News Roundup Friday 27th July 2018

NEWS ROUNDUP

TAX NEWS

HMRC’s ‘aggressive’ tactics resulting in judicial reviews

The number of taxpayers taking HMRC to the High Court rose by 36% last year, amid suggestions the Revenue is taking a more aggressive stance when pursuing individuals. Legal firm RPC said t his has resulted in an increase in legal challenges by those who believe HMRC has overstepped the mark or acted in an unfair manner. HMRC faced 122 judicial reviews in 2017, up from 90 in the previous calendar year. Adam Craggs, of RPC, said HMRC was under political pressure to increase tax revenues, and this had prompted the organisation’s new approach. “HMRC’s increasing aggression and intransigence mean that judicial reviews are becoming far too common and are all too often the result of simple errors by HMRC and a dogged refusal to correct them,” he said.

The Daily Telegraph

Businesses struggle with tax compliance burden

Research from the British Chambers of Commerce and Avalara show that the vast majority of UK businesses feel the burden of complying with tax regulations has escalated in recent years, with three in four saying the cost had increased compared to five years earlier. According to the survey, 64% of businesses said that VAT created the biggest administration, a finding mirrored in the responses of firms across all sizes and sectors. The BCC is urging ministers to reduce the complexity of current tax regulations and facilitate additional support from HMRC for companies trying to stay compliant, with a particular focus on SMEs. Adam Marshall, director general of the BCC, said: “We want to see more investment in frontline HMRC support that’s geared towards making compliance easier for SMEs. There should also be greater independent scrutiny of new tax proposals with the aim of minimising the administrative burden on business.”

The Scotsman, Page: 37 The Daily Telegraph, Business, Page: 29 US banks call for tax cuts in UK

Wall Street banks have called on the British government to cut taxes and regulation or risk financial services jobs leaving the UK after Brexit. An unnamed Wall Street executive said: “If this government stays in place it realises it has to swing back to the middle ground after Brexit, otherwise it risks losing some of this. The question is [do we move business to] New York; that is the real risk.” City leaders admitted that tax cuts and deregulation in the US have increased pressure on the UK to be more competitive. Stephen Jones, chief executive of UK Finance, said: “There is a perception that in the UK this is still a relatively hostile business and regulatory environment.” Foreign banks contributed £17bn to UK’s public finances in the 2016-17 financial year, according to PwC.

Financial Times, Page: 1 The Times, Page: 35

Amazon fears a UK free to change tax rules

The backlash against Amazon’s UK boss for saying he believes there will be civil unrest in the UK two weeks after a no-deal Brexit has included claims the company is scaremongering in order to keep the UK away from being able to change its tax rules. Charlie Elphicke, who sits on the Treasury select committee, said: “Out of Europe we will be able to take back control of our tax system – including making Amazon collect UK VAT, as they are now required to do in Australia. No wonder they want us to sign up to stop us doing that.” Fellow Conservative MP Marcus Fysh added: “Time to make Amazon contribute to rather than asset strip the UK retail environment.”

Daily Mail, Page: 10 Daily Express, Page: 4, 12

Off-Payroll (IR35): Much of perceived tax avoidance by hirers

Some 84% of the perceived tax shortfall resulting from IR35 is avoided by the hiring organisation, according to a illustrative example within HMRC’s ‘Off-Payroll working in the private sector’ consultation, which indicates that just 16% is attributable to the contractor. While the statistic may come as a shock, given HMRC’s rhetoric on IR35 and the new Off-Payroll tax, non-compliance among public sector hirers, some of whom have even passed liabilities on to their workforce, has left many organisations yet to feel the full impact of the new Off-Payroll tax.

Contractor Calculator

Jim Harra: HMRC more than capable

Responding to claims Brussels sees HMRC as not fit for purpose and not to be trusted with post-Brexit duty collection, Jim Harra, the deputy chief executive and Second Permanent Secretary at HMRC, says: “Compared with other EU member states, the UK has one of the lowest number of customs infringement proceedings launched against it. We exceeded our targets for clearing customs checks last year, and were ranked fifth in the world for efficient customs processes by the World Bank in 2016.” Additionally, the UK has one of the lowest tax gaps in the world and has recruited thousands of talented staff to help with Brexit-related work, Harra states.

The Times, Page: 24

INDUSTRY NEWS

UK to adopt fifth EU anti-money laundering directive

The Department for Business, Energy and Industrial Strategy (BEIS) has indicated that the UK will adopt the fifth EU anti-money laundering directive – which includes public registers of company owners in every member state, access to the names of the beneficiaries of trusts for law enforcement agencies and those with a “legitimate interest”, including investigative journalists and NGOs, and automatic access to the names of bank account holders for national financial intelligence units. “This is great news,” said Alex Cobham, the chief executive of the campaign group Tax Justice Network.

