News Roundup Monday 28th October 2019

NEWS ROUNDUP

TAX NEWS ROUNDUP

Airbnb ban could return as cost of rent-a-room tax break spirals

The most recent data suggests tax relief under the rent-a-room scheme will cost HMRC £230m for the 2018-19 tax year – 53% more than expected. Rent-a-room relief allows people to earn £7,500 a year tax-free by letting a furnished room in their property, or £3,750 per person if the property is jointly owned. The spike in tax relief is thought to be a result of an increasing number of people renting out rooms using Airbnb. A ban on Airbnb landlords profiting from the tax break was proposed last year but scrapped as the government rushed through the Finance Act 2019. George Bull, a senior tax partner at RSM, believes the ban could come back on the table especially considering HMRC’s concern that Airbnb may not be paying all the tax it should.

The Times, Page: 57

Wealthy Britons hold back on philanthropy

Analysis of charity donations on self-assessment tax forms shows that nearly two thirds of people earning more than £250,000 gave nothing to good causes last year. People earning more than £250,000 donated an average of only 1.7% of their income last year compared with 3.1% by those earning less than £50,000. In total, almost one million people earning more than £100,000 made no donations. Donations by the rich are down 12% over the past five years compared with a 4% drop among the least well-off. Campaigners say one reason why donations from the wealthy are falling is because only one in ten financial advisers in the UK asks someone selling their business what they want to do about philanthropy.

The Times, Page: 21

CORPORATE NEWS ROUNDUP

QuickQuid owner collapses into administration

Payday lender QuickQuid is folding after its owner, Enova, failed to reach agreement with the UK’s financial ombudsman over how many customers it should compensate over past loans. CashEuroNet UK, which operates the QuickQuid and On Stride brands, stopped lending after Grant Thornton was appointed as its administrator on Friday. Payday lenders have been struggling after the Financial Conduct Authority imposed affordability checks and capped payday loan charges in 2014. John Cullen, business recovery partner at Menzies, said: “For former customers, who feel they have been taken advantage of and are in financial hardship, the future is still uncertain, as the value of any compensation payouts will now depend on the process of closing the company. What is clear is that in the face of growing regulatory pressures, the curtain appears to be drawing on the payday lender market.”

The Guardian, Page: 39 Daily Mail, Page: 23 The I, Page: 68 The Press and Journal, Page: 21

Labour eyes more tax from tech giants

A Labour government would launch a £14bn tax raid on multinationals such as Amazon, Google and Apple, the party has said. Shadow chancellor John McDonnell is drafting plans to prevent such firms from using “arm’s-length” arrangements that allow them to pay tax in countries with lower rates. A new report from Tax Justice Network adviser Professor Sol Picciotto and Daniel Bertossa details how companies would be taxed on the basis of where their sales, assets and workforce are located and not where they have decided to book their profits. The plan would treat multinationals as one company, rather than continuing to allow subsidiaries in different countries to pay each other loans, transfer profits and assign intellectual property rights to spread liabilities to low tax jurisdictions. The £14bn figure could increase when Labour raises business taxes further.

The Sunday Times, Page: 4

Gibraltar could be given a peer in the House of Lords

Fabian Picardo, the chief minister of Gibraltar who was elected to another four years in office earlier this month, has said the Rock could be given a peer in the House of Lords in a move that could open the door for other British Overseas Territories to have representation at Westminster. Gibraltar does have significantly lower corporate taxes than the UK representation in the Lords would allow the territory some scrutiny over financial regulations that affect it. Conservative MP Andrew Rosindell, who sits on Parliament’s Foreign Affairs Select Committee, said he “wholeheartedly” agreed with the idea, adding: “I would extend representation to the House of Commons. I would also support this for all Overseas Territories.”

The Sunday Telegraph, Page: 9

Former F1 supremo to settle £1bn tax demand

The Sun reports that Bernie Ecclestone and HMRC may have come to an agreement over a record £1bn tax demand which has been fought over for 20 years. The dispute centres on the Bambino trust, set up by Bernie’s ex-wife Slavica in 1997 and based in Liechtenstein, which is believed to have raised £3bn from selling stakes in F1.

The Sun, Page: 7

Is Philip Day a liquidator or a retailer?

