News Roundup Monday 1st April 2019
News Roundup Monday 1st April 2019
MP accuses Treasury of loan charge ‘lie’
The controversy over HMRC’s pursuit of contractors who used tax reduction schemes over the last 20 years heats up with the Chancellor accused of lying and MPs bombarded with fake emails attacking the Chancellor and Mel Stride, the Treasury minister. HMRC claims that 50,000 contractors owe an average of £50,000 each in NI and income tax after allowing offshore companies to receive their salaries and then pay them in non-refundable loans. The tax authority’s loan charge has reportedly led to suicides and marriage break-ups as workers buckle under the stress of settlement demands on wages paid up to 20 years ago. Many of the schemes’ users claim that they were encouraged by accountants, recruitment agencies and employers to use them. The Loan Charge All-Party Parliamentary Group has written to Philip Hammond accusing the Treasury of publishing false claims in “their dreadful whitewash report” into the loan charge.
Hundreds of thousands of small firms remain unprepared for MTD
A survey of 500 companies for Telegraph Money by accounting app Coconut found that 23% of companies required to meet new digital tax reporting rules from Monday had not even heard of Making Tax Digital, while a further 28% were aware of it but did not know how it would affect their business. Half of self-employed people said they had been given no guidance from HMRC on the type of software that is compatible with the new requirements and 64% of those surveyed believed that the taxman had not given business owners enough time to comply. Sam O’Connor of Coconut said: “The data is worrying – people still need to be made aware of Making Tax Digital and given the right guidance on how to manage their finances. In reality, you need accountancy-level expertise to make it work with most packages on the market. This needs to be simplified for people, who want to focus on running their day-to-day businesses.”
The Daily Telegraph, Money, Page: 2
SMEs irritated by HMRC investigations
Research by HMRC has revealed that over half of small businesses in the UK believe the Revenue’s tax investigations are too intensive. The research also found that 56% of SMEs do not think HMRC attempts to minimise the cost, time and effort involved in dealing with inquiries. Kevin Igoe, MD at PfP, which specialises in insuring against the cost of tax investigations, said: “Although some small businesses responded positively when asked about their impressions of HMRC’s investigations, we need to get to a point where an overwhelming majority are happy with what’s happening.”
HMRC watched for decades as Muslim terror gangs milked then bombed the UK
A two-year-investigation by the Sunday Times reveals alarming facts about a network of British Asians who, over more than 20 years, committed fraud on the UK to the tune of an estimated £8bn, some of which was sent abroad to fund terrorism. Perpetrators had links to al-Qaeda and Osama bin Laden which were uncovered when laptops were recovered from Afghanistan. HMRC officers were probing serious crimes as far back as 1995 but even after the 9/11 attacks HMRC failed to contact British intelligence. It was only after the London bombings in 2005, when HMRC chiefs realised one of the bombers was linked to the network at the centre of its inquiries, that bosses decided to help the security services. HMRC investigators who wanted to share information were left frustrated as bosses put the confidentiality of the terror suspects above the interests of the country. Gang members infiltrated government agencies, donated thousands to the Labour par ty and some wonder whether HMRC itself was corrupted. The Sunday Times adds that reporting restrictions have been in place for years and even gang members who fled abroad cannot be named. Nazir Afzal, a leading prosecutor who brought the Rochdale sex-grooming gang to justice, commented: “The scandal here is that individuals have been to prison and come out of prison, yet the public still don’t know about it.” Writing in the Sunday Times, Meg Hillier, the chair of the Commons public accounts committee, says it is crucial HMRC’s information is shared “where individuals or companies seek to evade tax and do us harm.”
New probate fees will discourage AIM investments
Changes to probate rules could discourage investment in shares listed on the Alternative Investment Market (Aim), experts have warned. Fees for applying for legal permission to wind up someone’s estate will increase from the current flat fee of £250, or £155 with the help of a solicitor, to £6,000 for the largest estates. Aim shares qualify for “business relief ” and so are exempt from IHT. However, the new probate fees will be based on the value of the gross estate, meaning the tax-free investments will be counted along with other assets and subject to the de facto death tax. Rachael Griffin of Quilter, the wealth adviser, said the Aim relief existed to reward investors who supported smaller firms and that the changes risked creating a “contradictory” and “perverse” situation. “Aim investing should be a win-win for private investors and small businesses,” she said. “The proposed stealth tax format for probate fees will create a perverse situation where previously tax-exempt holdings are effectively taxed via the back door on death.”
