News Roundup Monday 30th September 2019
News Roundup Monday 30th September 2019
NEWS ROUNDUP MONDAY
Over two-thirds back wealth taxes
A survey by Tax Justice UK and Oxfam has found that 69% of adults agreed that earnings from wealth should be taxed at the same level, or more heavily, than earnings from income. More than half of respondents supported the idea of a new tax on wealth over £750,000. Robert Palmer, executive director of Tax Justice UK, said: “Tory and Labour voters, Remainers and Brexiteers all support greater taxes on wealth. This should be a no-brainer for any government. Failing to back this policy wouldn’t just be bad economics, it would go against the grain of public opinion, too.”
Jacky Wright to return to Microsoft
HMRC’s digital leader Jacky Wright is to leave next month and return to Microsoft. Wright joined as the tax agency’s chief digital and information officer (CDIO) in October 2017 on a two-year “loan arrangement” from Microsoft. HMRC said, during her time in Whitehall, Wright had “overseen a wholesale transformation” of the digital and IT function and had also “radically changed the employee experience across HMRC” by implementing new technologies and methods.
No replacement named for HMRC chief Jon Thompson
Sir Jon Thompson, the head of the HMRC, is due to take up his new job as chief executive of the Financial Reporting Council at the beginning of October but has not been replaced at the tax authority. HMRC has confirmed it is still looking for a replacement for the outgoing chief executive and first permanent secretary after over two months.
Google chief wants multilateral action on tax
In an interview with the Sunday Telegraph, Google chief Sundar Pichai has claimed that digital taxes applied unilaterally by nation states are doomed to fail. Mr Pichai said only a multilateral approach would work through the OECD and that Google “are strong believers in the OECD process.” It was the lack of progress by the OECD that led the UK and France to propose their digital taxes, the paper points out, but Mr Pichai says for him “it’s a multilateral trade issue which countries have to resolve and guide multinational companies.” Separately, the New Statesman reports the European Commission vice-president Margrethe Vestager has given the OECD until the end of 2020 to strike a deal on taxing tech companies or the EU will go ahead with its own tax plans. The publication notes research by Tax Watch which claimed that Facebook, Google, Apple, Microsoft and Cisco avoided paying £5bn in UK taxes in the last fi ve years.
Daniel Hannan: Boris Johnson’s tax cuts will benefit all
Writing in the Sunday Telegraph, Daniel Hannan argues that Boris Johnson’s proposed tax cuts will benefit everyone, boosting the economy, attracting investment and creating jobs. He says complaints by the likes of the Institute for Fiscal Studies (IFS) that certain tax cuts benefit the wealthy more than the poor are “an argument against nearly all tax cuts” and misses the point that “tax cuts will necessarily bring more immediate gains to people who pay taxes than to people who don’t pay taxes.” The PM’s plans to raise the threshold for higher-rate income tax from £50,000 to £80,000 and abolish National Insurance contributions on the first £12,500 people earn will together “make Britain a more attractive place to live, work and hire people.”
Corbyn’s threat to private schools will drive them abroad
Private schools are warning Jeremy Corbyn they will move abroad if a Labour government tries to strip their assets. “It is a straightforward decision for a boarding school to move from England to Dublin, Paris, Calais or Amsterdam,” said Barnaby Lenon, chairman of the Independent Schools Council. “It would be the end of the great British boarding tradition.” Labour voted last week for manifesto policies that would strip private schools of charitable status, add VAT to fees and redistribute their endowments to state schools.
CBI calls for “tax holiday” to help firms weather Brexit
Dame Carolyn Fairbairn, the director general of the Confederation of British Industry (CBI), has called for the Government to give companies more time to pay tax bills to help them weather the impact of a potential no-deal Brexit. She says it would help firms manage their cash flow if trading is disrupted. Adam Marshall, director general of the British Chambers of Commerce, also called for enhanced annual investment allowances for businesses.
The Sunday Telegraph, Business, Page: 1
Three non-executives join HMRC Board
The Prime Minister has confirmed three new appointments to the HMRC Board. Michael Hearty, Patricia Gallan and Paul Morton will join as non-executive directors. Michael Hearty steps up to become chair of the HMRC audit and risk committee. Patricia Gallan is a former senior police officer who was Assistant Commissioner Specialist Crime and Operations of the Metropolitan Police. Finally, Paul Morton was appointed Tax Director of the Office of Tax Simplification in March 2017. Before that he was Tax Director for RELX Group plc.
Brexit Party vows to abolish IHT
During The Brexit Party’s conference in London, chairman Richard Tice unveiled some non-Brexit related policies, including a pledge to abolish inheritance tax, slash the foreign aid budget by half to fund public services, and to invest in broadband across the UK.
