News Roundup Friday 3rd August 2018

NEWS ROUNDUP

TAX NEWS

IHT receipts break £5bn mark for the first time

Rising property prices and a spike in winter deaths helped push up IHT receipts to £5.2bn in 2017/18 – up 8% year on year – according to HMRC figures. IHT receipts have risen 10% on average every year since 2009/10 while the nil-rate band – the threshold above which individuals pay inheritance tax – has remained frozen at £325,000. The latest figures show the number of estates required to pay IHT is also rising, up from 3.9% in 2014/15 to 4.2% in 2015/16. Nearly 25,000 estates were hit with an average IHT bill mounting to nearly £200,000 during 2017/18. The figures do not show the full extent of new rules that allow for an additional £100,000 to be exempt this year, rising to an extra £175,000 over the next three years. By April 2020 couples will be able to pass on a family home worth £1m without incurring inheritance tax. Meanwhile, separate figures from HMRC reveal that cuts to stamp duty have saved more than 120 ,000 first-time buyers a combined £284m.

Financial Times, Page: 2 City AM Daily Mail, Page: 2 The Times, Page: 6 The Daily Telegraph, Page: 8 City AM, Page: 13

Think-tanks paid for reports backing tax havens

The Guardian reports that a study by the Institute of Economic Affairs contradicting the claim that off-shore financial centres were “hotbeds of tax evasion” was paid for by Jersey Finance, which represents banks, law firms and accountants in Jersey. The IEA did not disclose the funding in its discussion paper. The financial services industry in Guernsey also paid for a report written by Shanker Singham and published by the IEA (while Singham was working at the Legatum Institute). Both tax havens are facing pressure from Westminster to reveal the beneficial owners of companies registered in their territories, the Guardian notes.

The Guardian, Page: 18

Business taxation requires fundamental reform, ACCA executive says

Jason Piper, senior manager in ACCA’s Professional Insights team, champions fundamental reform in regard to taxing businesses on the basis of what they do and not “what they are”. While companies’ profits are taxed at significantly lower marginal rates than sole traders’ or partnerships’, on the back of incorporations and such, he suggests, there’s too much invested in the status quo to make real change likely.

City AM

HMRC challenged over countries exchanging data

An EU citizen is challenging HMRC, arguing the exchange of information required by common reporting standard rules would expose them to “a disproportionate risk of data loss and potentially hacking”.

Financial Times, Page: 2

Income tax rise suggested to fund social care

The Local Government Association (LGA) has proposed funding social care by raising income tax for all taxpayers, including a 1% increase on the basic rate. It said this could raise £4.4bn by 2024-25. Other suggestions from the LGA to “rescue older people’s services from collapse” include raising NICs for all ages.

Daily Mail, Page: 19 The Independent, Page: 8

Little profit to be made from tax haven crackdown

The Cato Institute’s Ryan Bourne says clamping down on tax havens will do little to boost the UK’s finances. He cites research from Duke University economist Juan Carlos Suarez Serrato which shows that trying to eliminate profit shifting can reduce company-level investment worldwide and shift what investment does occur overseas.

City AM, Page: 16

Dentists fear tax inquiry pain

Dental businesses have warned of a “catastrophe” if a tax investigation into thousands of their staff determines that dentists who claim to be self-employed are actually full-time employees. HMRC has written to about 50 dentists, mainly in the north of England, as part of an examination of the employment status of “dental associates”. If the Revenue decides that associates are not independent contractors but employees, it would force dental practices to start paying NICs that would hit hardest large corporate players that are already struggling to make money. “What HMRC is doing is dangerous. NHS dental profits have been falling since 2009 and if dental associates were deemed to be employees, the employers’ NIC contributions would be huge and the extra costs that would be landed at a stroke would not be recoverable – and that would be a disaster,” said Alan Suggett, a dental sector specialist at UNW. Big corporate dental businesses generally rely on using self-employed staff, often recruited from overseas, saving the companies millions of pounds in NICs. But despite their size, their margins have been shrunk by a combination of rising costs and the decreasing value of NHS work.

The Times, Page: 31

SMEs NEWS

FCA to take no action against RBS unit

The Financial Conduct Authority has announced that no action will be taken against RBS and its senior managers over the activities of its Global Restructuring Group (GRG). The GRG is accused of deliberately destroying small firms so it could seize their assets in the aftermath of the financial crisis. The FCA said its powers were “very limited” and that there were no “reasonable prospects of success” when it came to action against senior managers. Nicky Morgan, chairman of the Treasury select committee, said it was “bewildering” that the watchdog could not act. “This demonstrates the need for a change in how lending for SMEs is regulated,” she added. Nikki Turner of SME Alliance said for the FCA to find that there “was no evidence of dishonesty or lack of integrity is quite phenomenal.”

