times, Page; 40 Financial Times, Page: 3

More small firms in liquidation

The number of smaller firms going into liquidation has increased by 32% in 2018, according to KPMG. Some 679 companies were affected in the first nine months of the year, compared to 513 in the same period of 2017. KPMG’s Blair Nimmo said that “local challenges” had a “negative impact on smaller traders”. The rise in liquidations meant there was an increase in company insolvencies, which went from 581 in the first nine months of 2017 to 721 over January to September 2018.

The Scotsman, Page: 9 The Press and Journal, Page: 31

NatWest boosts funding for firms preparing for Brexit

NatWest is trebling its “growth fund” for small businesses to £3bn, up from an initial £1bn revealed in May this year. The bank has identified almost 2,000 business customers it believes may need extra cash to help weather Brexit and is already “proactively” contacting them.

The Daily Telegraph, Business, Page: 8 The Times, Page: 38

Hammond weighs lowering VAT threshold for small businesses

Philip Hammond is considering cutting the £85,000 turnover threshold for VAT after being advised that companies stop growing, or lie, to avoid crossing the line.

Financial Times, Page: 2

MPs call for urgent overhaul of small business lending

MPs have called for a drastic overhaul of Britain’s approach to small business lending, citing the “scandalous” treatment of companies at the hands of big banks. A report by the Treasury select committee said commercial loans must be urgently regulated to prevent a repeat of the abuse of thousands of SMEs after the financial crisis. MPs concluded that the Financial Conduct Authority’s decision not to punish RBS for the actions of its Global Restructuring Group (GRG), which the regulator had found to have systematically mistreated small businesses, was a “damning indictment of the regulatory regime and a sad reflection of its inadequacies”.

The Times, Page: 41

Pension billions will back drive in start-ups

Philip Hammond is expected to use the Budget to unleash billions of pounds worth of cash to back promising businesses. The chancellor will announce measures to make it easier for pension savings to power up new industries and generate extra returns for savers. Mr Hammond indicated a review is on the way earlier this month, promising to “ensure defined contribution pension funds are able to make long-term investment decisions, for the benefit of both their members, and the wider economy.”

The Daily Telegraph, Business, Page: 1

CORPORATE NEWS

Pressure on Patisserie over fraud inquiry

Leading investors in Patisserie Valerie have called on chairman Luke Johnson to give up control of an internal investigation into the £40m hole in its accounts. Invesco, a top ten shareholder in the company, has told Mr Johnson and the board of Patisserie Holdings to hand over the investigation to a law firm or an independent investigation firm during talks last week. Meanwhile, the FT’s Matthew Vincent says questions have been raised over the sale of shares by Patisserie’s chief executive and finance director in recent months.

The Times, Page: 37 Financial Times, Page: 18

Patisserie silent over share option discrepancy

Investors have expressed yet more concerns about the governance of Patisserie Valerie, after it emerged the café chain’s parent company may have issued twice as many share options to two of its directors as it disclosed to investors in its most recent annual accounts. Tim Bush, head of governance at Pirc, said: “It’s difficult to reconcile the number of shares issued under option with what was disclosed as share options in the last annual report.”

The Times, Page: 35-36

FTSE sees exodus of executives

Nearly a fifth of chief executives from the FTSE 100 have stepped down from their positions this year, with 18 top bosses departing. Only in 2007 amid the impending crash and in 2013 were there a similar number of chief executives exiting large-cap companies, at 17. The Telegraph suggests that rising anger over executive pay means some CEOs are being compensated for the fact that churn among top-flight bosses is increasing. Tom Gosling, a partner at PwC, said the risk of the CEO position had “undoubtedly changed” over the past couple of decades. Far more pay is now in the form of bonuses and long-term incentives and much less in the form of generous pensions, he added.

The Daily Telegraph, Business, Page: 8

Energy group takes accounting hit

Yu Group has warned it will take a £10m hit after uncovering accounting irregularities. The energy supplier said that problems with the way historic accrued income is recognised, as well as higher-than-expected non-payments from trade debtors, will push it to an annual loss.

