News Roundup Tuesday 16th July 2019
News Roundup Tuesday 16th July 2019
UK follows France to introduce digital services tax
The UK has published draft legislation for a digital services tax to be included in its next finance bill. The tax will consist of a 2% levy on companies with digital revenue of more than £500m, when more than £25m of this revenue is earned from UK users and is expected to raise £400m for the exchequer each year by 2021. The move will hit tech giants such as Facebook, Amazon and Google and comes just hours after the US reacted angrily to French moves to introduce a similar levy. The French plan will apply a 3% charge on turnover to companies with revenues of more than €750m globally and €25m in France – the same model as a draft EU digital services tax which has failed to progress. President Donald Trump responded by ordering trade representative Robert Lighthizer to conduct an investigation into whether the tax unfairly targets US companies. An FT opinion piece says the taxes are well warranted and designed to spur the final goal of a multilateral accord to ensure Big Tech pays fair taxes globally. However, trade body TechUK has warned the decision by Chancellor Philip Hammond left the UK “at risk of retaliation from the US government that would hurt British businesses and consumers”.
New employment laws mean contractors face £7,500 a year in extra tax
The Government has confirmed the extension of IR35 tax regulations into the private sector will go ahead in April 2020 in a move that will affect around 170,000 contractors. As revealed in the draft Finance Bill, published yesterday, the responsibility for determining a contractor’s IR35 will shift to the organisation employing the contractor, regardless of whether they are supplying their services directly (and paying themselves via a personal services company) or via an agency. HMRC said that as few as 10% of those who should be applying IR35 rules do so and that the cost of non-compliance will reach £1.3bn by 2023-24. But estimates from Contractor Calculator, an advice website, suggest a contractor earning £100,000 a year would be £7,500 worse off taking into account a reduction in fees as a result of increased taxes for the hiring firm as well as additional National Insurance. Paul Falvey, tax partner at BDO , said: “With all the political changes ahead, you wonder if this is the right time to put more burdens on businesses.”
Liz Truss: Tories must be more bold about tax cuts
Liz Truss has called on the Tories to be more bold about tax cuts arguing that the party has been too afraid to make the case for low taxes for over ten years. The chief secretary to the Treasury, who has ambitions to be Chancellor, said the reason Boris Johnson’s recent proposals faced flak was because “the Conservative Party haven’t been prepared to make these arguments for at least a decade.” Ms Truss defended plans to cut taxes for higher earners adding that the current overall tax burden on the economy was too high. She also suggested cutting stamp duty and reforming capital allowances for firms. “Simplifying the tax system, making it clearer, more transparent, will improve revenues and improve economic growth,” she said. But shadow chancellor John McDonnell said: “This is back to the 1980s from Liz Truss and the Tories, with tax cuts for the rich and increasing inequality.”
Daily Mail The Guardian, Page: 9 The Daily Telegraph, Page: 4
Company car tax scrapped for electric car owners
Electric cars owners will not have to pay any Benefit-in-Kind (BiK) tax during the next financial year after the Treasury reviewed its tax rules. It follows the introduction of the WLTP (Worldwide Harmonised Light Vehicle Test Procedure) emissions regulations which offers a more accurate representation of fuel economy and emissions in the real world. Matthew Walters, head of consultancy and customer data services at LeasePlan UK, said it was “a milestone moment for the industry” but warned businesses to plan for higher CO2 figures on traditional fuels as WLTP is rolled out.
HMRC bumped up insolvency pecking order
The Government is going ahead with plans to move tax debts above debts to suppliers, consumers, pension schemes and employees when companies go bust. HMRC will be bumped up the pecking order from April 2020, but R3, the insolvency trade body, said four in five of its members believe the changes will make it harder to rescue businesses.
Businesses urged to register for Making Tax Digital before August
Businesses with an annual turnover above £85,000 are being urged by HMRC to sign up to Making Tax Digital before the 7 August VAT filing date. Many of the 1.2m businesses affected by the MTD rules, which became law for VAT periods starting on or after 1 April, will be required to submit their first quarterly VAT return to HMRC using software by the 7 August. If paying by Direct Debit, these businesses must register by Monday 29 July.
Inheritance tax: what does the future hold?
FT Money looks at the main proposals for IHT reform from the Office of Tax Simplification, their implications – and what chance they have of becoming reality.
Millions still not saving for retirement
Research from Scottish Widows shows the number of people declining to save for their retirement has remained the same over the past 12 months, even as the percentage of those with adequate savings has risen. The firm’s 15th annual pension report shows 59% of workers in the UK think they are now saving adequately for the future, an improvement from the 55% recorded 12 months ago. This suggested April’s auto enrolment step-up in contribution rates had seen an immediate positive impact on saving habits. However, the report also found the proportion of people not saving at all for later life remains static at 17%, with a further 22% of UK adults expecting they will never be able to afford to retire.
Retirees forced back to work
Experts say some 25% of savers who dipped into their pension pots have been left with too little to live on, forcing them back to work. While many people aren’t blowing cash on luxuries, some are making risky investments or withdrawing cash too quickly, raising the danger of running out of funds. Andrew Tully, of investment firm Canada Life, said: “Pension freedom transferred all of the risks around retirement on to the consumer and with that comes much greater responsibility.”
Daily Mirror, Page: 11
Overhaul of financial crime rules too weak, warn critics
Campaigner s have criticised the government’s plans to tackle economic crime after it failed to address how to hold companies criminally liable for financial wrongdoing. Separately, MPs have said regulators need to act more robustly to prevent financial consumers from being exploited by suppliers.
India plans one-time scheme to resolve tax disputes
The Indian government is set to open a three-month window for corporate taxpayers to resolve existing excise and service tax disputes on a “no penalty, no interest, no prosecution” principle. The new one-time scheme aims to monetise disputed taxes stuck in various tribunals, according to two officials familiar with the matter.
The I, Page: 47
UK banking system resilient to no-deal Brexit
The Bank of England’s latest Financial Stability Report maintains that the UK banking system remains resilient to the financial impact of a worst-case disorderly Brexit. The Bank warned that the “perceived likelihood” of a no-deal Brexit had increased since Theresa May’s resignation, which would bring with it “material risks of economic disruption” and “significant” market volatility. However, the BoE also said Britain was more prepared for a disorderly Brexit than it was six months ago.
Contact Paul Southward.