News Roundup Monday 5th August 2019
News Roundup Monday 5th August 2019
Probate delays push up IHT bills
The Telegraph’s Harry Brennan reports that delays in the courts mean families are being charged punitive rates of interest on their inheritance tax (IHT) bills. This comes as overdue IHT attracts interest rates of 3.25% a year. While bills have to be settled before someone’s assets can be passed on, and payment is due six months after the date of death, system failures and a backlog of cases have led to delays at the Probate Registry. Kieran Bowe, a partner at Russell-Cooke Solicitors, said a fifth of his active cases had already gone six months without the grant of probate – which would normally take two or three weeks to obtain. While the Ministry of Justice says the process is currently taking four to six weeks on average, lawyers say they are having to wait as long as 12 weeks for the grants to arrive. A spokesman for HM Courts & Tribunals Service said: “Probate applications are only processed when the relevant IHT form has been completed, so, even with current delays of four to six weeks on average, those who apply in good time should be able to pay IHT well within the six-month window.” HMRC said: “When a customer knows their HMRC IHT reference they may make a payment on account to avoid interest.”
Money laundering fears over free ports
The Liberal Democrats have questioned Boris Johnson’s plan to create 10 free ports – special tax-free zones that allow goods to be manufactured, stored, imported and exported without the normal checks and paperwork. They warn that the Prime Minister’s plans risk turning Britain into “the world capital of money laundering”. With critics suggesting that free ports can be used to launder money and dodge taxes, Liberal Democrat home affairs spokesman Sir Ed Davey says it is important that an anti-money laundering directive called 5MLD that is being introduced by the EU is “implemented in full”.
Sunday Express, Page: 44
EU could issue £1trn tax bill
The Sun reports that Whitehall officials believe the EU could hit Britain with a £1trn tax bill that Brussels will argue is owed for unpaid VAT on certain commodities. The sum would come on top of the £39bn payment that the EU would command as part of a Brexit deal. MP Mark Francois, vice-chairman of the European Research Group, said: “The House of Lords says that, legally, we don’t owe them £39bn, so if they’re now ludicrously claiming a trillion, they can whistle for it.”
The Sun on Sunday, Page: 2
3% increase in CGT payers
HMRC figures show that the number of people paying capital gains tax rose by 3% to 281,000 in the past tax year, with the levy paid on gains totalling more than £57.9bn. Of those paying the tax, 62% had gains exceeding £1m.
The Sunday Times, Business and Money, Page: 16
Liz Truss lays out plans for ten free ports
The Government has unveiled plans for as many as ten free ports across Britain in a move trade secretary Liz Truss said would trigger a multi-billion pound investment boost. Shipping ports and airports across the UK will be invited to bid for “free port” status after Britain leaves the EU. The idea is that goods can be manufactured, imported and exported inside the zones without incurring tariffs. Rishi Sunak, the chief secretary to the Treasury, said: “We will focus on those areas that could benefit the most, as we look to boost investment and opportunity for communities across the country.” The proposals have been welcomed by the Federation of Small Businesses, which said it “would be transformational for this society, whether you are a unionist, nationalist or neither”. However, the shadow international trade secretary, Barry Gardiner, was critical: “This is not new investment and growth. It is a race to the bottom that will have money launderers and tax dodgers rubbing their hands with glee.”
Financial Times The Times, Page: 6 The Independent Daily Express, Page: 9 The Guardian, Page: 9 The Daily Telegraph, Page: 4, 17 The Sun, Page: 9 The Scotsman, Page: 7 Yorkshire Post, Page: 1
Inheritance tax bill battle over trust payments
A retired couple could have to pay £100,000 a year for the rest of their lives and their disabled son millions of pounds in death duties after falling foul of an inheritance tax trap. Olaf Rogge, a successful former investor, and his wife spent more than £15m buying and developing a manor house, converting a wing for their disabled son and put the home into trust for him. But they were deemed to be benefiting from continuing to live in the property and so face paying £100,000 a year in rent to the trust for the rest of their lives, on which their son will have to pay tax. Mr Rogge said: “I never understood the gift with reservation issues and the fact that my wife and I would have to pay full market rent to occupy a property we [ourselves] had purchased. If I had understood this, I would never have agreed to the house being transferred into trust.” The Office of Tax Simplification (OTS) recently recommended a radical ove rhaul of the system to try to improve people’s understanding of the levy. Rachael Griffin of wealth advice firm Quilter said the regime responsible for Mr Rogge’s case was like “something from a fictional society rather than a modern-day tax system”.
