News Roundup Monday 8th April 2019
News Roundup Monday 8th April 2019
HMRC’s loan charge assault runs contrary to legal safeguards
Keith Gordon of Temple Tax Chambers looks at concerns over the loan charge and considers whether it goes against safeguards protecting taxpayers from retrospective or retroactive legislation.
Jet tax breaks soar
Figures show that tax breaks for owners of private jets registered in the Isle of Man increased to £100m last year, taking the total of tax avoided on private jets to £940m since 2011. This comes despite warnings from the European commission that the practice is a breach of EU laws, with Brussels describing the tax breaks as “abusive” and characterising them as “evasion” in November 2018.
The Guardian, Page: 28
Tax disputes jump 40% in 2 years
Analysis by Price Bailey shows that disputes between HMRC and taxpayers have climbed by more than 40% in two years, with 7,377 first-tier tribunal cases in the tax year that ended in April 2018 compared to 5,161 in 2015/16. Richard Grimster of Price Bailey suggests HMRC, under pressure to maximise tax revenues, has adopted a “more aggressive and intransigent approach in its dealings with taxpayers”.
Rate rethink leaves tax gap for Scots
The Sunday Times looks at a tax gap between Scotland and the rest of the UK, noting that the starting point for 40% income tax has risen to £50,000 in England, Northern Ireland and Wales while taxpayers in Scotland pay higher-rate tax on earnings above £43,430, at a rate of 41%. Steven Cameron, pensions director at the insurer Aegon, says: “Someone earning £50,000 in Wales, England or Northern Ireland will pay £7,500 income tax this year, while someone earning the same in Scotland will pay £9,044”, before pointing to a positive for those north of the Border, saying: “People in Scotland earning £50,000 will be entitled to up to 41% tax relief on their pension contributions, whereas those earning the same in the rest of the UK would be entitled to only 20% tax relief.”
Tax and pension thresholds hit doctors
James Coney in the Sunday Times considers whether people in the top tax band are being unfairly treated, questioning why the point at which the additional-rate tax starts has remained unchanged at £150,000 since its introduction in 2010. HMRC data, he notes, shows that the number of taxpayers in this band has grown from 236,000 to 393,000 over that period. Mr Coney also highlights concerns around tax relief on pensions and the earnings threshold, detailing the impact it has had on some NHS doctors.
£1bn tax bill for FTSE firms
A European Commission investigation has ruled that a tax scheme introduced in 2012 gave an unfair advantage to multinationals based in the UK, with up to £1bn in lost tax set to be clawed back. Tommy Stubbington in the Sunday Times says the Treasury is unhappy at the decision, believing EC officials have been inconsistent in criticism of tax rules. The Treasury said it would “carefully consider” the ruling before taking action, while Dan Neidle of law firm Clifford Chance said the ruling was likely to be challenged by big companies as “HMRC and business have been forced into a billion-pound dispute neither want.”
Tax change boosts high earners
Torsten Bell, director of the Resolution Foundation, looks at austerity and notes that this year’s income tax cuts “are bumper ones for higher earners,” saying that those earning £30,000 will be £73 better off, but those earning £60,000 will see a £327 boost. Writing in the Observer, he adds that new tax and benefit changes for the year mean an average £280 income boost for the richest fifth of households, but a £100 reduction for the poorest fifth.
The Observer, Page: 4
IHT hit under Labour?
The inheritance tax regime would become more punitive under a Jeremy Corbyn led Labour government, argues Jeff Prestridge in the Mail on Sunday, saying the removal of exemptions would be likely, as would higher tax rates. He says Conservative governments have tried to help families shield more assets from the tax but adds that the changes have increased inheritance tax’s complexity, prompting Chancellor Philip Hammond to ask the Office of Tax Simplification to see whether the tax could be made fairer and easier to understand – with the outcome of its review imminent. Mr Prestridge also considers changes a Labour election win could see to tax matters such as relief on pension contributions and capital gains tax.
The Mail on Sunday, Page: 82
Zero rate on savings income
Mike Warburton in the Telegraph looks at a special rate that can apply to savings income which HMRC estimates will mean three-quarters of a million people will pay a zero rate of tax this year.
