News Roundup Monday 13th May 2019
News Roundup Monday 13th May 2019
Value of HMRC diverted profits probes rises
Figures obtained by Pinsent Masons show that HMRC was investigating £4.6bn of potentially underpaid tax by US-based multinationals last year, up 35% from £3.4bn in 2017. HMRC was investigating £27.8bn of tax possibly underpaid by large corporates in 2018, up 14% from the £24.8bn believed to be underpaid the year before. Jason Collins, partner and tax disputes expert at the firm, says technology groups which diver profits overseas are a particular focus.
The Scotsman, Page: 36
Lorraine “damn good” at playing Kelly
Lorraine Kelly has admitted she’s been “damn good” at acting during her TV career after winning an £1.2m tax battle with HMRC. The presenter argued she does not appear on ITV each morning as herself but instead she plays a persona called “Lorraine Kelly”. This satisfied tribunal Judge Jennifer Dean but HMRC is considering an appeal.
HMRC fails to class a third of MSPs as Scottish taxpayers
HMRC bosses failed to identify almost a third of MSPs as being Scottish taxpayers. Jim Harra, the deputy chief executive of HMRC, said 45 of Holyrood’s 129 members had been issued with an incorrect code for 2019-20. He said he was “not pleased to learn that the mistake had been made”.
The Scotsman, Page: 4
Google boss calls for simpler taxes
The boss of Google in Europe has called for company tax rules to be simpler, while saying firms like his were boosting the economy in other ways. Matt Brittin said: “We want to make a big contribution. Tax is one way, but actually using our products and services to save you money, get new jobs and so on, is another.”
Corbyn targets ‘tax dodgers’ and ‘migrant baiters’ at campaign launch
Launching his party’s European Parliament election campaign, Labour leader Jeremy Corbyn has pledged to tackle “tax dodgers, the polluters and the migrant baiters” while fending off “Farage’s snake oil”.
Labour flat-rate income plans ‘would require swath of taxes’
The Shadow Chancellor welcomed a study into UBI schemes this week saying: “We have to lead in developing a radical mechanism aimed at eradicating poverty.”
Court victory for HMRC spells more woe for contractors
HMRC won a case against payroll services firm Costelloe Business Services in March prompting the taxman to send out letters to contractors it believes may have used similar companies. Healthcare contractors used Costelloe to bill their clients and process payments, usually as dividends, reducing their tax and NI liability. HMRC argued this structure was in breach of legislation governing “managed service companies” (MSC) and that the income should be taxable as normal. Rebecca Seeley Harris, of PKF Francis Clark, comments: “What I find incredibly unfair is that a contractor can join a scheme 10 years ago which was completely legitimate and suddenly we go through court and it’s an MSC. It causes years of worry and anxiety wondering whether you have done the right thing.”
Holiday-let landlords invited on MTD pilot
Landlords with furnished holiday lets have been invited to take part in a Making Tax Digital pilot. Those taking part in the trial will use specialist software to keep their income and expense records digitally before submitting them to HMRC every three months, plus a final annual report. Alex Foster, a tax partner at RSM, says: “Making tax digital for income tax seemed to have been kicked into the long grass when it was announced that it would not come in until 2021 at the earliest. Yet a new pilot scheme involving landlords suggests that the idea is very much alive.”
Edinburgh tops Scotland’s R&D tax relief league table
Edinburgh is Scotland’s top spot for R&D tax relief claims with 425 made in 2016-17, according to HMRC data crunched by RSM. This is followed by Glasgow City on 335 and Aberdeen City with 250. The number of claims are up 50% on the previous year while the value of the claims rose 6%. However, Dougy Agnew, a tax partner at the firm in Aberdeen, said: “The fact is there are many more businesses across Scotland that are undertaking R&D work but are missing out on the R&D tax credit payments to which they are entitled.”