Sajid Javid orders HMRC to ramp up no-deal Brexit preparations
The Chancellor has ordered HMRC to make preparations for a no-deal Brexit on October 31 its “absolute top priority” amid fears the taxman is a weak link threatening border operations. Sajid Javid wrote to HMRC chief executive Sir Jon Thompson demanding action to support businesses and taxpayers and ensure staff and systems are in place to “deliver a functioning regime” on Brexit day.
Financial Times, Page: 2 Daily Mail, Page: 15 Daily Express, Page: 8
Pension savers overtaxed
HMRC says large numbers of savers are being overtaxed by almost £3,000 each when they withdraw money from their pension pot, with at least £480m overpaid by people taking advantage of the pension freedoms since April 2015. Figures show that 29,811 people claimed refunds for a total of £77.89m in overpaid tax on their pension withdrawals this year, with the £47m claimed in the past 3 months marking the highest of any quarter since the freedoms were introduced. The average amount reclaimed has risen from £2,003 in the three months to the end of June 2018 to £2,715 in the same quarter of 2019. Former Pensions Minister Steve Webb, the director of policy at insurer Royal London, commented: “It remains a scandal that people who are legitimately accessing their own money, using freedoms given to them by the Government, are routinely being overtaxed at the convenience of HMRC.” He added: “Thousands of peo ple every month are having to fill in complex paperwork to recover tax that they should never have had to pay,” saying that figures suggest “this problem is reaching epidemic proportions.”
Tech tax could hit UK-US trade deal
The Telegraph reports that Britain is unlikely to get a free trade deal with the US unless a new tax affecting large tech firms is dropped. The paper’s Ben Riley-Smith says US officials have told the UK Government “at multiple levels” that the digital services tax, which could hit US firms like Amazon, Google, Facebook and Twitter, could stand in the way of an agreement. He cites a “well-placed source” who says new International Trade Secretary Liz Truss has privately expressed concerns that tightening rules against US tech companies could make securing a trade deal harder. The digital services tax – a 2% tax on the UK revenues of search engines, social media platforms and online marketplaces – is due to be written into law in the autumn budget and come into effect from April 2020. Estimates suggest that it will raise more than £400m for the Treasury by 2022.
The Daily Telegraph, Page: 1 The Independent Daily Express
90% of loan charge bills yet to be settled
HMRC figures show that almost 90% of loan charge bills have yet to be settled, despite that tax office urging contractors to do so by the end of September. The Revenue has agreed payment plans with just 7,000 of the estimated 50,000 people affected by the loan charge.
NHS leaders call for chancellor to address pension tax rule
The NHS Confederation has urged Chancellor Sajid Javid to remove the tapered annual allowance which restricts pensions tax relief, saying some doctors are reducing their hours or retiring early to avoid large pension tax bills. The Mail says the Government is set to overhaul doctors’ pension schemes, saying the Department of Health and the Treasury have been drawing up reforms which would give doctors greater flexibility with their pensions contribution.
Daily Mail, Page: 22 Financial Times, Page: 3
Candy Crush firm gaming the tax system?
Activision Blizzard, the firm that owns popular game brands Call of Duty and Candy Crush Saga, is being investigated by HMRC over tax avoidance. The firm has reduced its tax bills by sending revenues and royalties into lower tax jurisdictions and tax havens. These include Malta, which has an effective corporation tax rate of just 5%, compared with a main rate of 19% in the UK. Tax Watch UK has analysed the company’s international tax structures, prompting the think tank’s director George Turner to warn that Activision Blizzard faces a potential liability of more than $1bn in taxes and penalties. HMRC is also investigating one of the firm’s subsidiaries, Activision Blizzard UK, and has demanded £2.4m in unpaid tax for the year ending December 31 2013 – and is pursuing an estimated £6m for 2014 to 2017.
Harland and Wolff close to administration
Engineering group Harland and Wolff will collapse into administration and appoint BDO as administrator unless a buyer is found by Monday night. Union GMB says that unless someone steps into rescue the firm, which was put up for sale in December due to financial problems at parent company Fred Olsen Energy, its administration will directly affect 130 jobs and up to 1,000 more in the supply chain.