The Guardian

SMEs NEWS

Collaboration key to business success

Anil Stocker, co-founder of MarketInvoice, says large firms are increasingly looking to collaborate with start-ups as they seek to become more agile and innovative. He suggests that for large companies, the benefits of partnering are twofold: access to new markets, and the opportunity for large organisations to learn to be more entrepreneurial. The latest KPMG Global CEO Outlook survey reveals that 61% of UK CEOs are planning to collaborate with start-ups, compared with 53% globally, while two thirds of both UK and global CEOs say that strategic alliances are a priority for growth.

The Times, Page: 42

Watchdog examines cost of card services

The Payment Systems Regulator (PSR) has set out the terms of a market review into so-called card-acquiring services to investigate whether banks and other finance firms are ripping off retailers. The PSR wants to investigate whether card-acquirers are overcharging small businesses due to a lack of competition, with costs being passed on to consumers. Around 30 card-acquirers dominate the UK, including specialists Worldpay and Global Payments, and Barclaycard and Lloydscardnet.

The Daily Telegraph, Page: 30 Daily Mail, Page: 63

Foreign investors improve productivity of UK firms

Research by the Office for National Statistics (ONS) has found that mid-sized UK businesses in the services sector with foreign owners are up to three times as productive as those with only UK investors. Small businesses are ahead by almost as much when 10% or more of shares or votes are foreign controlled, while large firms have a smaller lead. However, the ONS said it cannot tell from this data whether the companies are more productive because they have foreign owners, or whether it is simply that foreign investors buy into businesses that are already highly productive. Both Andy Haldane, the Bank of England’s chief economist, and Deloitte chief executive Ian Stewart agree that international capital itself can bring its own productivity improvements while firms that export are incentivised by global competition to boost efficiencies and match international best practices.

The Daily Telegraph, Business, Page: 27

PROPERTY NEWS

House transactions down amid ‘stagnant’ market

The number of residential property transactions dropped 3% between May and June to 96,370, according to data from HMRC, as the UK’s stagnant property market shows little sign of picking up. House sales completions were 5.7% lower in June, compared with the same month last year.

City AM

ECONOMY NEWS

More businesses in financial distress

A report from Begbies Traynor has found that 472,183 companies were suffering “financial distress” at the end of June, a rise of 9% year-on-year but down 1% compared with the previous three months. Sectors with the highest number of distressed businesses were support services (112,434), construction (60,208), real estate (42,254), telecoms (31,770) and general retailers (30,574). Companies in the south of England faced the most dramatic deterioration in their financial health, with London coming in as the worst-performing region in the UK. Julie Palmer, a partner at Begbies Traynor, said: “The rate of deterioration in UK corporate health has slowed during the second quarter of 2018, supported by recovering business and consumer confidence, higher levels of employment and continued interest rate stability.”

The Daily Telegraph, Business, Page: 27 The Times, Page: 36 Daily Mail, Page: 61 The I, Page: 40 The Independent, Page: 62 The Scotsman, Page: 34 Daily Mirror, Page: 43

Brits now most confident on finances since Brexit vote

UK households are currently the most positive about their household finances for the year ahead since before the Brexit vote two years ago, according to IHS Markit’s financial expectations index, while its measure of job security hit its highest level since the survey began in 2009. Sam Teague, an IHS Markit economist, noted a “marked improvement” in workplace incomes amid softer inflationary pressure.

City AM

UK living standards drop as child-poverty rate rises

The Resolution Foundation’s annual Living Standards Audit has found that household income growth has slowed over the last year, rising just 0.9% – the lowest level seen since 2012. Child poverty was estimated to have increased by 3% driven by benefit cuts which disproportionately hit low-income families.

Financial Times, Page: 2 The Guardian, Page: 31 I, Page: 40 Daily Mirror, Page: 12 The Independent, Page: 20 The Scotsman, Page: 17

OTHER NEWS

Ministers mull lump-sum ‘retirement levy’

Ministers are considering a so-called “retirement levy” as an alternative to hiking taxes to pay for the country’s social care costs. The proposal would see retirees make a one-off payment into a ‘national care fund’ which would go towards meeting the costs of funding their stay in residential homes.

The Daily Telegraph

Contact Paul Southward if you have any queries.

 Paul Southward