News Roundup Saturday 22nd June 2019
News Roundup Saturday 22nd June 2019
HMRC: Tax gap at 5.6%
HMRC has revealed that the tax gap for 2017/2018 was 5.6%, meaning the Revenue collected 94.4% of all tax due. The figures show that the tax gap, which shows the difference between the amount of tax that should be paid to HMRC and what is actually paid, has fallen from 7.2% since 2005/2006. The duty-only excise tax gap has reduced from 8.4% in 2005/06 to 5.1% in 2017/18, while the corporation tax gap has reduced from 12.5% to 8.1% in the same period. HMRC says avoidable mistakes are costing the Exchequer over £9.9bn a year, with £3bn of this attributable to VAT. The Revenue says efforts to tackle tax evasion, tax avoidance, and non-compliance mean it has secured and protected more than £200bn in extra tax that would otherwise have gone unpaid since 2010. Commenting on the report, Financial Secretary to the Treasury Jesse Norman said: “The UK’s low tax gap underlines both how the vast majority of people are paying the correct amount of tax, and how effective HMRC has been in its efforts to clamp down on tax evasion and avoidance.” George Bull of RSM said some areas of the gap remain “stubbornly high”, including tax evasion, criminal attacks and the “hidden economy”, which were worth a combined £13.2bn. With the data showing that small firms accounted for £14.4bn of the 2017/18 shortfall, Jason Piper of the ACCA noted the challenge in chasing up tax they owe, saying: “Small businesses by definition will have smaller tax bills, which means that HMRC will need to open more enquiries and handle more pieces of correspondence per pound than for large businesses.”
Judge rules against stamp duty dodge
Property buyers who used annuities to avoid stamp duty could be pursued by the taxman, reports the Telegraph’s Sam Meadows, pointing to a case involving tax adviser David Hannah, who runs Cornerstone Tax. Tribunal judge Victoria Nicholl threw out Mr Hannah’s appeal against a £30,600 bill, siding with HMRC to rule that a process which saw a property paid for via a complex web of annuities and companies registered offshore was a contrived way to avoid tax. Mr Meadows says similar schemes have been promoted to the public by several firms. He goes on to say that while most schemes claiming to mitigate stamp duty are likely to fail, there are a number of ways to limit or eliminate the bill, including: buying a property worth less than £125,000; being a first time buyer; buying overseas; buying commercial property; or being gifted the property.
Can today’s ultra-rich make peace with a wealth tax?
The FT’s Martin Sandbu considers the merits of wealth taxes, looking at different countries’ approaches to such levies and the impact these taxes have. Elsewhere in the same paper, Stephen Foley says any effort to increase taxes for wealthy US taxpayers “risk being undermined by the exceptionally generous tax break given for charitable donations”.
Laffer no laughing matter
Ryan Bourne, the R Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute, looks at economic policy set out by Art Laffer, who has been awarded US Presidential Medal of Freedom. He says that while some have derided and criticised the economist, the effect on global tax policy of Mr Laffer’s “supply-side” school is “indisputable”, noting that many global economies have followed the US in cutting top tax rates on income and profits. Mr Bourne says Mr Laffer has “helped popularise … important tax policy principles we now take for granted.” He adds that Mr Laffer’s ideas “had important application to maintain growth in the transition to low inflation in the Eighties” and “generated a global tax revolution.”
Banks need more support and tax cuts
UK Finance chairman Bob Wigley has warned the Government that UK banks need more support to promote a positive vision of the finance industry. The trade body chair called for a new formal body to be set up to better represent the sector, as the Government had failed to adequately support the finance industry in the Brexit negotiations, and called for tax cuts. He noted that the aggregate rate of tax paid by banks in New York and Frankfurt was much lower than in London.
City AM, Page: 4
Tories and tax
The FT looks at policy proposals from Conservative leadership candidates Boris Johnson and Jeremy Hunt, commenting that tax cuts aimed at appealing to party members “are not a sensible way to approach fiscal policy”. Meanwhile, research by Prof Tim Bale at Queen Mary University of London suggests that 15% of Conservative Party members think that the tax system should redistribute from the rich to the poor.
Financial Times, Page: 10 Daily Mirror, Page: 4
Monsoon seeking lower rents to stay afloat
Monsoon Accessorize is asking landlords to reduce rents on more than half its 258 leased stores in return for a share of £10m future profits. Under the restructuring, which is taking place under a two separate CVAs in a process overseen by Deloitte, no stores would close and no jobs are expected to be lost from the 4,440-strong workforce. Owner Peter Simon, who has also given the company an emergency £12m loan and offered another £18m at 0% interest if the CVA is approved, said that it had faced “significant pressure” on working capital because of the removal of trade credit insurance, meaning it has to pay suppliers up front. Considering the use of CVAs by retailers. Nils Pratley in the Guardian asks “how many more of these requests from wealthy individuals are landlords prepared to tolerate?” He suggests landlords “hold a poor hand, but they’re also playing their cards weakly” and says they have themselves to blame if an “open season for retail CVAs” occurs.