Financial Times The Daily Telegraph, Business, Page: 31 The Independent Daily Mail, Page: 6, 58 Daily Express, Page: 46 The Guardian, Page: 27 The Times City AM, Page: 1, 4

One in ten SMEs will stop exports to EU with no-deal Brexit

The Federation of Small Businesses says more than one in ten of its members would stop exporting to the EU in the event of an exit from the bloc without a deal. Two thirds who exported to the customs union feared their trading would be damaged if costs rose as a result of having to complete additional customs declarations.

The Times, Page: 42 The Scotsman, Page: 39

Next CEO calls for business rates reform

The chief executive of Next has urged the government to reform business rates, which he says are accelerating the rate at which high street shops close. Lord Wolfson said the tax on commercial property needs to be re-calibrated rather than cut. He suggests the tax could still raise £30bn for the government annually, but needs changing to ensure that successful retail locations shoulder the greatest burden.

ITV News Daily Mail, Page: 8 The Daily Telegraph, Business, Page: 29

Small firms want to remain in EU

A new poll of small companies reveals the majority would vote to stay in the European Union if there were to be a re-run of the Brexit referendum. Funding Circle surveyed 965 small businesses and found that 56% now want to stay in the EU, while 32% wish to leave. The remainder were undecided or declined to state their preference. The survey highlighted a 7% swing towards remaining since April last year. A separate study of SME investors by the EIS Association found that Brexit was now their foremost consideration when choosing whether to back a business.

The Times, Page: 39

P2P platforms welcome FCA intervention

The Times reports that some peer-to-peer finance platforms have welcomed the Financial Conduct Authority’s announcement that operators are likely to face tougher rules in future. It quotes the unnamed co-founder of one of Britain’s larger P2P platforms, who said “It’s good to see the regulator getting a grip on the platforms that don’t operate properly.” The FCA’s intervention revealed its anxieties over a range of issues, including variable standards of disclosure of information to investors, unclear pricing structures and poor record-keeping.

The Times, Page: 39

CORPORATE NEWS

Former Tesco FD will not stand trial

Carl Rogberg, the former UK finance director of Tesco, will not stand trial in September on charges of fraud and false accounting. The reason for him not standing trial has not been reported. Mr Rogberg was accused of one charge of fraud by abuse of position and one charge of false accounting alongside Christopher Bush, former head of Tesco UK, and John Scouler, former UK commercial director for food, who will stand trial in September.

The Times, Page: 44

Company rules ‘not fit for purpose’

Richard Osborne, founder of campaign group Robust, argues that the UK’s rules around company formation are not fit for purpose. He was commenting after a report by Global Witness found more than 335,000 companies have not declared a beneficial owner.

City AM, Page: 17

Former VW boss faces tax evasion allegation

Former Volkswagen chief executive Martin Winterkorn is under investigation in Germany on suspicion of secreting more than €10m (£8.9m) in Swiss bank accounts in an attempt to evade tax.

The Daily Telegraph, Business, Page: 29

PROPERTY NEWS

Mediate to avoid CVAs, advocate argues

David Abramson, CEO of corporate and property advisors Cedar Dean Group, challenges the premise that a CVA via an accountancy firm is the best way to manage poorly performing leases. The challenge that many businesses and landlords find is that once a CVA is in place, he suggests, it becomes a hostile conversation bound by legalities and time, where everybody is under pressure. While retailers battle the tough current trading climate, landlords, he says, are increasingly resorting to legal measures to find other solutions, so all parties must approach mediation with open arms.

City AM

Mortgage approvals booming

British lenders approved 65,619 mortgages in June, up 1.5% from 64,684 in May, according to data from the Bank of England (BoE), a five-month high. Remortgage approvals fell from 51,669 to 47,895 however, while approvals for house purchases were down 0.2% year-on-year. Howard Archer, chief economic advisor to the EY ITEM Club, said: “There seems little evidence that the cutting of stamp duty for first-time buyers in last November’s Budget has provided a significant boost to housing market activity.”

City AM Financial Times, Page: 2

Estate agents under pressure

Foxtons has reported losses of £2.5m for the first half of the year, as the capital’s property market continues to stagnate. A recent report from Moore Stephens found that more than 150 estate agency firms became insolvent last year as high street operators face the triple whammy of online competition, a sagging property market and cuts to letting fees.

The Guardian, Page: 27

PENSIONS NEWS

Pensioners pull record £2bn from savings in just three months

Savers in the UK withdrew a record £2.2bn from their retirement savings in the last three months despite the risk of high tax bills. Withdrawals exceeded £2.2bn in the second quarter of 2018, 20% more than savers withdrew in the same quarter last year. But experts are warning that along with higher tax bills, savers risk triggering a rule that restricts the amount they and their employers can contribute in future from an annual allowance of £40,000 to the Money Purchase Annual Allowance of just £4,000, after which a tax charge applies.

The Daily Telegraph The Times, Page: 2

Public sector pensions jump in value

New analysis shows the value of public sector pensions has risen two and a half times since 2012. Independent pensions expert John Ralfe highlighted the growth of taxpayer contributions in recent years in order to ensure public sector workers get “defined benefit” pensions.

