NEWS – WEEKEND TO 12TH JULY 2020

NEWS ROUNDUP

TAX NEWS – WEEKEND TO 12TH JULY 2020

SATURDAY

Recession will put HMRC under pressure to raise revenue

After HMRC revealed that the tax gap had been reduced to a record low of 4.7%, or £31bn, experts point out that large slices of this is put down to “taxpayer error”, “failure to take reasonable care” or “legal interpretation” – where tax is not legally due, but HMRC was expecting it because it misunderstood the law. John Barnett at the Chartered Institute of Taxation, commented: “If even HMRC does not understand the law to the tune of £4.9bn, what hope is there for ordinary taxpayers faced with the same complexity in the system?” With the tax gap predicted to increase and tax revenue to shrink as the economy contracts, there is likely to be more pressure on HMRC to raise revenue. Tom Selby, a senior analyst at the wealth manager AJ Bell, said: “These efforts are likely to focus on people breaking or bending the rules to artificially reduce the amount of tax they pay. However, simplification of the rules that people are required to navigate and efforts to further modernise the system of reporting could also go a long way to reducing tax errors.” HMRC said: “We provide a wide range of support and guidance so all our customers can access all the information that they need to get their tax right.”

The Times, Page: 57

A data foundation for tax automation

As tax authorities have become more sophisticated about their own data management, they’re requiring more data, more frequently, from tax departments. At the same time, new regulations require finer levels of transaction detail, and U.S. tax reform has created ever more complexity. “Data management is a constant challenge for tax,” says Deloitte Tax partner Emily VanVleet. “Despite a host of new automation technologies that can be deployed for greater efficiency—including workflow tools, robotics, and AI – much of the actual data retrieval and processing is still done manually with spreadsheets.” Data wrangling is a fundamental process that can support and complement many of the latest technologies because of its ability to retrieve and aggregate raw data from multiple sources and in different formats, making it readily available for analysis and reporting. “Data wrangling can be deployed relatively easily, which makes it very inviting to tax functions because users can see real benefits soon after implementation,” says Joel Hermes, a partner at Deloitte Tax LLP. “It can offer quick wins while establishing a platform for more widespread tax automation. We like to think of this in terms of think big, start small, and act fast.”

CFO Journal

Labour conflicted over wealth taxes

Labour is fighting with itself over whether the party supports a wealth tax or not. Following reports that the shadow chancellor was no longer calling for tax rises, Dan Carden, the shadow financial secretary, broke ranks to dismiss as “false” reports that leader Sir Keir Starmer had abandoned plans for a new tax on wealth. Mr Carden said: “Labour is clear that the cost of the crisis should be borne by those with the broadest shoulders. We are following very closely the academic research under way by LSE Inequalities, CAGE Warwick and others on how a UK wealth tax would work.”

The Times, Page: 14

SUNDAY

Planning overhaul and tax cuts planned for ‘freeports’

Under Government plans for a post-Brexit economic revolution, Chancellor Rishi Sunak is preparing to introduce tax cuts and an overhaul of planning laws in up to 10 new “freeports” within a year of the UK becoming fully independent from the EU in December. Mr Sunak will use his autumn budget to invite bids from towns and cities to become freeports, where tax and regulatory changes will be introduced, including research and development tax credits, generous capital allowances, cuts to stamp duty and business rates, and local relaxations of planning laws. The Government believes the policy can transform ports into “international hubs” for manufacturing and innovation. Meanwhile, Michael Gove has announced that the Government is spending £705m to ensure that Britain’s “new borders will be ready when the UK takes back control on January 1 2021”, with or without a post-Brexit trade agreement. The work will lay the foundations for “the world’ s most effective border by 2025”.

The Sunday Telegraph, Page: 1, 2 The Sunday Telegraph The Sunday Times, Page: 2 The Mail on Sunday, Page: 4

Tories will struggle with inevitable need for tax rises, says Gauke

Former Tory Treasury minister David Gauke says in a piece for the Observer that tax rises will have to do “most of the heavy lifting” when it comes to paying for the state intervention needed to rescue the economy from the shock of the coronavirus pandemic. Mr Gauke says the country is heading towards an annual deficit of £350bn and that for the first time since the early 1960s the size of government debt will exceed the size of the UK economy. “The political challenge in raising tax by the necessary amount will be immense. Any plan will need to be seen as being fair – those with the broadest shoulders will have to bear the greatest burden – but must not undermine our attractiveness as a location for investment and wealth-creating individuals.” He goes on to add, however, that it is “not yet clear that the Conservative Party as a whole is reconciled to the reality that sound public finances wil l require higher taxes.” A range of other voices echo these sentiments and consider how various tax rises could make a dent in the country’s debt.

