News Roundup Thursday 11th April 2019
News Roundup Thursday 11th April 2019
Tax and the top tier
David Smith in the Times says the wealthy are “helping to ensure a healthy flow of tax receipts into the Exchequer,” with the Office for Budget Responsibility recently saying that revenues were up because of “particularly strong earnings growth among the highest earners”. He considers why the highest earners, who are “normally good at finding ways to reduce their tax liabilities”, are proving to be a rich source of revenue. He notes that the top 1% of earners account for 12.2% of incomes before tax and the top 5%, 24.4%. Mr Smith says the tax system “has got a lot better at redistributing income”, pointing to estimates that in 2018/19, the top 1% of earners accounted for 27.9% of all income tax revenues while the top 5% accounted for 48.4%. This reduced their post-tax shares of income to 19.6% and 9%, respectively. Mr Smith also looks at the impact of the additional ra te of income tax, the income tax personal allowance and allowances for pensions.
Thousands facing “retrospective” loan charge yet to receive settlement offers
A backlog at HMRC means thousands of contractors have yet to receive loan charge settlement offers from the tax office, the Telegraph reports. HMRC is seeking payment from those who used disguised remuneration schemes in the form of tax-free loans over the past 20 years. Those affected had until April 5 to register to settle but HMRC has yet to inform may contractors about the final amount they will need to pay. HMRC said an estimated 50,000 people will be liable for the loan charge and it has written to more than 40,000 scheme users. The crackdown has been heavily criticised by campaigners and MPs as overly aggressive and “retrospective”. The Yorkshire Post’s Greg Wright cites Tory MP Ross Thomson who called for an immediate suspension of the loan charge for six months and demanded an independent inquiry to be conducted by a party that is not connected with either the Government or HMRC.
The Daily Telegraph Yorkshire Post, Business, Page: 2
UK businesses ignore paperwork needed for no-deal Brexit
HMRC has admitted that only a third of companies whose foreign trade is only with the EU have registered for a customs ID number.
Here at KSK we periodically release Tax Alerts regarding the latest changes and proposals that may have an impact on individuals and businesses. Here are links to the latest Tax Alerts issued:
Capital Gains Tax
Proposed changes to Capital Gains Tax and Personal Residences
Private residence relief consultation
CAPITAL GAINS TAX FOR NON-UK RESIDENTS
Non-UK Resident owners of UK property need to be aware of new changes
Debenhams falls into administration
Debenhams has been taken over by its lenders after the department store group fell into administration. Its 165 UK outlets will continue to trade under the pre-pack administration deal, with around 50 stores believed to be under threat from cost-cutting plans being considered by the chain’s new owners. Mike Ashley’s Sports Direct, which attempted a last minute takeover of Debenhams, has said that the takeover by its lenders is “nothing short of a national scandal”, with Mr Ashley calling for the administration process to be reversed. The Telegraph notes that KPMG and property agents at Savills have been working on a review of Debenhams’ estate and lease liabilities.
The Daily Telegraph, Business, Page: 1 The Times, Page: 37 Financial Times, Page: 13 The Guardian, Page: 3 Daily Mirror, Page: 11 The Independent I, Page: 38 The Sun, Page: 45 Daily Star, Page: 2 The Scotsman, Page: 1 City AM, Page: 2 BBC News
Mike Ashley threatens to sue Debenhams administrators and directors
Sports Direct is considering legal action against Debenhams’ directors after the retailer’s administration wiped out shareholders. Sports Direct boss Mike Ashley branded the pre-pack administration a “national scandal” yesterday after he failed to gain control of the department store chain. He is also demanding Debenhams’ administrators at FTI resign or reverse the administration claiming they are “conflicted”, having been an adviser to Debenhams’ lenders since February. RPC, Sports Direct’s law firm, added that FTI had been “heavily involved” in the events that led to the pre-pack. FTI responded saying that it understood “that Sports Direct as a shareholder will be disappointed that there is no value in the equity. However the transaction delivers continuity for all group operations and was in the best interests of the group’s creditors, employees, customers, pe nsion holders and suppliers. We strongly refute our actions in undertaking a sale for the benefit of the company’s creditors were subject to any conflict of interest.”
Green’s US backer dumps Topshop stake ahead of restructuring
Los Angeles-based private equity firm Leonard Green & Partners has sold its stake in Topshop back to Sir Philip Green’s Arcadia as the business gears up for a radical restructuring. It is thought that Sir Philip could pursue cuts to store rents and the closure of shops as part of a company voluntary arrangement (CVA) while pension contributions may also be slashed. The chairman of the work and pensions select committee, Frank Field, has criticised Sir Philip’s plans to reduce Arcadia’s pension recovery repayments from £50m a year to £25m as part of its restructuring. Field said that MPs and the Pensions Regulator were monitoring the situation and the pension deficit, believed to be close to £1bn. The Labour MP added: “Does he really think he’s going to get away with his old tricks again? Run the business down, pocket whatever cash is left, stiff the pensioners and sail off on the Lionheart leaving employees, pension schemes and his long-suffering creditors in the lurch? Not if we have anything to do with it.” The Guardian notes that Arcadia’s advisers at Deloitte have been presenting the CVA deal to major landlords over the past few weeks in the hope of announcing firm plans next month.
