News Roundup Tuesday 29th January 2019
News Roundup Tuesday 29th January 2019
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No-deal Brexit could stymie $1.5bn EU tax bill
The European Commission is running out of time to issue the UK with a demand to recoup $1.5bn from British companies deemed to have benefitted from illegal tax breaks. Raymond Luja, a tax professor at Maastricht University in the Netherlands, questions whether the EU could enforce any decision taken just before Brexit. In the event of a no-deal Brexit, Howard Liebman, a tax partner at Jones Day in Brussels, says the UK “might indeed just ignore the whole thing”. “If the EU wins before the court and then wins again as part of any appeals, what can the EU or the European Courts actually do to force the UK to comply?” said Liebman. “I do not believe there is any enforcement mechanism available.” Diageo, Pearson and Compass Group are among 53 companies said to have warned of costs arising from the EU probe.
HMRC raises billions more in tax
HMRC data shows it raised £19.4bn more between April and December 2018 than it did during the same period the previous year. This was largely down to a £12.8bn increase in the amount of inheritance tax, National Insurance and capital gains tax paid by Britons, while VAT receipts rose by £4bn and income from corporation tax grew by £1.7bn. Increases in income tax allowances were announced in the Budget but Sarah Coles of Hargreaves Lansdown warned: “For basic-rate taxpayers, savings from income tax cuts will easily be eaten up by higher council tax, VAT, fuel and alcohol duty costs”. She said local authorities could raise council tax by 3%, plus a further 1.5% for policing. Some councils can add 2% for social care. The average band D property will cost £107 more.
The Daily Telegraph
The Patisserie Valerie puzzle
Bill Jamieson considers the failings at Patisserie Valerie in the Scotsman and ponders the motivations of those who allegedly cooked the books. Jamieson also queries how many boardroom roles someone like Luke Johnson can have before they lose focus. “As for the Financial Reporting Council and auditors Grant Thornton, they also have searching questions to answer,” concludes Jamieson. The Times continues to report on the probe by PwC into the fraud, which hasn’t been released, but which sources say reveals a slew of irregularities that ran on for years. Gavin Pearson, a forensic accountant at Quantuma, says: “This is a company that may have been built on sand all along and no one got wind of it.” The FRC is probing Grant Thornton’s audits going back three years, the paper notes. Meanwhile, administrators KPMG are confident they can find a buyer for the company’s remaining outlets.
The Scotsman, Page: 35 The Times, Page: 36
Banks to issue Brexit advice to SMEs
UK Finance is teaming up with the FSB, the CBI and the British Chambers of Commerce as well as trade groups and accountancy bodies to draw up emergency no-deal Brexit support for small businesses. They predict a surge in demand for loans and cashflow problems resulting from delays at ports and broader economic disruption. One source told the Times: “We would like people to stop and think about the impact of a possible no deal, not to scaremonger but for scenario planning. We want to give reassurance that banks will retain capacity to lend.” The alliance plans to issue non-financial advice too, such as on import/export issues.
Small business confidence set to slide
A study by Bibby Financial Services shows small companies are experiencing a decline in sales and increasing costs with a third deciding not to invest in their business in the final quarter of 2018, up from 20% in Q4 2017. The invoice finance provider said that “many SMEs are feeling the full brunt of political uncertainty on the Brexit issue” and a “no deal would cause confidence to fall further still”. Bibby added that confidence and investment intentions are expected to fall in the first quarter of 2019 compared with the end of last year.
The Times, Page: 35 Daily Mail, Page: 60 City AM, Page: 6
Scottish employers must pay in more from April
Scottish business owners are facing a 3% increase in mandatory pension contributions from April 6. Where employers make the minimum 3% contribution, employees will have to add 5% in pension auto-enrolment contributions to ensure the minimum 8% total is met, up from the existing provision of 2% for employers and 3% for staff. Linda Kelly, head of payroll at French Duncan, warns businesses to “act immediately to ensure that their systems are adjusted to increase the payments from the start of April.”
The Press and Journal, Page: 33
Hospices face pension pain
Government plans to increase employers’ pension contributions in the health sector will hurt charity hospices and care homes, according to Hospice UK CEO Tracey Bleakley. NHS Trusts will get extra cash to deal with the increase, but other health sector employers will not. The increase from 14.3% to 20.6% from this April will lead to £30m in extra costs for hospices across the UK, Bleakley says.
Daily Mirror, Page: 18
Moody’s: UK’s reputation for competence in danger
Moody’s has warned that failure to strike a Brexit deal with the EU would undermine investor confidence in the UK. “From a sovereign credit perspective, if you leave the EU without a deal, that is a sign that something institutionally has quite profoundly failed. It is a sign of institutional weakness if we end up with this,” said Sarah Carlson, a government debt specialist at Moody’s. She added that extended Article 50 does not solve the problem, rather this prolongs uncertainty. However, Ms Carlson added: “There are fundamental strengths of the UK that are not going to go away as a result of Brexit. This is still a large, very flexible, competitive economy.”
Consumer confidence falls
Consumer confidence has dropped to its lowest level in 18 months during the final three months of last year, according to the Deloitte Consumer Tracker. Confidence fell two points to -9% compared with the previous quarter with Brexit uncertainty outweighing the benefits of low unemployment and rising real wages. Ian Stewart, the Deloitte chief economist, said: “Work may be easier to find than for decades and pay may be rising, but today’s decline in confidence shows that consumers’ spirits are heavily influenced by expectations.”
Craft beer boom
The craft beer sector is continuing its boom, according to UHY Hacker Young, which found that 430 breweries opened in 2017, compared with just over 100 in 2009.
The I, Page: 40 Daily Mail, Page: 60
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