News Roundup Wednesday 17th October 2018
News Roundup Wednesday 17th October 2018
No delay to MTD plans
Business minister Kelly Tolhurst has told small businesses that there will be no further delay to “making tax digital” despite warnings from the Federation of Small Businesses and others that SMEs are not ready for moving tax compliance online and are having to deal with uncertainties around Brexit at the same time. Last month, the ICAEW said 40% of affected businesses were not aware of the change. Ms Tolhurst said: “We’re making sure the communication is there so small businesses know exactly what they’ve got to do. Digitalisation is the way to go. It’s all about making it easier for business, but it’s rightly down to us to sell it to businesses and make sure they understand what the benefits are.” From April, all VAT-registered companies will have to have digital record-keeping for VAT and file VAT returns directly from third-party software.
EU tax evasion rules full of holes
A report by the European Green party claims that, despite the introduction of the “common reporting standard” in 2017, wealthy people can still hide foreign accounts from tax inspectors. The report said the easiest way for an EU citizen or firm to avoid the automatic exchange of information was to set up bank accounts in one of about 43 countries that have not committed to implementing the rules, or in the US, using a company name. Golden visa schemes also provide a way to investors to shift funds to countries outside the arrangement, while there are no sanctions for tax havens that fail to send the relevant information to EU countries.
The Guardian, Page: 33
Chancellor’s Budget tax plans face Tory challenge
The Chancellor’s scope for tax rises has been limited by the fallout of Brexit talks and a refusal by Number 10 to endorse his claim that tax pledges made in last year’s manifesto are void, the FT says. Elsewhere, the Mail’s Alex Brummer warns Philip Hammond against coming down on pension savers in his Budget. He says: “The tax break on pensions may look ‘eye-watering’ but it is not free money. Citizens pay income tax on that cash, often at higher rates.” Finally, the Telegraph reports on a letter from UK Finance chief Stephen Jones who calls on Hammond to review whether the bank levy may have served its purpose.
Financial Times, Page: 2 Daily Mail, Page: 62 The Daily Telegraph, Business, Page: 6
Church failing to address tax concerns through AGMs
The Church of England has been criticised for raising concerns over the tax affairs of Amazon and Google while failing to push for change at the companies’ AGMs. The Church was found to be a shareholder after the Archbishop of Canterbury slammed Amazon for “leeching off the taxpayer” last month. The Church Commissioners, who handle more than £8bn of assets for the Church of England, have not attended any AGM held by Amazon or Google for at least three years. The Church insisted there were other ways for it to voice its concerns.
A tax on US tech firms will likely bring retribution
The Times’ Simon Duke considers EU plans to tax US tech firms with a 3% sales levy. Brussels intends to target companies with global revenues of more than €750m in a move likely to draw retaliation from the Trump administration. Mr Duke notes that Philip Hammond appeared to row back on plans to unilaterally implement a tax on online sales when speaking at the IMF’s recent meetings in Bali. A post-Brexit Britain will probably not want to torpedo a possible trade deal with the US with a digital tax, Duke concludes.
High earners beware of huge pension tax rates
Louise Peters at Johnston Carmichael warns that many professionals approaching retirement are having to choose between paying hefty extra tax bills or agreeing to a reduced pension due to growth in value of their pension fund. The problem is particularly acute for higher earners in generous pension schemes where the combined taxable value of actual income and imputed pension growth exceeds £150,000, says Peters. Annual tax bills of £15,000 to £25,000 are not uncommon.
Aberdeen Press and Journal, Page: 5
May’s pledge to end austerity could cost 1% tax rise
The Institute for Fiscal Studies calculates that Philip Hammond will have to increase income tax, NICs and VAT by the equivalent of one penny in the pound to meet Theresa May’s pledge to end austerity and still continue with his plan to eliminate the deficit. The IFS said in its so-called Green Budget that the alternative to tax hikes would be economic growth that far exceeds that currently predicted. Either way, the chancellor would need to find an extra £19bn a year by 2022 to keep May’s promise. The IFS adds that restricting tax relief on pension saving to the 20% basic rate could save the exchequer £11bn a year but would be “a step in the wrong direction”.
