NEWS – WEDNESDAY 15TH JULY 2020

NEWS ROUNDUP

TAX NEWS – WEDNESDAY 15TH JULY 2020

Sunak calls for CGT review

The Chancellor has asked the Office of Tax Simplification to conduct a review into capital gains tax and whether it is fit for purpose, with the body launching a survey asking for “evidence to seek views about capital gains tax”. Rishi Sunak said he was particularly interested in “how gains are taxed compared to other types of income”. Industry experts suggest the review could indicate that the Government is considering increasing CGT in an effort to offset its £350bn deficit this year because of coronavirus. Nathan Long, senior analyst at Hargreaves Lansdown, said the review looked like a “tax claw back” from Mr Sunak. “We could be seeing the tips of the Government’s fingernails, as it considers how to claw back the enormous sums spent on bailing the economy out of the COVID-19 crisis,” he said. George Bull, senior tax partner at RSM, said: “It’s an expectation of mine that he will review the existing rates,” while Blick Rothenberg partner Suzanne Briggs said: “To increase CGT rates would be an easy win – and it would also come neatly under the umbrella of simplification and so suit the remit.” Mike Hayes of Moore Kingston Smith, said restricting the CGT exemption on a person’s home would enable the Chancellor to “tap into this vast source of wealth.” The Times notes that the Chancellor could also have an eye on entrepreneurs’ relief, citing experts who believe it could be scrapped.  Paul Southward comments “the total capital gains tax receipts in 2018/19 was £9.2bn out of total tax receipts of £623bn.  There would have to be some drastic changes to CGT to make any significant impact on tax revenues, if higher taxes are going to be a solution to the UK deficit, there are likely to be increases across all taxes in the long term”.

The Times, Page: 1 The Daily Telegraph, Page: 1 Financial Times, Page: 2 Daily Mail, Page: 2 The Sun, Page: 2 Daily Express, Page: 29 City AM

Consumers may not see hospitality VAT cut

The Guardian reports that some organisations will not pass a reduction in VAT for tourism and hospitality sectors onto customers. Chancellor Rishi Sunak last week announced that the tax would be cut from 20% to 5% from July 15 until January 12 2021 for restaurants, cafes, hotels and attractions such as zoos and cinemas. Deloitte calculates that this could save families more than £5 on a £45 meal out.

The Guardian, Page: 31

CORPORATE NEWS – WEDNESDAY 15TH JULY 2020

Supermarket sector tops customer service rankings

Research by KMPG looking at customer service during the coronavirus crisis saw the supermarket sector come out on top, having increased its score by 4% compared to rankings compiled last year. The financial service sector also added 4% and was the next best performing sector. The biggest increase was the 5% added by logistics, restaurant and fast food and public sector brands. Challenger bank First Direct top s the list of consumers’ best brands, with rival Starling Bank ranking third. Shopping channel QVC sits between the banks in the rankings, while John Lewis & Partners and retailer Lush made up the top five. KPMG’s UK head of retail Paul Martin commented: “Looking ahead though, all consumer brands need to review their business models and ways of working, given how much consumers have changed their behaviour in recent months.”

City AM

McKinsey told Wirecard to fortify controls before collapse

Consultancy McKinsey reportedly warned scandal-hit Wirecard it needed to address an absence of controls, with Wirecard’s management board said to have pushed for PwC to set up a compliance organisation.

Financial Times, Page: 7

Cardinal collapses

Interiors manufacturer Cardinal Shopfitting and Systems is unable to continue trading given a collapse in its order book amid the coronavirus crisis, KPMG administrators have said, with 135 jobs lost.

Yorkshire Post, Page: 18

PROPERTY NEWS – WEDNESDAY 15TH JULY 2020

Commercial property sales increase

Figures from estate agent Savills show that the investors spent £1.3bn on commercial property in the UK during June. While this is 54% down on the £2.8bn spent in June 2019, it marks a 42% increase on the £755m spent in May and suggests the market may be stabilising amid the coronavirus crisis. Analysis shows that February saw sales of £8.4bn but, as the pandemic started to have an impact, sales slipped to £3.5bn in March and £859m in April. The Telegraph notes that Q2 was the weakest quarter on record for UK investment, while sales during H1 are thought to be 43% below the five-year average.