BBC News Financial Times, Page: 18 The Daily Telegraph, Business, Page: 4 The Times, Page: 41 Daily Mail, Page: 80 I, Page: 44 The Guardian, Page: 34 Daily Express, Page: 50 The Sun, Page: 47 The Scotsman, Page: 40
PTSG agrees to £265m offer
Specialist services provider Premier Technical Services Group (PTSG) has agreed a recommended all cash offer from global investment bank Macquarie. The Yorkshire Post notes that KPMG corporate finance partner Giles Taylor is a lead financial adviser to PTSG.
Yorkshire Post, Page: 18
Investor could check in to hotels
Centerbridge Partners, a New York-based private equity and real estate business, could acquire 27 hotels for more than £300m, having reportedly entered talks with owner Macdonald Hotels. The Times says the potential deal follows a process by Deloitte that is believed to have led to interest from Kop, a Singapore property company.
The Times, Page: 42
8 in 10 SMEs have no wellbeing strategy
A study commissioned by AXA PPP healthcare shows that 82% of small and medium businesses do not have a health and wellbeing strategy in place. The report reveals that two-thirds of staff at SMEs experience stress or anxiety related to their job, while almost half said they continue to “power through” even when ill. On the impact a wellbeing strategy could have, half of the staff polled said they would feel less stressed, while 52% said they believe it would deliver an improvement in productivity. Tracy Garrad, CEO at AXA PPP healthcare, said: “The reality is small businesses make up more than half the UK’s workforce and their employees are crying out for greater support.”
The Sun, Page: 42
Record tax-dodger complaints Down Under
Australians reported suspected tax dodgers a record 60,000 times this financial year, with public reports of tax avoidance up by 42% between July 2018 and May 2019. The tax commissioner said: “Honest businesses and consumers have had enough – they’ve decided to take action.”
I, Page: 45
Bank freezes rates and cuts growth outlook
The Bank of England has kept interest rates on hold at 0.75% amid heightened no-deal Brexit fears and as UK growth falters. The MPC voted unanimously to keep rates unchanged as it cautioned the “downside risks” to growth had increased since its last set of forecasts in May. The Bank also trimmed its expectations for second quarter growth, predicting GDP will remain flat against a previous forecast for 0.2% expansion, after official data showed the economy dipped by a worse-than-feared 0.4% in April. However, the Bank reiterated that “gradual” rate hikes would be needed over the next three years to keep inflation to its two per cent target. Howard Archer, Chief Economic Adviser at EY Item Club, said: “With the economy clearly having a difficult second quarter and likely to be hampered by prolonged Brexit uncertainties, we believe the odds strongly favour the Bank of England keeping interest rates at 0.75% through 2019.”
Poor weather hits UK sales
The Office for National Statistics has revealed that retail sales fell by 0.5% in May from a month earlier, after an unseasonably cold May prompted a sharp decline in summer clothing sales. In the three months to May, retail sales expanded 1.6% compared with the previous three-month period, the smallest annual rise since October. The downturn was led by a slide in Department stores sales, with sales falling by 0.9% in the three months to May, while clothing and footwear sales fell by 4.5%, the biggest drop since July 2015. Rhian Murphy head of retail sales at the ONS, said: “Retail sales continued to grow in the latest three months despite two consecutive monthly falls, with clothing sales declining considerably in May, due to unseasonably cold weather.” Deloitte’s Ian Geddes said: “The grey clouds that have continued to gather in June may foretell further headwinds for retailers for the rest of the month,” while Li sa Hooker of PwC noted that high street discounting has “ramped up earlier than usual”, adding: “While this might provide a short term fillip to sales, the consequent margin erosion points to even more high street distress in the rest of 2019.” Phil Mullis at Wilkins Kennedy commented: “We will have to hope that the sun does come out soon to help shift summer clothing ranges and encourage people to spend a little bit more.”
UK leads on FDI
EY ‘s 2019 UK Attractiveness Report shows that the UK remained Europe’s most attractive place for international investment in finance in 2018. It was shown that regionally Scotland is the most attractive location for international investment into financial services outside London. Those polled were asked to identify how the UK’s attractiveness might be enhanced in the future, with 32% saying improving the skill levels of the UK workforce was key, while 23% said reducing corporate taxation levels.
City AM, Page: 6 The Press and Journal, Page: 33
Contact Paul Southward.