The Sunday Telegraph, Business, Page: 11
Tweedy’s firm fights HMRC over alleged avoidance schemes
Singer Cheryl Tweedy is facing legal action from HMRC which accuses the star of making use of an artificial employee bonus scheme that allowed her to avoid paying income tax and national insurance. Instead, she paid capital gains tax, which is charged at a lower rate. HMRC reportedly tried to make the case against her firm, CC Entertainments, the lead case in a court action against 56 separate firms accused of similar tax dodges. Grant Thornton which marketed the scheme, said in a statement: “The growth securities ownership plan was developed to help our clients link their employees’ contribution to the performance of their businesses and are not free of tax. In common with other incentive plans, if there is growth in value in the share or security that is issued to the holder of those shares/ securities, then that increase in value is correctly taxed as a capital gain. It’s a common approach . . . We have been open and transparent about this plan from the outset, including with HMRC.”
Firms are still advertising strategies to tempt self-employed people
The Sunday Times’ Ali Hussein reports that despite an HMRC crackdown on schemes that reduce workers’ tax bills companies are still promoting plans that promise to reduce tax to just 10%. Tom Wallace, head of tax at WTT Consulting, said: “Anything offering savings of 85%-90% of income may be bending the rules.” Some of these umbrella schemes operate for a year, he added. “By the time the Revenue catches up with the individual, the umbrella firms are long gone.” HMRC said: “Individuals should treat schemes marketed in this way with caution. We have reported and will continue to report schemes which make inaccurate claims or provide misleading advice.”
Three auditors and no warning over LCF
The Financial Reporting Council is standing by to investigate any audit errors relating to the collapse of London Capital & Finance (LCF) after it was revealed that the investment firm changed accountants three times in two years. The company, which is at the centre of a £237m criminal investigation by the Serious Fraud Office, was audited by EY when it went into administration in January. EY took over from PwC for the 2016-17 financial year. PwC had picked up the contract a year earlier from Oliver Clive & Co. LCF’s administrator Smith & Williamson is understood to be looking at several years of audits. The Times reports that commentators are questioning how EY and PwC did not notice that LCF was marketing a high-risk mini-bond scheme as a fixed-rate Isa. The Guardian points out that the Financial Conduct Authority is also under pressure to explain why it failed to act despite being warned of the risks at LCF as early as November 2015. Finally, the FT reports that LCF was technically insolvent at least two years ago.
More retail jobs at risk with Select failure
Genus UK, the owner of value fashion retailer Select, has filed a notice of intention to appoint an administrator, putting the jobs of 2,000 workers under threat. Quantuma has been lined up to handle the administration process.
The Daily Telegraph, Business, Page: 39
UK house price growth subdued in March
House prices are lower in England compared with a year ago – the first annual fall in property values since 2012, according to the Nationwide. In the first three months of the year, prices in England were down 0.7% from the same period in 2018. The average house price rose to £213,102 in March from £211,304 in February. London remained the weakest performing region, with prices 3.8% lower than the same period in the previous year – and the biggest fall for a decade. But despite declines in London and the southeast dragging down prices for England as a whole, overall UK house prices in March were up 0.7% from the same month a year earlier. Northern Ireland had the biggest annual increase in the first quarter at 3.3%. Prices rose by 2.4% in Scotland and 0.9% in Wales.
Amazon accused of “institutionalised theft”
Amazon has been accused of abusing its dominance as small businesses are faced with long delays to payments and detrimental conditions of trading with the online giant. Stewart Golf, a British maker of electric golf trolleys, accused the retailer of “institutionalised theft” claiming that Amazon sometimes took between 90 and 120 days to pay for items and that it made deductions for damaged products, even after they were delivered to the Amazon’s own warehouses. Stewart Golf also raised concerns over Amazon’s “reverse provision credit notices” which delayed payment in case it needed to return goods. The company no longer trades through Amazon. Mike Cherry, chairman of the FSB, said that online platforms offered big expansion opportunities, but businesses were being subjected to “poor payment terms and unfair dispute mechanisms”. An Amazon spokesman said terms are agreed in advance with suppliers and are “commonly used throughout retail.”
Business ‘devastated’ by Brexit vote
Business groups have said they are “devastated” after Parliament’s latest rejection of Theresa May’s EU withdrawal plan. They urged MPs and the government to find a solution and stave off the “nightmare” of a no-deal Brexit. Edwin Morgan, the interim director-general of the IoD, said businesses were “sick” of being stuck in “spirit-sapping limbo”. Small business representatives also expressed dismay over the political deadlock. The national chairman of the Federation of Small Businesses, Mike Cherry, said: “Our small firms are sick and tired of politicians debating and dithering over Brexit. They are trying to get on with their jobs and it’s time that politicians get on and do the same.”
BBC News Daily Mail, Page: 11
Scotland’s SMEs least confident in UK
Confidence among small businesses north of the Border, the engine room of the Scottish economy, has slumped to a new low. The latest optimism tracker index from the Federation of Small Businesses fell almost two points to -34.5, marking the second quarter in succession that confidence has hit a record low. In contrast, the UK-wide index picked up slightly, rising 4.9 points in the latest quarter to -5, though this figure is 11 points lower than at the same stage last year.