The Observer, Page: 1, 9, 45 The Sunday Times, Business, Page: 9

Labour’s wealth tax plans would cost £2,500 each

A tax on wealth by the Labour party could land six million people with an annual bill of £2,500, according to an estimate from the Conservative Research Department. The Tories claim that Labour is eyeing a system in operation in Norway – where everyone with savings and property worth more than £126,000 is hit with an annual charge of 0.85% above that amount. Labour appears split over the wealth tax policy with several members of the front bench taking different positions. The Express cites Paul Falvey, a tax partner at BDO, who believes “a UK wealth tax would probably take account of homes”.

The Mail on Sunday, Page: 6 Sunday Express, Page: 19 The Sun, Page: 2

CORPORATE NEWS – WEEKEND TO 12TH JULY 2020

SATURDAY

Standard Life Aberdeen dumps Boohoo stock amid ethical concerns

One of Boohoo’s biggest investors has sold down its stake and labelled the retailer’s response to illegal pay allegations “inadequate”. Standard Life Aberdeen has now sold most of its 3% holding in the company which is embroiled in a scandal over claims its suppliers are paying staff less than the minimum wage and that Leicester factories where its clothes are made failed to protect staff from coronavirus. Multiple sources report of instances where staff are paid as little as £3 per hour with a dossier on another retailer, Quiz, put together by the Times now in the hands of the National Crime Agency and the Gangmasters and Labour Abuse Authority. Questions are being asked about the lack of enforcement, undocumented workers, collusion between bosses and workers who want to continue to receive benefits, and VAT fraud. One source told the Times: “It’s an open secret there are an army of accountants and lawyers who h elp these factories in Leicester shut and reopen by phoenixing companies.” The FT cites David Metcalf, the former director of labour market enforcement at HMRC, who said recently: “Often, HMRC doesn’t go after the people who don’t have records.” The Mail talks to one factory operator who freely admits to paying staff £4 per hour and a machinist who says she’s paid £5 per hour but her payslip reads £8.72.

The Daily Telegraph The Times, Page: 19 The Times, Page: 19 The Times, Page: 45 Financial Times, Page: 17 The Guardian Daily Mail, Page: 32

SUNDAY

M&C Saatchi’s profits set to crash

There is speculation that the 2018 profits at M&C Saatchi could be marked down to zero by the advertising agency’s auditor PwC in another blow to investors. The company was hit by an accounting scandal last year that prompted four directors to leave. PwC has been carrying out an independent review of the agency’s accounts after KPMG, the firm’s auditor since 2012, resigned last September after clashing with the agency over fees.

The Mail on Sunday, Page: 112

Byron Burger staff braced for job cuts

Burger chain Byron filed notice of its intention to appoint administrators for a second time on Friday as KPMG continues its attempts to sell the chain. Byron, which has 1,200 staff across 52 outlets, is said to have received interest from three suitors. The Sunday Times says a pre-pack administration is the most likely outcome.

The Sunday Times, Business, Page: 1

Private hospital company NMC Health set to be sold

Alvarez & Marsal , the administrators to NMC Health, have appointed advisers from US firm Perella Weinberg to find a buyer for Aspen Healthcare as part of a break-up of the company. NMC Health collapsed into administration in April after a £5.2bn debt pile was unearthed.

The Mail on Sunday

SMEs NEWS – WEEKEND TO 12TH JULY 2020

SATURDAY

New P2P COVID-19 loans for the self-employed

A new emergency COVID-19 loans scheme has been launched to help some of the freelancers and self-employed workers who have missed out on Government support. The Small Business Interruption Loan Service has been unveiled by a fintech-led group in association with EXCLUDEDUK – which has been joined by tens of thousands of self-employed and small business owners not eligible for Covid financial help. It works as a peer-to-peer lending platform, which has been provided by P2P lender JustUs.

Daily Express, Page: 57

SUNDAY

High street banks hampered SME crisis lending

Peter Evans reports in the Sunday Times that high street banks, including RBS, Lloyds, HSBC and Barclays objected to plans to allow fintech lenders indirect access to funding from the Bank of England so they could sell loans to small businesses through the Government’s emergency bounce back loan scheme (BBLS). Without access to the same cheap funding, fintech must rely on private backers, meaning the soon run out of cash leaving them unable to lend to thousands of small firms applying for emergency loans. The scheme would have required the big banks to funnel cash from the Bank’s term funding scheme to alternative lenders. But sources say commercial banks did not want to help their competitors.