The I, Page: 41

Air Partner lifts dividend despite auditor warning

Private jet operator Air Partner has raised its dividend despite its auditor Deloitte repeating a warning over the historical “concealment” of a multimillion-pound accounting black hole. Air Partner suspended its shares in April after it unearthed a £4m hole in its books. The carrier’s profit before tax fell almost a third to £2.6m, but it lifted its interim dividend per share 2.9% to 1.75p. Deloitte said there were “limitations in the company’s ability to recreate historical accounting records in respect of £3.4m of the accumulated £4.4m overstatement of net assets”. Deloitte has also handed in its resignation and Air Partner is understood to be in the process of re-tendering its audit.

The Daily Telegraph, Business, Page: 3

Lloyds FD to retire

Lloyds Banking Group has announced that its finance boss George Culmer, who helped steer the ship back from the brink following the 2008 financial crisis, is to retire next summer.

The Daily Telegraph Financial Times, Page: 19

Drax appoints Andy Skelton as CFO

Power firm Drax, which owns the UK’s largest plant in North Yorkshire, has appointed Andy Skelton as CFO.

Financial Times

PENSIONS NEWS

HMRC changes to hit pensioners

Hundreds of thousands of pensioners could get less than they are due from the end of this month, according to financial consultancy Willis Towers Watson. The firm warned that after October 31 company pension schemes will not be able to easily check with HMRC that they have the correct information to pay pensioners the right income – affecting both state and final salary employer pensions.

The Daily Telegraph

Budget pensions move could deepen doctor hiring crisis, says BMA

The British Medical Association has warned that cuts to pensions tax relief could lead to some senior doctors facing tax charges of tens of thousands of pounds.

Financial Times, Page: 2

PROPERTY NEWS

High stamp duty sees London house sales at record low

House sales in central London have dropped to a record low as buyers are deterred by high stamp duty, according to an analysis by London Central Portfolio. Just 70 properties are being sold each week – down 16.8% on last year.

Daily Mail, Page: 71

Landlords ‘navigating around’ buy-to-let tax rules

According to data from Mortgages for Business, landlords are increasingly choosing to own properties through companies to get around new tax rules. Research shows that 44% of completed buy-to-let mortgages are now done through limited companies, up 42% from the previous quarter, while the amount of limited company buy-to-let deals rose from 263 in the third quarter of 2017 to 628 in the same quarter this year.

The Daily Telegraph

Debenhams’ rates bill through the roof

Philip Hammond is facing more pressure to act on business rates after Debenhams announced plans to close 50 stores following the worst loss in its 240-year history. The retailer’s chief executive Sergio Bucher highlighted that Debenhams now pays £80m a year in business rates and called on the government to end the “preferential” tax regime for online retailers. The Telegraph’s Jeremy Warner says there is now an urgent need to shift from a tax based on property to one levied on sales in the retail sector. He adds that increasingly, business rates are treated not as a conventional tax but as a money machine for the Treasury.

The Guardian, Page: 20-21 The Sun, Page: 8, 49 The Daily Telegraph, Business, Page: 3 The Daily Telegraph, Page: 21 Daily Mail, Page: 12

Cut property taxes to solve housing crisis, RLA boss urges

David Smith, policy director for the Residential Landlords Association (RLA), argues that the Government’s approach to the way the sector is taxed is hurting those most reliant on the rental market for a place to live. He warns that another 130,000 private rented homes could be lost in the year ahead as a result of the Government’s tax hikes on the sector, which include restricting mortgage interest relief to the basic rate of income tax and imposing a stamp duty levy on the purchase of new homes to rent out, while the demand for private rented homes continues to increase.

The Daily Telegraph

ECONOMY NEWS

Sluggish wage growth hits household confidence

Confidence among British households over their finances hit a three-month low as wages rose at their most sluggish rate since February. IHS Markit found that a “pessimistic tilt” helped to suppress confidence from 45.7 in September to 45.1 in October.

