News Roundup Monday 23rd July 2018
News Roundup Monday 23rd July 2018
Chequers’ customs arrangement to cost £700m a year, HMRC warns
HMRC boss Jon Thompson has told members of the Lords’ EU external affairs committee that the facilitated customs arrangement (FCA), which has prompted the resignations of David Davis and Boris Johnson among others, will cost businesses around £700m each year to run, potentially rising to between £17bn-£20bn in the event of a “no deal” outcome. Thompson also indicated that though the government’s planned dual tariff system could be implemented by 2020, the creation of a repayment mechanism will take longer: “That would be a unique technology project. It’s totally new and does require coders to sit down and work out how it would work,” he added.
City AM The Sun, Page: 5 The Daily Telegraph, Business, Page: 33 Yorkshire Post, Page: 4
UK Treasury to relax border taxes in ‘no-deal’ Brexit
Mel Stride, financial secretary to the Treasury, has said the collection of border taxes would be relaxed in the event of a “no deal” Brexit to keep goods flowing. Elsewhere, the Times’ Raphael Hogarth reports that trust in HMRC is at a catastrophically low level in the EU, making the prospect of Brussels agreeing to Theresa May’s facilitated customs arrangement a long shot. An assessment of member states’ tax collectors last year found the UK undervalued goods imported from the Far East and the US on a “massive” scale and failed to conduct all manner of checks. The EU’s anti-fraud office also found that the EU lost €2bn in revenue between 2013 and 2016 thanks to HMRC’s “continuous negligence” over dodgy imports of Chinese clothes and textiles.
Gig employers should handle tax affairs of their workers
The Office of Tax Simplification has proposed that gig economy employers such as Deliveroo and Uber should take responsibility for the tax affairs of their self-employed workers. The OTS said the system, equivalent to Pay As You Earn, would be optional for workers but would remove a big administrative burden from them.
Brussels threatens UK with court action over illegal tax breaks
The European Commission wants the UK to end “unfair” income tax breaks for investors who incur losses on sales of shares in companies that do business in Britain, arguing the arrangement breaches EU standards.
The consequences of IHT avoidance
James Connington examines punishment for the avoidance of inheritance tax (IHT), noting hefty fines and even jail time. Gordon Andrews, a tax expert at Old Mutual Wealth, says: “HMRC is hard to pin down on this, but has said previously that the minimum penalty is 50% of the undeclared tax, however it could go up to 100%”.
Tax raid on contractors who used offshore tax avoidance schemes
Tens of thousands of contractors who used offshore tax avoidance schemes are facing a crackdown by HMRC, the Telegraph reports. The schemes allow people to avoid tax by taking loans from trusts based overseas, but they now face a charge on any loans that remain outstanding in April next year. HMRC estimates that 50,000 people are engaged in schemes which were effectively outlawed in 2010 following the collapse of Scottish football giant Rangers. A cross-party group of over 70 MPs are calling for an exemption for those who used schemes before the rules were changed last year with the Finance Bill.
Government to top-up pay for soldiers in Scotland following tax hikes
Defence Secretary Gavin Williamson has confirmed that the UK Government will spend £4m a year to compensate soldiers based in Scotland paying higher taxes under SNP policy. The Scottish Government’s decision to raise taxes on those earning more than £33,000 per year will affect around 8,000 military personnel, who would take home less that their colleagues in the rest of the UK without the top-ups.
The Scotsman, Page: 3 Aberdeen Press and Journal, Page: 10
HMRC and IR35 to blame for increase in tax avoidance
HMRC, through the implementation of IR35 and their invention of the “deemed employee”, is to blame for the proliferation of tax avoidance in the UK, argues Dave Chaplin, chief executive of Contract Calculator
Ocado tycoon’s fortune held in secret trust
The Mail reports that company shares held by Ocado CEO Tim Steiner have been placed in a trust in the Bahamas, raising questions about the transparency of share sales from a company owned by the trust. Prem Sikka, professor of accounting and finance at the University of Sheffield, said secrecy around such trusts needs to end and the Government “must tell us what the tax cost is of allowing these trusts”.
