News Roundup Monday 22nd October 2018
News Roundup Monday 22nd October 2018
Global agreement on tax desperately needed, says OECD
The Organisation for Economic Co-operation and Development (OECD) has called for an urgent crackdown on tax avoidance, as head of tax Pascal Saint-Amans revealed that roughly £190bn a year was lost through profit shifting. He added that “global tax rules must be changed to prevent tech firms from dodging taxes […] you need all the countries in the world, starting with the US, to agree on a set of rules that would allow you to tax without a physical presence.”
Daily Mail, Page: 82
EU wants Brexit deal to strangle future UK tax policy
Leaked documents drawn up by EU officials show Brussels intends to tie the UK’s tax policy to that of the EU after Brexit as part of any future agreement. Papers written by the European Parliament’s TAX3 secretariat and seen by the Telegraph disclose a plan to force the UK to “abide by the tools adopted at EU level to fight tax evasion/avoidance.” The diktat would also apply to UK overseas territories and would prevent the UK from becoming a low-tax economy by cutting its corporation tax rate to attract business. John Longworth, co-chairman of Leave Means Leave said, “the EU will stop at nothing to stifle Britain’s competitiveness post Brexit. An agreement on tax provisions would of course also bind us to future regulations. If they are keeping this secret, what else are they planning for us?” The documents were written up by TAX3 following a meeting with Michel Barnier’s Brexit Task Force last week. The minutes of the meeting describe Chequers as “wishful thinking” and state: “According to the Commission, it is not feasible that the political declaration will not include taxation provisions.”
Chancellor to unilaterally tax online giants
The Mail’s Alex Brummer claims Philip Hammond is preparing to “go it alone” and craft a new tax for internet giants after growing frustrated at progress from the EU, which Treasury officials say has been stymied by lobbying from low tax countries like Luxembourg and Ireland. Separately, the Chancellor has reportedly dropped plans to put VAT on private school fees.
Daily Mail, Page: 12 The Sun, Page: 8
The tax cow that keeps on giving
The Times’ Carol Lewis considers what the Chancellor might do with CGT, IHT and stamp duty in his Budget. Receipts for the three capital and wealth taxes have risen 73% in five years, making up 36% of overall tax receipts, and RSM’s tax partner George Bull thinks cuts to these are unlikely. He says: “The dramatic increase in capital taxes will be welcome news to the Chancellor. It also seems to be in keeping with the spirit of our times, with more people focusing on the taxation of capital or of wealth.” Elsewhere, the FT analyses the rise of IHT receipts over the last decade, noting how a house price slowdown has resulted in growth in estate values levelling off.
Clegg takes job at Facebook
Sir Nick Clegg has been accused of hypocrisy after taking a high profile PR role with Facebook despite criticising the social media company for paying too little tax. Lib Dem leader Sir Vince Cable said he intended to write a letter to Clegg asking him to get his employer to pay more tax. “I will be urging him to make sure Facebook co-operates with attempts to make sure they pay their fair share of taxes,” he said. “That is the big public policy issue.”
The Daily Telegraph, Page: 1, 2 The Guardian, Page: 3 The Times, Page: 3 The Sun, Page: 11 The Scotsman, Page: 5
HMRC delays rollout of digital VAT returns
Filing VAT returns using the Making Tax Digital system will be delayed for some companies due to the complexity of the system, customer concerns and Brexit complications, HMRC has said.
Pension tax raid ‘will widen retirement funds gap’
A raid on pensions tax relief in the Budget will widen the gap between the retirement funds of public and private sector workers, a report has warned. Last week Philip Hammond said pension tax breaks have become “eye-wateringly expensive” in a clear indication they could be cut in the Budget. However, analysis by the Taxpayers’ Alliance suggests that stripping back tax relief on money saved into pensions would hit private sector workers significantly harder than their public sector equivalents, who already enjoy more generous arrangements. If pension tax relief is limited, the analysis found, a private sector worker earning £72,000 would subsequently have to pay around a fifth more in increased tax than their public sector counterparts to build up equivalent pension.
