News Roundup Friday 7th September 2018
News Roundup Friday 7th September 2018
IPPR wants tax reform to combat wealth inequality
The Archbishop of Canterbury has called for an increase in the minimum wage and an overhaul of the tax system to help close a widening gap between the rich and the poor. Justin Welby’s demands come in a report from the IPPR Commission on Economic Justice, which was co-written by the Archbishop and sets out a 10-year plan to get the economy working better for everyone. The report calls for all types of income to be taxed equally – hitting those earning from capital harder, and for IHT to be scraped and replaced with a tax on all gifts over a lifetime threshold of £125,000. The proceeds would go towards a Citizens Wealth Fund which would hand out £10k to 25-year-olds to spend on housing or starting a business. The left-leaning think tank also calls for a new National Investment Bank and for workers on company boards. Tech companies should pay a tax on UK sales rather than declared profits and 50% of workers should be involved with collective bargaining by 2030.
Expert highlights disclosure window ahead of Scottish offshore income deadline
Taxpayers with undeclared income generated from offshore assets and investments have until October 1 to declare earnings or face hefty fines of 200% of underpaid taxes, a 50% surcharge for deliberate avoidance and being “named and shamed”. Ian Williams, a partner with Campbell Dallas, notes that a disclosure window applies however: “Qualifying disclosures will be subject to interest charges and the ‘general’ penalty regime, ranging from zero to 30%, but deliberate behaviour will attract significantly higher penalties”.
The Scotsman, Page: 39
Mourinho sentenced for £3m tax fraud
Manchester United boss Jose Mourinho has accepted a one-year prison sentence from Spanish prosecutors in relation to a €3.3m (£3m) tax fraud. Though he won’t actually serve time, in line with Spanish rules for first time offenders, he has been fined €1.98m (£1.78m) over charges relating to income for image rights in 2011 and 2012 which were claimed to have been funnelled through a British Virgin Islands company, Koper Services, and Irish and Swiss companies, before ending up in the New Zealand-based Kaitaia Trust – which had Mourinho’s wife and children as named beneficiaries.
Welby’s intervention on tax not wholly appreciated
Reaction to Archbishop Justin Welby’s call for more taxes to pay for the levelling up of poverty hasn’t been wholly positive. Dr Welby contributed to a study by the Institute for Public Policy Research which called for higher taxes on wealth and multinationals and more state intervention to address economic “unfairness”. Not only are the tax and spend policies objected to by economists but so too is the intervention itself by Christians, who suggest Welby sticks to “talking about God” instead, as Jacob Rees-Mogg put it. A letter to the Express points out that the Church of England is worth about £7bn, with most of the cash held in tax-free endowment funds, so perhaps higher taxation should start there. The Sun’s leader points out that the richest pay 27% of all income tax, as opposed to just 11% under Labour in the 1970s, while low corporation tax has boosted employment. Overall, the tax burden is near a 30-year high; Welby’s “solutions are standard lazy Labour fare”. The Guardian asserts that Welby’s presence on the IPPR panel reminds us that economics should be an “ethical pursuit as well as a technical one” while the paper’s Owen Jones claims the report shows a “public appetite for radical reform” that could go even further. Nick Timothy says in the Telegraph that some of the policy ideas have value and that the Tories risk the “destructive policies” of Corbyn and McDonnell if they “defend a status quo with which the public is unhappy”. Finally, writing in the Telegraph, Jill Kirby, a former director of the Centre for Policy Studies, says it is depressing that the Archbishop used “his position to espouse the standard Left-leaning political prescriptions we can hear any day of the week” while economics professor Len Shackleton calls the report “a succe ssion of dubious empirical generalisations” in City AM.
The Daily Telegraph, Page: 12, 23 Daily Mail, Page: 21 The Times, Page: 24 The Sun, Page: 8, 12 Daily Express, Page: 48 The Guardian, Journal, Page: 2, 3 City AM, Page: 15
Thousands still to settle Rangers-style tax avoidance schemes
Up to 26,000 taxpayers set to be hit by the charge on loans they received as part of tax avoidance structures in the early 2000s, as highlighted in the high-profile case involving Scottish football club Rangers, are yet to settle their affairs with HM Revenue & Customs. Tom Wallace, of tax disputes specialist WTT Consulting, said many clients would go to court on the grounds that the employer should be targeted for national insurance and income tax – a precedent set by the Rangers case. Those who fail to meet the September 30 deadline will face a “loan charge” in April next year.
