NEWS – THURSDAY 16TH JULY 2020

NEWS ROUNDUP

TAX NEWS – THURSDAY 16TH JULY 2020

Treasury: CGT review is standard practice

The Treasury has launched a review of the capital gains tax system to ensure it is fit for purpose, with Chancellor Rishi Sunak having asked the Office of Tax Simplification to investigate how capital gains are taxed for both individuals and smaller businesses. Hargreaves Lansdown analyst Nathan Long said: “It would be naïve to assume the Chancellor didn’t have his eye on tweaking taxes to refill his coffers.” Tom Selby, senior analyst at AJ Bell, said the review “feels like the starting pistol for a tax grab ahead of the autumn Budget”, with Katharine Arthur, partner at haysmacintyre, saying the review “has potential to be a fundamental rejig of a complete area of tax.” The Treasury yesterday insisted that it is “standard practice to keep taxes under review.” The Telegraph looks at potential policy changes around CGT, including bringing rates in line with income tax and lowering the £12,300 annual CGT allowance to bring it in line with the £2,000 dividend allowance. While scrapping CGT relief for people selling their main residence is said to be unlikely, George Bull of RSM UK suggests the Chancellor could introduce a limit in the form of a new lifetime allowance.  Paul Southward comments “If this Chancellor and government had any backbone, they would be addressing how they can strip away crippling bureaucracy, and the waste of public resources which has been a predominant trend throughout this current crisis.  The UK collected over £630bn in taxes last year; whilst that revenue undoubtedly delivers great benefits for the country, it is heartbreaking to see how much of it is also wasted “.

BBC News The Daily Telegraph, Business, Page: 4 Financial Times The Independent, Page: 16

Sunak: Tough choices ahead on tax

Chancellor Rishi Sunak has hinted that tax rises could be on the way as the Treasury looks to tackle the economic fall-out from the coronavirus crisis. He told the Treasury select committee there were “tough choices ahead” for the economy as he took action to balance the books over the “medium term”. This came after the Office for Budget Responsibility warned that the Government faces a gap of at least £60bn in its finances, suggesting an increase in taxes could be required to get public spending back under control. Considering the impact of the calculations, Mr Sunak told MPs: “In terms of what does that mean for spending and taxes, those are decisions that will have to wait until we get to Budgets. But there are tough choices ahead, that is clear.” Meanwhile, shadow chancellor Anneliese Dodds has warned against raising taxes, saying she thinks doing so “would be really quite a dangerous move at a time when the economy is very fragile”.

The Daily Telegraph, Page: 4 The Independent, Page: 15 The Sun, Page: 2 Daily Mail, Page: 14 Daily Mirror, Page: 9 Daily Express, Page: 6

VAT reduction rolled out

A number of firms have opted to reduce prices after the Chancellor’s temporary VAT cut for firms in the food, drink and hospitality sectors came into force. With the rate cut from 20% to 5% until January 2021, Nando’s, Pret A Manger, Wetherspoon, Starbucks and McDonald’s are among those who will pass at least some of the cut onto customers. However, some firms are expected to use the money to bolster finances hit by the coronavirus lockdown rather than reduce prices. The Treasury estimates that, if passed on to consumers, the measures could save households an average of £160 a year.

The Daily Telegraph The Guardian, Page: 31 The Times, Page: 2 Daily Express, Page: 47 BBC News

LEGAL NEWS – THURSDAY 16TH JULY 2020

Apple wins in landmark tax battle against EU

Apple will not have to pay Ireland €13bn ($14.8bn) in back taxes after winning an appeal at the European Union’s General Court. The decision follows a ruling by the European Commission (EC) in 2016 which found that the tech firm had been given illegal tax breaks by Ireland. The General Court said it annulled that decision because the Commission had not proven Apple had broken competition rules. The EC brought the action after claiming Ireland had allowed Apple to attribute nearly all its EU earnings to an Irish head office that existed only on paper, and thereby avoided paying tax on EU revenues. The EC has the right to appeal yesterday’s decision to the European Court of Justice. “This case was not about how much tax we pay, but where we are required to pay it,” Apple said in a statement. The FT says the ruling is a “serious setback” to the EC’s “laudable efforts to curb unfair corporate tax practices through state aid control”.

BBC News Financial Times, Page: 1 Financial Times, Page: 22 The Daily Telegraph, Business, Page: 1 The Times, Page: 35 The Guardian, Page: 29 Daily Mirror, Page; 11 The Independent, Page: 7 Daily Express, Page: 2 The Sun, Page: 47 Daily Star, Page: 2

CORPORATE NEWS – THURSDAY 16TH JULY 2020

City group urges policymakers to tackle corporate debt crisis

A report from a number of big players in the City has urged the Government to act to prevent defaults on £35bn of corporate debt taken on during the COVID-19 pandemic hitting the economy. The Recapitalisation Group, which was formed by finance industry body The City UK, has suggested a UK Recovery Corporation should be formed to turn risky debts into more manageable forms like tax liabilities or shares. The 144-page report, which is being sent to the Treasury and the Bank of England, says ministers should set up a new UK Recovery Corporation to oversee schemes designed to restructure companies’ debts to make them more sustainable. Omar Ali, a partner at EY and one of the report’s key organisers, said the proposals would help firms “get back onto a stable footing as we emerge from the pandemic, and will ultimately support the UK’s economic recovery”, adding that “taking action now is vital&rdq uo;. City grandees from Lloyds Bank, Citigroup, Schroders, Legal & General, and the City of London Corporation have backed the report. The City UK estimates UK firms could hold £100bn of unsustainable debt by the time repayments of coronavirus support loans first become due in March 2021, with pre-pandemic borrowing factored in.

