NEWS – THURSDAY 21ST JANUARY 2021

NEWS ROUNDUP

TAX NEWS – THURSDAY 21ST JANUARY 2021

Sunak urged not to raise taxes

Chancellor Rishi Sunak has been urged not to increase taxes in his March budget, with CBI chief economist Rain Newton-Smith arguing that “now is not the time” to be increasing taxes significantly. Appearing on Times Radio she was asked for her views on reports that the Chancellor could increase corporation tax as he looks to cover the nation’s coronavirus costs. Ms Newton-Smith said there is a need to get the economic recovery “on a stable footing” before the “sensible changes that could be made around taxation” are considered. She added that the CBI’s “first message is now is absolutely not the time.” She added that changes in the tax system may be appropriate down the line, arguing that policymakers should ensure any tax rises “fall on the broadest shoulders, are done sensibly, are done in consultation with business and incentivise business investment.” “The more businesses you save and help to get on the other side of this crisis the more tax revenues you will see,” she added.

Daily Express

Experts not buying online sales tax

Experts have spoken out over a potential online sales tax, with Tom Clougherty of the Centre for Policy Studies saying: “Taxing internet sales differently is a terrible idea, especially in the middle of a pandemic when many have no choice but to shop online.” He added that online shoppers already pay VAT and “there’s no good reason for clobbering them with an additional tax.” John O’Connell, of the TaxPayers’ Alliance, also questioned the potential move, saying online purchases “have been a lockdown lifeline for millions” and warning that if an online sales tax is put in place, “hard-pressed shoppers can’t win”. The comments came after Treasury Financial Secretary Jesse Norman said a levy on internet sales was one of the measures being considered as officials look to tackle the deficit.

Daily Express

Biden and global tax reform

Simon Duke in the Times looks at global efforts to reform tax on tech firms, highlighting the Organisation for Economic Co-operation and Development’s (OECD) ambition of ensuring multinational companies pay tax on profits generated where they do business, rather than where they register subsidiaries. He notes that the OECD project stuttered under President Trump’s America First agenda and considers what successor Joe Biden’s stance on the matter may be, arguing that it is “clear that only multilateral co-operation can solve the problem of digital taxation”.

The Times, Page: 41

Burberry questions tax-free shopping move

Burberry has warned about the impact of the move to scrap tax-free shopping for tourists, saying sales are likely to shift from the UK as a result. The scheme allowing VAT-free shopping for tourists to the UK ended on January 1. CFO Julie Brown said the fashion brand had written to the Chancellor to highlight the potential hit the move could have the UK, saying the firm was “disappointed” that the Government had not reversed its stance.

The Times, Page: 44 The I, Page: 43 The Independent, Page: 56

Swap student loans for graduate tax, says report

A report from the Higher Education Policy Institute suggests student loans should be replaced by graduate tax, arguing that the current system operates under a “fiscal illusion” and is “so flawed that there is no realistic way in which it could be revised to make it workable”.

The Daily Telegraph, Page: 17

INDUSTRY NEWS – THURSDAY 21ST JANUARY 2021

Business Secretary pledges to ‘get the ball rolling’ on audit reform

In his first appearance before the Business, Energy and Industrial Strategy committee since being appointed Business Secretary, Kwasi Kwarteng pledged to “get the ball rolling” on long-delayed changes to rules for auditing financial accounts. More than a year after findings were published from the last of three separate reviews into auditing that were prompted by a string of corporate failures, Britain has yet to introduce legislation to implement recommended reforms. Mr Kwarteng did not put forward a timetable for when the recommendations will be realised.

The Times

EMPLOYMENT NEWS – THURSDAY 21ST JANUARY 2021

Chancellor considers extending support

Rishi Sunak is reportedly considering a further extension of the furlough scheme in a bid to support the jobs market amid the blow dealt by the pandemic. The CBI has called for the initiative to be extended until the end of June and followed up with targeted support, while the TUC has said it should be available through 2021. Sources say the Chancellor is also mulling other support tools, including the revival of the £1000 job retention bonus. The Telegraph says Mr Sunak is also facing calls to extend reliefs on business rates and VAT that are due to come to an end at the end of March. Ministers are also being urged to deliver support for entrepreneurs unable to access financial support, with Glenn Collins, head of policy at the ACCA, warning: “Many of them may go bankrupt, many of them may also have to lay off employees”, with Richard Wild of the Chartered Institute of Taxation echoing the warning and saying entrepreneurs are “definitely in need of support.”

The Daily Telegraph, Business, Page: 3

PAC asks HMRC to explain support shortfall

The Public Accounts Committee has called on ministers to explain why so many people have been “left without a penny” of coronavirus financial support, with MPs giving HMRC six weeks to explain why many freelancers and other excluded groups have not been given greater help. A report from the cross-party group said a lack of certainty over the support schemes has been an issue and argued that “quirks in the tax system” have left some groups of taxpayers excluded from financial support that other taxpayers received throughout the pandemic. Committee chair Meg Hillier warned that “out-of-date tax systems are one of the barriers to getting help to a significant number of struggling taxpayers who should be entitled to support.”

The Independent Daily Mirror

CORPORATE NEWS – THURSDAY 21ST JANUARY 2021

630k firms in significant financial distress

The latest red flag report from Begbies Traynor shows that around 630,000 businesses were experiencing significant financial distress as they entered the most recent coronavirus lockdown. The report shows that in Q4 2020 there was a 27% increase in companies suffering a marked deterioration in financial metrics including working capital, contingent liabilities and retained profits when compared to Q4 2019. Each of the 22 sectors monitored exhibited increases in signs of significant distress, with Begbies Traynor warning that its figures marked “the tip of a very large iceberg”. Julie Palmer, a partner at the firm, said: “Without the financial aid and support measures the Government has put in place during the pandemic, insolvency levels would have been much higher.” She added: “The sad truth is that for many this will provide little more than a stay of execution”.