New tax penalty proposals unfair on taxpayers
The Association of Taxation Technicians (ATT) is urging HMRC to amend proposals for a new penalty regime for late payment of tax in order to avoid unfair outcomes for taxpayers. Unless the plan is amended, it would mean that taxpayers who had agreed with HMRC to pay tax liabilities by instalments could incur substantial penalties even on instalments which had been paid as agreed with HMRC.
Scots income tax receipts £550m below forecast
Income tax receipts in Scotland were £550mn lower in 2016-17 than originally forecast by the Scottish Fiscal Commission (SFC) with the shortfall allegedly driven by an under estimate of the number of additional and higher rate income taxpayers north of the Border.
The Scotsman, Page: 9 The Press and Journal, Page: 16
ENRC wins appeal in key legal privilege case
The mining group Eurasian Natural Resources Corporation (ENRC) has won an appeal against a High Court judgement last year which said the company must hand over documents prepared by an external law firm to the Serious Fraud Office. The Law Society warned the judgement might discourage firms from conducting investigations into themselves and self-reporting to the authorities. Judges at the Court of Appeal agreed, saying it was “in the public interest that companies should be prepared to investigate allegations… prior to going to a prosecutor such as the SFO, without losing the benefit of legal professional privilege for the work product and consequences of their investigation”.
Douglas leaves pub chain
James Douglas, the FD of pub chain Fuller, Smith & Turner has stepped down after 11 years.
Daily Mail, Page: 71
Dropping our mid-sized auditor makes no sense
A director says his company is switching to a Big Four auditor because of fears a smaller firm would be less independent – banning auditors from dual roles would re-build trust and eliminate such fears, he says.
Amortise goodwill swiftly and with a pre-set formula
Professor of Finance and Accounting at Cranfield, David Middleton, says the preferred way to amortise purchased goodwill and avoid conflict of interest is by using a pre-set formula.
Meaning of ‘true and fair’ not open to interpretation
To manage competing concepts of “true and fair”, Paul Norton suggests a simplification of accounting standards and the disclosure of auditors’ own views.
Jooste unaware of black hole
The former boss of Steinhoff, Markus Jooste, has told South African MPs that he was unaware of a black hole in the company’s accounts when he left the embattled retailer back in December. He informed lawmakers that he had no knowledge of accounting irregularities that caused the company to lose 95% of its market value. South African police are currently investigating Jooste over alleged fraud while PwC are still unpicking Steinhoff’s accounts.
Financial Times, Page: 17 Daily Mail City AM, Page: 11
Government breaks pensions dashboard promise
The Federation of Small Businesses says the Government’s decision to pass responsibility for the creation of the pensions dashboard to industry lets down the UK’s self-employed community. The FSB’s Development Manager, Claire Reading said: “Ministers promised to get this sorted. They should have kept that promise. If we end up with an industry dashboard that doesn’t include information about the state pension then you’ll still have a proportion of the self-employed believing that their government top-up will get them over the line. That’s a really dangerous place to be.” In a statement to the Commons, the Department for Work and Pensions said the work it has done “in assessing feasibility for a pensions dashboard has made it clear that we should not underestimate the size or complexity of the challenge. An industry-led dashboard, facilitated by government, will harness the best of industry innovat ion.”
Press Release Parliament
Calorie count rules will hurt small firms
New rules requiring restaurants, cafes and fast-food outlets to display calorie counts on their menus will disproportionately hit small businesses. The Department of Health’s proposals aim to combat obesity, but Liz Truss, the Chief Secretary to the Treasury, accuses the DoH of underestimating the impact on SMEs, which she estimates could face average costs of £500 for each menu change.