The Times

Young workers enjoy biggest pay rises

Analysis by the ONS suggests that while young Britons have been worst-hit by the squeeze on living standards, when it comes to pay rises they are ahead of the rest. The typical worker aged 16 to 24 is getting an annual pay rise of almost 30%, whereas the typical 56 to 64-year-old is getting only 1.6%.

The Times The Daily Telegraph, Business, Page: 8

Brexit bites into manufacturing orders

British manufacturing orders fell at their fastest pa ce since October 2015 in the third quarter, according to the latest statistics from the CBI, amid continuing uncertainty over a Brexit deal.

The Daily Telegraph, Business, Page: 3 Financial Times, Page: 3

Service exports surge

Service exports increased to £72.3bn in the second quarter of 2018, up from £66.9bn in the first quarter, and up from £68.6bn during the same period in 2017, according to the ONS. Exports to the EU increased by more than any other region between the first and second quarter. However, the US remained the UK’s largest single country trade partner, buying £15.2bn of British services in the second quarter. ‘Other business services’ – including legal, accounting and advertising – was the biggest type of exported services, followed by financial services.

The Daily Telegraph The Times, Page: 38-39

Scottish corporate failures fall over Q3

Latest data from the Accountant in Bankruptcy (AiB) shows the number of Scottish companies failing dropped during the third quarter. However, the data continues to indicate “a trend of rising insolvencies” according to analysis of the latest figures by French Duncan. There were 232 corporate insolvencies in Scotland between July and September, a 5.3% drop compared with the previous quarter but 3.6% higher than the same quarter in 2017.

The Scotsman, Page: 37
No-deal predicted to drag down growth

The National Institute of Economic and Social Research has warned that Britain’s economic growth will slow to its lowest rate in a decade in the event of a no-deal Brexit. The institute said such an outcome meant economic growth would only be 0.3% in both 2019 and 2020, compared with 1.9% and 1.6% in a soft-Brexit scenario. Meanwhile, the Bank of England has warned UK banks to ensure they hold enough cash to withstand any disorderly Brexit hitting financial markets next March. Deputy Governor Sam Woods said he was making sure that Britain’s departure from the EU is as smooth as possible for markets, even if there is no agreement in place between the UK and Brussels.

The Times The Times Financial Times Daily Mail The Guardian, Page: 35

British shoppers showing signs of optimism

PwC ’s latest retail consumer survey reveals just over a quarter of UK retail consumers think they will be better off in the next 12 months.

City AM

OTHER NEWS

Retailers urge chancellor to scrap tax-free shopping reforms

Some 600 retailers – including Harrods and Fortnum & Mason – have written to Philip Hammond asking him to scrap the government’s proposal to digitise tax-free shopping. The letter states that the industry has “lost confidence” in the Treasury’s reform of tax-free shopping, which “risks a further loss of international competitiveness post-Brexit”.

The Times, Page: 38-39

Stephen Hawking’s archive donated to the nation to settle IHT bill

A large part of the archive of Stephen Hawking is to be donated to the nation to help his family pay millions in IHT. Professor Hawking’s estate was valued at around £15m after his death in March. His family have now asked Christie’s to value his archive so that a large proportion can be donated to the nation through the Acceptance in Lieu process.

The Daily Telegraph, Page: 3
Rehash drug policy to boost tax coffers, says thinktank

A report by the TaxPayers’ Alliance (TPA) argues that legalising cannabis would reduce spending by police, prisons, courts and the NHS and provide the Treasury with a tax boost of around £900m a year.

City AM
Billionaires getting richer

A report by UBS and PwC shows billionaires made more money in 2017 than in any year in recorded history. The richest people on earth increased their wealth by a fifth last year to a record $8.9tn (£6.9tn).

The Guardian

Sheeran stumps up…

Ed Sheeran paid £5.3m in tax last year – or £14,560 every day. An accountancy source said: “He deserves maximum credit for paying every last penny.”

Daily Star, Page: 16

…while Bale battles bill

Gareth Bale is appealing a fine of nearly £300,000 from the Spanish authorities for avoiding paying tax on his image rights.

Daily Mail Daily Star, Page: 16 The Sun, Page: 62

Contact Paul Southward if you have any queries.

Paul Southward