NEWS – THURSDAY 12TH NOVEMBER 2020
NEWS – THURSDAY 12TH NOVEMBER 2020
TAX NEWS – THURSDAY 12TH NOVEMBER 2020
OTS recommends CGT overhaul
Three times as many people will have to pay capital gains tax (CGT) under plans put forward by the Office for Tax Simplification, as the Government looks to fill the fiscal hole left by the COVID-19 crisis. A report from the statutory body found the disparity between CGT and income tax rates often distorted “business and family decision-making” and created a tax incentive for taxpayers to re-characterise income and capital gains. The OTS suggested bringing CGT into line with income tax, meaning higher rate taxpayers would face a flat rate of 40% or 45%, slashing personal allowances and passing bills down the generations in a move which could raise more than £18bn a year. The report comes after think tank the Institute for Public Policy Research estimated that the Government could raise an extra £90bn over five years if CGT and income tax rates were brought into line. Nimesh Shah, chief executive Blick Rothenberg, suggested that the study was politically motivated and went beyond tax simplification, saying: “This report contains more policy direction than any other report I have seen from the OTS.”
Think tank demands steep tax rises
The Resolution Foundation has proposed the most stark increase in taxes since 1993 as a means to balance public finances. The think tank says a new health and social care levy, placing a 4% tax on all incomes above £12,500 coupled with cuts to national insurance, would generate a total of £17bn, of which £6bn should address social care funding shortfalls. Employees earning less than £19,500 and self-employed workers with income of less than £17,000 would be better off but the majority of the workforce would face tax hikes. Thresholds would be frozen, corporation tax would rise to 22% and CGT and inheritance tax reliefs would be cut. The Foundation suggested waiting until 2023 before raising taxes. But Syed Kamall, research director at the Institute of Economic Affairs, said: “The Treasury should be turning its attention to ensuring the economy can bounce back from coronavirus by considering a radical package of measures to reduce the tax and regulatory burden on businesses to allow them to sustain existing jobs and create new ones.”
Working from home should be taxed ‘to support vulnerable jobs’
Economists at Deutsche Bank have suggested employers pay an extra 5% tax on the salaries of staff who work remotely to help support workers whose jobs are under threat. The bank argues this is only fair, as those who work from home are saving money and not paying into the system like those who go out to work. In the UK, Deutsche Bank calculates the tax would generate a pot of £6.9bn a year, which could pay out grants of £2,000 a year to low-income workers and those under threat of redundancy “For years we have needed a tax on remote workers,” wrote Deutsche Bank strategist Luke Templeman. “Covid has just made it obvious. Quite simply, our economic system is not set up to cope with people who can disconnect themselves from face-to-face society.”
INDUSTRY NEWS – THURSDAY 12TH NOVEMBER 2020
Big Four snap up law firms to deliver integrated services
The Times’ Jonathan Ames takes an in-depth look at the Big Four’s continued expansion into legal services, noting the recent deal between Deloitte and technology and digital media law firm Kemp Little, which saw the accountancy company hoover up a team of 86 lawyers. Commenting on the deal, Michael Castle, the managing partner of Deloitte Legal in London said: “Our clients are asking for new ways of delivering quality legal services and for integrated solutions that combine legal services with other professional services and technology.” Philip Goodstone, the UK head of law at EY said the move illustrates that the legal sector in the UK is “healthy and robust”. Mr Ames suggests the Financial Reporting Council’s demand that the Big Four hive off their auditing divisions from the rest of their businesses by 2024 may well have accelerated moves into legal services; and Matthew Kay, the managing director of Pinsent Masons’ contract lawyer service Vario, says the size of the Big Four may curtail their expansion into law due to similar conflict of interest issues.