The Scotsman, Page: 33
Political chaos leads millionaires to flee UK
Research from New World Wealth shows thousands of millionaires have fled the UK over the past two years, with Brexit, high crime rates and the prospect of tax hikes under a Jeremy Corbyn government all being blamed. George Bull at RSM said entrepreneur and business clients complained most about the “sheer inability of politicians to deliver”. BDO’s Dawn Register adds that Donald Trump’s business-friendly policies had made the US an attractive destination.
Ulster Society urges Northern Ireland corporation tax cut
Richard Gillan, chairman of the Ulster Society, a body representing accountants, has emphasised the opportunity to cut corporation tax in Northern Ireland after power to do so was devolved last year. Changing the tax rate requires an Executive to be in place and Gillan urged politicians engaged in talks to be cognizant of the fact that a tax cut would be a “quick win” that would “take away some of the impending pain of Brexit”.
Tax cuts in no-deal Britain would swell economy
A no-deal Brexit could see the UK adopt tax policies along the lines of Switzerland, reeling in investors and global companies, KPMG partner Matthias Bopp has said. Mr Bopp added that the move could prove so popular it could negatively impact Switzerland’s VAT register. The Express notes that Britain and Switzerland signed a deal in March to maintain the trade relations between both countries post Brexit, deal or no deal.
Dominic Chappell charged with money laundering and tax evasion
The Former owner of BHS Dominic Chappell has been charged with money laundering and tax evasion in relation to the purchase of two yachts using cash from his bankrupt finance company Swiss Rock Ltd.
Labour plans to extend minimum wage to under-18s
Jeremy Corbyn has announced plans to extend Labour’s proposed £10-an-hour national minimum wage to workers under 18 “to end discrimination” against young people. Currently, under-18s are entitled to a minimum wage of £4.35 per hour, compared with £8.21 for over-25s. Paul Johnson, director of the Institute for Fiscal Studies, said the plans were “dramatic” and that they could risk reducing the number of 16 and 17-year-olds in work. Elsewhere, the Institute of Directors warned: “Politicians directly setting rates will always risk not taking full account of the implications for employers and jobs.” The Mail on Sunday says taxpayer subsidies will be needed to pay for the policy which will secure Labour the under-18 vote and an eventual majority government. It will be Conservatives who will be taxed to keep Labour in power, “so that they can then be taxed even more.”
Life sciences fear R&D rule change
Government proposals to cap R&D tax credits are being fought by biotech bosses who fear the move could decimate the UK’s life sciences industry. Biotech developers say they will be disproportionately affected by proposed laws that would restrict payments to lossmaking companies. HMRC estimates that its R&D plans would hit 5% of all small businesses, but figures released tomorrow in a report, State of the Discovery Nation, will reveal that 60% of companies in life sciences will be affected.
Rich prepare to flee Corbyn’s Britain
Fears over a Jeremy Corbyn-led government have led Britain’s super-rich to flee the UK. Billionaires and multimillionaires on the new Sunday Times Rich List have revealed that they are making plans to protect themselves from hard-left tax increases on wealth, income and inheritance by moving family trusts and other assets offshore or their businesses overseas. Mark McMullen, of the private client services team of Moore Stephens, said the UK could lose some £1trn in capital, or 10% of multimillionaires’ assets, if Labour were able to form a government.
The Sunday Times, Page: 1, 2 The Sunday Telegraph, Page: 2 The Mail on Sunday, Page: 14
Issuing 1p demand is a waste of public money
Ali Hussain reports on a £0.01p tax bill sent to a Sunday Times reader by HMRC. Dawn Register, a partner at BDO, said: “It’s lucky for the taxman that the 1p coin wasn’t scrapped. The cost of the letter is more than the tax owed. This letter has clearly been issued automatically by a computer. It would not have happened if a person had taken just one look at it. There is no benefit to the exchequer from this.”
HMRC unlawfully processed biometric data
HMRC has been ordered by the Information Commissioner’s Office to delete any Voice ID records where it did not obtain explicit consent to record and create a unique biometric voiceprint linked to the individual’s identity. Deputy Commissioner Steve Wood commented: “Innovative digital services help make our lives easier, but it must not be at the expense of people’s fundamental right to privacy.”
