NEWS – WEDNESDAY 20TH MAY 2020
NEWS – WEDNESDAY 20TH MAY 2020
TAX NEWS – WEDNESDAY 20TH MAY 2020
Tax warning over pension withdrawals
Former Pensions Minister Steve Webb has warned that savers forced to dip into their pension early amid the coronavirus crisis may be forced to pay more tax than they need to. Pointing to the way HMRC taxes some people when they make one-off lump sum withdrawals, he warns that rates are sometimes elevated as the taxman assumes the amount withdrawn will be taken as regular income. Mr Webb, who also notes that decreased incomes may mean people should be paying lower rates of tax, has called on HMRC to rethink the system. Mr Webb said: “In my view, it is already unacceptable that HMRC routinely over-taxes thousands of people on one-off withdrawals from their pension pots, leaving them to fill in forms to claw back the excess they’ve paid.” Analysis by pensions consultancy LCP shows that HMRC has repaid more than £600m in overpaid tax on pension withdrawals since 2015.
Daily Mail, Page: 42 Daily Mirror, Page: 34
Home office equipment tax changes introduced
Temporary new rules have been introduced by Financial Secretary to the Treasury, Jesse Norman, exempting people who have been forced to work from home as a result of the coronavirus lockdown from paying income tax and National Insurance on newly-purchased home office equipment. Jeremy Coker of the Association of Tax Technicians says: “Reimbursing the cost of newly-bought office equipment would under existing rules be taxable and result in a tax bill for the employee. This is clearly unwelcome, and the announcement of a temporary exemption from income tax and National Insurance for such reimbursements is fair and very welcome.” The Institute of Chartered Accountants noted that it had been lobbying for the exemption since the beginning of lockdown restrictions.
Pension savers risk having to repay tax relief after judgment
HMRC has won a landmark case centred on non-cash assets transferred into personal pensions, with it ruled that tax relief is only applicable on pension contributions made in cash, not other assets.
CORPORATE NEWS – WEDNESDAY 20TH MAY 2020
Bonus ban for bailout scheme firms
Large firms using the Government’s COVID-19 bailout scheme are to be banned from paying cash bonuses to executives and dividends under changes to the loan scheme. Companies wishing to borrow money from the Bank of England’s COVID Corporate Financing Facility (CCFF) beyond May 2021 will be required to commit to showing “restraint” on remuneration while debts are repaid. State-backed loans under the scheme can now be as large as £200m, up from £50m previously. The new rules apply to companies borrowing more than £50m. Michael Izza, chief executive of the ICAEW, said: “The restrictions may dampen enthusiasm, but I think it is fair that businesses which benefit from loans should be expected to demonstrate corporate and social responsibility.” Considering the revision, James Moore in the Independent questions why they make no mention of companies’ tax affairs, arguing that they “can be every bit as controversial as dividends or executive bonuses”.
One in ten retailers at risk
One in ten retailers are facing imminent collapse due to challenges brought about by the coronavirus outbreak and resulting lockdown, according to the Opinium-Cebr Business Distress Tracker. About 510,000 businesses are at a high risk of entering insolvency, according to the tracker. Many of the firms polled said it would take 28 weeks to recover, three week longer than the previous poll, conducted a fortnight ago. On a more positive note, 41% said their outlook for the next 12 months is more optimistic than when previously polled, suggesting they are over the worst.
The Times, Page: 41 Daily Mail, Page: 66
Antler calls in administrators citing coronavirus
Luggage firm Antler has called in administrators from KPMG, citing the effects of the coronavirus crisis. Some 164 of the firm’s 199 staff have been made redundant across its 18 shops and concessions, with KPMG partner and joint administrator Will Wright commenting: “Like so many companies across the retail and travel sectors, Antler has been profoundly impacted by the COVID-19 pandemic.”
Administrator opens Gate probe
Administrators of entertainment company Gate Ventures are investigating a number of allegedly suspicious transactions, looking at loans, investments and some related party deals. Insolvency practitioners from Quantuma are investigating the company’s affairs and are trying to return money to creditors, while an administrator from Moore Kingston Smith is examining counter-claims made by Gate concerning Zheng Youngxiong, an investor who sought court action claiming the business owed him £2.5m.
German watchdog opened probe into Wirecard accounting last year
Germany’s accountancy watchdog last year opened an investigation into Wirecard following whistleblower claims of accounting fraud. A recent KPMG audit could not verify sales and profits figures at the payments company. Meanwhile, TCI Fund Management has filed a complaint against Wirecard executives, saying the KPMG report points to “anomalies that may have criminal relevance.”
Compass launches £2bn fundraising
Catering group Compass is looking to raise about £2bn in an equity fundraising offer to institutional and retail investors.
The Daily Telegraph, Business, Page: 7 Financial Times Daily Mail, Page: 68
EMPLOYMENT NEWS – WEDNESDAY 20TH MAY 2020
Benefits claimant numbers in UK increase
The Office for National Statistics in the UK has reported that the number of people claiming unemployment benefit increased to 2.1m last month – 856,500, or 69%, more than in March. With jobless figures expected to worsen sharply in the coming months, Jagjit Chadha, director of the National Institute of Economic and Social Research, commented: “We can reasonably expect unemployment to rise very quickly to something over 10% – something we haven’t seen since the early 1990s,” while Tej Parikh, chief economist at the Institute of Directors, noted: “Even before lockdown, coronavirus was threatening to take the shine off the UK’s sterling jobs record, and initial estimates for April don’t make for easy reading.”
ECONOMY NEWS – WEDNESDAY 20TH MAY 2020
Chancellor warns of ‘severe recession’
Chancellor Rishi Sunak has warned that the UK is facing a “severe” recession, telling the Lords Economic Affairs Committee that the “jury is out” on the “degree of long-term scarring” that the coronavirus crisis and support measures rolled out to tackle it will cause. Mr Sunak said lockdown measures are having a significant impact on the economy, adding that the country is “likely to face a severe recession, the likes of which we haven’t seen,” with it “not obvious there will be an immediate bounceback”. He added: “We are clearly dealing with something unprecedented so economic forecasting is not as precise as it might normally be.”
Scotland sees worst high street decline on record
Scottish high streets suffered the worst performance on record last month, with a retail sales monitor from the Scottish Retail Consortium and KPMG showing sales were down 40.3% year-on-year in April. Paul Martin at KPMG said: “As Scotland now approaches two months of full lockdown, it’s no surprise that the country’s retailers are facing their biggest sales declines since records began,” adding that it is “impossible to downplay the scale of the impact the COVID-19 pandemic has had on one of the country’s most important sectors.”
The Scotsman, Page: 36
OTHER NEWS – WEDNESDAY 20TH MAY 2020
Shadow economy growing under lockdown restrictions
The Telegraph reports on the growth of the shadow economy in the UK during the lockdown, saying a “grey” economy is emerging as people turn to informal services. Analysis shows that even before coronavirus-driven restrictions, more than 2m people worked in Britain’s informal economy, with those operating without contracts, benefits or insurance accounting for close to 14% of all employment. Helen Brand, chief executive of the ACCA, said : “The prevalence of shadow economy activity throws up considerable practical and ethical issues for both business and government,” adding: “The UK has a relatively small shadow economy compared with other countries around the world, but it is quite worrying that by 2025 it [is predicted that it] won’t have fallen by much.”
Live Q&A: How would a wealth tax work?
FT tax expert Emma Agyemang will take questions from readers at 12 noon UK time today, with a potential wealth tax among issues that may be discussed.
Contact Paul Southward