UK’s largest businesses receive bumper fines
HMRC has fined some of the UK’s largest businesses around £59m in the past year, according to a report by law firm Pinsent Masons, which says “HMRC imposed the fines on businesses managed by the Large Business Directorate (LBD) for ‘Failure to Take Reasonable Care’ to ensure all information given is correct.” HMRC fined 115 Finance Directors and other senior finance executives in the last twelve months due to failings in their company accounts, the report added, noting that this, paired with ongoing investigations of large companies, has led to HMRC collecting an additional £8bn in tax.
IHT issues facing siblings who live together likely to remain
Jacqueline Thomson, a senior manager at BDO, highlights attempts to ensure that siblings who live together, who don’t currently enjoy the tax advantages given to married couples or those in a civil partnership, are not unfairly hit by the inheritance tax threshold. A bill seeking to include sibling couples who have cohabited for 12 years in civil partnerships received its second reading in the House of Lords in July and is awaiting examination at Committee stage, she notes, but will likely join “a list of other pressing matters” competing for government resources.
Contractor ‘witch hunt’ letter leaked
HMRC is requesting the personal details of contractors working for public sector bodies (PSBs) who are continuing to work outside of IR35 through their limited companies, according to a letter leaked to Contractor Calculator, as part of the tax body’s compliance check for the off-payroll tax. HMRC is also chasing PSBs to provide details of contractors who traded via a limited company previously but have since entered into employment contracts or umbrella company engagements, prompting concerns that it may pursue named individuals for back taxes.
Tax raid on school fees
The Treasury is considering introducing VAT on private school fees in a move that could pull in £1.5bn. But independent schools warn the move could backfire by sending thousands of children back into the state sector at a cost to taxpayers.
Daily Mail, Page: 12
Auditor faces legal action over Patisserie failures
Grant Thornton could be sued by Patisserie Holdings over their alleged failure to spot a £40m black hole in the cake shop operator’s finances. The company found last week that instead of having the £28.8m of cash declared in May, it had net debt of £9.8m, a deficit of £38.6m. Following the revelation, CFO Chris Marsh was arrested and an SFO probe begun. The Financial Reporting Council is also looking into Grant Thornton’s work. Executive chairman Luke Johnson has launched a rescue bid and described the fraud as “a betrayal”. He added that “a number of things” would come out when accounts for the year to September were published and that they would “not be a pretty sight”.
To raise audit standards, you must change accounting standards
As the audit market and its regulator, the Financial Reporting Council face reviews, the FT’s Jonathan Ford asserts that “tick-box” rules disable “auditors’ truth-seeking radars.”
Bank of England tells institutions to prepare for climate change
Banks and insurers are to be instructed to put a senior executive in charge of reporting climate risks to the board and to be accountable if insufficient action is taken to address them.
BlackRock believes FRC must improve as a supervisory agency
Barbara Novick clarifies Blackrock’s opinion of the Financial Reporting Council, stating that it believes the regulator needs to improve as a supervisory agency but a “full overhaul” is not necessary.
There shouldn’t be any accounting ‘rules’ at all
D?R Myddelton agrees that there is a problem with accounting rules but says “in the sense of compulsory instructions” there shouldn’t be any accounting “rules” at all.
Asset seizures rocket in tax clampdown
Nearly 3,000 businesses had assets seized by HMRC last year for not paying tax on time. The increasingly aggressive debt collection policy has led to calls for a review of the approach. The number of firms facing asset seizures jumped 45% from 2016-17 and has increased more than fourfold since 2014-15. Conrad Ford, CEO of Funding Options, said: “HMRC is jeopardising the future of these businesses by removing their assets. There may be a better way for HMRC to recover the tax than removing a business’s vital assets. Cashflow difficulties that mean a business cannot settle its tax bills should not spell the end for them.”
