NEWS – WEDNESDAY 16TH DECEMBER 2020

NEWS ROUNDUP

TAX NEWS – WEDNESDAY 16TH DECEMBER 2020

Ministers urged to extend or adapt stamp duty holiday

Banks have urged the Treasury to extend the stamp duty holiday rolled out to support the property sector amid the coronavirus pandemic beyond the March 31 cut-off, arguing that pushing the deadline back could prevent close to a quarter of a million sales from collapsing. Yorkshire Building Society estimates that 240,000 sales worth £58bn could miss the deadline. While some banks and those within the property sector are calling for the stamp duty holiday to be extended, others have mooted a technical change that would mean contracts had to be exchanged by the end of March, with current rules saying deals must be completed by the end of Q1 2021. Nitesh Patel from Yorkshire Building Society has called on ministers to give buyers three months to complete purchases if their mortgage offer has been accepted by the current cut-off.

The Daily Telegraph, Page: 3

Treasury plans UK tax shake-up for asset holding companies

The Treasury has detailed proposed reforms to taxation of specialist vehicles used by private equity and infrastructure funds, a move that could “remove barriers” to establishing such companies in the UK.

Financial Times, Page: 2

Wealth tax debate

With former MP Michael Meadowcroft having suggested that land could offer a viable route to taxing wealth, Robert Rhodes, QC, writes to the Times to argue this may be “unduly optimistic”. He says most land outside towns and cities is used as working farmland, with few farms sufficiently profitable to bear a wealth tax. He adds that a wealth tax is “not a realistic option to raise a huge amount of money quickly”.

The Times, Page: 30

EMPLOYMENT NEWS – WEDNESDAY 16TH DECEMBER 2020

Record spike in redundancies

Office for National Statistics (ONS) figures show that redundancies rose by an all-time high as 370,000 jobs were lost in the three months to October. The losses mean the jobless rate has hit 4.9%, up from 4.8% in September to the highest level since 2016. The number of UK workers on payrolls has fallen by 819,000 between February and November due to the impact of the coronavirus pandemic. On top of this, the ONS estimates that around 4.5m workers are currently on furlough. Experts have suggested that the Chancellor may be forced to extend the furlough scheme beyond March, with Investec’s chief economist Philip Shaw warning that a no-deal Brexit may have an impact, saying: “That is a non-C OVID-19 event but one that could disrupt the economy in such a way to persuade the Chancellor to extend.” Paul Dales, chief UK economist at Capital Economics, said that if the pandemic means the Government is forced to continue tiers or lockdowns beyond March, “I think they are obliged to continue the furlough.”

The Daily Telegraph The Guardian, Page: 37 The I, Page: 8 Daily Mirror, Page: 2

CORPORATE NEWS – WEDNESDAY 16TH DECEMBER 2020

UK firms see highest impairment charges since 2012

UK companies have recorded the highest goodwill impairments since 2012, with Duff & Phelps analysis showing that FTSE 100 companies recorded an aggregate impairment of €16bn in 2019, a 248% increase on the year before. UK companies within the pan-European Stoxx 600 recorded a 172% increase in impairment charges, with an aggregate of €19.3bn. Michael Weaver, Duff & Phelps’ managing director and head of valuation advisory, said: “The data is already showing that aggregate goodwill impairments will likely exceed 2019 levels as the effect of C OVID-19 as well as Brexit negotiation uncertainty continue to weigh on companies’ outlook”. He added that while the full impact of the pandemic remains uncertain, “the outlook for European companies has deteriorated significantly from the beginning of the year”, with analysts dramatically cutting earnings growth forecasts for 2020.