The Daily Telegraph, Money, Page: 2
Chief executive defends HMRC over pay regulations
HMRC chief executive Sir Jonathan Thompson has defended pay regulations which have come under criticism, denying suggestions that they prevent employers from setting up salary schemes for staff. With Business Secretary Greg Clark examining claims that the rules are “overly complex” and “too difficult to comply with”, Sir Jonathan has insisted they are “very clear” and “designed to avoid any potential for abuse”. With some critics suggesting HMRC is targeting companies that accidentally fall foul of pay regulations through salary sacrifice schemes, Sir Jonathan insisted that the Revenue has a “legal duty” to pursue all cases. Helen Dickinson, chief executive of the British Retail Consortium, comments: “HMRC should be focusing its time and effort on catching those who abuse the law, rather than responsible employers who are trying to do the best for their employees but are being held back by poorly thought-out legislation.”
Tax scam reports increase
The Mail reports that HMRC staff have dealt with 60,000 scam reports in the six months to January, marking a 360% increase on the previous six months. The paper, which earlier this year exposed scammers operating from overseas call centres, says reports of tax fraud have climbed 10% since it published details of its investigation. It adds that Treasury Minister Mel Stride has written to Foreign Secretary Jeremy Hunt to demand diplomatic action to tackle such fraudsters.
Daily Mail, Page: 22
Doctors warn of tax impact
David Chung, a vice-president of the Royal College of Emergency Medicine, says changes to pension taxation could see hospital services reduced and a less safe service for patients, with some consultants cutting their hours or refusing extra shifts to avoid an effective 100% tax rate.
The Times, Page: 21
Suicide claim over loan charge
The family of a grandfather who took his own life say he did so after struggling with stigma of being branded a tax avoider by HMRC. They say the man said he could not face the shame of being targeted by the loan charge and a £50,000 tax bill. The Telegraph notes that a panel of MPs chaired by Sir Ed Davey has said the Revenue has been told of a “suicide risk” linked to the loan charge.
The Daily Telegraph, Page: 11
SUMMARIES OF THE NEW TAX YEAR CHANGES
The new tax year starts on 6th April and we have reviewed the tax changes that come into effect this April and you can check these out in the downloads below..
Personal tax changes
Business tax changes
SMEs hit by invoice fraud
Barclays Bank research shows that one in seven UK SMEs have paid fake invoices in the last year, with over a quarter of those saying invoice scams resulted in losses of more than £5,000. Mike Cherry of the Federation of Small Businesses warned: “All too often businesses introduce cyber-defences only after they have been the victim of fraud or an attack, and this attitude needs to change.” Tony Price of PwC comments: “We are living in a time where digital technology pervades everything a business does and as a by-product businesses are open to a range of new scams. The cyber-attacks and online scams we are seeing are becoming increasingly sophisticated and devious.” James Maycock of KPMG said: “Individuals who have the inside track on a business can often exploit loopholes in financial procedures to their advantage, and the repercussions for a business, particularly smaller businesses, can be devastating.”
Scheme sees 80 new small firms a week
Official figures show that 28,000 entrepreneurs have taken advantage of the New Enterprise Allowance scheme, with 80 new small businesses created every week since its launch in 2011. Of the 126,000 companies created through the initiative, a quarter were started by someone with a disability. The scheme, which supports new firms with mentoring and funding of up to £25,000, has been extended for two more years.
The Sun on Sunday, Page: 13
Uppal criticises retailer over payments
Small Business Commissioner Paul Uppal has criticised Holland & Barrett, saying it has treated suppliers “shabbily” and accused the health food chain of “a purposeful culture of poor payment practices”. Highlighting figures showing that Holland & Barrett took an average of 68 days to pay invoices and that 60% of invoices were not paid within agreed terms, Mr Uppal said this, along with its refusal to co-operate with his investigation into payment practises, points to “a company that doesn’t care about its suppliers or take prompt payment seriously.”
The Guardian, Page: 37
PERSONAL FINANCE NEWS
Employers urged to alert staff over pensions change
Saffery Champness has urged employers to inform their staff that auto-enrolment pension contributions have increased, with the minimum contributions paid into defined contribution automatic enrolment workplace pension schemes increasing from 2% to 3% for employers and from 3% to 5% for staff contributions.
The Press and Journal, Page: 33
Isa rethink call
The Telegraph’s Matthew Lynn reflects on Isas, which were launched twenty years ago, saying that they could be boosted by reforms. He suggests Isas could be “turbocharged” by giving tax relief as well as tax breaks, by exempting them from inheritance tax and by extending them to new forms of finance such as crowdfunding.
The Daily Telegraph, Page: 34
Podcasts pay off?
The Mail evaluates whether investment in podcast firm Audioboom would be worthwhile, noting that the sector is booming and that PwC estimates advertising revenues will reach £1.2bn by 2022.