Shops set for £300m tax cut
Philip Hammond could announce a £300m tax cut for shops in Britain’s most deprived town centres from April, as pressure mounts on the Government to help high street retailers. A source quoted by the Mail on Sunday said the Government is weighing up an instant reduction in bills for the next two years, along with a package of measures that could include a tax on digital firms. It is facing growing pressure to level the playing field on tax to help domestic firms, as criticism mounts against multinationals using complex company structures to reduce their tax bills. The Tax Justice Network has called on ministers to demand greater transparency from global corporations operating in the UK, arguing that that powers enshrined in the Finance Act 2016 gives the Treasury the ability to demand firms publicly state country-by-country financial data.
The Mail on Sunday, Page: 97
Pension switch could land grieving families with IHT bills
The families of people who cashed in final salary pensions while terminally ill could face huge IHT bills following a landmark ruling. The Court of Appeal last week ruled in favour of HMRC after it launched a legal case against the family of Rachel Staveley, who transferred her money from one pension scheme to another in 2006 while terminally ill and died before accessing any of the cash. HMRC said that Ms Staveley knew she had a terminal condition and had deliberately not accessed the money, to prevent her family from paying IHT.
HMRC expands football probe
HMRC is now investigating almost 200 footballers for alleged tax abuses linked to image rights payments. Tax officials are probing 198 players at 44 Premier League and Football League clubs, as well as 29 agents. The number of players under investigation has risen from 181 in April, while the number of agents under HMRC scrutiny has increased from 21 to 29 in the same period. The football investigation has so far netted £329m in extra tax for the Treasury, with several clubs having settled with HMRC during the year.
The Mail on Sunday, Page: 132
Budget offers chance for reform
The Sunday Times’ Tommy Stubbington says Philip Hammond should use this month’s Budget to ask “some fundamental questions about the tax system.” He argues that the chancellor should target some of the loopholes that “distort the tax system with perverse incentives and amount to absurdly generous giveaways to some of the wealthiest citizens.” Amongst the areas most ripe for reform are CGT, IHT and pensions, says Stubbington.
No-deal Brexit poses risk to jobs
The Federation of Small Businesses has warned that a no-deal Brexit would result in small companies postponing investments and cutting their workforce. The FSB found that more than one in three SMEs would postpone big business decisions or investment in research and development if Britain left without a deal. Meanwhile, one in five firms said they were likely to make redundancies or cut spending. Separate research from Citibase found that 60% of SMEs have started or are about to start making Brexit contingency plans.
The Times, Page: 42 The Scotsman, Page: 39
Business owners warned over loss of relief
Gibson Hewitt director Lynn Gibson is warning business owners who may be considering retirement to make plans to put their firms into a Members’ Voluntary Liquidation (MVL) ahead of the Budget this month amid rumours the Chancellor is considering shutting down Entrepreneur’s Relief. The relief has made taking money out of a company more tax efficient. As such, it continues to be used by business directors and shareholders when they are looking to sell or close their company,” explained Lynn. She added: “Those who are considering an MVL in the near future should look to bring their plans forward if at all possible, as a sudden change in the Autumn Budget may make this form of winding up order less tax efficient than other options, such as succession or a buyout.”
Funding Circle recovers after loan book lift
Shares in peer-to-peer lender Funding Circle recovered on Friday after a poor start as a public company. Share rose 4.9% to 430p after it revealed its loan book had expanded 61% by the end of September. Funding Circle said its total loan book was worth £2.8bn by September 30, up from £1.7bn on the previous year. Investors funded a record £564m of new loans in the third quarter and £1.6bn in the year-to-date. More than £1bn of this was lent to SMEs in the UK.
Daily Mail, Page: 105 Financial Times, Page: 17
Philip Hammond targets £2bn job subsidy to make Budget savings
Philip Hammond is looking to scale back the Employment Allowance, which takes the first £3,000 off every company’s bill for employers’ NI and is costing £2bn a year, possibly restricting it to micro-businesses.