The Daily Telegraph, Business, Page: 3 City AM

Brexit warning from manufacturers

Manufacturing lobby group Make UK and BDO have warned that industrial areas in the north of England, the Midlands and Wales could be at most risk of severe economic damage if no Brexit deal is agreed, pointing to a “triple whammy” for firms dependent on Europe and manufacturing, with COVID-19 also hitting the regions.

The Guardian, Page: 31

Bistrot Pierre pre-pack

The owners of Bistrot Pierre have retained control of most of the restaurant chain after a pre-pack administration, with administrators from KPMG saying 19 restaurants have been sold to “a connected party”, saving 682 jobs. The remaining sites are to close with the loss of 123 jobs.

The Times, Page: 44

Wirecard short-seller charts road to absolution

Dan McCrum looks at Wirecard and how Leo Perry, who co-runs Ennismore Fund Management, was suspicious of the firm. He notes cash balance scandal “leaves a big question for EY”.

Financial Times, Page: 11

Next’s secret success

Next has won the race to take over Victoria’s Secret in Britain after its UK arm went bust, beating 30 bidders to be chosen as the preferred franchise partner. Victoria’s Secret’s UK arm was going through a ‘light touch’ administration process led by Deloitte, allowing it to keep trading while putting off its debts.

Daily Mail, Page: 21

EMPLOYMENT NEWS – THURSDAY 16TH JULY 2020

1 in 3 firms could lay off staff

A poll of 7,400 firms by the British Chambers of Commerce (BCC) shows that 29% plan to cut the size of their workforce in the next three months. This marks the biggest proportion of firms planning layoffs since the BCC began tracking employment intentions in 1989. Larger firms were found to be more likely to be plotting redundancies, with more than four in ten of those with ten or more staff saying they expect to reduce headcount in the next quarter. It was also found that 28% of respondents have already laid off staff since the lockdown began. The BCC notes that the survey was carried out prior to Chancellor Rishi Sunak announcing up to £30bn of fresh tax and spending measures to protect jobs in the aftermath of the COVID-19 crisis.

Daily Mail, Page: 14 The Guardian, Page; 7

PROPERTY NEWS – THURSDAY 16TH JULY 2020

Property prices could slip 2.4%

A forecast from the Office for Budget Responsibility suggests that the fallout from the coronavirus crisis could see property prices fall 2.4% this year and a further 11.7% in 2021. This would see the value of the average British home, which currently stands at £230,000, fall to £200,000. Russell Galley of Halifax commented: “Average house prices fell by 0.1% in June as the UK property market continued to emerge from lockdown.” He added that while this marks a small decrease, it is “notable as the first time since 2010 … that prices have fallen for four months in a row.”

Daily Express

SMEs NEWS – THURSDAY 16TH JULY 2020

SMEs optimistic despite pandemic

UK SMEs are among the most optimistic in western Europe, with research by Facebook, the World Bank and the OECD showing that 60% of owners are hopeful about the future of their business. Small firms in the UK remain positive despite the coronavirus lockdown forcing 43% to temporarily close and 58% seeing a decline in sales due to the pandemic. The study shows that 64% of male-led firms reported falling sales during the crisis, compared to 52% of female-run companies, while SMEs run by women are 11% more optimistic on future performance. Facebook vice president of northern Europe Steve Hatch said: “These findings show a steely optimism among British business owners looking to bounce back better following COVID-19, despite how challenging the past few months have been.”

City AM

ECONOMY NEWS – THURSDAY 16TH JULY 2020

Inflation up 0.6% in June

Data from the Office for National Statistics (ONS) shows that the inflation rate rose to 0.6% in June, with the Consumer Prices Index rising from May’s four-year low of 0.5% as lockdown measures began to ease. Despite the increase recorded last month, inflation remains below the Bank of England’s 2% target. The ONS said it is possible that prices have been influenced by the coronavirus lockdown “changing the timing of demand and the availability of some items”. Debapratim De, a senior economist at Deloitte, said: “June’s inflation figures are slightly above expectations but there remains abundant spare capacity in the economy. This should maintain a downward pressure on inflation, which could fall further, especially if there is a spike in unemployment later this year.” Yael Selfin, chief economist at KPMG, said the figures pointed at “ample room for the Bank of England to act” to boost the economy.

BBC News The Guardian, Page: 31

BoE policymaker: ‘Incomplete’ V-shaped recovery likely

Bank of England rate-setter Silvana Tenreyro believes the UK economy is likely to go through an “interrupted or incomplete” V-shaped recovery. Ms Tenreyro, a member of the Bank’s monetary policy committee, told a London School of Economics webinar that the economic recovery will depend on coronavirus cases being brought under control, both nationally and globally, adding that if case numbers fall, her “central forecast is for GDP to follow an interrupted or incomplete V-shaped trajectory, with the first quarterly step-up in the third quarter”. Ms Tenreyro highlighted two factors likely to slow the recovery, saying higher unemployment could hit consumer demand, while “voluntary or mandated social distancing” would hit both supply and demand if it continued for a prolonged period.

The Daily Telegraph, Business, Page: 8 City AM

Contact Paul Southward

Paul Southward