CORPORATE NEWS ROUNDUP MONDAY
Thomas Cook was profitable for some
The Telegraph’s James Burton considers the role of advisers and executives in the collapse of Thomas Cook. He cites Unite’s Oliver Richardson, who says: “The directors, lawyers, accountants and auditors advising the company all played a huge role in the collapse of Thomas Cook. Their focus appeared to be about maximising their income rather than what was in the long-term interests of the company.” Elsewhere, accounting professor Prem Sikka writes in Left Foot Forward about some of the accounting methods used by Thomas Cook, noting the continued use of “one-off” costs and rolling over goodwill regardless of how worthless it had become would have inflated performance related executive pay. He points out that Financial Reporting Council rules enable companies to show goodwill in their balance sheets almost indefinitely, adding: “The FRC itself is arguably culpable as its rules permit companies to engage in dubious accounting practices.”
The Daily Telegraph, Page: 39 Left Foot Forward
Thomas Cook – CEO blames the banks, staff blame the Tories
The collapse of Thomas Cook is widely covered in Sunday’s papers, with Geoff Ho in the Sunday Express noting that the Financial Reporting Council is considering an investigation into the holiday firm’s accounting practices. Thomas Cook is accused of classifying regular costs as one-off “exceptional items” in its results and of failing to reduce the goodwill of MyTravel for years after it was acquired in 2007. EY, after it took over from PwC as auditor in 2017, challenged some of the treatments, the Observer notes. One insolvency expert told the paper: “If you remove the MyTravel goodwill then it’s been bust pretty much since it bought the thing.” The paper goes on to suggest that the probe by the BEIS should not be distracted by the idea corporate greed brought the company down – it was “incompetence and hubris in the boardroom.” The paper also reports that Thomas C ook staff are set to hold protests at the Conservative party conference over the Government’s decision not to step in and save the company from liquidation. Finally, Peter Fankhauser, the company’s CEO, insists in an interview with the Sunday Times that he did everything he could to save Thomas Cook and accuses the banks and bondholders of failing to move quickly enough to stave off its demise. Fankhauser also speaks with the Mail on Sunday, hitting back at claims he is a “fat cat” and insisting he is “deeply sorry”.
Labour’s four-day week will drive firms into the ground
Labour’s plan to reduce the working week to four days or 32 hours within a decade, without reducing workers’ pay, would drive profit-making firms into the ground and threaten future investment in the UK economy, the CBI’s director general has said. Labour’s policy also prompted a backlash from the Federation of Small Businesses. Chairman Mike Cherry said: “Our productivity gap cannot be closed by simply reducing working hours. Forcing a shorter working week on small firms is not feasible.”
Nearly 40% of SMEs believe no-deal will hurt
More than a third of small British firms think a no-deal Brexit on 31 October will hurt their business, according to the Federation of Small Businesses. A fresh survey showed 39% of small companies believe a no-deal Brexit would be negative, while 34% predicted no impact and 11% a positive impact.
The I, Page: 72 Yorkshire Post, Page: 25
Time for charities to comply with the rules
The Yorkshire Post criticises charity trustees for failing to ensure their organisations’ books are properly examined. The Charity Commission has found “significant failings” in the accounts of a sample of charitable organisations. The paper says that with public confidence in the charity sector at a low ebb “it is vital that trustees use their positions of strength to ensure staff not only adhere to charity law but more than comply with its obligations.”
Yorkshire Post, Page: 26
Broker critical of Imperial’s statements
Liberum has accused Imperial Brands directors of aggressive accounting following the tobacco company’s profit warning this week. The broker said the group had reduced the usefulness of its financial statements by including gains on the sales of businesses, pension restructuring and the sale and leaseback of its Bristol headquarters in its adjusted operating profit.
A tip for married landlords
The Times talks to Stefanie Tremain, a director at Blick Rothenberg, who says many married couples are unaware that, if they buy property to let, they should do so as tenants in common with the person liable for the least tax owning the larger share. This can substantially increase the profit they make from rent. However, couples should be aware that HMRC will assume they share income from the property on a 50-50 basis unless they provide a declaration of interests and income (income tax form 17).
PERSONAL FINANCE NEWS
Stockbrokers call for risky Isa to be scrapped
Three of the country’s biggest fund shops, AJ Bell, Interactive Investor and The Share Centre, have called for the “innovative finance” Isa to be withdrawn. They say the Isa, which allows peer-to-peer and other alternative investments to be held in a tax-free wrapper, can legitimise high-risk schemes which are not protected by the compensation scheme for savers.
The Daily Telegraph, Money, Page: 3
Wealthy families continue to ditch trusts
The FT looks at the continued decline in the popularity of trusts, with Mike Hodges at Saffery Champness explaining that a “punitive tax regime and draconian regulatory requirements [has created] a toxic combination.”
Thousands more hit by tax penalties for breaching annual pension allowance
Several papers pick up on news that the number of pension savers landed with tax bills for annual allowance breaches has jumped by more than 40%. The Treasury has netted an extra £325m in tax after 26,550 people breached the annual pension savings limit in the 2017-18 tax year. An additional 4,550 pension savers breached the lifetime allowance of £1m, raking in £510m for the taxman. Tom Selby, a senior analyst at investment platform AJ Bell, says: “As we approach an inevitable general election, political parties need to reflect on the anti-savings message being given to the British public by these measures.” Separately, Ann Ashworth says in the Times that the over-complex pensions system is in itself becoming a disincentive to save.