The Times, Page: 13

Telegraph’s Jeremy Warner is predicting Mark Carney will try to persuade the Bank of England’s MPC to vote for a quarter point rate rise this month. The rise has been “pretty much factored in” already, says Warner, but the Bank’s timing is off, he adds, having missed the chance to raise rates a year ago with little consequence, it risks unsettling the economy just when it is about to “hit the buffers once more.” The Times reports that equity and debt markets are pricing in a 90% certainty that the Bank will raise interest rates this week while the National Institute of Economic and Social Research says the MPC should raise interest rates to combat inflation, but be ready to cut them again if the economy needs more support in the autumn.

The Daily Telegraph, Business, Page: 30 The Times, Page: 34 The Daily Telegraph, Business, Page: 29

UK needs full EU access to maintain modest growth

The National Institute of Economic and Social Research (NIESR) has predicted the UK economy will grow by 1.4% this year and by 1.7% in 2019 – no change on its May forecast. However, the NIESR said the growth was dependent on the UK achieving nearly full access to the EU market for its goods and services and that the global trade war remained contained. A no-deal Brexit would lead to growth of just 0.6% in 2019, the institute said.

The Times, Page: 34 Daily Mail, Page: 15

UK top for fintech investment

The UK has surpassed the rest of Europe in terms of fintech investment for the first half of the year, attracting $16.1bn (£12.3bn) out of the continent’s $26bn total. It also outstripped the US, which scored $14.2bn. Data provided by KPMG‘s Pulse of Fintech report shows four of Europe’s top 10 fintech deals happened in the UK, allaying fears that Brexit would hurt the UK’s startup scene.

City AM, Page: 11 The Scotsman, Page: 37

Fall in insolvencies ‘may only be a blip’

New figures highlighting a quarterly fall in corporate insolvencies may only be a blip in an underlying upward trend, according to the Midlands branch of R3. The body is urging business owners not to be lulled into a false sense of security after the Insolvency Service reported that corporate insolvencies fell by 12% in the second quarter of this year compared to the first quarter. R3 Midlands points out that corporate insolvency figures are still 12% higher than the same quarter last year, and that company directors still need to remain vigilant.

The Business Desk

Credit card lending rising

Credit card lending increased by 11% in June, according to new data from the Bank of England, its joint fastest rate since April 2017. The 12-month rate of growth in non-credit card consumer lending held steady at 8.5% in June however, its joint lowest since May 2015. Total borrowing now stands at £72bn, up from £65bn two years ago.

The Times, Page: 2 City AM The I, Page: 40 The Independent, Page: 57

Banks plan no-deal Brexit lending

Banks are preparing to lend businesses billions, in the event that Britain crashes out of the EU without a deal, in order to ease the economy through a potential crisis. The Telegraph reports that banks are ready to extend vital lines of credit, mitigating a potential cash crunch caused by delays to cross-border shipments and payments following Brexit. “Extending credit to firms impacted is one thing we’re looking at. It’s a bit Dunkirk spirit type of stuff. But banks are in reasonably good shape and can cope,” said one executive at a FTSE 100 bank. Bank lobby group UK Finance added that it was prepared to co-ordinate any efforts to provide support.

The Daily Telegraph, Business, Page: 29

Global debt dips

Global debt fell last year for the first time since the turn of the decade, according to an Invesco analysis of data from the Bank for International Settlements. Debts surged from 172.1% of GDP in 2001 to 219.5% in 2016, but then fell back to 218.3% last year.

The Daily Telegraph

INTERNATIONAL NEWS

Behind the downfall of Abraaj

The Independent examines the collapse of Dubai private equity firm Abraaj Group, which is defaulting on at least $1.1bn of debt. Investigators at PwC are now selling Abraaj assets to pay creditors, and investigating allegations of “mismanagement, commingling of funds and misappropriation of assets”.

The Independent, Page: 62

OTHER NEWS

Unemployment in Eurozone at lowest level since 2008

Eurozone unemployment in June was at the lowest level since December 2008, falling to 8.3%. Spain’s falling unemployment has meant divergence between countries in the north and south of Europe is less marked than it has been, analysts said, but high youth unemployment across the south remains problematic.

The Daily Telegraph

Amnesty accountant jailed

An accountant with Amnesty International has been jailed for 21 months for spending £43,000 on flights, hotels and luxury goods on the charity’s credit card. Sebastian Sarmiento Orozco, 27, who is originally from Colombia, admitted fraud at Southwark crown court and is likely to be deported at the end of his sentence.

The Times, Page: 18

Brussels does not trust HMRC to collect duties

Senior EU sources have said that they no longer trust Britain’s enforcement of common European customs rules, citing the UK’s alleged failure to tackle customs and VAT fraud from China. It follows accusations that HMRC has failed to take action against a multibillion-pound scam that has allowed Chinese companies to flood websites such as Amazon with cheap goods on which no VAT is paid.

The Times, Page: 12

Contact Paul Southward if you have any queries. 

Paul Southward