Daily Mail, Page: 66
Cosmetic businesses warned over VAT
Campbell Dallas has warned that cosmetic businesses that have provided treatment where VAT is due but not charged are facing a clampdown from HMRC. Veronica Donnelly, a VAT partner at the firm, is urging all businesses to ensure that their treatments comply with guidelines on VAT which can be exempt when a treatment is undertaken as part of a health care programme. Donnelly stressed that whilst well-managed clinics have little to fear, the aesthetics sector has grown rapidly, and there will be many practitioners and businesses that are at risk of an inquiry.
School fees set to rise
Private schools in Scotland are set to up their fees, in part due to plans to end business rates relief for the sector. The average private school is expected to hike their fees by 3.9% – or more than £500.
HMRC plays down plans to raid bank accounts
HMRC has moved to allay concerns following the news that it could be given new powers to trawl bank accounts without the holders being told. An HMRC spokesman said: “We are considering a range of options to improve the flow of information to help establish the right tax has been declared. Nothing has been decided. If these powers became law, we expect they would only apply to a few hundred cases each year.” However, John O’Connell, chief executive of the TaxPayers’ Alliance, warned that “giving the taxman powers to access taxpayers’ bank accounts without notifying them is a sinister step that would undermine fundamental freedoms.” And Justin Modray of consumer advice group Candid Money said: “Anything that gives the taxman more power to dive into your finances is a concern.”
Business Matters The Sun Daily Express
Relocators reminded of HMRC’s reach
Accountants and wealth planners are seeing widespread confusion about UK tax obligations among Britons thinking of moving abroad, as employers begin to relocate jobs in response to Brexit. A survey by Old Mutual International and Atomik Research questioned 147 British expatriates across the world to gain insight into the most common misunderstandings about UK tax law. Nearly three-quarters of those surveyed said they wrongly assumed they would no longer be UK-domiciled after moving, which would free them from taxes levied by HMRC such as IHT. Some respondents were also unaware that non-residents have to pay tax on any UK income, such as rental income from a British property.
Software suppliers on course for MTD
More than 35 software suppliers have reported they will have new systems ready for businesses and agents to use HMRC’s Making Tax Digital programme from next April.
Revised governance code welcomed
The majority of business groups, accountancy firms and thinktanks have welcomed the Financial Reporting Council’s new corporate governance code, although bodies including the IoD and TUC suggested the reforms could have gone further. The Independent’s James Moore says the new code is better than the previous one, but “will still, in all likelihood, fail in its aims to restore the public’s declining faith in business.” Elsewhere, the FT’s Matthew Vincent says the FRC is bound to face accusations that the new code is “too little, too late,” while the Times’ Patrick Hosking concludes that the governance code is “a modestly useful standard against which to measure companies, but no more than that.”
Businesses to be advised on how to prepare for a no-deal outcome
The Government is to provide companies and consumers with weekly advice on how to prepare for a no-deal Brexit over the summer. The campaign will include asking as many as 250,000 small business to start preparing to make customs declarations for the first time. Ministers will tell the businesses, which export to the EU but not beyond, to invest in customs arrangements at the point “we think a no deal is likely”.
SMEs winning less Government work despite pledge
Figures from the Cabinet Office suggest the Government is failing to deliver on its promise to help SMEs secure more public work, with small businesses winning 22.5% of central government spending last year, down from 24% in the previous 12 months. The decline comes despite an official target to increase the percentage of work won by SMEs to 33% by 2022. The Federation of Small Businesses said that the deteriorating performance was “unacceptable and reaffirms the belief that small businesses face a fixed procurement system, which is preventing them getting a fair share of public contracts”.
Business owners risk burnout without breaks
Research from Direct Line for Business found that a third of sole traders across the UK were unable to take any holiday leave in the last 12 months. Matt Boatwright, head of Direct Line for Business, said: “Our research shows that there are millions of business owners who feel that they cannot leave their place of work to go on annual leave, but they should be reassured that of all the businesses surveyed, only a small percentage actually experience any business-critical issues while away.”