Bin Brexit and UK can expect to bail out the euro
Writing in the Sunday Telegraph, Liam Halligan warns that revoking Article 50 and cancelling Brexit would mean the EU’s latest “growth-stifling” regulations would apply to the UK, as would closer tax harmonisation; while the prospect of euro membership could be revived. Moreover, the UK would be on the hook “when the jerry-rigged single currency finally implodes.” If the UK left with a deal, Halligan predicts a growth spike and a sharp rise in sterling along with the release of pent-up investment. The damage of a no-deal Brexit “has been grotesquely exaggerated”, argues Halligan, and although there would be some economic impact this would be limited by Government counter measures. The prospect of an extension only brings more uncertainty and the danger of Jeremy Corbyn in No 10.
INDUSTRY NEWS ROUNDUP MONDAY
The consequences of changing airline insolvency rules
Duncan Swift, president of insolvency trade body R3, suggests changing airline insolvency rules could have unintended consequences. After Monarch collapsed reforms were mooted that would enable carriers to continue running planes to repatriate holidaymakers. But this could see aircraft impounded abroad until debts were paid, putting crew at risk. The costs of repatriation would also “deplete the value of what the insolvent airline can repay to creditors”, Swift said, which may deter lenders from financing airlines or suppliers from trading with them.
Ombudsman raps Stargate over high-risk investments
The Financial Ombudsman Service has ordered Stargate Capital Management to repay a pensioner the £75,000 it gambled on “unsuitable” high-risk investments. The ombudsman ruled the firm had “watered down” the likelihood its “risk averse” client would lose money and ordered compensation and any loss to be paid back with 8% interest.
The Daily Telegraph, Money, Page: 8
Sage acquires Dublin start-up AutoEntry
Following a two-year partnership with Sage, Dublin-based AutoEntry has been bought by the enterprise software company. AutoEntry automates data entry for accountants, bookkeepers and businesses. The automation solution is currently used by more than 3,000 accounting and bookkeeping practices, and it services in excess of 150,000 businesses. According to Sage, AutoEntry will be offered to its customers worldwide in the coming months.
Global start-up accelerator program seeks new applicants
The Association of International Certified Professional Accountants (Association) and CPA.com are seeking new applicants for their joint start-up accelerator program, which focuses on innovation in accounting, finance and regulatory technology. The program is open to entrepreneurial companies worldwide.
Big Four accountants facing changing times
Tabby Kinder says in the FT that the Big Four’s monopoly over auditing looks certain to end, in the UK at least, amid increasing scrutiny from politicians and regulators.
ECONOMY NEWS ROUNDUP MONDAY
Continued Brexit uncertainty could lead to interest rate cut
Bank of England MPC member Michael Saunders has suggested interest rates could be cut even if a no-deal Brexit is avoided. A deal would still leave uncertainties over future trading arrangements with Europe. Speaking at a business event in Barnsley, Mr Saunders said if high Brexit uncertainties persisted UK growth would continue to be depressed, in which case it “probably will be appropriate to maintain an expansionary monetary policy stance and perhaps to loosen further.”
Eurozone suffers biggest monthly fall in confidence ten years
Overall economic confidence in the eurozone fell to its lowest level in four years this month. Business confidence in Germany and Italy tumbled to a six-year low amid worries over shrinking order books, according to the European Commission. The fall in confidence was the steepest in ten years.
Business saw drop in activity in Q3
The CBI’s latest growth indicator shows that a balance of 6% of companies across services and manufacturing reported a drop in sales or output volumes in the three months to September. For the three months to December, a balance of 16% expect falling volumes. “Decision-makers in boardrooms across the country have been watching politics this week with a heavy heart,” said Rain Newton-Smith, the business lobby’s chief economist. “Despite all the noise, what must not be forgotten is the importance of getting the UK economy back on track.”
The Sunday Times, Business, Page: 1 The Mail on Sunday, Page: 93
Data expected to confirm 0.2% fall in GDP for Q2
Economists expect the Office for National Statistics to confirm tomorrow that GDP shrank by 0.2% over the period April to June. Markit/CIPS figures due over the course of next week are expected to show slight falls for manufacturing, construction and services.
Sunday Express, Page: 44
Organised crime gang sentenced for £3.5m fuel fraud
Five people, including the former owners of a Sussex petrol station, have been sentenced for distributing and selling an estimated 4.8m litres of illicit fuel to unsuspecting motorists including haulage companies across the south east. Three were given jail sentences totalling more than 16 years.
TAX DODGER NEWS
Tax-dodging pair caught with £180,000 stash
Husband and wife fraudsters Shezaad and Sabina Karim have been sentenced for dodging tax on sales and income to the tune of nearly £200,000. Investigators found a key to a safety deposit box in Birmingham inside which they found £180,000 in cash and a stash of gold and jewellery. Shezaad, the director of MAK Digital (AA) Ltd which traded in electronics and mobile phone accessories, and wife Sabina Karim, used the stolen cash to finance their lifestyle. They were sentenced to 28 months and 18 months suspended, respectively.
Contact Paul Southward.