The Scotsman, Page: 28
Small firms look forward to Brexit dividend
Hitachi Capital’s quarterly business confidence survey reveals that over 40% of small businesses expect to see growth with nations outside of the European Union this year. It found that 32% of SMEs believe they will see significant growth with non-EU partners, while a further 10% thought that they would see modest growth. More than half believed Brexit could lead to more government support and around half thought there would be less red tape to with. Hitachi Capital Business Finance managing director Gavin Wraith-Carter said: “Over the course of the last few years we have asked how they have been feeling about Brexit and, contrasting to the wide-ranging – even exhaustive – national debates, small businesses have been remarkably calm and pragmatic, just wanting to get on with running their ventures.”
Sunday Express, Page: 44
McDonnell to unveil plan for £2.5bn nationalised bank
The shadow chancellor is to unveil plans to create a new nationalised bank built from post office branches. The new “Post Bank” would be given £2.5bn by a Jeremy Corbyn-led government to save the high street and protect face-to-face banking. John McDonnell said: “Poor access to local bank branches hurts our town centres and local communities, particularly affecting elderly and more vulnerable customers, as well as damaging the ability of local small businesses to invest.”
PERSONAL FINANCE NEWS
Investors face ‘unacceptable’ delays to switch platforms
The FT’s Kate Beioley reports on how investors are being forced to wait up to six months to move pensions and investments from one investment platform to another when it should take weeks.
FSCS will now protect investments worth up to £85,000
From today the limit to investments consumers will have safeguarded by the Financial Services Compensation Scheme will increase from £50,000 to £85,000, bringing it in line with protections for cash savings. The move is designed to make it easier for consumers to understand the scheme. Mark Neale, chief executive of the FSCS, says: “Increasing the limit further strengthens financial confidence and means people will have protection for more of their money.” Claire Walsh, personal finance director at wealth manager Schroders, points out: “The FSCS won’t compensate you just because your investments perform badly. Neither does it pay out to people who have lost money to a scam.” Ms Walsh adds: “Always check any product you are considering benefits from FSCS cover. Unregulated investments are not usually covered.”
The Mail on Sunday, Page: 71
Compensation unlikely for LCF investors
Thousands of first-time investors who lost their savings through investment with London Capital & Finance (LCF) are unlikely to qualify for compensation. Nearly 12,000 people put more than £230m into the firm which collapsed in January. The Financial Services Compensation Scheme acknowledged that the investors had lost money “through no fault of their own”. However, it said “there were no grounds for offering compensation”.
Consumer confidence underpins growth
Despite growing uncertainty over Brexit, consumer confidence remains steady, with Britons spending more than they earned for a record ninth consecutive quarter at the end of last year, according to figures from the ONS. Consumer spending offset falling business investment as disposable real income edged up 1% over 2018 while December’s wage growth of 1.4% also helped to push up Britain’s savings ratio. But there were signs households have been borrowing heavily or dipping into their savings to sustain spending, leading to concerns over the sustainability of economic growth. GDP growth was confirmed at 0.2% for Q4 2018, though compared with the final quarter of 2017 the economy grew by 1.4%, slightly stronger than the 1.3% previously estimated. Andrew Wishart at Capital Economics commented: “The figures released today illustrate that if a no deal Brexit is avoided, solid consumer spending can underpin a strengthening in the economy.& rdquo;
Mervyn King: Nothing to fear from no-deal
Former Bank of England Governor Mervyn King told BBC Radio 4’s Today programme on Friday that the UK should leave with no deal and accused MPs of exaggerating the economic risks of no-deal Brexit. Lord King said Philip Hammond’s failure to accelerate spending on no-deal preparations had been “disastrous” and cost the UK negotiating leverage. He added that economics was not the main issue with Brexit and considerations of identity, culture and politics were more important. The Mail’s Alex Brummer says that even if the Chancellor has failed to properly prepare the UK for a no-deal Brexit, the BoE’s current Governor Mark Carney and leading businesses have “not been so foolish” – nor have large parts of Europe – there’s no reason to fear a well-prepared no-deal Brexit.
Daily Mail, Page: 109 The Guardian The Times
Businesses urged to prepare for Corbyn government
The Investment Association (IA) is warning businesses to prepare for a Jeremy Corbyn government as the threat of a general election grows. The trade body representing investment firms warns of an “inbuilt scepticism of the City” and a lack of engagement from the very top of the party. In a private briefing, the IA urged the industry to “step up” attempts to influence Mr Corbyn’s policies, citing Labour plans to nationalise rail and utility firms and impose a new levy on financial transactions.
Contact Paul Southward.