News Roundup Monday 8th October 2018

NEWS ROUNDUP

TAX NEWS

HMRC criticised for lack of no-deal preparedness

The Public Accounts Committee has criticised HMRC for failing to properly inform business about how to prepare for a no-deal Brexit. PAC chair Meg Hillier said officials have not yet identified 100,000 small traders who would be affected by a new customs regime after the UK leaves the EU, stating in a letter to Jon Thompson, permanent secretary of HMRC, that she was “concerned and disappointed” that firms had not been contacted. Hillier also expressed concern that Thompson had acknowledged that HMRC’s CDS system would be subjected to further delays, and that would mean it would have to run alongside the old CHIEF system, further increasing costs.

The Guardian, Page: 13 City AM, Page: 7

Focus on finance cost UK £4.5trn

A study from the Sheffield Political Economy Research Institute estimates that the UK lost out on £4.5trn in economic growth over the course of two decades because the financial services industry sucked investment and talent from other sectors. John Christensen, a director at the Tax Justice Network who helped develop the framework for the research, said to solve the problem the City’s “leaden grip on our economy” needs to be loosened by strengthening regulation and increasing taxes on the financial sector.

The Independent, Page: 40

Unilever decision forces Dutch government to review controversial tax break

Unilever has abandoned plans to scrap its dual-listed structure and move its headquarters to the Netherlands, following intense investor pressure to remain in the UK from shareholders. The FT reports that the decision has led the Dutch government to reconsider its promise to scrap its dividend tax – a move designed to attract foreign businesses to the country.

Financial Times The Daily Telegraph Financial Times, Page: 17 The Times, Page: 48

Dividend tax confusion

The Times’ Mark Atherton explains the rules around dividend tax following numerous reports that HMRC guidance has been substandard and risked many people not reporting income when they should have. The nub of the problem, Atherton says, is that HMRC failed to make the distinction between needing to submit a tax return if dividend income was above £10,000 and needing to notify the Revenue if it exceeds the tax-free allowance – £5,000 for 2017-18, falling to £2,000 for 2018-19.

The Times, Page: 60

Hammond told not to dampen winemakers’ spirits

Wine growers are urging the Chancellor to scrap plans to hike a planned 3.4% duty rise stating that it would reverse the good fortune brought by the hot summer. Miles Beale, from the Wine and Spirit Trade Association, said: “Adding to the already high tax bill is hampering the industry’s ability to grow.”

Daily Mirror, Page: 11 The Sun, Page: 18

Hammond drafting tax on digital ad revenue

The Chancellor is putting together a new digital tax on advertising revenues that would hit the likes of Google and Facebook hard but would cost Amazon relatively little. The Telegraph reports that the Treasury is attempting to identify how much value companies generate from UK users and trying to make sure tax is paid on that value. In 2017, Google and Facebook generated £4.4bn and nearly £2bn in UK advertising revenue. A Whitehall source suggests Amazon may be let off the hook when it comes to a digital tax over fears the costs would be passed on to consumers. Meanwhile, Tesco’s chief executive Dave Lewis has called for a 2% tax on goods sold online – dubbed an “Amazon tax” – to help lift Britain’s struggling store chains. It would make £1.25bn a year for the Treasury, he added. The Sunday Times’ Tommy Stubbington looks in detail at the options for a digital tax and the challenges facing the Chancellor, both domestically and internationally.

The Sunday Telegraph, Business, Page: 1 The Mail on Sunday, Page: 16, 87 The Sunday Times, Business, Page: 6

Facebook’s tax bill inches upwards

Revenues have leapt for Facebook in the UK from £842m in 2016 to £1.26bn for the year ending December 2017 while UK profits increased from £58.5m to £62m. The company’s corporate tax bill rose from £5.1m to £15.8m. It is also noted that Facebook received £8.4m in tax credits from employee share awards. The social media company’s head of Northern Europe Steve Hatch pointed out that Facebook “changed the way we report tax so that revenue from customers supported by our UK teams is recorded in the UK and any taxable profit is subject to UK corporation tax.” Elsewhere, the Sunday Times shows how McDonald’s uses franchise fees to limit its UK tax bill.

The Sunday Telegraph The Sunday Times, Business, Page: 3

Now ITV stars face IR35 crackdown

TV presenter Eamonn Homes is facing a tax bill of up to £2m after HMRC challenged his freelance status and use of a personal service company to receive his ITV salary. Holmes said: “I was in court in Central London for a week in June. I’ve been freelance for 28 years and that’s been okay. Now they’ve said it’s not okay.” He said he was the test case – “next they would be after everyone else.” The Mail on Sunday claims other ITV stars who are directors of their own limited companies include Ant and Dec, Phillip Schofield, Holly Willoughby and Lorraine Kelly. HMRC says that under rule ‘IR35’ most TV presenters will fall into the category of being employees. The paper also reports that BBC R4 Woman’s Hour presenter Dame Jenni Murray is heading for a tax tribunal showdown with HMRC over her use of a PSC which she wound up in 2014.

