News Roundup Thursday 26th September 2019

NEWS ROUNDUP

TAX NEWS

Labour planning comprehensive tax raid

The Telegraph’s Harry Brennan examines Labour’s tax policies, including the effective income tax rates of more than 67% for higher earners and the loss of up to £875,000 in inheritance tax breaks for families. The 80,000 people currently living as “non-doms” in Britain would lose their beneficial tax status while capital gains tax would rise to match new income tax rates. Council tax would also be replaced with a “progressive property tax” payable by the owner and not the tenant, with rates set nationally and not locally. Elsewhere in the paper, Tim Wallace looks at the hit to businesses from Labour, through the financial transactions tax and hikes to corporation tax.

The Daily Telegraph The Daily Telegraph, Business, Page: 4

Use of BPR falls to decade-low

Families have significantly cut the amount of inheritance tax relief (IHT) they claim from investments via business property relief (BPR), according to HMRC, which has fallen to its lowest level this decade at just £1.3bn. Just over 1,000 people used BPR, which provides 100% exemption from IHT for investments in qualifying businesses, to cut inheritance tax bills last year. The drop is 22% down on the preceding tax year, when £1.6bn was saved, and 45% down on 2014-15. More people than at any point in the past decade are paying the 40% death duty, data indicates, helping HM Treasury take a record £5.4bn in 2018-19.

The Daily Telegraph

UK public struggle with understanding tax, survey finds

A survey by Deloitte has found British people have a poor understanding of personal tax issues and lack basic knowledge of the tax system. Tax codes and income rates were among the issues least understood.

Financial Times

REPORTING NEWS

M&C Saatchi hit by profit warning and accounting scandal

M&C Saatchi shares fell sharply yesterday after it warned that full-year profits would be lower than expected. The firm also said it had appointed PwC to review its books after it was caught up in an accounting scandal earlier this year. The company has restated its accounts for the first half of last year, reducing its reported profit by £6.4m. It overstated turnover by £2.6m after declaring some fees that it had yet to receive, as well as understating overheads by £3.1m.

City AM, Page: 7 The Times, Page: 47 Financial Times Daily Mail, Page: 82

Muddy Waters restates claims against Burford Capital

Muddy Waters has repeated its claims that litigation funder Burford Capital has questions to answer over its accounting practices. Burford issued a 45-page presentation to investors which defended its practice of recognising revenue from unfinished legal cases, so-called fair value accounting. But Muddy Waters said: “We believe Burford is manipulating the cases it deems ‘concluded’ in order to avoid truing up marks.”

City AM, Page: 4

REGULATION NEWS

FRC mulling Thomas Cook investigation

The Financial Reporting Council has announced that it is considering investigating the collapse of travel company Thomas Cook. The move comes amid reports that Royal Bank of Scotland and Lloyds Bank had called for extra funding at the beginning of August – much earlier than CEO Peter Fankhauser had claimed. EY took over as Thomas Cook’s auditors in 2017 from PwC. In 2018, it “strongly recommended” the travel firm strengthen its accounting procedures and voiced particular concern about the firm’s use of one-off costs. The business select committee said it wanted answers about the collapse. Its chair, Rachel Reeves MP, said: “There are serious questions to answer, including about the company’s accounting practices, its remuneration policy and practice, and about the stewardship of the company.”

Financial Reporting Council The Daily Telegraph, Business, Page: 1 Financial Times, Page: 14 The Times, Page: 42 The Times, Page: 41 City AM, Page: 4 The Guardian, Page: 12 Daily Mail, Page: 15 Daily Express, Page: 55

WEALTH MANAGEMENT NEWS

Family offices prepare for market downturn

A survey of 360 family offices by UBS and Campden Wealth found that 55% expected the global economy to sink into a recession before the end of 2020. Some 63% of family offices believe that Brexit will be negative for the UK as a destination for investment long-term while over 90% cited tensions between the US and China as a concern. Dr Rebecca Gooch, Campden Wealth’s director of research says while family offices are not making “wholesale changes” to portfolios, mitigating risk is becoming a priority, with 45% re-aligning investment strategies and 42% building up cash reserves.

Financial Times City AM

PENSIONS NEWS

Pensions should be invested in private companies too, says report

A report written by the British Business Bank and consultancy Oliver Wyman has recommended that money from pension savers should be invested via open-ended funds to buy illiquid, unlisted stocks. The Future of Defined Contribution Pensions report says that defined-contribution schemes are missing out by not being able to invest in open-ended funds that back venture capital and other private companies. Risk would be mitigated by limiting investment in such assets to 5% of a pension scheme’s total portfolio. The Treasury-backed study argues that young people today would be 7% to 12% better off in retirement if the barriers to investment were removed.

The Times, Page: 44

PROPERTY NEWS

Property transactions broadly flat, HMRC says

Property transactions in August fell year-on-year, according to new data from HMRC, with 99,890 residential deals in the month, down 0.9% on last year but up 15.8% on July 2019. The average price of newly listed homes fell by 0.2% month-on-month in September, according to Rightmove. Nick Leeming, chairman of Jackson-Stops, said: “Brexit and the recent political uncertainty has undoubtedly delayed the market’s seasonal bounce this year. Finally, after months of waiting we’ve seen a healthy uptick in transactions in August.”

City AM

INTERNATIONAL NEWS

EU court strikes down Brussels tax ruling against Starbucks

A European Union court has overturned a ruling by the European Commission that a tax deal between the Dutch government and Starbucks amounted to illegal state support for the coffee giant, stating that Brussels was “unable to demonstrate the existence of an advantage in favour of Starbucks” from a so-called “sweetheart” corporate tax arrangement for the U.S. company in the Netherlands. In 2015, the Commission ruled that the Netherlands gave tax advantages to Starbucks, leading to Dutch authorities recovering EUR25.7m from the coffee giant

Financial Times, Page: 6 Daily Mail The Sun, Page: 45 The I, Page: 41

PayPal faces Australian watchdog probe

Australia’s financial crime agency has ordered an audit of PayPal following concerns that the online payments company is not meeting the reporting rules aimed at fighting serious crimes such as child sex exploitation.

Financial Times Financial Times, Page: 14 The Independent, Page: 56

PERSONAL FINANCE NEWS

Public remain wary of digital-only banks

A survey by KPMG has found two-fifths of UK consumers won’t consider using a bank with no presence on the high street, demonstrating more needs to be done to give consumers confidence in digital-only banking.

Daily Mirror, Page: 40

ECONOMY NEWS

Manufacturers predict decline over next three months

UK factories are continuing to struggle, according to the latest monthly CBI Industrial Trends Survey, weighed down by Brexit and the global manufacturing slowdown. The survey found that output expectations this month are at their lowest level since April 2009. Order books weakened and stockpiling reached the highest level since the downturn. Anna Leach, deputy chief economist at the CBI, said: “UK manufacturers have become noticeably gloomier in September.”

The Daily Telegraph Daily Mail The Times The I, Page: 39

ONS reforms push up borrowing

Revised figures from the Office for National Statistics, including changes to student loans, public sector pensions and corporation tax, increased borrowing in the year to March by 75% to £41.4bn. John Hawksworth, chief economist at PwC, said: “Based on the new and revised data, it does look quite likely that the budget deficit in 2020-21 could exceed the 2% of GDP target set by the previous chancellor, even assuming that a no-deal Brexit can be avoided.”

Financial Times, Page: 4 The Daily Telegraph The Times, Page: 44

Contact Paul Southward.

Paul Southward