The Sunday Times, Business, Page: 1

EMPLOYMENT NEWS – WEEKEND TO 12TH JULY 2020

SATURDAY

Graduates left out of kickstart programme

Rishi Sunak’s “kick-start” scheme to get young people into work is focused on low-paid jobs in industries such as hospitality, construction and care, experts argue. The Government’s scheme will do nothing for aspiring lawyers, accountants and other ambitious graduates, the Telegraph reports. The £2bn package will l see the state pay the wages of young people on Universal Credit for six months, but most university leavers will be excluded and those who can take part can only work for 25 hours a week, paid at the national minimum wage.

The Daily Telegraph, Money, Page: 4

Jobless total rose by 250,000 last month

Official figures next week are forecast to show that roughly 250,000 people lost their jobs in June, with Capital Economics predicting that the quarter-on-quarter employment figure will fall by 290,000.

The Times, Page: 49

SUNDAY

Furlough brings fall in wages while jobless rate jumps

Official figures will this week reveal that average wages have fallen for the first time in six years, driven down by the Coronavirus Job Retention Scheme which has resulted in a pay cut for many. Furloughed workers only receive 80% of their pay to a maximum of £2,500 and many employers have not taken up the option of topping up this up. The overall jobless rate is expected to rise to 4.5% over the quarter, but this excludes furloughed workers and economists fear as many as 20% could be laid off as the scheme is wound up. Kallum Pickering, Berenberg’s senior UK economist, said: “We estimate the actual underlying rate of unemployment is somewhere between 8% and 9%.” Some good news is that May growth figures are likely to reveal a record 5.3% surge in output. But this revival is set to “struggle for traction beyond August”, says Samuel Tombs, chief UK economist at Pantheon Macroeconomics, as social distancing and an increase in redundancies hampers the recovery.

The Sunday Telegraph

Police let illegal sweatshops go unchecked due to racism fears, says Patel

Priti Patel has reportedly raised concerns that police have declined to investigate exploitation in the garment industry due to fears they would be viewed as racist. A source close to the Home Secretary said: “This scandal has been hiding in plain sight and there are concerns cultural sensibilities could be in part to blame for why these appalling working practices haven’t been properly investigated.” Shares in Boohoo slumped last week following news workers were being paid as little as £3.50 an hour to pack clothes destined for the fast-fashion retailer. Sara Thornton, the independent anti-slavery commissioner, says the Modern Slavery Act needs to be tightened up while Robert Jenrick, the communities secretary, has ordered an investigation. The Sunday Times suggests this could lead to the Government seizing control of Leicester city council, which has been accused of repeatedly failing to address the issue. HMRC, which is responsible for enforcing the minimum wage, has also come under fire, with a senior Home Office source saying they have “been asleep on this issue for ages.”

The Sunday Times, Page: 1, 6

REPORTING NEWS – WEEKEND TO 12TH JULY 2020

SATURDAY

Separating COVID-19 impact in results “inappropriate”

Some companies are deciding to simply exclude the impact of the coronavirus pandemic from their earnings leading investors and market watchdogs to speak out against the practice. They say that turning the commonly used Ebidta (earnings before interest, depreciation, taxes and amortization) into Ebidtac (c for coronavirus) can give a misleading impression. Ebidtac is a measure that’s emerged in recent months as a way for borrowers to show what their performance might have been had it not been for the impact of the pandemic. Proponents of Ebidtac say it provides continuity with past results and some banks have been sympathetic, but regulators are cautious. The European Securities and Markets Authority has said businesses should be wary of separating the impact of the virus in profit and loss statements while the Financial Reporting Council has warned that measures which attempt to show “normalized” results are likely to be “highly subjective” and “potentially unreliable”. Ratings agencies and investors echo these views.

Washington Post

REGULATION NEWS – WEEKEND TO 12TH JULY 2020

SUNDAY

New State regulator for tax advisers

The Treasury is launching a consultation on whether to create a new regulator to oversee tax advisers, the Mail on Sunday reports. “Many tax advisers are competent and adhere to high professional standards,” said the Treasury. “But some are incompetent, some unprofessional, a few actively corrupt.” Glyn Fullelove, head of the Chartered Institute of Taxation, said: “We are greatly in favour of raising standards, but believe this ought initially to be based on the professional bodies. It would raise tricky conflict-of-interest questions were the State to be the regulator.”

The Mail on Sunday, Page: 12

PROPERTY NEWS – WEEKEND TO 12TH JULY 2020

SATURDAY

Tax cut announced for Scottish home buyers

Kate Forbes, the Scottish finance secretary, has announced a temporary cut to the transaction tax on house sales and extra support for first-time buyers. The starting point for land and buildings transaction tax (LBTT) is to rise from £145,000 to £250,000 from Wednesday.