City AM

WPP gets its numbers wrong by £300m

Advertising agency WPP has admitted to understating its losses by £301m, with the accounting error meaning a record half-year loss of £2.6bn reported in August has been corrected to a loss of £2.9bn. WPP said its finance team spotted the error after the results were issued, adding that it plans to restate accounts for 2017 to 2020 to correct them. Lord Sikka, a professor of accounting at Sheffield University, said the disclosure raised questions about why no one at WPP or Deloitte – which signed off accounts in 2017, 2018 and 2019 – spotted the mistake sooner. He commented: “What on earth were the auditors doing and where are the regulators?”

Daily Mail, Page: 65 The Times, Page: 46

INSOLVENCY NEWS – WEDNESDAY 16TH DECEMBER 2020

Pandemic prompts insolvency warning

Patrick Collinson in the Guardian reflects that while UK Insolvency Service figures show that individual bankruptcies and debt relief orders have fallen over the last year to the lowest level in a decade, the Citizens Advice Bureau has warned that the coronavirus crisis has driven up energy bill debt, unemployment and rental arrears. He highlights that the number of applications forcing someone into bankruptcy has fallen as various initiatives reduced proceedings, while noting that a “broad system of support” for those in debt has emerged. However, Mr Collinson says the “great reckoning is to come”, with history pointing to an 18 month to two-year lag after a crisis “before the proverbial rug gets pulled”. He notes that the peak period for individual insolvencies was in Q4 2009 – two years after financial crisis first hit. “Expect that record crash; and many people’s lives – to be shattered some time in 2022”, he warns.

The Guardian, Page: 39

INDUSTRY NEWS – WEDNESDAY 16TH DECEMBER 2020

Big Four employ CCP members

Documents seen by the Telegraph show that the Big Four have employed more than 2,000 members of the Chinese Communist Party (CCP), including at least one partner in every firm. At least 400 KPMG staff had CCP membership in 2016, while EY and Deloitte each employ more than 800 party members, including Deloitte’s deputy director in China. The report also shows that some senior staff at PwC are members, including at least one partner. MP Bob Seely, a member of the Foreign Affairs Select Committee, said the issue “is a bizarre and scandalous state of affairs,” arguing that alongside an “espionage risk, which is clearly highly serious in itself”, the matter raises “significant questions” about client confidentially. The Telegraph notes that there is no evidence to suggest that any of the CPP members have prejudiced the interests of clients.

The Daily Telegraph, Page: 1

BUSINESS RATES NEWS – WEDNESDAY 16TH DECEMBER 2020

To save the high street, first fix business rates

An FT editorial calls for reform of the business rates system, saying it needs to be fit for purpose so as to help address the challenges facing the retail sector.

Financial Times, Page: 24

ECONOMY NEWS – WEDNESDAY 16TH DECEMBER 2020

Capital Economics issues optimistic prediction

Economists at consultancy Capital Economics have predicted that the coronavirus vaccine will see the UK economy recover more quickly than most analysts expect. While the Government’s official forecaster has predicted growth of 5.5% in 2021 and 6.6% in 2022 following a decline of 11.3% this year, Capital Economics believes that following a record decline of 11.5% this year, the economy will grow by 7.5% next year and by the same rate the year after. Paul Dales, chief UK economist at Capital Economics commented: “We think the C OVID-19 crisis will lead to minimal long-term scarring. Later this decade GDP will return to the path it would have been on if C OVID-19 never existed.” The firm also suggested that chancellor Rishi Sunak will not raise taxes or reduce spending in 2021 or 2022.

City AM

Retail sales fall north of the Border

The latest monitor from the Scottish Retail Consortium and KPMG shows that retail sales in Scotland fell by 10.2% last month compared with November 2019. On a like-for-like basis, sales decreased by 9.6%. Paul Martin, UK head of retail at KPMG, said ongoing localised lockdowns have “hit the sector at a time when it usually reaps the rewards from a pre-Christmas sales surge.” He added: “November’s data reflects the near-daily fight for survival facing many of Scotland’s retailers.”

The Scotsman, Page: 40 The Press and Journal, Page: 31

Contact Paul Southward

Paul Southward