Daily Mirror, Page: 37
MPs seek to level playing field between banks and businesses
The All Party Parliamentary Group for Fair Business Banking is calling for the creation of a specialist financial services tribunal to rule on disputes between banks and small businesses. Writing in the Times, APPG chair Kevin Hollinrake, says the group also wants to see the legal rights of small businesses enhanced by extending the so-called section “right of action” in the financial services and markets act to small businesses. Meanwhile, representatives of small businesses damaged or destroyed by the £1bn HBOS Reading fraud have met Andrew Bailey, chief executive of the Financial Conduct Authority, to share their concerns that a compensation scheme established by Lloyds Banking Group has failed to deliver a fair outcome.
Half of invoices paid late
A study by FreeAgent reveals just 52% of invoices sent in 2017 were paid on time or within three days of the deadline. Its research also shows that 26% of micro-businesses have had to wait three to six months for payment, and 10% have had a client who has never paid them at all.
Yorkshire Post, Business, Page: 8
One in 10 retiring this year ‘plan to withdraw all their pension pot’
One in 10 people retiring this year expect to withdraw their entire pension savings pot as a single lump sum, a survey has found. This could cause a shock tax bill for some of the 10% planning to take out the whole amount, according to Prudential, which made the findings. Stan Russell, of Prudential, said: “Those taking all their fund in cash not only face paying more tax but put their security at risk.” The study also reveals that one in five will get slapped with tax bills for withdrawing more than their 25% tax-free sum.
Daily Mirror, Page: 19 Yorkshire Post, Page: 1 Aberdeen Press and Journal, Page: 16
Watchdog orders pension trustees to shop around
Mercer, Willis Towers Watson and Aon have avoided a forced break-up of their businesses after the Competition and Markets Authority stopped short of recommending a significant overhaul of the investment consultancy sector. However, the watchdog ordered all pension schemes to run a competitive tender, rather than just hand the mandate to their existing investment consultant. It also suggested that some schemes might be paying 24% more than they needed for the services.
Minister plans to ‘kill off’ online pension tracker
Welfare secretary Esther McVey is considering scrapping an online dashboard intended to help millions of people keep track of their pensions.
Summer clothing sales hold back inflation
Inflation remained at 2.4% for the third month in a row in June, according to the Office for National Statistics, after clothing prices fell. The Consumer Price Index measure of inflation had been expected to rise to 2.6%, with deflation in clothes and games, toys and hobbies pulling back the overall level. The ONS’s preferred measure of inflation which includes housing costs, CPIH, also remained steady, at an annual rate of 2.3%. There had been expectations that the Bank of England would raise interest rates in August; however, Suren Thiru, head of economics at the British Chambers of Commerce, said the case for a rate rise now looks “very weak”. Neil Wilson, chief market analyst at Markets.com, also said an increase looks less likely.
BBC News City AM
Slow wage growth stunts rate rise prospects
Average weekly UK earnings increased by 2.5% in the three months to May, according to data from the Office for National Statistics (ONS), slowing slightly from the prior month’s 2.6% reading and casting doubt on a potential Bank of England interest rate rise. The UK unemployment rate held at 4.2%, a four-decade low, while the employment rate rose by 137,000 people to 75.7%, its highest ever recorded.
City AM The Guardian, Page: 31 The Independent, Page: 37 Daily Mirror, Page: 38
OBR issues public finances warning
The Office for Budget Responsibility has warned that the UK will face 50 years of tax increases and spending cuts unless measures are taken to address the surging costs of healthcare and pensions with fewer workers to pay for them.
AI expected to lead to net jobs gain
Artificial Intelligence will create as many jobs in the UK as it will displace over the next 20 years, according to PwC. The firm’s analysis found AI would boost economic growth, creating new roles as others fell away. It claims around 7m existing jobs could be displaced by AI from 2017-2037, but around 7.2m could be created, giving the UK a small net jobs boost of around 200,000.