Daily Mail, Page: 102
Google tax claim
Campaign group the Tax Justice Network claims that Google avoided £1.5bn in UK corporation tax last year, with it noted that the firm paid £67m in corporation tax in 2018. Google UK generated £1.4bn in revenue last year, with this not including the bulk of Google’s business – advertising sales – which are traditionally booked in Ireland. If those were included, Google’s UK’s total turnover could be at least £9.7bn, according to the analysis. Google refused to comment on the Tax Justice Network’s study but said in a statement: “As an international business, we pay the majority of our taxes in our home country, as well as all the taxes due in the UK.”
Daily Mirror, Page: 5 Daily Express, Page: 6 The Sun, Page: 2
House prices fall in March
The latest Halifax House Price index shows that the average property value fell by 1.6% in March. This follows a 5.9% month-on-month increase reported in February. Quarterly figures show a rise of 1.6% over the first three months of the year. Annually, the data shows an increase in the average house price of 3.2%, bringing the typical property value to £233,181. Howard Archer, chief economic adviser at EY Item Club, said: “The overall impression is that the housing market is currently soft as it is being hampered by challenging conditions with buyer caution currently being reinforced by heightened Brexit and economic uncertainties.”
Tax warning for homeowners
Experts have warned that tax rules set to come into force next April could drive accidental landlords from the market. The Government is consulting on alterations to principal private residence relief that would see the 18 month exemption from capital gains tax on the proceeds from the sale of a main home cut to nine months. The changes could affect anybody who owns their own home “because nine months is not a long period to dispose of a home, especially in difficult economic times. “The new exempt period means that those who are going through separation may find themselves dragged into the capital gains tax net if the former marital home is not sold within nine months of the separation.”
Hotels and pubs hit by business rates
Rising property taxes will see London’s hotels facing renewed pressure, according to business rate experts who fear that the sector could suffer under the latest round of bills. Real estate firm Colliers found that 93 London hotels have been charged with a combined total rates bill of £12.2m this year – over two-and-a-half times the sum in 2016/17. Meanwhile, the Campaign for Real Ale has warned that business rates are forcing publicans to lay off staff and put up prices. A poll of 650 licensees saw three-quarters say the system is unfair to pubs.
City AM, Page: 12 Daily Mirror, Page: 16
Confidence concern for businesses
Business confidence has fallen to the lowest point since 2012, BDO’s latest optimism index shows. The overview of how businesses expect output to develop in the next three to six months suggests the UK economy could struggle to grow in 2019. The report said: “In absolute terms, sentiment is now weaker than its previous low point after the UK’s vote to leave the EU in 2016. The services sector, which comprises around 80% of UK GDP, drove the overall decline in confidence, with the sector index falling by a dramatic 4.15 points to 95.13 in March.” BDO’s output index held steady at 98.74 in March, up from 98.32 in February.
The Guardian, Page: 37 The Times, Page: 45 Daily Mirror, Page: 2 The Sun, Page: 4 City AM, Page: 2 Yorkshire Post, Page: 4
Float numbers sink in Q1
Analysis from EY shows that London has seen the slowest quarter for flotation’s in eight years, with just four companies listing on London’s main market from January to March, while only one business floated on the junior market. The first quarter figures mark a fall of 69% compared with the nine main market companies and seven Aim floats that took place over the same period last year, while the amount raised fell 63%. Considering factors behind the dip, Scott McCubbin at EY pointed to a global slowdown and Brexit uncertainty, but said there is a strong pipeline of companies waiting to list, adding that clarity over the UK’s relationship with Europe will be a “key trigger for this.” Meanwhile, separate figures from PwC show a decline in IPOs across European markets in Q1 2019. The research shows that the value of flotations over the first quarter came in at only & euro;700m, against €13.1bn a year earlier.
Five times more men than women earn over £150k
HMRC figures show that five times as many men as women earn more than £150,000, with analysis by the Sunday Times also revealing that 10 times as many men earn more than £1m. The data shows that around 295,000 men earn more than £150,000 a year, while only about 61,000 women do – although figures from 2012-2017 do show that the number of female workers earning more than £100,000 is increasing at about double the rate of men. Ann Francke, chief executive of the Chartered Management Institute, commenting on the analysis, said: “Male dominance of powerful positions is centuries in the making – and this shows how men still have a stranglehold on the best-paid jobs.”
The Sunday Times, Page: 20
Leaving London: Voices from financial front line speak of foreign attractions
The FT looks at how financial services companies with London hubs have responded to Brexit, with EY analysis showing that 28 have committed to relocate staff or operations to Dublin since 2016.
Contact Paul Southward