How SMEs can attract and retain the best staff
Writing in the Telegraph, Yorkshire Bank’s Alison Coleman asks recruitment firms how SMEs can compete with larger organisations when it comes to attracting new talent. James Calder, CEO at Distinct Recruitment, says that adequate promotion is essential and advises firms to make use of social media. SMEs can also widen the net for talent by thinking smartly about what is really required for the job, says Alex Fleming, president and country head of Adecco Group UK&I. Finally, Brighter Connections’ Darren Stringer says that it is essential for firms to offer adequate training and coaching opportunities.
Venture capital investment remains steady
A new report by KPMG has revealed that venture capital investment into UK start-ups over the first three months of 2019 was around the same level as last year. In total more than £1.2bn has been invested since the start of the year across 161 deals. Fintech, biotech and healthtech were the most popular sectors for venture capital firms.
City AM, Page: 9
The big tech companies are smothering small start-ups
Greycroft co-founder Alan Patriocof says venture capitalists are discounting companies that rely on a digital platform to reach their markets because minor changes to a platform’s algorithms can harm a business’s traffic overnight.
Should personal auto-enrolment pension contributions rise above the current level?
Steve Webb and Samantha Seaton debate whether personal auto-enrolment pension contributions should rise above the current level of 5%. Ms Seaton, the chief executive of Moneyhub, says yes, because even saving the minimum amount is still unlikely to be enough for workers to have a comfortable retirement. She adds that the low opt-out rate indicates “there is scope to further increase the employee contribution”. Sir Steve Webb, a former pensions minister and director of policy at Royal London, suggests that instead of pushing up personal contributions above 5%, “we should gradually expect firms to match the 5% contribution made by their workers.” He adds that behavioural nudges should be used, “such as suggesting people save more when they get a pay rise, to encourage people to save at realistic rates, without risking mass opt outs.”
PERSONAL FINANCE NEWS
VCTs at 13-year high
Data from the Association of Investment Companies shows that investors shielded £731m from the taxman in the tax year 2018/19 by buying shares in venture capital trusts (VCTs). The figure marks the second-highest amount ever raised in a year, with only 2005/06 seeing a greater total. The investments, which tend to be higher risk while offering a higher reward, provide investors with big tax breaks in return for putting their money in unquoted, fledgling companies. VCTs offer 30% income tax relief on up to £200,000 per year on new shares held for five years, with dividend payments and capital gains also tax free.
Shop closures at record level
PwC research compiled by the Local Data Company shows that the number of high street shop closures were at record highs last year, while store openings fell to their lowest levels on record. In 2018, a record net 2,481 high street stores closed their doors – with 5,883 closures and 3,372 openings – compared to a net loss of 1,772 in 2017. The findings show that closure rates remain high in Q1 2019 due to a number of CVAs, restructures and administrations announced last year. Zelf Hussain of PwC said: “We have already seen several casualties and there will undoubtedly be more.” “Retail companies looking to survive, let alone flourish, in 2019 face an uphill battle,” he added. The Times notes Deloitte research showing that the total number of retailers falling into administration rose by 6% to 125 in 2018.
Daily Mail, Page: 6 The Daily Telegraph, Business, Page: 1 The Times, Page: 9 Daily Star, Page: 2 Daily Mirror, Page: 11 Yorkshire Post, Page: 1 The Scotsman, Page: 5 City AM, Page: 3
IMF cuts global growth forecast
The IMF has predicted that the global economy has slowed sharply since last summer and is now relying on a “precarious” boost from emerging markets to stabilise the economy. The global economics watchdog downgraded world growth for 2019 from 3.5% to 3.3%. It has also warned that the British economy would be hit seven times harder than the rest of the EU in the event of a no-deal Brexit, slipping into recession.
Economy standing firm against Brexit chaos
Despite the ongoing political impasse over Brexit, the UK economy expanded 0.2% in February and is now 2% larger than it was a year ago. John Hawksworth, chief economist at PwC, said: “The main reason why the economy has held up is that while business investment has been falling over the past year, consumer spending has fared much better on the back of continued strong jobs growth and a steady pick-up in real earnings growth,” while Ian Stewart, chief economist at Deloitte, added: “The pace of growth could be choppy, but the UK is likely to grow at about the same pace as the euro area this year.”
The Daily Telegraph, Business, Page: 8 The Guardian, Page: 39 Daily Express, Page: 5 Daily Mail, Page: 2
Royal baby faces IRS bill
The Duchess of Sussex and her baby may, as US citizens, be liable to pay the Internal Revenue Service. David Treitel, the founder of American Tax Returns, which provides taxation advice to US expats, said the US has a citizenship-based taxation system, “so as long as Meghan is a citizen of the United States she is taxed”. He adds that the royal baby will automatically be a citizen of the United States simply because her mother is, noting that the child will inherit investments which will then generate income – reportable and taxable in the United States – as soon as they are born.
OECD: Decimating middle classes could undermine political stability and economic progress
The Organisation for Economic Co-operation and Development (OECD) has warned that the world’s middle classes are shrinking rapidly as taxes squeeze incomes, inflation and rising house prices slash spending power and robots threaten jobs. “The shift in employment towards high-skilled non-routine jobs and some low-skilled non-routine jobs has hollowed-out middle-skilled jobs.” The OECD argues that a large middle class is crucial to maintaining political stability and economic progress. “The investment of the middle class in education, health, and housing, their support for good quality public services, their intolerance of corruption, and their trust in others and in democratic institutions, are the very foundations of inclusive growth,” it said.
Contact Paul Southward.