The Guardian, Page: 33 The Sun, Page: 2 The Times, Page: 48 City AM, Page: 9 The Scotsman, Page: 23
Britain’s services exports lose billions
Total UK services exports have fallen to £37.8bn, according to the ONS, a £7.8bn decrease in first three months of 2018 compared to the previous quarter. Though exports to Ireland, Belgium, the Netherlands and Germany saw steep declines, the EU remains the UK’s largest exports destination, with £14.7bn in total during the first quarter.
Retailers’ bad debt and insolvencies rocketing
There has been a 2,464.5% rise in the level of debt owed to retail companies, according to Creditsafe, a rise of more than £51.5m, bringing the total to £53.6m. The data also shows a 59.4% increase in the number of retail insolvencies in the second quarter of this year, compared to the same period last year.
UK house price growth in May cools to lowest rate since 2013
House prices rose at their slowest annual rate since 2013 in May, continuing the slowdown seen since the UK voted to leave the European Union. The ONS said that average UK house prices rose 3% in the year to May, the slowest annual rate since August 2013, compared to 3.5% in April. The average house price in the UK was unchanged from April at £226,000, and stood at £479,000 in London, the most expensive region. The average fell 0.4% in the capital, while rising 6.3% in the East Midlands and 5% in the West Midlands. In the North East they were up 1.3%, in Scotland 4.9%, and 1% in Wales. Economists at PwC said they expected London house prices to continue falling this year and next, while forecasting overall UK growth of about 3% per year over the next decade.
British Land’s retail income knocked by CVAs
British Land has warned that retail administrations and restructurings through CVAs had cost it 1.6% of its total group rent since April 1.
Daily Mail, Page: 69 The Independent, Page: 71 Daily Mirror, Page: 38
GP ordered contract killing of financial adviser on dark web
David Crichton, a retired GP, used the dark web to hire a hitman to kill a financial adviser he blamed for him losing £300,000, a court has heard. Crichton allegedly contacted Chechen mobsters and paid them £3,800 in bitcoins to murder Andrew Bolden. Crichton had made a complaint to the financial regulator but Mr Bolden was found to have given correct advice. Crichton lost the cash after failing to comply with tax laws, resulting in fines.
Daily Mirror, Page: 12 The Daily Telegraph, Page: 7 Daily Express, Page: 11 The Sun, Page: 11 The Guardian, Page: 13 The Times, Page: 5 The Scotsman, Page: 13
Work-life balance priority for graduates
A survey by Grant Thornton has found university graduates care less about pay than getting a job with a good work-life balance with 50% looking to split their time equally between their work and home life. Only 27% said pay was their top priority.
The Times, Page: 44
New report echoes accountants’ verdict on Olympic stadium deal
Newham Council backed a “flawed” deal to turn the Olympic stadium into West Ham Football Club’s new home, according to a new independent review by Peter Oldham QC, which says the council’s external financial advisers, Navigant, had even warned that the stake “was not value for money”. Last year, the Standard notes, in a report ordered by London Mayor Sadiq Khan, Moore Stephens also detailed a “litany of misjudgements”.
Bond paid accountant in costumes
Sean Connery, who played James Bond 007 in six official films, reportedly paid his accountant in costumes from the movies. The revelation came to light after the 007 Elements archive had to purchase back original Bond costumes.
Minimum wage underpayment allegations double
HMRC received 6,027 whistleblower reports about alleged underpayment of the national minimum wage in 2017 – more than double the previous year’s number. Pinsent Masons, which obtained the figures via a freedom of information request, said the influx of reports was partly driven by the introduction of an online complaint system in 2017. It suggested some employers – especially smaller businesses without sizeable HR departments – were getting caught out by “complex” national minimum wage rules, with common issues including deducting money from pay for employee uniforms, paying apprentice rates to full-time employees and failing to properly pay for overtime.
NHS pledge raises pressure for higher taxes, warns OBR
The OBR will today warn that Theresa May’s unfunded commitment to spend more on the NHS has underscored the need for tax increases or more cuts to public spending.
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