The Sunday Times reports on how Philip Day’s takeover of Bonmarché and its collapse after he took it private was all part of a clever plan to restructure the women’s fashion chain and fold it into his Edinburgh Woollen Mill empire. He took Bonmarché private in July in a cut-price £5.7m deal, despite warnings from PwC that it might not continue as a going concern. Day provided a loan facility and an overdraft in exchange for security over the company’s assets so any new owner would have to repay Day’s loan. But if Day reclaims the business, it will be shorn of its debts and lease obligations, leaving suppliers and landlords out of pocket. A source close to Bonmarché said: “This is planned financial engineering, pure and simple […] He does it under the guise of being a retailer, not a liquidator, which is quite clever.” FRP Advisory are Bonmarché’s administrators.

The Sunday Times, Business, Page: 8 The Sunday Times, Business, Page: 3

Mothercare calls in KPMG to help

Mothercare has drafted in restructuring experts from KPMG to assess options for its troubled UK business. Mothercare carried out a CVA with KPMG last year to shut 55 stores and a second CVA is on the cards, but KPMG said a sale of the UK business was the preferred solution.

The Sunday Times, Business, Page: 1

INDUSTRY NEWS ROUNDUP

RSM ventures where other auditors fear to tread

The FT’s Tabby Kinder says how RSM handles the Sports Direct audit will affect the chances of the accounting sector being opened up to greater competition for the Big Four.

Financial Times, Page: 18

Key Facts and Trends in the Accountancy Profession

The Financial Reporting Council has released its seventeenth edition of ‘Key Facts and Trends in the Accountancy Profession’, which provides statistical information and trends on the members and students in the accountancy profession.

Financial Reporting Council

SMEs NEWS ROUNDUP

Plans to end rural mobile coverage blackspots

The UK’s four mobile network operators – Vodafone, O2, EE and Three – have agreed to spend £532m between them over 20 years to remove so-called not-spots in the countryside where mobile phone coverage is poor. The deal with the Government is designed to ensure 95% of the UK has 4G coverage by 2025. The Government could contribute a further £500m into the scheme. Mike Cherry, national chairman of the Federation of Small Businesses, said that a shared network “would go some way to help to bridge the widening communication gap in the countryside”, where companies were “blighted on a daily basis” by poor connections. Fifty-seven per cent of small businesses in rural areas report unreliable connections on their mobile phones, according to FSB research.

Financial Times The Times, Page: 50 City AM

Brexit workshops get small businesses ready to trade

The Department for International Trade (DIT) has held 130 Brexit workshops for small businesses trading with the EU and will soon launch a new market access database for UK traders, the government has said. To date, 2,047 businesses have attended the workshops and 86% felt more prepared for Brexit as a result. More than 2,700 businesses also attended 30 Brexit readiness events organised by the Department for Business, Energy and Industrial Strategy with a similar proportion saying they were more prepared after having attended.

GOV

PENSIONS NEWS ROUNDUP

Over-50s to get ‘wake-up’ alerts on retirement pots

Pension savers above the age of 50 will receive ‘wake-up’ alerts about their pensions from next Friday, as part of efforts to encourage those who are not saving enough to get their pension pots on track. The short documents will tell savers the current size of their pot, indicate the income it might generate in retirement, what they are being charged, how the pension is invested, and where to turn for help. Separately, the Telegraph highlights analysis by Brewin Dolphin which shows the power of starting to save early. Assuming annual investment returns of 5%, a worker aged 30 with no pension savings would need to put away £440 a month in order to have a pot worth £500,000, capable of providing an income of £20,000, at the age of 65. But a saver who started at 21 would need to save just £261 a month.

The Daily Telegraph Daily Mail The Sun

Pension firms resist over compensation payouts

Pension companies are resisting calls to begin settling compensation payments for pensioners whose “guaranteed minimum pensions” were calculated at different rates after the High Court ruled the practice illegal last year.

Financial Times, Money, Page: 4

PROPERTY NEWS ROUNDUP

Complicated death taxes and stamp duty killing housing market

The property market is being gummed up by inheritance tax rules with older homeowners put off downsizing so they can benefit from high allowances under the residence nil-rate band exemption. Also known as the family home allowance, the tax break allows homeowners to pass on £150,000 of property wealth tax free, on top of the existing £325,000 standard IHT allowance, if leaving a home to a direct descendant. In 2020 this increases to £175,000 and means spouses and civil partners, who can share their allowances, will be able to pass on up to £1m free of tax. But some are deciding not to sell up and move to a smaller, less valuable home or into care in an effort to pass on as much wealth as possible, exacerbating the supply problem in the market. However, there is an additional relief which offsets the loss incurred by selling before the allowance increases against other assets in the estate that a direct descendant inherits. And y Butcher, of wealth advice firm Raymond James, called the system “ridiculously complicated” while the OTS has recommended the downsizing provision be removed altogether.