The Mail on Sunday, Page: 7

HMRC blunder robbing grieving families of tax-free benefits

HMRC is sending out demands to grieving relatives claiming tax is due on lump-sum death benefits when it is not. A computer foul-up relating to the P6 coding notice means that, since 2016, HMRC has been mistakenly issuing temporary tax codes based on the lump sums. The issue was reported to HMRC in May 2016 but still has not been resolved. Sir Steve Webb, director of policy at Royal London and a former pensions minister, said: “It is distressing enough to deal with bereavement without having the tax office take a chunk of your bereavement lump sum when it should have been tax free.”

The Sunday Times, Business, Page: 11

Applying tomorrow’s rules to yesterday’s tax bill

The Sunday Telegraph’s Sam Meadows considers how tax laws are being enforced retrospectively, ruining the lives of people who legitimately believed they were engaging in lawful practice. He focuses on contractors who used employee benefit trusts, which were widely used for much of the 2000s but declared effectively illegal by HMRC in 2010. People are being bankrupted for schemes they declared to the taxman almost 20 years ago and for which they received expert advice. Meadows says: “The Government hasn’t so much moved the goalposts as pulled them from the stadium and set them alight.”

The Sunday Telegraph, Business, Page: 5

BCC calls for Brexit tax break

The British Chambers of Commerce (BCC) has written to Phillip Hammond calling for a five-fold increase in the annual investment allowance in his Budget. Adam Marshall, director-general of the BCC, said hiking the allowance to £1m would create a “Brexit investment incentive” that would unleash an economic resurgence.

The Sunday Times, Business, Page: 2

Insurance tax hikes send patients back to NHS

Tax rises on private medical insurance have pushed 200,000 patients back to the NHS since 2015 at a cost to the taxpayer of £126m a year, according to a report commissioned by Bupa.

The Sunday Times, Business, Page: 15

INDUSTRY NEWS

Open-plan offices hinder focus-based work

A study by office design company Unispace has found open-plan offices are harming productivity because workers find it harder to concentrate. Professional services workers said their activities require them to focus for two thirds of their day, bankers said it was 60% and IT experts said 55%. All three professions said only about a quarter of the day was spent collaborating.

The Times, Page: 48

SMEs NEWS

UK manufacturers pulling back on investment plans

A report from the EEF and Santander has warned that British manufacturers are pulling back on their investment plans due to mounting uncertainty about Brexit and fears of a global trade war. Only a third of companies said they planned to increase their investment in plant and machinery – a record low in the fifth annual survey. Smaller firms are particularly squeezed, with 75% saying they were having to mothball spending plans in the coming two years.

The Guardian, Page: 58

Santander campaigns for small business customers

Santander is making its 123 current account available for business customers as it moves to increase its slice of the small business banking market. The bank will offer small businesses an account costing £12.50 a month and will return cash, based on their turnover, of between 1% and 3%, with a maximum of £300 a year. The move comes as Santander gets ready to bid for a grant from the £775m RBS fund designed to increase competition and innovation in business banking.

The Times, Page: 44

Red tape and finance key barriers to SME growth

The Sunday Telegraph’s Matthew Caines reports on how red tape and difficulties with early-stage financing are holding back small business growth in the UK. The British Business Bank found many small firms are unsure about navigating today’s finance options and only one-in-four have someone sufficiently qualified in charge of finance. The FSB’s Mike Cherry says skills shortages are one of the biggest barriers to future growth while 18% of SME owners questioned by BVA BDRC’s Finance Monitor said bureaucracy and red tape was a “major obstacle” to their business.

The Sunday Telegraph, Business, Page: 5

Top Track 250 firms achieve record profits

Dave Munton from Grant Thornton explores in the Sunday Times the reasons behind the performance of the UK’s Top Track 250 companies, profits at which are up a record 27% to £6.4bn, on combined sales of £66.7bn, up 18%. Their success is attracting North American investors and corporate buyers in particular, the paper points out. Elsewhere in the Top Track 250 supplement, David Dunckley, head of Mid-Market at Grant Thornton, talks to leaders of eight firms about the opportunities they see for further growth.