GVC finance boss moves to private equity
The CFO of GVC Holdings is to leave the gambling operator after less than seven months in the role. Paul Bowtell is leaving to join Alchemy Partners.
The Times, Page: 49
Patisserie Valerie may face legal action from investors
Law firm Teacher Stern is canvassing Patisserie Valerie investors about a possible legal action following the discovery of “significant, and potentially fraudulent, accounting irregularities.” The law firm wants to pursue the café chain for losses endured by shareholders. Philip Rubens, head of financial services litigation at Teacher Stern, has also suggested that Patisserie Valerie could take action against its auditor Grant Thornton. Meanwhile, Iain Cowie in the Sunday Times says Patisserie Valerie’s predicament should serve as “a warning to anyone who thinks tax-efficient investing is a piece of cake.”
The Sunday Times, Business, Page: 3 The Mail on Sunday, Page: 99
New pensions death tax risk
HMRC has won a controversial appeal case that means the pensions of savers in ill-health face being taxed if transferred to loved ones. Tom Selby, of AJ Bell, said the ruling caused “major confusion for pension savers in ill-health” and risked landing families with a “shock 40% tax bill on the money left behind by a loved one”. He added: “Instead of allowing court rulings to determine whether inheritance tax is due on retirement funds left behind, the Government could radically simplify the system by exempting pensions from inheritance tax altogether.”
HMRC reduces check facilities for incorrect pension records
Changes to the way HMRC checks company pension schemes mean up to a million pensioners could be stuck with incorrect payments after the end of this month. State and final salary employer pension holders who reached state pension age before April 6, 2016 will be affected by HMRC’s decision to shift to only checking errors in company pension schemes on a case-by-case basis, a move that will slow down the process of revising records and could leave pensioners stuck with incorrect payments.
The Daily Telegraph, Money, Page: 7
Downward trend for stamp duty receipts could cost treasury £1bn this year
Official figures released yesterday show a £542m fall in stamp duty receipts to £6.5bn so far this year – a 7.7% drop on the same period last year. Mark Littlewood, director general at the Institute for Economic Affairs, said: “Stamp duty is a bad tax […] Ultimately this pernicious tax needs to be scrapped to increase efficiency in the housing market and bring down prices.” Elsewhere, John Hawksworth, chief economist at PwC, said: “Stamp duty has been weaker than expected, reflecting lower housing transactions in London in particular.”
Daily Mail, Page: 12
ICAEW CEO writes to Chancellor
In a letter to the chancellor Philip Hammond, the CEO of ICAEW, Michael Izza, suggested ways to keep the UK economy competitive. He called on Mr Hammond to slow down the introduction of new tax legislation and for the National Productivity Council to assess the impact of regulations on productivity growth. To support businesses in the future, Izza said ICAEW hoped that the profession would be afforded mutual recognition in regards to professional qualifications. Izza also claimed there was a need for the UK to close the skills gap, through the government boosting technical education programmes and by recognising difference in the availability of skilled staff in different regions.
Food sales down
Food sales saw their steepest drop in three years in September as consumers tightened their belts after the unusually hot summer, the ONS has said. Sales of food were down 1.5% in the month, contributing to a 0.8% fall in total UK retail sales. Andrew Westbrook, head of retail at RSM, said: “There continue to be signs of distress on the high street, with deep discounting evident in some stores. For many retailers the run-up to the Christmas season when stock can be converted to cash can’t come soon enough.”
Deutsche Bank chief economist: UK is going to come out just fine
Deutsche Bank’s Chief Economist David Folkert-Landau, has said Britain’s economy will do “just as well, if not better” than that of the EU. He told Bloomberg: “I believe over a generational period the UK is going to come out looking just fine. The UK economy has flexibility, it is in its genes to do well, to be innovative. It doesn’t have this bureaucratic construct that the Europeans have to struggle with, and it’s got flexible exchange rates.”