Tax reliefs help F1 teams achieve zero tax bill
Analysis of the accounts of the UK’s Formula One teams shows they collectively paid no corporation tax in 2017 despite making combined profits of £31.4m. The zero tax bill was due to their use of accumulated tax losses and a Government technology tax relief scheme.
Sunday Express, Page: 44
Creditors approve Debenhams store closures
Creditors at Debenhams have approved plans by the retailer to close 22 stores and reduce rents on more than 100. Landlords, including Hammerson, British Land and Intu supported the CVA with 97% of the votes while a vote of retail creditors supported the deal by 95%. Ahead of the creditors’ vote Debenhams said that administrators at KPMG had rejected all takeover approaches for the department store as the bids were “not at the level required to be taken forward”, meaning the retailer remains in the hands of a consortium of lenders, Celine, who took control last month through a pre-pack administration.
Aviation industry riled by ‘insolvency levy’ proposal
A proposal from the UK Government to add a 50p insolvency levy to every airfare has brought an angry reaction from the aviation industry. The money would be used to repatriate travellers stranded by an airline bankruptcy.
Government scales back tax hikes to foreign property buyers
The government has been accused of cutting homelessness funding by up to £80m after scaling back proposed taxes on foreign property investors. Theresa May last year announced plans to charge overseas buyers of UK homes up to 3% more stamp duty, saying it could raise up to £120m, to be spent on tackling rough sleeping. But a consultation launched by the Treasury proposes only a 1% tax hike, capping the potential fund at £40m. The Association of Accounting Technicians noted the low percentage was unlikely to reduce overseas residential property purchases enough to control house price inflation.
Productivity could improve if stamp duty abolished
The Times’ Oliver Kamm suggests the abolition of stamp duty could improve Britain’s productivity as it serves as a tax on “labour mobility and thus a constraint on economic growth.” It could be paid for by the removal of the exemption from CGT of the sale of primary residences, adds Kamm.
Fairbairn issues post-Brexit immigration policy warning
Carolyn Fairbairn will warn against taking the Tory government’s post-Brexit immigration plans forward at a CBI lunch in Glasgow later today. The Confederation of British Industry (CBI) director-general will say that the plans, including a £30,000 salary floor for migrants, will not work “for any part of the UK” with Scotland likely to be among the worst hit. Ms Fairbairn will add: “We need to make the immigration system affordable and accessible, particularly for our SMEs. Get this right and we can build a system that works. But get it wrong and – let’s be frank – calls for Scottish flexibility on immigration will only increase.”
Funding Circle investors left frustrated
Funding Circle is taking longer to return funds to investors over recent weeks, the Times’ James Hurley reports. The platform, which links retail and institutional investors with small business borrowers, said increased waiting times were a result of a new approach that seeks to protect the interests of new users of the service.
Business urges caution on speed of minimum pay rises
Business leaders have urged the Chancellor to not to introduce increases to the minimum wage too quickly amid economic uncertainty and high costs for small firms.
How gathering finance data can help small business borrowing
Philip Aldrick looks at how fintech can cut borrowing costs for small businesses in the Times, citing Ezbob, a firm which has signed deals with American Express and RBS and uses “digital footprints” to speed up small business loan applications. Online business and personal information is cross-referenced against ecommerce platforms, online marketplaces and payment providers and a credit file is generated within minutes. It can cut costs by up to 80%. A solid credit profile built on a clear track record and smart analytics also offsets the higher risk, increasingly intangible, SME assets, Aldrick points out.
Concerns over banking misconduct victims’ representation
The co-chairman of the All Party Parliamentary Group on Fair Business Banking has warned that victims of banking misconduct could be denied equal status with financial services firms on a new regulatory working group. Kevin Hollinrake MP said that small business groups and alleged victims are underrepresented on groups that have been established to support the new dispute resolution service implementation steering group.