The Sunday Times, Top Track 250, Page: 1, 3

ECONOMY NEWS

McEwan: No-deal Brexit could result in recession

RBS chief executive Ross McEwan has warned a no-deal Brexit could tip the UK economy into recession. He said that a “bad Brexit” could result in “zero or negative” economic growth which would hit RBS’s share price. He also said the bank was becoming careful about lending to certain sectors of the economy – particularly retail and construction. Mr McEwan said: “We are assuming 1-1.5% growth for next year but if we get a bad Brexit then that could be zero or negative and that would affect our profitability and our share price.” He said that RBS’s lending to large businesses was down 2% this year as they delayed investment decisions. On a brighter note, Mr McEwan said that SMEs seemed relatively unaffected by Brexit and were continuing to borrow, invest and grow their businesses.

The Daily Telegraph City AM, Page: 7 BBC News The Guardian, Page: 36 The Scotsman, Page: 13

PM will need £20bn to end austerity

The Institute for Fiscal Studies has estimated that Theresa May’s pledge to end public sector cuts and fund pay rises will cost at least £20bn over the next five years. IFS director Paul Johnson told the BBC that the Chancellor would be concerned about adding to rising public sector debt and warned that, if Brexit resulted in a recession, more austerity could follow. A report from the think-tank also predicted that male manual workers are at “particular risk” from the new barriers to trade that are likely to be introduced after the UK leaves the EU.

The Independent, Page: 10, 13 The Sun, Page: 2, 8 Financial Times, Page: 3 The Times City AM, Page: 2

Productivity improves in Q2

Official figures from the ONS have revealed that UK productivity grew in the second quarter of the year but is still behind rates achieved before the global financial crisis in 2008. The ONS said output per hour was up 1.4% compared with the same period last year, it rose by 0.5% compared to the first quarter. Yael Selfin, chief economist at KPMG, said productivity would need to show further improvement for households to see a meaningful rise in purchasing power. Meanwhile, Howard Archer, chief economic advisor to the EY ITEM Club, said that while the rebound in productivity growth was encouraging, businesses would need to invest in themselves for productivity to improve.

BBC News The Times, Page: 50

Interest rates could reach 1% by February

Economists have suggested that interest rates could rise to 1% by February as strong economic data prompts the Bank of England to act before Brexit. Figures due out this week are expected to show the economy grew by 0.6% between June and August, up from 0.4% the previous three months. Amit Kara, chief UK forecaster at the NIESR think-tank, said he was confident growth would continue at least until the New Year. He said that would pave the way for a rate rise from 0.75% to 1%. Jay Mawji, managing director of Infinox, added that a rate rise before March was “probable” if Brexit negotiations went well. However, Yael Selfin, UK chief economist at KPMG, said she did not expect a rate rise for at least another year.

The Mail on Sunday, Page: 88

PENSIONS NEWS

Hammond told to end pensions trap hurting poorest workers

Former pensions minister Baroness Altmann is supporting calls for a change in pensions rules that currently mean over a million low-paid workers are missing out on pensions tax relief. As many as 1.2m people earn between £10,000 and £11,850 per year, meaning although they are automatically enrolled in a pension by their employer, they are not entitled to 25% relief on pension contributions because they are below the income tax threshold. Altmann said: “This issue is a huge pensions injustice [and] has the potential to destroy confidence in auto-enrolment, which has so far been a huge success.” A slew of pension, tax and employment leaders have joined Altmann in signing a letter to the Chancellor demanding he end the scandal in this month’s Budget.

Sunday Express

Pension savers losing out on cash trade-in deals

Savers in their fifties are losing nearly 50% of the value of their “gold-plated” defined benefit pension funds when trading them in for cash lump sums, new research reveals.

Financial Times

OTHER NEWS

UK’s Brexit divorce bill could rise, EU auditors warn

A report published on Thursday by the European Court of Auditors indicates that the EU’s pension liabilities have unexpectedly increased to €73.1bn in 2017, up from a previous estimate of €67.2bn, meaning that the UK’s generally-accepted figure of around £39bn could increase substantially. So-called “contingent liabilities”, guarantees on investment projects, have also increased – to €123bn in 2017 from €115.3bn the prior year.

The Independent Daily Mail, Page: 12

HSBC commissions finance fairy tales

HSBC has collaborated with children’s author Emma Dodd to publish a fairy tale designed to help children better understand finance. The book, called Fairer Tales: Princesses are doing it for themselves, tells of Cinderella starting a business, Sleeping Beauty having her savings grow while she sleeps, and Rapunzel chopping off her hair to make a ladder for herself rather than a prince before redeveloping the tower with a bank loan.

