News Roundup Tuesday 2nd July 2019

NEWS ROUNDUP

TAX NEWS

Tax burden on highest earners has become “dangerous”

Government figures show that for the first time the richest workers – estimated as those earning more than £75,300 a year – will pay just over 50% of the income tax collected by the Treasury. The proportion of income tax paid by the top 5% was 39.6% 20 years ago but is expected to hit 50.1% this year. Prof Philip Booth, senior academic fellow at Institute of Economic Affairs, said: “A highly mobile group of people have become responsible for paying a greater and greater share of the tax take. This is dangerous. The tax base has become too narrow. Allowing a small number of better-off people to shoulder the cost of public services is a risky policy, politically and economically.” George Bull of RSM says the increase is due to a rapid rise in the tax-free personal allowance, adding: “We have this notion that we ought to have a fair tax system, but no one can really say what that looks like. Higher earners are frequently criticised for the amount they earn, but almost nobody realises their contribution to the Exchequer through the disproportionate amount … they pay.”

The Daily Telegraph, Page: 9

Johnson’s stamp duty plan would free thousands from the tax

Boris Johnson has repeated his pledge to raise the threshold for stamp duty from £125,000 to £500,000 while lowering the top rate from 12% to 7%. The policy pledge saw stocks rise for housebuilders yesterday. It is estimated that more than two-thirds of residential transactions in England and Northern Ireland would be exempt from stamp duty under the plans. If the 3% surcharge for landlords and additional home buyers was dropped as well, just 10% of properties bought last year would be liable for the tax.

The Times, Page: 52 The Daily Telegraph, Page: 37 Daily Mail, Page: 110 Daily Express, Page: 10

Hunt vows tax cut on jobs for veterans

Jeremy Hunt has promised to cut NICs for companies that employ military veterans. Mr Hunt said: “On Armed Forces Day we should acknowledge the debt of gratitude to those who serve our country in the Armed Forces… It ought to be a national scandal that veterans are twice as likely to be unemployed. It’s time to cut the job tax on veterans, giving more opportunities to our brave former servicemen and women. It’s good for business too.”

Daily Express, Page: 11 The I, Page: 7

Summer childcare costs made easier with Tax-Free Childcare

Working parents could be entitled to Tax-Free Childcare worth up to £2,000 per child per year to pay towards regulated holiday clubs during the school holidays. For every £8 that parents pay into their Tax-Free Childcare account, the government will make a top-up payment of an additional £2. The scheme is open to working parents, including the self-employed, who earn between the minimum wage and £100,000 per year and have children aged 0-11 years old.

Press Release

Gift Aid hits record high of £1.35bn

The total tax relief claimed by charities in the year to the end of March went up to £3.79bn, an increase of £100m, according to new figures from the government. Gift Aid claimed by charities reached a record high of £1.35bn – a near £900m increase on 2017/18. The rise follows a campaign to raise awareness about how the system works following a warning from HMRC that charities were missing out on an estimated £560m of Gift Aid each year.

Third Sector

Puppy sellers warned of tax risks

HMRC has taken in more than £5m from underground dog breeders who sell puppies on the black market and evade tax, with one breeder handed a tax bill of £425,000. Tim Stovold of Kingston Smith said that if you are deemed a “trader”, your profits are taxable if they exceed the £1,000 annual trading allowance

The Daily Telegraph, Money, Page: 2

Tax experts warn of looming loan charge penalties

People facing the loan charge are being warned by experts that they risk additional penalties if they miss fast-approaching deadlines.

Financial Times, Page: 5

HMRC grabs record £860m in late fines

Figures revealed by UHY Hacker Young show HMRC took a record £860m in late penalties last year. The taxman pulled in 24% more from those who were late paying or filing returns in the year to May 2019 than during the previous 12 months. Matt Kilcoyne of the Adam Smith Institute called the numbers outrageous and said those who pay late were often “struggling to make ends meet.” UHY said the surge in income from penalties was due in part to HMRC hitting people with the highest fines possible.

Daily Mail, Page: 24

Hunt unveils £20bn no-deal Brexit ‘war chest’

The Foreign Secretary is set to unveil a £20bn no-deal Brexit “war chest” as part of plans to support the economy if the UK leaves the EU without a deal. Jeremy Hunt will put aside £6bn to help farmers and fishermen weather any impact of no deal and spend £13bn cutting corporation tax from 19% to 12.5%. Further economic stimuli including plans for business rates would add another £1bn. Mr Hunt will say: “If we could do it for the bankers in the financial crisis, we can do it for our fishermen, farmers and small businesses now.”