Government borrowing drops
The ONS has revealed that government borrowing fell by more than expected last month, to £4.1bn from £4.9bn a year earlier, the lowest borrowing figure for the month of September since 2007. Public sector net debt, excluding public sector banks, now stands at £1,789.5bn, equivalent to 84.3% of GDP. John Hawksworth of PwC said: “This borrowing undershoot should give the Chancellor a little extra wiggle room for his Budget, but it will not be enough on its own to cover the cost of announced increases in spending on the NHS, let alone other priority areas where there is pressure to bring austerity to an end.”
Carney: Banks can cope with no-deal
The Governor of the Bank of England, Mark Carney, has said that Britain could withstand a hard Brexit and tough trade relations after Britain leaves the EU. The BoE does not see the scenario as the most likely outcome in March next year, when Britain formally leaves the EU, but it is still possible. Mr Carney said: “We aren’t hoping for the best, we’re preparing for the worst in several ways.”. Mr Carney added that about £100trn of cross-border derivative contracts may be disrupted by loss of regulatory permissions for clearing houses after Brexit.
Wages expected to rise
Economists are expecting pay to rise by 3% next year while inflation will slow to 2%, meaning that real incomes will rise by 1% in 2019. When a fuller picture of living standards is included, economists predict real household disposable income growth of 1.4% next year, almost three times the OBR’s forecast of 0.5%. Peter Dixon at Commerzbank commented: “Personal incomes were remarkably weak through 2016 and 2017, growing [in cash terms] by 2.25%. We think this year that will be closer to 4% and similar next year.” The Telegraph explains that the recovery has been caused by a strong jobs market, with very low unemployment, which has pushed employers to raise wages.
Profit warnings increasing
Retailers issued eight profit warnings in the past three months, according to EY’s profit warning stress index – the joint highest third quarter figure since the credit crunch. In total 206 listed companies have issued profit warnings in the past 12 months, up from 191 a year ago. EY attributed the rise to the ongoing pressures facing the high street and consumer-facing businesses, as well as the economic uncertainty caused by Brexit and rising regulatory, wage and commodity costs.
The Sunday Telegraph, Business, Page: 3 Sunday Express, Page: 55
German investigation into tax wheeze spreads to Spain’s Santander
Banco Santander has confirmed it is “fully cooperating with German authorities” who are looking at the bank’s role in an alleged tax-evasion scheme. The scheme let shareholders use a loophole to claim tax refunds on dividends they may not have been entitled to. It is claimed that Germany and at least ten other European countries lost out on £48.6bn of tax.
Financial Times, Page: 13 Daily Mail, Page: 82
Refugee tax break for French
French households will be able to claim tax breaks worth up to €1,500 a year if they open their home to a refugee.
The Times, Page: 39
Name checks to begin on bank payments
As part of plans to combat fraud, the name of someone receiving a payment will be as important as their bank details for the first time from next summer. The plans, which have been revealed by Pay UK, will alert the sender if the name does not match the account. It is designed to combat cases when fraudsters mimic a genuine business and attempt to trick people into sending money to an account controlled by the con-artist.
BBC News Daily Mail, Page: 8
Ranks of UK ultra-rich swells
A report by Credit Suisse shows the number of ultra-high net worth individuals (UHNWIs) in Britain – those with fortunes of more than $50m (£38m) – rose over the 12 months to summer 2018 by 8.5% to 4,670, while the average Briton saw their wealth, including property, grow by 1% to £213,000.
The Guardian, Page: 2
Property sale to clear Dwight Yorke’s tax debts
Former Manchester United and Aston Villa striker Dwight Yorke is hoping the sale of a £2m property will allow him to clear a £1.5m tax debt and avoid bankruptcy.
Daily Mirror, Page: 15
Families battling for fortunes
The Sunday Times’ Kate Palmer highlights the soaring numbers of siblings, stepchildren and partners who are contesting wills and inheritances in an effort to get their hands on family fortunes. Ministry of Justice figures show the High Court considered 145 inheritance disputes last year, slightly down on the record of 158 in 2016 but three times higher than a decade earlier.
1D’s biggest hit
One Direction have been hit with a £24.7m tax bill during their hiatus. The boyband have appealed the ruling, which is believed to be one of the biggest such debts in pop history.
The Sun, Page: 22-23
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