SMEs NEWS – THURSDAY 12TH NOVEMBER 2020
Record number of firms see BBI investment
The annual report of British Business Investments (BBI), the consumer arm of the government-backed British Business Bank, reveals an additional 15 commitments of £547m in the year to 31 March 2020. The BBI has supported over 37,000 SMEs this year, representing an increase of almost 9% year-on-year, with investments including a £15m commitment to Assetz Capital, a Manchester-headquartered property-focused marketplace lender. BBI chair Francis Small commented: “Excluding the exceptional impact of COVID-19 on our financial return, British Business Investments has once again delivered on its overall objectives. The COVID-19 pandemic has had a devastating impact on many of the UK’s small and medium-sized businesses. We have worked closely with our delivery partners and have increased our commitments to them, as they have continued to provide essential finance to the UK’s SMEs.”
Pay small firms’ postage, Rishi told
Liberal Democrat MP Christine Jardine has written to the Chancellor, Rishi Sunak, urging him to cover postage fees for small businesses at Christmas to help “level the playing field” with giants such as Amazon. Mike Cherry, of the Federation of Small Businesses, said: “This creative idea would boost small businesses.”
Daily Mirror, Page: 17
PERSONAL FINANCE NEWS – THURSDAY 12TH NOVEMBER 2020
Charity says Britain ‘sleep-walking’ into personal debt crisis
StepChange has warned that Britain is “sleep-walking” into a personal debt crisis with the number of people in severe financial difficulty now at approximately 1.2m due to the coronavirus pandemic. The charity said a further 3m people are at risk with 5.6m already in arrears or borrowing to make ends meet. Household borrowing and arrears linked to the coronavirus pandemic have soared 66% since May to £10.3bn. StepChange CEO Phil Andrew said the Government and banks needed to provide further protective measures.
Daily Mirror, Page: 9 The Guardian, Page: 33 Reuters
WEALTH MANAGEMENT NEWS – THURSDAY 12TH NOVEMBER 2020
Trading blackout brings calls for compensation
The Financial Conduct Authority has said investment platforms should plan for unexpected scenarios so that they can continue providing services to customers. It issued the statement after brokers including Hargreaves Lansdown, AJ Bell Youinvest and Fidelity Personal Investing refused to compensate investors for missed trades after IT failures blocked millions of customers from their accounts on Monday. “We are aware of the issues and are discussing it with the [companies] involved,” the FCA said.
PROPERTY NEWS – THURSDAY 12TH NOVEMBER 2020
Massive rent shortfall poses risk to landlords
Landlords are facing a £4.5bn rent shortfall by the end of the year with collection rates remaining at around 75% and service charge payments at similar levels. With the Government’s ban on evictions and aggressive rent collection, concerns are growing that tenants increasingly will turn to company voluntary arrangements and this in turn could affect property owners’ ability to meet repayments on loans secured against properties.
ECONOMY NEWS – THURSDAY 12TH NOVEMBER 2020
BoE policymaker says negative interest rates could benefit economy
Bank of England policymaker Silvana Tenreyro believes negative interest rates could help lenders and the economy at large recover from the effects of the coronavirus crisis. She remarked: “The positive evidence related to negative interest rate policy comes from Europe, where it has worked fairly well.” This comes after Bank of England deputy governor Ben Broadbent noted recently that the issue of whether sub-zero interest rates could have counterproductive effects on banks’ balance sheets during times of stress should be considered by policymakers.
OTHER NEWS – THURSDAY 12TH NOVEMBER 2020
Croydon council goes bust after running up £1.5bn debt
The London borough of Croydon has gone bust after running up £1.5bn in debt. The local authority has issued an order banning further spending and admitted that it cannot balance the books. Last month the council’s auditors Grant Thornton issued a rare Report in the Public Interest, warning of its dire financial straits. It said Croydon had had an “unsustainably low level of reserves for some time” and had been borrowing money to invest in properties. It had also set up a number of companies but had not managed to make any return on them. Its investment plans had exposed taxpayers to “significant risk”, the auditors wrote, adding: “There has not been appropriate governance over the significant capital spending and the strategy to finance that spending.”
Contact Paul Southward