The Daily Telegraph, Page: 1, 4 The Times, Page: 8 Financial Times, Page: 3 The Independent The Guardian, Page: 1, 8 Daily Mail, Page: 10

Boris Johnson says lowest paid will be his priority for tax cuts

Boris Johnson has said the lowest paid will be his priority when considering tax cuts. Mr Johnson, who previously promised to cut taxes for those on the higher rate, said lifting the threshold for National Insurance would be a good thing to do. He also said he believes in “expanding the living wage where possible” and borrowing cash if necessary to pay for infrastructure projects. The former foreign secretary will also give public sector workers a pay rise, according to ally Matt Hancock.

The Daily Telegraph The Times Daily Express, Page: 5 The Times, Page: 1 Daily Mail, Page: 10

Shadow Chancellor on board with lifetime gifts tax plan

John McDonnell has admitted that the Labour party is actively considering radical changes to inheritance tax rules that would hit ten million homeowners. A report commissioned by Labour proposes cutting the inheritance tax threshold to £125,000 and making it a “lifetime gifts tax”, meaning each child would pay tax on everything their parents gave them – either during their lives or after their deaths – above £125,000. Tory Party chairman Brandon Lewis said Labour’s new tax grab would hammer families across the country.

Daily Mail, Page: 1 The Sun, Page: 2

Lawyers warn of Facebooks Libra tax risks

Clifford Chance partner Dan Neidle warns that Facebook’s plan to peg its Libra digital currency to a basket of currencies means users should pay tax on its gains, a burden that could hamper its growth.

Financial Times, Page: 10

CORPORATE NEWS

Construction failure rate hits highest since 2014

The Scottish construction sector suffered its highest number of business failures for four years in 2018. Eileen Blackburn, head of restructuring and debt advisory at French Duncan, said that after a strong recovery by the sector since the downturn a decade ago there are now signs it may be facing some serious issues again, as output declines and employment numbers fall. Blackburn also points out that changes to VAT rules being introduced in October mean businesses will no longer be able to use the VAT they collect from customers as working capital prior to it being paid over to HMRC. “The result is that many cash strapped construction businesses may find themselves simply running out of money,” she warned.

The Scotsman, Page: 28

The Good Food Chain goes into liquidation

A food supplier linked to a fatal listeria outbreak in seven NHS Trusts has gone into liquidation, days after being told it could restart production. The Good Food Chain, based in Stone, Staffordshire, said all 125 employees would lose their jobs. The liquidation will be handled by Currie Young.

BBC News

Ten in race for British Steel as clock to lodge bids ticks down

EY , which is running the sale of British Steel, says it expects around ten bids for the company with just days to go before the deadline for offers.

Financial Times, Page: 17

Gender balance review reveals mixed progress on female board representation

The Hampton-Alexander Review shows female board representation at FTSE 100 companies is now at more than 32%, up from 12.5% in 2011, while the FTSE 250 is working hard to catch up with the number of board positions held by women up from 24.9% to 27.5%. However, figures released today also show four companies in the FTSE 350 still have no women on their boards and dozens only have one, leading to accusations companies are applying a “one and done” policy. Separately, the Independent’s Zoe Ettinger talks to Helen James, a corporate finance partner at HW Fisher, about the importance of female role models at work. Ms James says: “I personally always try to champion more junior women within HW Fisher and aim to instigate changes that will have a positive influence on diversity at the top.”

Financial Times The Daily Telegraph The Times City AM The Independent, Page: 41

Lynch countersues HP for $150m

Autonomy founder Mike Lynch says the accusations made by Hewlett Packard that he and his former finance director Sushovan Hussain were guilty of “accounting improprieties” have cost him nearly $1bn in lost investment. HP is suing Lynch for $5bn over its purchase of Autonomy in 2011 while Lynch is countersuing for $150m, which he says is the cost of losing the investment.

The Times, Page: 39

REGULATION NEWS

Reports of cyber incidents at financial services firms rocket

Financial services firms reported 819 cyber incidents to the Financial Conduct Authority (FCA) in 2018, up from 69 in 2017, according to data obtained by RSM. Technology partner Steve Snaith said: “While the jump in cyber incidents among financial services firms looks alarming, it’s likely that this is due in part to firms being more proactive in reporting.”