Yorkshire Post, Page: 26
Why female founders are tapping female investors for cash
The FT lo oks at how women experienced in venture capital are setting up networks and encouraging peers to learn about angel investing on order to support female entrepreneurs.
Softbank eyes Greensill
SoftBank is said to be in negotiations with former Morgan Stanley and Citigroup banker Lex Greensill over investing about £500m in his fintech firm Greensill, which specialises in providing SMEs with access to working capital finance to run their day-today operations.
The Mail on Sunday, Page: 91
PERSONAL FINANCE NEWS
Millennials ‘wrongly relying on inherited money’
Some millennials have unrealistic expectations of inheritance and how it may help them buy a first home, a survey suggests. The research suggested that 22% of millennials expected to receive inheritance to use as a deposit, although official statistics suggest only 7% actually did so. The study, by wealth manager Charles Stanley, also suggested that young people expected to receive nearly £130,000, while the median average amount handed down was only £11,000. Additionally, Dan Garrett, founder of will writing service Farewill, said that 30m people in the UK had not written a will. He also called on the Government to clarify its plans for probate fees.
LCF investors given hope of redress
Thousands of small-scale investors who lost their savings by investing with London Capital & Finance (LCF) have been given fresh hope they may qualify for compensation. Nearly 12,000 people put £236m into the firm which collapsed in January. The Financial Services Compensation Scheme said it would “explore whether there are grounds for compensation,” having earlier said investors wouldn’t be able to lodge claims as the scheme was unregulated.
Landlords braced for tenant fees ban
Landlords face more pain as letting agents prepare to increase fees ahead of new rules limiting charges to tenants. Landlords have already seen their profits squeezed by tax changes and the Residential Landlords Association says over a quarter are now looking to sell at least one property in the next year, the highest number since 2016.
The Daily Telegraph, Money, Page: 1, 2
Super-rich tire of UK, head to Italy
The Guardian’s Rupert Neate details how the world’s wealthy are being lured to Italy to exploit a little known tax break that allows them to pay a “flat tax” of €100,000 no matter how much they earn. Tuscan estate agent Ian Heath, who sells homes to the super-rich, comments: “Lots of people are fed up in the UK and want to leave London. They want to feel European, they like the culture and lifestyle. And, of course, the tax break.”
The Guardian, Page: 33
Poor pensions advice comes under regulator’s scrutiny
John Glen, economic secretary to the Treasury, has revealed the Financial Conduct Authority is investigating 30 individuals and firms over poor pension transfer advice and scams.
Indulging pension freedoms risks IHT bill
The Sunday Telegraph carries a warning from pensions experts that people drawing on their pensions too early are risking an avoidable inheritance tax bill. Sean McCann of NFU Mutual, an insurer, said: “If you take money out of a pension you’re taking it out of a protective wrapper that shields it from income tax, capital gains tax and crucially, in most cases, inheritance tax. The protection from these taxes can be passed down through generations without the taxman taking a large slice. Those who can afford to should take money from their Isas or other investments before they dip into the most tax efficient of all their assets.”
The Sunday Telegraph, Business, Page:14
NHS pensions rule change mooted
Philip Hammond and Matt Hancock are considering changes to NHS pensions to halt an exodus of doctors hit with big tax charges for exceeding their pension allowance limits. The chancellor and the health and social care secretary are mulling plans for a 50/50 pension system which would mean staff can make only half their usual pensions contributions for up to 10 years during their careers. Separately, the Sunday Times reports on a poll of 4,000 senior doctors by the British Medical Association which found that more than 30% of NHS consultants had received a tax charge in the past two years.
The Observer, Page: 6 The Sunday Times, Business, Page: 17
Smooth Brexit will not see interest rates soar
A Ban k of England rate-setter has said interest rates are unlikely to rise “far or fast” even if the economy accelerates after a smooth Brexit. Michael Saunders, an external member of the monetary policy committee, suggested growth will improve as business investment picks up once the political uncertainty clears but households need not fear a sharp increase in borrowing costs.