The Sunday Telegraph, Business, Page: 9

CPS says stamp duty hurts mobility and aspiration

Alex Morton, who was responsible for housing and planning under David Cameron when he was prime minister and is now head of policy at the Centre for Policy Studies (CPS), has drawn up plans that would see stamp duty scrapped on properties costing under £500,000. Under the proposals, buyers would pay 4% on homes costing £500,000 to £1m and 5% above £1m, plus a 3% surcharge for overseas purchasers. At present, stamp duty is paid in England and Northern Ireland on homes costing more than £125,000. “We propose a far more appropriate rate for the most valuable homes – and taking nine out of 10 people who just want to buy a decent home for themselves and their family out of the tax altogether,” Morton said.

The Sunday Times, Page: 8 The Sunday Telegraph, Page: 6, 18

EMPLOYMENT NEWS ROUNDUP

Walters on Labour: People will just leave

Harriet Dennys interviews Robert Walters in the Mail on Sunday. His stake in his headhunting firm is worth £12.5m. Robert Walters Plc has placed more than a million City workers in new roles and grown in value to £384m. Walters says people are “sitting on their hands” as they wait for a resolution to the Brexit negotiations. But his biggest concern is a potential Corbyn-led Labour government. “There’s this devaluation of the entrepreneurial spirit within the Corbyn camp; there’s no incentive to really work,” he says. “So the whole spirit of employing people and growing a business, which is really healthy, could evaporate if there’s a change of government.” Labour “would be a massive negative for the country,” he adds. “People will just leave.”

The Mail on Sunday, Page: 99

ECONOMY NEWS ROUNDUP

CIOT issues budget warning for Scotland

The Chartered Institute of Taxation (CIOT) warned on Friday that a delay to the UK Budget will put Scotland’s Finance Secretary Derek Mackay in a “tight corner” when it comes to planning Scotland’s finances for the next year. Mr Javid said his Budget planned for 6 November will not go-ahead as the UK government pushes for a 12 December election. The CIOT said this will hinder Scotland, with Mr Mackay due to issue his spending plans on 12 December.

The Scotsman, Page: 8

ONS admits £1.5bn public finances error

The ONS has said that the UK budget deficit is as much as £1.5bn less than what had been previously reported after a statistical error. A year-to-date budget deficit of £40.3bn, excluding public-sector banks, was reported earlier this week. The ONS now says there was “an error in the measurement of local government social benefits.”

City AM

Surveys expected to show Brexit dampening UK economy

A series of surveys this week are expected to show the weight of Brexit uncertainty on the UK economy. The CBI’s distributive trades survey is expected to show retailers struggling while the GfK consumer confidence survey will indicate household gloom over economic prospects. The PMI for manufacturing will on Friday show the sector in recession, the Sunday Times reports. Finally, a new assessment of the economy by the ratings agency S&P predicts growth of just 1.3% a year over the 2020-22 period. Britain’s outlook remains negative due to “the risk of sustained economic weakness”, S&P said.

The Sunday Times, Business, Page: 1

OTHER NEWS ROUNDUP

Grape plot squashed as tobacco smuggler jailed

A lorry driver has been jailed for four years and eight months after smuggling eight million cigarettes into the UK disguised as grapes. Miklos Sokorai, 48, of Ukraine, tried to smuggle the cigarettes worth £2,500,229 unpaid duty into the UK through the Port of Dover, an HMRC investigation found.

Press Release

Robot traders will accelerate market collapse

With tomorrow marking the 90th anniversary of Black Monday, 1929, the Sunday Express warns that liquidity risk and the rise of high frequency “robotic” trading could trigger a meltdown to match the worst in history and force more funds like Neil Woodford’s to suspend trading. The paper notes that James Burns, portfolio manager at Smith & Williamson, is avoiding UK smaller companies over liquidity fears. Brian Dennehy, managing director of FundExpert, says with two thirds of stock market activity now made up of high-frequency trading, in the next downturn, “it will be machine against machine.”

Sunday Express, Page: 46

Contact Paul Southward.

Paul Southward