The Independent, Page: 43

HSBC commissions finance fairy tales

HSBC has collaborated with children’s author Emma Dodd to publish a fairy tale designed to help children better understand finance. The book, called Fairer Tales: Princesses are doing it for themselves, tells of Cinderella starting a business, Sleeping Beauty having her savings grow while she sleeps, and Rapunzel chopping off her hair to make a ladder for herself rather than a prince before redeveloping the tower with a bank loan.

The Independent, Page: 43

Fear of far-left loathing

Several papers consider the prospect of a Jeremy Corbyn-led Labour government coming to power following several recent reports that Britain’s wealthy are readying themselves to flee. The Mail on Sunday’s Jeff Prestridge talks to advisers about what people can do to minimise risk if they cannot afford to simply up sticks like Lord Sugar, who said he would leave the country if Mr Corbyn becomes the next PM. Writing in the Sunday Times, Luke Johnson, chairman of Risk Capital Partners, says it is entrepreneurs who are the real anarchists – they enter what are essentially chaotic market places and overthrow the existing order – “Socialists such as Jeremy Corbyn fail to see that more government, public spending, taxation and regulation is not the answer. These just crush individual initiatives, which taken together are what actually deliver progress.” Finally, the FT follows up on a previous re port into the topic and talks to one London small business owner, who tells the paper a

far-left Labour government “is a f**king terrifying possibility.”

The Mail on Sunday, Page: 94 The Sunday Times, Business, Page: 9 Financial Times

CORPORATE NEWS

Viral publisher to enter administration

Bentley Harrington, the firm behind internet news site Unilad, is set to go into administration, placing hundreds of jobs at risk. Unilad co-founder Alex Partridge is owed £5m by Bentley Harrington, which also owes HMRC £1.5m.

City AM The Sun, Page: 49

PROPERTY NEWS

Council wants to take over empty Kensington and Chelsea homes

The Royal Borough of Kensington and Chelsea is lobbying ministers to change the law so the council can move social housing tenants in empty private homes. Current rules on Empty Dwelling Management Orders only permit local authorities to take over temporarily empty and vandalised properties, but the council wants the law relaxed so any homes that have been vacant for two years can be taken over. Kim Taylor-Smith, the council’s deputy leader, said owners could be offered “a favourable taxation scheme on the income provided to them from tenants” as an incentive to offer their homes voluntarily.

The Daily Telegraph

HMRC too slow rectifying overpayments

Leicestershire-based Cornerstone Tax says an over-complicated stamp duty system is leaving people waiting months to get refunds on overpaid duty. Properties deemed as “mixed use” should attract a tax discount, but solicitors are often using HMRC’s basic online calculator to advise buyers and this fails to give adequate guidance. David Hannah, the founder of Cornerstone, says the average response rate from HMRC is at about three months but some have waited nearly a year for a refund.

The Times, Page: 60

House price growth slump in September

UK house prices saw their biggest fall in five months in September, while price increases compared to the same period in 2017 slowed to a three-month low. Latest figures from Halifax show house price inflation dropped to a 2.5% rise in the year to the end of September from 3.7% in August, with the average home costing £225,995, down from £229,284 last month – a month-on-month drop of 1.4%.

BBC News City AM Financial Times, Page: 3 The Daily Telegraph, Business, Page: 35 The Times, Page: 50

Government considers “big offer” to Generation Rent

Downing Street and Treasury officials are studying a plan to scrap CGT for landlords if they sell their properties to tenants who have lived in them for three years or more.

The Sunday Times, Page: 2

WEALTH MANAGEMENT NEWS

Ultra-rich shift assets as fear of Labour mounts

The FT reports on how the UK’s super rich are moving assets out of the UK in fear of a Corbyn-led Labour government. Grant Thornton is among those with clients seeking advice on the threat.

Financial Times, Page: 2

Rich getting ready for a quick getaway if Corbyn wins

Growing fears over a Corbyn-led Labour government are leading wealthy Britons to sell up and rent so they can quickly shift their capital abroad, the Times reports. Glentree Estates said their letting market had “gone berserk” while wealth management partner at Baker McKenzie, Ashley Crossley, said “wealthy people are […] are starting to ask whether the UK is the right place for them if Corbyn wins.” Gareth Parsons, financial planning director at wealth manager Saunderson House noted that concerns were not all about tax increases – “it’s more a fear of Labour policies damaging the economy more widely and having a detrimental effect on asset values.” Following reports in the FT yesterday that the ultra-wealthy were preparing to move assets abroad, John McDonnell, the shadow chancellor, warned: “Society will not tolerate the rich refusing to shoulder their fair share of resp onsibilities. We will take all the necessary action to make sure they do.”

The Times, Page: 4 Financial Times Daily Mail, Page: 10 The Sun, Page: 2

Contact Paul Southward if you have any queries.

Paul Southward