City AM, Page: 8

FCA steps up investigations into individuals

Research by RPC reveals that the Financial Conduct Authority (FCA) doubled the number of investigations into individuals last year as it responded to political pressure to take a tougher stance against misconduct. The number of individuals referred to the watchdog’s regulatory decisions committee (RDC) rose to 27 from 13 the year before.

City AM, Page: 12

PENSIONS NEWS

State pension changes set to hit millions of newly bereaved

Experts are warning that the new state pension system means the amount partners get from their spouse’s state pension when they die will drop significantly. Steve Webb, director of policy at Royal London. “Under the new state pension system, widows and widowers will inherit little, if anything, of their late spouse’s pension and income from an annuity often ceases when the recipient dies. Household outgoings may reduce somewhat following a bereavement, but income is likely to fall by much more. Couples in retirement need to make sure they know where they would stand and plan ahead to make sure they do not face an unexpected financial shock.”

The Independent, Page: 46

PERSONAL FINANCE NEWS

LCF investors could receive compensation

Investors who lost millions of pounds in the collapse of London Capital & Finance could be entitled to some compensation after a U-turn by the Financial Services Compensation Scheme. The FSCS said it will begin considering claims of compensation from investors in “mini-bonds” issued by LCF, having initially said that it could not protect investments in the company.

The Times, Page: 48 Financial Times Daily Mail, Page: 109

PROPERTY NEWS

Collapse of UK student property scheme hits investors

Quantuma is handling the collapse of A1 Alpha Properties (Leicester) Ltd, a company that encouraged over 1,000 investors to buy into a student property scheme promising annual returns of 8% to 12%.

Financial Times, Page: 3

ECONOMY NEWS

EU and Mercosur agree trade deal after 20-year talks

The EU and the Mercosur bloc, made up of Argentina, Brazil, Uruguay and Paraguay, have clinched a huge trade deal after 20 years of negotiations. The deal aims to cut or remove trade tariffs, making imported products cheaper for consumers while also boosting exports for companies on both sides. However, Greenpeace said the deal amounted to a “disaster for the environment on both sides of the Atlantic” and would lead to more destruction of the Amazon rainforest and attacks on indigenous peoples.

BBC News

Economic paralysis set to last all summer

The British Chambers of Commerce has warned that the UK economy is likely to remain “in stasis” until October as the lack of clarity over Brexit continues. The business lobby group’s latest quarterly survey found the underlying economic conditions were “stagnant” in the three months to June. Meanwhile, a survey by BDO has found that British export growth in the second quarter fell below the long-run trend but there was a sharper decline in France, Italy, Spain and Germany. The weakness of EU exports was put down to “the hangover effects from pre-Brexit stockpiling”.

The Times, Page: 33 Yorkshire Post, Page: 4

Further rate cuts increasingly dangerous, BIS warns

The Bank for International Settlements has warned that further cuts to already rock-bottom interest rates and quantitative easing cannot deliver genuine growth on their own. The resultant asset booms are becoming harder to justify and risk a cascade of fire sales in the next downturn, the world’s top financial watchdog said, while there are “clear signs of overheating in the corporate sector in a number of advanced countries”. Agustín Carstens, BIS general manager, compared the scale and threat posed by the world’s $3trn leveraged loan market to the CDOs that caused such chaos a decade ago.

The Daily Telegraph The Guardian, Page: 29 The Times, Page: 36

Farmers warned as incomes fall to five-year low

Yorkshire-based Hentons warns farming businesses to get a firm grip on their finances if they are to ride out the next waves of market volatility. Recent Government survey findings suggest that 2018/19 farm incomes are on course to have dropped to their lowest level for five years. Martyn Dobinson, a director at Saffery Champness adds: “Future farm incomes are also likely to be significantly affected by the continuing uncertainty around trade deals which are dependent on the outcome of the Brexit negotiations, the impact of which will not be reflected in this latest dataset.”

Yorkshire Post, Page: 2

OTHER NEWS

Accountant jailed for naked photos deception

An accountant who posted naked pictures of her ex-boyfriend’s new lover online has been jailed for four months. Blerina Dobla posed as a male model on social media to persuade the victim to send her explicit material. She then sent the images and footage to the woman’s family and threatened to send them to her employer.

The Daily Telegraph, Page: 2 The Times, Page: 18
Contact Paul Southward.

Paul Southward