The Independent, Page: 58 City AM, Page: 13
Call for support for importing SMEs
A new report from Bibby Financial Services calls for increased support for importers from the EU as Brexit looms. Bibby’s latest SME confidence tracker found 61% of firms that import from the bloc said they would see a decline in profits if they could no longer access the EU single market, “further demonstrating SMEs’ current reliance on EU suppliers for survival and business growth”. Additionally, 8% of EU businesses have already cut ties with British suppliers.
The Scotsman, Page: 34 City AM, Page: 8
Clampdown on sale of tech jewels could harm SME access to finance
The EEF has warned that new rules on foreign investment could cut off access to capital for UK start-ups. A White Paper on regulations designed to stop strategic companies and technologies from falling into overseas ownership fails to consider the implications for small businesses that are struggling to secure finance domestically, the manufacturers organisation says. Ollie Welch, head of defence, aerospace and security policy at the EEF, said there was a risk start-ups would have the rug pulled from under them unless the rules were more precisely defined.
Communities depend on thriving high streets
The Mayor of the West Midlands and former MD of John Lewis, Andy Street, says in the Daily Telegraph that while the high street has not yet been killed off by online shopping, creative thinking is required to successfully remodel traditional retail. On taxation, Mr Street welcomes hints that the Chancellor will look to reform taxes for online companies such as Amazon, address the problems with business rates, and agrees that tax policy should also support small businesses. Meanwhile, the boss of retail landlord Shaftesbury, Brian Bickell, has backed calls for higher taxes on online retailers to relieve the pressures of the “out of date” business rates regime on the country’s struggling high streets. Waterstones boss James Daunt also adds his voice to calls for a fairer business rates system.
Fewer consumers visit stores
Analysis shows that footfall on the high street dipped 2.2% in September, with shopping malls seeing a 2.4% drop that marks the 18th consecutive month of decline. Retail parks saw a 0.1% increase in footfall, although growth was down on August where a 0.3% increase was recorded. Helen Dickinson, chief executive of the British Retail Consortium, said the figures are “yet further demonstration of the increasingly difficult operating environment British retailers are facing,” adding a call for ministers to reform the tax system to help the sector.
The Times, Page: 41 Daily Express, Page: 44
High street banks told to assess no-deal exposure
Officials at the Treasury have joined Bank of England regulators in urging banks to assess their exposure to UK sectors seen to be at-risk from a no-deal Brexit. A City source has told the Telegraph that companies assessed to be most at risk of cash flow or credit problems include those reliant on overseas supply chains or just-in-time delivery. Those exposed to foreign currency risks have also been identified as potentially hazardous for banks.
Biotech sector could provide economic tonic
KPMG partner Moray Barber says in the Press and Journal that Aberdeen’s biotech industry is one of the key threads holding together the city’s renewed sense of optimism.
Aberdeen Press and Journal, Page: 11
A third of UK firms expect decline in profits due to Brexit
A survey of finance professionals by the Chartered Institute of Management Accountants has found that 35% of businesses forecast their profits will decline as a result of Brexit, while 27% expect profits to be flat. More than half of respondents said they expect business costs to rise, with 14% forecasting to spend more than £1m on Brexit planning. Some 77% of businesses have taken steps to prepare for Brexit, while 20% have conducted a full risk assessment, the study said.
The Times, Page: 48 The Scotsman, Page: 36
ONS prepares to turn page on economic understanding
The FT considers the new measurement techniques and improved data sources set to be used by the Office for National Statistics to determine the state of the economy and change our understanding of it.
New private sixth-form planned for priced-out middle class
A group of public school teachers are setting up their own sixth-form because lawyers, accountants and other professionals are struggling to afford the fees for independent schools.
Scots VC deals dominated by healthcare
Healthcare helped Scottish firms more than double the amount raised via venture capital in Q3 from the previous three months, according to the latest Venture Pulse report from KPMG, indicating a very positive prognosis for the sector.
The Scotsman, Page: 35
Smith & Williamson has warned companies that fail to adopt artificial intelligence could “disappear in the coming years”.
Daily Mail, Page: 75
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