News Roundup Saturday 28th September 2019
News Roundup Saturday 28th September 2019
Boris Johnson’s tax cuts will cost £26bn a year, IFS claims
The Institute for Fiscal Studies (IFS) has challenged Boris Johnson’s flagship policy to lift the thresholds for both higher rate income tax and National Insurance, claiming the giveaway “risks putting the public finances on an unsustainable path”. Mr Johnson pledged to raise the threshold for paying higher rate income tax from £50,000 to £80,000. The IFS said the PM’s proposed tax cut would cost the Treasury up to £9bn a year if introduced immediately and would take 2.5m people out of paying 40% higher rate tax. About three-quarters of the tax benefit would go to the highest-income 10% of households. Increasing all the National Insurance thresholds to £12,500 in line with the personal allowance for income tax would cost £17bn a year, the IFS said.
The Times, Page: 2 Daily Mail, Page: 2 The Guardian The Daily Telegraph, Business, Page: 3 The I, Page: 10
FRC: Audit firm transparency reports not visible enough and ineffective
A review from the Financial Reporting Council (FRC) has concluded that transparency reporting by accountancy firms performing audits is currently ineffective with a lack of awareness amongst investors and Audit Committee Chairs that the reports even exist and many being used as a marketing exercise. While mandatory Transparency Reports broadly contain the required information, for those aware of the reports, there is a view they are too long and overly positive to be useful. The FRC is concerned that many firms treat the reports wrongly as a marketing tool which damages their perception among stakeholders and limits their usefulness. The regulator is calling on firms to reduce the length of their Transparency Reports and explain within them the challenges they are facing in seeking to deliver consistently high-quality audits, along with their assessment of how successful they are being at meeting those challenges. Sitting alongside the reports on audit quality that the FRC publishes, Transparency Reports by the firms should provide stakeholders with important information about each firm’s quality processes and initiatives to improve audit quality.
Brexit: EU audit and accounting rules retained
A motion to approve draft legislation retaining EU accounting and audit law after the UK leaves the EU has been passed in the Lords. The statutory instrument (Statutory Auditors, Third Country Auditors and International Accounts Standards (Amendment) (EU Exit) Regulations 2019) also completes the process of extending powers to the UK’s competent authority, the Financial Reporting Council. It extends the FRC’s ability to regulate third-country auditors to include EEA and Gibraltarian auditors. It also puts beyond doubt that those EEA auditors who have already registered in the UK as statutory auditors will retain that status after exit.
MPs to launch inquiry into Thomas Cook collapse
The Business, Energy and Industrial Strategy (BEIS) Committee said on Thursday that it would seek to question Thomas Cook executives over the travel firm’s collapse on Monday. MPs will be focussing on the company’s accounting practices, executive pay, and the role of its auditors. The announcement follows requests from Andrea Leadsom, the business secretary, to the Financial Reporting Council (FRC) and the Insolvency Service to expedite investigations. The Insolvency Service has launched an investigation and the FRC said it was reviewing “as a matter of urgency” whether to join that probe. As part of the government inquiry, BEIS chair Rachel Reeves said the committee would follow up on its “longstanding interest in corporate governance, executive pay and audit reform”. Ms Reeves has also written to Ms Leadsom to raise concerns about the “slow progress of audit reform”. The audit work of EY and PwC, who had audited Thomas Cook since 2008, before handing the reins over to EY in 2017, will come under intense scrutiny from the FRC should an investigation take place. Meanwhile, Government figures suggest the cost of Thomas Cook’s failure will exceed £500m with industry sources suggesting it was likely that the total could almost wipe out funds held under the Air Travel Organisers’ Licence (Atol) scheme. The Times’ Alistair Osborne points out that if insolvency reforms following the collapse of Monarch had been put in place the state could have saved tens of millions.
Financial Times The Times, Page: 43 The Times, Page: 16 The Times, Page: 45 Financial Times, Page: 20 The Guardian, Page: 2 Daily Mail, Page: 29, 87 Daily Mirror, Page: 19, 31 Daily Express, Page: 15 Yorkshire Post, Page: 6 The Herald, Page: 5
Latest pension tax grab brings renewed calls for reform
New figures show there has been a 44% increase in pension savers being hit with a tax bill for exceeding their annual allowance. HMRC said on Thursday that 31,050 people were hit by tax charges, paying an estimated £510m for the 2017-18 financial year. The rise from £375m the previous year is mostly due to the “annual allowance”, which allows savers to pay up to £40,000 each year into their pension, but savers were also breaching the £1.05m lifetime limit. Sir Steve Webb, of insurer Royal London, and a former pensions minister, warned: “The annual allowance cuts are just starting to bite, but they take time to work through because you can carry forward unused allowances from earlier years. Now we are starting to see the restrictions biting, because with each passing year you have less and less opportunity to carry forward unused allowances from before the cuts.” Mr Webb said the “worst part& rdquo; of the system is the tapered annual allowance for higher earners. “It’s so complex that people just don’t know where they stand. It’s unreformable – it just has to go.”