The Scotsman, Page: 7

PENSIONS

Pensions savers forced to wait for cash

Pension Bee has found that one in seven savers who requested access to their pension pots have had to wait more than five months. The research also found that a fifth of savers abandoned their plans to withdraw their cash to reinvest or spend it because they found their pension company’s process too complicated. Romi Savova, the chief executive of Pension Bee, said the delays were concerning. “Companies should develop straightforward and flexible products to help consumers draw down their pension funds simply and efficiently,” she said. Ros Altmann, a former pensions minister, defended the delays, saying, “if accessing your pension is as simple as a click of a button, people may think it is just like their bank account, which it’s not supposed to be at all.”

The Sunday Times, Page: 15

Families of women who died with underpaid state pensions will get paid

The Government has confirmed that the heirs of elderly women who die without realising they were underpaid massive sums in their state pension will receive the money. According to research by the Mail on Sunday, tens of thousands of women are owed a fortune in lost state pension due to the blunder. In another breakthrough, women will be shielded from unfair income tax bills on their back payments, the Labour Party has established after pressing the Government on the scandal.

The Mail on Sunday

SUNDAY

Pensions savers forced to wait for cash

Pension Bee has found that one in seven savers who requested access to their pension pots have had to wait more than five months. The research also found that a fifth of savers abandoned their plans to withdraw their cash to reinvest or spend it because they found their pension company’s process too complicated. Romi Savova, the chief executive of Pension Bee, said the delays were concerning. “Companies should develop straightforward and flexible products to help consumers draw down their pension funds simply and efficiently,” she said. Ros Altmann, a former pensions minister, defended the delays, saying, “if accessing your pension is as simple as a click of a button, people may think it is just like their bank account, which it’s not supposed to be at all.”

The Sunday Times, Page: 15

Families of women who died with underpaid state pensions will get paid

The Government has confirmed that the heirs of elderly women who die without realising they were underpaid massive sums in their state pension will receive the money. According to research by the Mail on Sunday, tens of thousands of women are owed a fortune in lost state pension due to the blunder. In another breakthrough, women will be shielded from unfair income tax bills on their back payments, the Labour Party has established after pressing the Government on the scandal.

The Mail on Sunday

ECONOMY NEWS – WEEKEND TO 12TH JULY 2020

SATURDAY

UK FDI up 4% in the latest financial year

Britain attracted 1,852 new inward investment projects in the latest financial year, up 4% on the year before, according to official figures. Data from the Department for International Trade shows that the US continues to be the No 1 source of foreign direct investment in the UK, delivering 462 projects and 20,131 jobs. Liz Truss, international trade secretary, said: “These figures demonstrate the resilience of the UK economy and the work of the government to continue to build and attract inward investment into the UK.”

The Times, Page: 52

UK expected to suffer worst crash of any big economy

Credit ratings agency Moody’s expects the UK to suffer the worst economic crash of any major economy in 2020, with Brexit acting as a drag after the coronavirus crisis. Analysts said they thought the UK will suffer the biggest drop in GDP in the G20 this year, with the economy shrinking by 10.1%. Moody’s also predicted that government debt as a share of national income will increase by 24 percentage points compared to its 2019 level.

City AM

SUNDAY

Labour calls for a back-to-work budget

The Labour leader is calling for a back-to-work budget with jobs at its heart. Sir Kier Starmer told a virtual Durham Miners’ Gala that working people should not have to pay for the costs of the crisis. “It is not of your making and many of you, and your families, have been on the front line, in our hospitals, our shops, our care homes, keeping schools open for the children of key workers and in so many other jobs that have been undervalued and underpaid for too long,” he said.

The Mail on Sunday

OTHER NEWS – WEEKEND TO 12TH JULY 2020

SATURDAY

Just one in five people feel safe dining out

A new survey by the Office for National Statistics indicates just one in five people are ready to return to restaurants as they reopen following lockdown. The ONS survey of 2,500 people – which was conducted before the Chancellor’s ‘eat out to help out’ meal voucher scheme was announced – found just 20% of adults were comfortable with eating at restaurants either indoors or outdoors, compared with 60% of respondents put off by the idea. Among the over-70s, two-thirds of all respondents rated themselves either “uncomfortable” or “very uncomfortable” with eating out. “The reluctance of consumers to go to restaurants and cinemas fuels concern that the UK’s recovery will be held back by persistent cautious behaviour even after restrictions are eased,” said Howard Archer, chief economic adviser at the EY Item Club.

The Daily Telegraph Financial Times, Page: 3

SUNDAY

BlueBay bets on sterling drop from hard Brexit

BlueBay Asset Management is predicting a 10% slide in sterling against the euro as the chances of a comprehensive trade deal between the UK and the EU grow increasingly unlikely.

Financial Times

Contact Paul Southward

Paul Southward