RBS bank branch closures blow to small firms
The Federation of Small Businesses laments RBS bank branch closures following the announcement that 54 more will close across England and Wales. FSB Development Manager, Claire Reading, said the losses would further hurt small businesses which value bank branch access. “Demand for new finance among small firms is already low, hampering their expansion and wider economic growth. A diminished branch network could well make a bad situation worse.” The latest cull comes on top of 421 closures announced since December last year, taking the total since then to 475.
Press Release The Daily Telegraph, Business, Page: 1 Daily Express, Page: 10 The Guardian, Page: 32 City AM, Page: 3
FSB demands urgent help for struggling high streets
The Federation of Small Businesses has called for town centres to be thrown a “lifeline” by reforming business rates and changing the tax rules to make it easier for small retailers to expand. The FSB wants a freeze on rates from April 2019; a £1,000 discount for local shops, cafes, restaurants and pubs; extra relief for small firms in London, and a faster appeals process. Access to cash and banking services also was vital and investment in roads and parking was needed to make it easier for shoppers to visit high streets. Mike Cherry, chairman of the FSB, said: “Small business owners are resilient and are used to adapting to market forces, but we want to see government and local authorities come together to look at real solutions to these issues so that our high streets are not only able to survive, but to thrive.”
The Times, Page: 41 Daily Mail, Page: 19 Daily Mirror, Page; 18 City AM, Page: 8
SME-focused lender aims for overseas expansion
Small business fintech lender OakNorth has completed a $100m fundraising to help license its artificial intelligence loan system to banks outside the UK.
Cable calls for business rates to be replaced with a land tax
Writing in City AM, Vince Cable says business rates are a tax on investment and suggests a new tax – the Commercial Landowner Levy (CLL) – based solely on land value (thereby excluding premises and machinery from calculations) and paid for by landowners rather than businesses. The idea has been expounded in a report called “Taxing Land, Not Investment” by Andrew Dixon, founder of the Liberal Democrats Business and Entrepreneurs Network.
City AM, Page: 14
Brexit must bring bold economic reform
John Mills, the chairman of consumer goods business JML, says in the Telegraph that, with “effort and determination”, Britain will prosper outside the EU. But the founder of Labour Leave and member of the IPPR Commission on Economic Justice, which issues its Plan for the New Economy today, believes the economy needs restructuring away from financial services towards manufacturing. Mills calls for a fairer economy and a “new industrialisation” to diversify and grow our exports. The IPPR’s report asserts that the UK is being held back by a business culture dominated by decades of short-term profit-taking, weak levels of investment and low wages.
August slow for housebuilders
Construction industry activity cooled in August as housebuilders felt a “particularly sharp slowdown” and infrastructure projects dried up, the PMI for the construction sector shows. The index fell from 55.8 in July to 52.9 in August. “This raises concerns that the UK economy is flagging”, Howard Archer, chief economic adviser to the EY Item Club, said.
The Times, Page: 34
UK services sector activity accelerates in August
Britain’s services sector picked up the pace in August, according to IHS Markit’s purchasing managers’ index, which rose to 54.3 from 53.5 in July. New orders accelerated and hiring rose to its strongest level since February, while wages increased to encourage retention and attract new workers. However, business expectations for the year ahead sank largely due to increased anxiety over Brexit negotiations. Howard Archer, chief economic adviser to the EY Item Club, said that, as a result, it “looks unlikely that interest rates will rise again until after the UK leaves the EU in March 2019”.
Carney deigns to help smooth Brexit transition
Mark Carney told MPs yesterday that he was willing to stay on as governor of the Bank of England beyond his planned departure date in order to “smooth” the Brexit process. Mr Carney had planned to step down in June 2019. He warned that Brexit would bring a “real income squeeze” but the Bank would “do what we could do to support and ease that adjustment”.
Consumer borrowing shift from private to public
A National Audit Office report says local authorities and Government departments are deemed worse than private sector creditors for the heavy-handed way in which they collect debts and manage people in arrears. The NAO estimates that problem debt costs taxpayers £248m a year and the wider economy £900m a year. “The government lags behind the retail lending sector in following good management practice,” the report says, with only 19% of councils adopting best practice guidelines. Since tighter rules on private borrowing and debt collection were introduced consumer borrowing shifted markedly from private credit providers to the state.
Contact Paul Southward if you have any queries.