Rothesay Life signs UK’s biggest ever pension transfer deal
Rothesay Life has taken on the huge £4.7bn GEC pension scheme in the UK’s biggest ever pension transfer deal. Last month Rothesay raised £900m of fresh capital from investors to back new deals. Before the latest agreement, it had signed £4.4bn of deals so far this year. Telecoms firm Telent said the deal would secure payments to 39,000 members of the GEC 1972 plan, many of whom were hired by GEC and Marconi – Telent’s previous incarnations.
Financial Times City AM
FSB: Small businesses unprepared for no-deal Brexit
A UK-wide survey of small businesses by the Federation of Small Businesses (FSB) has found that almost 40% of small companies would be negatively affected by a no-deal departure – and of those only one in five has planned or prepared for disruption. Nearly two-thirds said they felt unable to plan because they were unsure about what to plan for. The FSB’s Mike Cherry said: “Ongoing uncertainty is to blame for preparations hitting the skids with the picture still not clear as to how the UK will leave the EU.” The FT notes that Liverpool Council is establishing a £15m loan fund to aid small businesses in a no-deal scenario.
Financial Times, Page: 2 The Sun, Page: 49 The Times, Page: 54
P2P lenders given final warning by regulator
The Financial Conduct Authority has warned Britain’s peer-to-peer lending industry to “act now” to clean up poor practices or face a “strong and rapid” crackdown. In a letter sent to 65 firms the FCA highlighted problems including weaknesses in disclosure of information to clients, opaque charging structures, inadequate record keeping and suspect due diligence. Investors were not as aware of risks as they should be and platforms had changed their business models without informing the regulator; taking “additional, opportunistic risks” in areas beyond their expertise.
Gold app Glint collapses just months after fundraising
UK start-up Glint has collapsed in a blow to backers including MP Steve Baker and Dave Mortlock, global head of investment banking at Berenberg. The Glint app allowed customers to swap currencies into gold. They could then spend it via a debit card. FRP Advisory has been appointed as Glint’s joint administrator.
Ted Baker poaches Debenhams’ finance chief
Debenhams’ finance chief Rachel Osborne is leaving after only a year to join Ted Baker. Debenhams’ Mike Hazell will step up to chief financial officer from group finance director.
Bond firm delays accounts again
Manchester-based Blackmore Bond, which has raised more than £25m for property developments by selling minibonds, has delayed filing its accounts for a second time. A spokesman said the delays were caused by the resignation of Grant Thornton in the spring.
Holiday-home businesses on the rise
Letting agency Mulberry Cottages is running masterclasses for investors who want to run a holiday-home business, the Express reports. The move has been driven by an increased number of people shifting away from buy-to-let due to a reduction in tax benefits. Holiday-let home-owners, however, are still able to offset expenses from insurance and water rates to crockery, linen and cutlery, as long as their property is available to rent as a furnished holiday home for 30 weeks in the tax year and is actually rented out for at least 15 weeks.
Daily Express, Page: 26
Economic fears weigh on household confidence
September’s consumer confidence index from GfK reveals that households are generally happier than they were in August but are still more worried than they have been for six years. The survey of 2,000 adults found that expectations for the economy over the next 12 months were deeply negative, although people’s confidence in their personal financial situation over the coming year was positive.
‘German problem’ at ECB exposed by Lautenschläger departure
The FT says the departure of Sabine Lautenschläger from the European Central Bank is the latest example of German dissatisfaction with the ECB’s loose monetary policy. Ms Lautenschläger, an executive member of the board representing Germany, resigned just over halfway through her eight-year term. The Telegraph says the move is a worrying sign for incoming ECB head Christine Lagarde
Accountant jailed for shears attack
Argentinian accountant Brenda Barattini has been jailed for 13 years after cutting off her blindfolded lover’s manhood with garden shears. Ms Barattini, 28, was found guilty of the attempted murder of musician Sergio Fernandez, 42.
Daily Mail, Page: 31
Contact Paul Southward [Tax Consultant].