The Daily Telegraph

EMPLOYMENT NEWS – WEDNESDAY 15TH JULY 2020

Jobless could hit 4m by end of year

Unemployment could reach more than 4m by the end of the year, according to a fiscal sustainability report by the Office for Budget Responsibility (OBR). The report warned that 1.3m people will go directly from furlough to joblessness when the job protection program ends in the autumn. Paul Johnson of Institute for Fiscal Studies noted that the new prognosis for jobs in the report was gloomier than the OBR’s analysis early in the pandemic.

The Daily Telegraph, Business, Page: 1 The Times, Page: 10 The Sun, Page: 2 Evening Standard

INTERNATIONAL NEWS – WEDNESDAY 15TH JULY 2020

Brussels plans attack on low-tax states

The European Commission is exploring ways to tackle low-tax member states’ advantageous corporate tax regimes and reduce multinationals’ ability to exploit them.

Financial Times, Page: 4

ECONOMY NEWS – WEDNESDAY 15TH JULY 2020

Economy sees slower than expected rebound

Data from the Office for National Statistics (ONS) show that the economy rebounded more slowly than expected in May, growing just 1.8% from the previous month when economists had expected an increase of around 5% on the back of lockdown measures easing. The increase recorded in May follows a record 20.4% fall in April and a decline of 6.9% seen in March. The ONS figures show that the economy is now 24.5% smaller than it was in February and has shrunk 19.1% in the three months to May compared with the previous three-month period. Revealing the figures, the ONS warned that the economy is “in the doldrums”. Chancellor Rishi Sunak said the figures “underline the scale of the challenge we face”, while the British Chambers of Commerce’s head of economics, Suren Thiru, said that while economic output may grow further in the short term, “this may dissipate as the economic scarring caused by the pandemic start s to bite, particularly as government support winds down.” Ian Stewart of Deloitte commented: “It is likely to take years, not months, to repair the damage done by COVID-19.”

The Daily Telegraph, Business, Page: 4 Financial Times, Page: 2 The Independent, Page: 11 Daily Express, Page: 7 Daily Mirror, Page: 2 Daily Mail, Page: 2 BBC News

OBR in debt warning

The Office for Budget Responsibility (OBR) has warned that the UK must raise taxes or cut spending as borrowing soars on the back of the coronavirus crisis, noting that the economy faces a decline of 12.4% in 2020. The OBR said the Government is on course to borrow £372bn this year to pay for the shortfall between tax revenues and public spending, with the UK’s total debt pile set to hit 104.1% of GDP. It warns that without tax rises or spending cuts, debt could climb to more than 400% of GDP by 2070. The OBR’s Fiscal Sustainability Report suggests the economy will not get back to its pre-crisis level until the end of 2022, while unemployment is likely to rise to a record 12% by the end of 2020, falling back to 10.1% in 2021.

The Times, Page: 36 The Guardian, Page: 11 Daily Mail, Page: 65 Financial Times, Page: 2 BBC News

OTHER NEWS – WEDNESDAY 15TH JULY 2020

Wait to talk tax doubles

UHY Hacker Young analysis shows that waiting times for HMRC helplines doubled during the lockdown as demand jumped. Callers were put on hold for an average of 14 minutes, 59 seconds in May, up from six minutes, 43 seconds in March. It was also found that the number of calls to HMRC rose by 18% to 3.2m in May, up from 2.8m in April. The report also reveals that there were 6,437 complaints about the service in May, up 19% on the 5,410 reported in April. UHY Hacker Young’s Sean Glancy said: “HMRC is under huge pressure and the cracks are starting to show – basic tasks are not being completed.”

Daily Mail, Page: 43

Contact Paul Southward

Paul Southward