The Times, Page: 40

Defence contractor needs to defend its accounting?

The Times’ Robert Lea considers the climate for defence contractor Babcock International following the launch of an accounting review that will evaluate its balance sheet and contract profitability. He says: “The spotlight is shining on how or why PwC has been the company’s auditor for the past 19 years”, voicing concern over the “cosy relationship” and saying the firm and its auditor may soon part ways.

The Times, Page: 38

UK chiefs share pain by losing bonuses

Deloitte analysis shows that annual bonuses for CEOs at firms reporting in H2 2020 have dipped, with more than half seeing no payout and overall salary and pension allowances for executive directors falling.

Financial Times, Page: 10

PROPERTY NEWS – THURSDAY 21ST JANUARY 2021

House prices hit new high

UK house prices have hit a record high, with Land Registry data showing the average price rose to £250,000 in November. Property values rose 7.6% in the year to November, with this marking the steepest annual price growth since June 2016. Across UK nations, England saw values climb 7.6% year-on-year in November, reaching £267,000; the average in Scotland rose 8.6% to £166,000; Wales saw growth of 7%, taking the typical value to £180,000; while Northern Ireland’s 2.4% increase took its average to £143,000. Analysts believe the stamp duty holiday has helped drive the market and push up prices, warning that the market and growth may slow once the tax break ends on March 31. Howard Archer, EY Item Club’s chief economic adviser, said: Elevated housing market activity and robust prices will prove unsustainable sooner rather than later,” adding that prices could fall by up to 5% this year .

The Independent The Times Financial Times

Building delays mean buyers may miss tax break

The National Federation of Builders has warned that more than 16,000 homebuyers could miss out on stamp duty savings because the coronavirus crisis has forced developers to slow down their building projects. It notes that delays are stretching to up to two months, meaning buyers of new build homes hoping to complete before the stamp duty holiday ends on March 31 could miss the deadline and lose out on savings worth up to £15,000. The federation has backed calls for the cut-off for the tax break to be extended.

The Daily Telegraph, Page: 17

130k borrowers unable to cover mortgage costs

UK Finance figures show that around 130,000 homeowners in the UK are unable to pay their monthly mortgage costs. The analysis shows that around eight in ten of the 1.9m homeowners who took a mortgage holiday as a result of the coronavirus pandemic are once again making full repayments. However, around one in 84 are still relying on repayment holidays.

The Daily Telegraph

Low-deposit mortgages return

Moneyfacts analysis shows that low-deposit mortgages have made a return, with many products for buyers with a 10% deposit pulled last year on the back of coronavirus-driven uncertainty. The report shows that there were 44 deals available for those with a deposit equal to 10% of the property’s value in September, with this now climbing to 197. Deals for those whose deposit covers 15% of the value have also increased.

BBC News

FINANCIAL SERVICES NEWS – THURSDAY 21ST JANUARY 2021

Business volumes climb in Q4

Business volumes in UK financial services grew for the first time in two years during Q4, according to the latest Financial Services Survey. It was found that firms expect business volumes to grow at a slightly quicker rate in the first three months of 2021. They also expect to cut headcount this year, while the shift toward remote working is prompting many firms to consider redefining, reconfiguring or cutting existing office space. The report, published by the CBI and compiled by PwC, was completed before the latest lookdown restrictions were rolled out, with CBI chief economist Rain Newton-Smith saying: “Unfortunately, the health and economic picture has sadly deteriorated since with restrictions tightening again”. With the report suggesting many City firms have opened hubs in the EU, the Mail notes EY analysis showing that over 7,500 financial jobs have so far left Britain for the bloc.

Daily Mail

REGULATION NEWS – THURSDAY 21ST JANUARY 2021

Evaluations of UK company boards face tighter scrutiny

A Chartered Governance Institute review of board evaluation in the listed sector has found no widespread market failure but recommended that the Government bring in a voluntary code of conduct.

Financial Times

ECONOMY NEWS – THURSDAY 21ST JANUARY 2021

Inflation doubles in December

Figures from the Office for National Statistics show that UK inflation doubled in December, with prices up 0.6% on December 2019. This compares with a 0.3% annual increase recorded in November. The Consumer Prices Index grew by 0.3% month-on-month after a 0.1% fall in November. The increase came despite food and drink prices falling, with rising prices for clothing, transport and cultural activities pushing inflation higher. Howard Archer, chief economic adviser to EY Item Club, commented: “Price conscious consumers, excess capacity, limited earnings and curtailed economic activity are likely to limit inflation in the near term at least”.

The Guardian Financial Times City AM

OTHER NEWS – THURSDAY 21ST JANUARY 2021

Blair wealth in the spotlight

The Mail’s Richard Pendlebury looks at the wealth accumulated by former Prime Minister Tony Blair and his family. He cites Nick Kochan, co-author of the book Blair Inc: The Man Behind The Mask, who says: “Blair’s fees, and indeed all his earnings are protected by complex tax structures, nothing illegal of course, but constructed by the top accountants KPMG and are inevitably complex and opaque.”

Daily Mail, Page: 34

Fraud cases fall

Analysis from KPMG shows a steep decline in high-value fraud cases in Scotland, with just one case of fraud worth more than £100,000 in 2020, compared with a total value of £15.6m from ten trials in 2019.

The Times, Page: 57

Contact Paul Southward

Paul Southward