Sunday Express, Page: 43
Goals uncovers ‘improper’ accounting
Goals Soccer Centres is to delist from the stock market after it discovered “improper behaviour” that means it will be unable to file its accounts. Goals said an investigation into historical accounting practices around the recognition of revenue and the preparation of financial statements uncovered improper behaviour which involved a number of individuals and dated back to at least 2010, with this leading to “material uncertainty” about its historical financial statements. Goals, which saw trading in its shares suspended in March after it made a “substantial mis-declaration of VAT” totalling approximately £12m, said work on its full-year 2018 audit has been suspended “until further clarification on the historic financial statements has been obtained”. A report from BDO claims former Goals chief executive Keith Rogers “corroborated” with former chief financial officer Bill Gow to create “fictitious documents”, including invoices. KPMG, Goals’ former auditor, was said to have been given “completely false information” and was “completely misled by the company”.
Holiday firms collapse
Malvern Group, the parent company of holiday firms Super Break and LateRooms.com, has collapsed. KPMG, which has been appointed as administrator, said the firms had “significant cash-flow pressure”. Tracey Pye, of KPMG, said the group’s directors had failed in their attempt to obtain further investment, prompting them to “take the difficult decision” to enter administration.
Ipagoo enters administration after watchdog’s clampdown
FRP Advisory has been appointed as administrator to Ipagoo, which has collapsed into administration just days after the Financial Conduct Authority ordered it to cease all regulated activity.
FCA boss: SMEs need better protection
Andrew Bailey, chief executive of the Financial Conduct Authority, says small businesses are in need of greater protection. The regulator has been criticised for a report into the treatment of small businesses by RBS’s Global Restructuring Group. Mr Bailey says the idea that the regulator “sort of washed our hands” of the issue “is far from the truth,” telling the Sunday Times: “Of course, we do care about it a lot, and actually we do think that small firms need better protection. ”
Small businesses need more targeted help preparing for Brexit
The FT and the Times report on the Government’s efforts to prepare businesses for a no-deal Brexit as Liz Truss and Andrea Leadsom meet with MPs and trade groups to consult on next moves. MPs told Ms Truss that companies would benefit from “short bullet-point guides, containing targeted calls to action”, adding that with an exit without a deal becoming more likely it was “crucial that businesses receive the best advice as soon as possible”. Over £100m has been set aside to help support businesses, but Martin McTague, policy chair of the Federation of Small Businesses, said the money was not enough. “Many small businesses are desperately underprepared for a chaotic no-deal Brexit on 31 October,” he said. “This offer desperately underestimates the support that small businesses need … it does not really cut it.” The FSB has urged ministers to take action, for example by issuing Economic Operator Registration and Identific ation (EORI) numbers to all VAT-registered small companies. The FSB also wants “Brexit vouchers” of up to £3,000 to be given to companies for no-deal preparation.
Financial Times, Page: 2 The Times, Page: 42
UK aid money paying terrorists?
Nick Craven in the Mail on Sunday reports that UK foreign aid money is said to have funded “salaries” given to Palestinian prisoners held in Israeli jails for terrorist acts. He says campaigners have been calling on the Department For International Development (DFID) to release an audit of where aid given to the Palestinian Authority has gone. Mr Craven says that ministers have claimed that since the process was audited by independent accountants, the UK knew where British money was going. However, PwC says the narrow scope of its work did not require it to consider whether the money was going to terrorists.
The Mail on Sunday, Page: 35
Workers dip into pension pots
Half of over-55s using rules that allow them to draw money from their pension funds are still in gainful employment, according to research from financial company Zurich. The firm’s Alistair Wilson comments: “Savers taking a pension income they don’t yet need are in danger of leaving a black hole in their finances when they eventually retire.” The Mail notes recent HMRC figures showing that 336,000 savers withdrew a record £2.75bn from their pension funds between March and June this year.
The Mail on Sunday, Page: 63
Pension gap nears 40%
Analysis by the union Prospect show that the average woman’s annual pension income is 39.9% lower than the typical man’s, with men receiving £7,000 more a year on average. It was also shown that the gender pay gap stands at 17.9%. The union looked at data from the Office for National Statistics, the European Commission. HMRC and the Department for Work and Pensions.
