News update extra Friday 5th April 2019
News update extra Friday 5th April 2019
NEWS UPDATE EXTRA
IFS hits out at stealth taxes
Institute for Fiscal Studies (IFS) analysis has found that around 1m people are losing more than £1bn in tax allowances. The research shows that the Government freezing the salary threshold at £100,000 has seen an extra 340,000 people have their income tax personal allowance withdrawn over the past decade, taking the total number affected to 986,000. If ministers had increased the £100,000 threshold in line with inflation these people would have been paying more than £1bn less in tax. The figures also show that the threshold being frozen at £150,000 since 2008 means 110,000 extra people have been pulled into the highest 45% tax rate, taking the total to 428,000. The IFS said “stealth” taxes have moved from being the “rare exception to being commonplace.” The IFS added the “most perverse case of all” was the reduction in the pension annual allowance for high-income individuals, saying: “In some cases, people with pension contributions in excess of £40,000 can face a marginal tax rate of more than 100%,” adding that they “would actually be worse off if they increased their earnings.” IFS director Paul Johnson said: “Recent governments have, rather stealthily, increased tax rates on high earners and the number of people facing high marginal rates of tax. If government thinks there is a case for more high-income people to pay more tax, it should be upfront about that view.” Elsewhere, City AM calls for a rethink of tax bands, saying that while a “long-overdue attempt” to prevent workers with modest lifestyles from falling into the 40p tax bracket by lifting the threshold should be applauded, “static thresholds continue to trap a growing number of employees.”
The Daily Telegraph, Page: 8 Daily Mail, Page: 75 City AM, Page: 2
Threshold change widens tax gap
Scottish workers earning under £27,000 – which equates to around 55% of the country’s taxpayers – will contribute less income tax than their counterparts elsewhere in the UK when new income tax thresholds are implemented on April 6. However, those earning more than this will pay more than taxpayers south of the Border. While Chancellor Philip Hammond raised the top rate of income tax to earnings over £50,000, Scottish Finance Secretary Derek Mackay announced in October that the point at which the higher rate kicks would be frozen at £43,430. The change effectively widens the gap between Scotland and the UK for higher rate taxpayers, who pay 41% in Scotland compared to 40% in the UK.
Loan charge delay call
A number of MPs have backed calls for a six-month delay to the loan charge and an independent inquiry, with Justine Greening saying: “The approach HMRC has taken has been punitive rather than proportionate.” Elsewhere, Dawn Register of BDO commented: “This controversial tax charge has not received sufficient Parliamentary scrutiny.” She added: “With MPs’ time dominated by Brexit it is hardly surprising, however the flurry of evidence and activity in recent weeks suggests that more time is needed to consider the impact of the measure.” Meanwhile, the Loan Charge Action Group has called for the charge to be forward-looking rather than retrospective.
Pension tax break cuts risk crippling the NHS
The FT looks at the impact regulations restricting tax relief on pension contributions for higher earners are having on the NHS, with senior doctors opting to reduce hours or retire early.
UC impact on tax credit claimants revealed
A study by HMRC and the Department for Work and Pensions into how tax credit claimants coped with a shift to universal credit found that 60% of those who reported struggling financially said their difficulties began when they made the move.
The Guardian, Page: 23 Daily Mirror, Page: 2
SUMMARIES OF ALL THE NEW TAX YEAR CHANGES
The new tax year starts on 6th April and we have reviewed the tax changes that come into effect this April and you can check these out in the downloads below..
Personal tax changes
Business tax changes
BBC criticised over pay arrangements
The Commons Public Accounts Committee has said the BBC’s “muddled and chaotic” handling of freelance pay arrangements caused misery and hardship for staff. The report comes amid claims the BBC told freelancers to set up personal service companies so it could avoid paying millions in national insurance, with HMRC subsequently chasing staff over unpaid tax bills. The BBC’s attempt to reach an agreement with HMRC that would see it settle all outstanding cases with a lump-sum payment is taking longer than expected, the committee noted.
The Times, Page: 48 The Guardian, Page: 15 The Sun, Page: 4
Stores hit by online rivals
The Daily Mail reflects on a report which shows that one in eight high street stores are empty, saying “ruthless competition from tax-avoiding internet firms” has taken its toll. The editorial says such firms “pay microscopic sums to HMRC” and as they operate out-of-town warehouses “they avoid the suffocating business rates”.
Daily Mail, Page: 16
Pottery firm collapses
Pottery manufacturer Dudson has collapsed, with over 300 jobs lost. Of the 390 staff employed at the firm, 72 “will be retained to support the closing down of the business”. Administrator PwC said “a deterioration in sales and increased costs” had hit the business.
The Times, Page: 48
Late payment pain for small firms
Sathnam Sanghera in the Times looks at the impact late payment has on SMEs. He notes Federation of Small Businesses analysis which suggests about 50,000 businesses fail every year due to larger firms neglecting to settle bills, while Lloyds Banking Group research suggests that 65% of firms which report their payment practices took more than 30 days to settle invoices and 21% took more than 50 days. Mr Sanghera also points to a Small Business Commissioner report showing that a third of payments to small businesses are late, 20% of small firms have experienced cash flow problems due to late payments, and that the economy would see an annual boost of £2.5bn if bills were settled promptly. Meanwhile, the Cabinet Office has written to Government suppliers saying they risk being barred from future public sector work if they fail to pay subcontractors on time.
Sales up but dip not offset
The latest BDO high street sales tracker shows that like-for-like in-store sales rose by 4.8% in March, with the increase not strong enough to rebound from a 10.1% dip seen in March 2018. The data also shows that online sales rose 18.7%, up on the 11% growth recorded a year ago. BDO’s Sophie Michael commented: “Retailers continue to trade on paper-thin margins and the impact of further increases in business rates and staffing costs will only add to the fears of further possible high street casualties.”
The Times, Page: 42 City AM, Page: 3 Yorkshire Post, Page: 9
The monthly Report on Jobs by KPMG and the Recruitment and Employment Confederation shows that the number of permanent job appointments in March fell to its lowest level since immediately after the 2016 referendum. The survey of 400 UK employment consultancies found that permanent appointments dropped for the second time in three months in March and at the steepest rate since July 2016, with political uncertainty said to have played a part. James Stewart, vice chair at KPMG, said: “Brexit has been sapping business confidence for months, and now it is causing the jobs market to grind to a halt.” “With unclear conditions ahead, many companies have hit the pause button on new hires,” he added.
The Times, Page: 48 The Sun, Page: 51 Yorkshire Post, Page: 4
Contact Paul Southward.