NEWS – WEDNESDAY 10TH MARCH 2021
NEWS – WEDNESDAY 10TH MARCH 2021
TAX NEWS – WEDNESDAY 10TH MARCH 2021
Osborne says corporation tax rise sends wrong message
Rishi Sunak’s tax hikes have been criticised by former chancellor George Osborne who said plans to increase corporation tax will deter international investment in Britain. Mr Sunak announced plans in his Budget last week to reverse corporation tax cuts in 2023, increasing it from 19% to 25%. The Chancellor also felt the ire of former PM Theresa May who slammed his plans for a “super-deduction” which will enable businesses to claim 130% of the cost of investment in plant and machinery against their tax bill. “If we want an innovation economy what we need to do is to support investment in areas that encourage growth and innovation, and that means R&D,” Mrs May said, adding: “Extend the definition of R&D expenditure [or] increase the rate — but act. What we need is investment in innovation, not in chief executives’ jacuzzis.”
UK overseas territories tax haven charts
Britain’s overseas territories have topped a list of the world’s most significant tax havens ahead of Switzerland, the Netherlands and Luxembourg, The British Virgin Islands were ranked as the “greatest enabler of corporate tax abuse” in the Tax Justice Network’s biennial report, with the Cayman Islands in second place and Bermuda third. Britain charted 13th, singled out for providing the widest scope for international corporations to cut their tax bills. Dereje Alemayehu, the executive coordinator of the Nobel peace prize-nominated Global Alliance for Tax Justice, said the report’s findings showed the biggest economies in the world were helping companies avoid $245bn in tax, and “to trust the OECD in light of its findings is like trusting a pack of wolves to build a fence around your chicken coop”.
Rishi Sunak asked to explain corporation tax claims
The Chancellor is being asked to explain his claim that his “super-deduction” corporation tax relief will not only bring forward business spending for two years but “will increase the amount of investment as well”. However, the Office for Budget Responsibility says its forecasts show that investment tails off from June 2023 compared with its November outlook, correlating with the increase in corporation tax from 19% to 25% in 2023. Anneliese Dodds, the shadow chancellor, said: “The Chancellor claims that his massive tax break for some of the biggest businesses will, on its own, bring more investment. However, the OBR is clear it won’t. He needs to come back to the House and explain this statement. The truth is that the Government’s plan for growth is in tatters.”
UK companies/tax losses: deferred gratification
The FT looks at how higher corporation tax rates and the new “super deduction” will push up deferred tax assets and deferred tax liabilities, suggesting auditors and investors will need to be wary.
CORPORATE NEWS – WEDNESDAY 10TH MARCH 2021
Sanjeev Gupta’s metals businesses miss UK tax payments
Companies controlled by Sanjeev Gupta have failed to pay tax owed to HMRC for both workers and VAT, sources have told the FT. The news adds to concerns about the health of the industrial conglomerate following the collapse of its main funder, Greensill Capital. The Times’ Katherine Griffiths considers the business of supply chain financing, which is widely seen as open to abuse, pointing to its use by Carillion and NMC. We are likely to hear more about whether accounting standards are robust enough, Griffiths suggests, and if there hasn’t been “inappropriate actions by individuals, misinformation or even corruption” at Greensill and Gupta’s steel empire. Meanwhile, the Telegraph reports that Gupta’s Liberty Steel will furlough workers at its operation in Rotherham and Stocksbridge this week in an attempt to conserve cash. Mr Gupta is also trying to seal a standstill agreement on repayment s to Greensill to remove the prospect of insolvency.
Angus Steakhouse looks to trim rental payments
Angus Steakhouse is on the verge of administration with KPMG now seeking concessions from landlords. But KPMG warns they may not all reach agreement and the firm is now preparing for an administration. Angus Steakhouse, which is run by the Gateshead-based Noble Organisation, hopes landlords will permit the restaurant chain to forgo rental payments until trading restrictions are lifted after lockdown.
Daily Telegraph, Business, Page: 3 City A.M.
LCF bondholders unhappy about administration costs
The Times reports that Smith & Williamson will likely charge close to £8m for the administration of London Capital & Finance by the time the work is complete. A further £3.7m has been levied by third-party professional advisers and total administration costs have reached £13.2m. Andrea Hall, of LCF Bondholders, a group representing some of those who lost money in the firm’s collapse, said that the fees were “eye watering”.