The Sunday Times, Business and Money, Page: 12
Small schemes failing to meet standards
The Pensions Regulator’s annual survey on defined contribution schemes has found that 71% of savers are now in pension schemes which are meeting all of the expected governance standards. This represents an increase from 54% in 2018 and 32% in 2017. However, most smaller schemes are failing to meet standards, with only 4% of micro pension funds and 1% of small schemes meeting all of their governance requirements.
FINANCIAL SERVICES NEWS
EY: No-deal could see banks opt for overseas hubs
A study by EY shows that banks are preparing to move some of their UK business to hubs outside the EU in the event of no-deal, with 42% of financial services firms saying they would make such a move on the first day of a no-deal scenario. While most of those who would look to bases outside the EU would opt for New York, around 6% said they would move business to Singapore, while 3% would move to Hong Kong. John Liver, a partner at EY, commented: “Should the UK leave without an agreement, the City will be less accessible to the EU than those global centres with equivalence status with the EU.”
ICAEW report shows confidence dip
The Institute of Chartered Accountants in England and Wales’ (ICAEW) quarterly business confidence monitor will this week reveal that confidence has turned negative in every sector of the economy and every region in England and Wales. It is also set to show that a fifth of all businesses are having difficulties as a result of late payments, with the proportion rising to around a quarter for smaller businesses. Michael Izza, the ICAEW’s chief executive, said that action was needed to restore “confidence and momentum” to business.
Bank of England cuts growth forecast on Brexit uncertainty and trade tension
The Bank of England has forecast a 30% chance that the UK economy will shrink at the start of 2020, amid growth of just 1.3% this year and next. The forecast is based on a smooth transition to a Brexit deal and a disorderly exit would have more severe consequences. The Bank left interest rates at 0.75%. It said that assuming a smooth Brexit and some recovery in global growth, it would be appropriate to raise rates “at a gradual pace and to a limited extent”. But Tory Brexiteer Iain Duncan Smith said Carney’s forecast should be taken with a “massive pinch of salt” accusing him of reviving Project Fear and undermining Brexit negotiations.
Financial Times, Page: 3 The Daily Telegraph, Business, Page: 29 The Daily Telegraph, Page: 1, 4 The Times, Page: 42 The Times, Page: 7 The Guardian, Page: 2 The I, Page: 46 Daily Mail, Page: 14 Yorkshire Post, Page: 2
Manufacturing output falls to seven-year low
The Purchasing Managers’ Index compiled by research group IHS Markit has shown that British manufacturing is “suffocating”, with factory activity at a six-and-a-half-year low as a downturn in the sector continued into July. Marking the third consecutive month that the majority of companies reported a fall in output, the figure remained at 48.0 in July, its lowest level for more than six years.
City AM Financial Times
Construction shrinks for third consecutive month
The UK construction industry outlook plummeted to a seven-year low in July and output fell for the third consecutive month, adding to evidence of a stalling economy. The latest Purchasing Managers’ Index (PMI) came in at 45.3 – substantially below the 50 level that indicates no change from the previous month. Howard Archer, chief economic adviser for EY Item Club, commented: “The weak July construction survey increases the concern that the UK economy has started the third quarter poorly, after GDP likely stagnated in the second quarter and could have contracted marginally,” adding that Brexit related uncertainties “were reported to be particularly affecting the commercial sector, with some companies unwilling to commit to new projects.”
The Times, Page: 43 The Independent, Page: 36 The Daily Telegraph
Spain set to top spending league
Analysis by Deloitte shows that Premier League clubs have spent £925m on transfers this summer and are on track to hit the £1.2bn mark by Thursday’s transfer deadline. Spending in Spain’s top league could top this, however, with clubs in La Liga on course to break the record £1.4bn set by Premier League clubs in the summer of 2017.
Sunday Express, Page: 43
Cowell in the clear over tax
The Sun says Simon Cowell is in line for an OBE after getting the all-clear over tax, with it found that he had done nothing illegal despite the X-Factor boss being named in the Panama Papers scandal.
The Sun on Sunday, Page: 3
Kingman a BoE front runner?
The Daily Mail’s Alex Brummer says that Legal & General chairman Sir John Kingman is the Treasury’s “top choice” to replace Mark Carney as governor of the Bank of England. He adds that deputy governor of the Bank of England, Sir Jon Cunliffe, is another preferred candidate, while “ante-post favourite” Financial Conduct Authority chief executive Andrew Bailey is said to lack “fulsome” support at the Treasury.
Contact Paul Southward.