US-China trade war leaves global economy counting the cost
The US-China trade dispute has led to a sharp slowdown in global commerce, with Brexit and a fall in Chinese domestic demand also playing part, economists say.
Brexit stockpiling boosts economy
The UK economy picked up in the first three months of the year after manufacturers’ stockpiling ahead of Brexit helped to boost growth. Growth was 0.5% in the quarter, up from 0.2% in the previous three months, the Office for National Statistics said. The manufacturing sector grew at its fastest rate since 1988 in the period, driven by manufacturers rushing to deliver orders before the original Brexit deadline of 29 March. But economists warned that the boost from stockpiling was likely to be temporary and would unwind in the coming months .
UK exports at record high
UK exports reached a record high of £640bn in the last financial year, up by £18.5bn on the previous year. The ONS figures showed UK firms sold more overseas in the last financial year than at any time since records began. UK exports also grew faster than those of Germany, France and Italy between 2016 and 2018, according to the Organisation for Economic Co-operation. Britain’s 13.8% rate also outstripped the EU’s overall rate of 11.9%. However the total UK trade deficit has widened to 3.4%. International Trade Secretary Liam Fox said: “These new numbers highlight the quality and innovation of British goods and services and how much they are valued across the globe.”
Sunday Express The Sun on Sunday The Mail on Sunday
Pay rises at fastest rate for decade
Wages rose at the joint-fastest rate in more than a decade in the first quarter of the year. Economists are forecasting a 3.5% rise in average weekly earnings when official data for the three months to the end of March is reported by the ONS on Tuesday. Unemployment is expected to stay at a 44-year low of 3.9%, confirming employers shrugged off Brexit concerns in the run up to March 29th – the original Brexit deadline.
Barbados creditors fume at ‘absurd’ $27m advisory fees
Boutique financial adviser White Oak has been criticised for billing Barbados $27m for restructuring the country’s $7bn of debts. The Caribbean island’s creditors described the fee as “absurd.”
Financial Times, Page: 1
Corporate Britain may prefer McDonnell to Corbyn’s centralisers
Ed Conway provides an in-depth view of John McDonnell’s socialist ideology in the Times, contrasting it neatly with that of the Corbynites, who are said to seek a return to 1970’s statism rather than the devolutionary prospectus of the shadow chancellor. One example is universal basic income, championed by McDonnell, and universal basic services – an idea preferred by the leader’s office. One devolves power to the individual and the other power to the state. These differences are what chief executives, who have been on the receiving end of McDonnell’s two-year charm offensive, need to contemplate, suggests Conway. Assuming Labour wins the next election, how they do it will determine the kind of socialism Britain might be about to experience: an outright victory could leave McDonnell’s not unreasonable vision at the wayside with fiscally irresponsible centralisers enthusiastically shoving Britain back to th e 70s.
Accountant stole to fund jaunts with sex cam model
Football club accountant Andrew Barnbrook has been jailed for stealing almost £250,000 from AFC Fylde to fund a cocaine and alcohol habit and his obsession with a webcam glamour model.
The Independent Daily Star
Video games and apps are the new route to wealth
According to this year’s Sunday Times Rich List, people are now making their fortunes not from industries and professions such as banking, stockbroking and the law, but from dating apps, video games and social media platforms. You need £6.85bn to join the Top 20 of The Rich List, while Sri and Gopi Hinduja and family are at the top of the pile with £22bn.
James Moore: Swap Rich List for a Tax Contributor List
The Independent’s James Moore says the Sunday Times Rich List should be dumped in favour of a Tax Contributor List. Instead of fawning over the super-rich, Britons should be talking about their tax avoidance and how it cripples social programmes, thinks Moore. A Tax List showing the Top 50 contributors to the Exchequer should be a more celebrated publication than the Rich List, he concludes.
Contact Paul Southward.