SMEs NEWS – WEDNESDAY 10TH MARCH 2021
SME debt could hamstring the recovery
A report from the British Business Bank shows lending to SMEs rose by 82% last year to £104bn, fuelled by emergency Covid schemes. Catherine Lewis La Torre, head of the Business Bank, said that small businesses were likely to divide into those struggling with repayments and those able to borrow and invest in growth. The Federation of Small Businesses said four in ten of those who recently accessed finance described their debt as “unmanageable”. The group’s national chairman Mike Cherry said: “More than half of those with facilities say that a student loan approach, whereby repayments are only made once a firm is profitable again, would mark a helpful way forward.”
Cybersecurity crucial as economy recovers
Conservative MP Simon Fell, who is also chair of the All-Party Parliamentary Group on Cyber Security, says in a piece for City A.M. that as the economy navigates its way out of the pandemic it will be more important than ever that small businesses are protected from cyber-attacks. With SME’s crucial to growth and the country’s levelling up SME cybersecurity is “an issue of national economic resilience.” Mr Fell goes on: “As we recover economically from the pandemic, we need to make sure that we properly consider the cybersecurity challenges posed by a dispersed and distributed workforce, especially for SMEs and start-ups. It is in everyone’s interests to have businesses of all sizes, throughout the economy, properly equipped to deal with the opportunities and challenges of a digital world.”
HSBC launches £15bn fund for SMEs
HSBC is launching a new £15bn fund to help UK SMEs with £10bn of this focussed on regional allocations. Head of small business banking at HSBC UK, Peter McIntyre, said: “We’ve helped British business get through the last year with over £14bn of COVID-19 lending support. Now it’s time to turn our minds to what comes next and how we help companies grow again, opening up a world of opportunity and contributing towards a sustainable future society.”
PROPERTY NEWS – WEDNESDAY 10TH MARCH 2021
Buy-to-let landlords shrug off corporation tax increase
Analysts say landlords who hold their properties in a company structure are unlikely to change their ownership arrangements despite the Chancellor’s plan to hike corporation tax.
ECONOMY NEWS – WEDNESDAY 10TH MARCH 2021
OECD predicts UK GDP will rise 5.1% this year
UK GDP is now forecast to increase 5.1% this year and 4.7% in 2022, according to the Organisation for Economic Cooperation and Development (OECD). It said the recovery from the pandemic has been “faster than expected”, with global GDP now expected to grow 5.6% in 2021, up from a previous forecast of 4.2%. The OECD also said a stimulus bill from the US would also provide a boost to the country’s trading partners. But the Telegraph’s Ambrose Evans Pritchard says Joe Biden’s $1.9trn injection will run out of fizz after three months leaving the US economy looking at a short-term boom in the rear-view mirror. Republican Senate Leader Mitch McConnell commented: “This isn’t a pandemic rescue package. It’s a parade of left-wing pet projects. Our country is already set for a roaring recovery, but not because of this bill. In fact in spite of this bill.”
INDUSTRY NEWS – WEDNESDAY 10TH MARCH 2021
Wait continues for ‘priority’ BEIS audit reform report
A report from the Department for Business, Energy and Industrial Strategy (BEIS) on audit reform is now more than a month late to be published, despite business secretary Kwasi Kwarteng insisting audit reform was a “priority” for his department. The reforms in the report, which was due out on February 8th, are rumoured to place new burdens on bosses in an effort to improve audit standards. Directors, rather than boards, will be held personally responsible for financial reporting, facing fines or temporary bans if they are found to have fallen short of their duties. Asked about the delay, a spokesperson for the department said: “The business secretary has been clear that audit reform is a priority for the department and we will publish comprehensive proposals shortly”. Mazars global head of audit David Herbinet said audit and wider governance reform should not be delayed any longer. “There have now been four Secretaries of State since the reform process began, yet we are still faced with the reality that one of the existing dominant firms leaving the market would seriously destabilise capital markets, as Arthur Andersen did less than 20 years ago. This must be addressed at the soonest opportunity”, he said.
Contact Paul Southward