NEWS – WEEKEND TO 14TH FEBRUARY 2021
NEWS – WEEKEND TO 14TH FEBRUARY 2021
TAX NEWS – WEEKEND TO 14TH FEBRUARY 2021
Starmer: ‘You can’t choke off the recovery by raising taxes’
In an interview with the Times, Labour leader Sir Kier Starmer talks about the steps the party has taken since its worse election defeat since 1935. As the interview turns to the economy, Starmer is reluctant to discuss specific policies but does say balancing the books should not be the priority while the economy is recovering. “Over the course of the recovery, tax rises are not the right way to ensure that we go forward to a more thriving economy,” Sir Kier says. “There’s an emerging view that I subscribe to that, in the short term, you don’t balance the books and you don’t choke off the recovery by raising taxes on the one hand or reverting to austerity on the other. You’ve got to get your economy to thrive.”
Budget tax rise targets: who will pay?
The Times takes a look at the most likely tax hikes the Chancellor could introduce in his Budget, with income tax and national insurance contributions probably most controversial considering raising these would break a Conservative Party manifesto pledge. Then there’s the equalisation of self-employed workers with employed people, but the Institute of Fiscal Studies said going ahead with this policy now could be seen as “downright perverse”, given the hardships faced by many self-employed workers in the pandemic. The paper goes on to consider the problems with cuts to pension tax relief, reducing the capital gains allowance and reforming inheritance tax.
John O’Connell: PM should emulate Churchill’s tax cutting strategy
New research from the TaxPayers’ Alliance finds that the tax burden now stands at its highest sustained level – based on a five-year average – since 1951. The tax burden next year will be an estimated 34.2% as a share of GDP. That will be the highest single year score since 1969-70. Writing in the Yorkshire Post, John O’Connell, the chief executive of the Taxpayers’ Alliance, says Boris Johnson should follow Winston Churchill’s example and drive the burden down. Tax cuts will be critical to a post-pandemic Britain trying to restore growth and prosperity, as Churchill noted when he said, “for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle”.
Sunak commits to 2021 deadline for global tech tax deal
Rishi Sunak confirmed his commitment in a G7 meeting yesterday to establish a new global tax on tech firms. The Chancellor said the new digital tax framework was a “key priority” and called on member nations to reach an “enduring multilateral solution” by the mid-2021 deadline set by the G20. Mr Sunak also called for cooperation on tax between the G7 and G20, as well as the Organisation for Economic Co-operation and Development.
EU members opt into detached worker provisions
HMRC have updated their National Insurance rules for UK workers operating in the EEA or Switzerland. The move came after the EU notified the UK that all member states will be applying for the detached worker provision, meaning that any workers who are temporarily moving between the UK and the EU will continue to pay into the social security system for their home state.
Expats stranded by pandemic face heavy tax toll
The FT examines the problems faced by oversees workers and business travellers who have been forced by COVID-19 travel restrictions to breach tax residency codes. Elsewhere, the Telegraph profiles some of the tech workers that have left behind the grind of city life for low-tax, sun-kissed countries now they are no longer tied to an office.
Financial Times, Page: 6 The Daily Telegraph, Page: 37
Banks may pass savings details to HMRC
Banks and wealth managers may be asked to pass sensitive information directly to HMRC as tax authorities look to pull in around £5.5bn a year believed to be owed from earnings that taxpayers fail to mention on their tax returns. This comes as HMRC looks to close the £31bn tax gap – the difference between the amount of tax paid each year and what it believes should be paid. A review by the Office of Tax Simplification (OTS) has called on financial services firms to offer views on how they might send information on things such as interest payments, dividends, Gift Aid and pension contributions to the taxman. The OTS document said: “Instead of millions of individuals having to provide to HMRC details of potentially taxable income and gains on their investments, the review will consider whether it could instead be uploaded by their investment or wealth management company.” George Bull, a senior tax partner at RSM, said the plan raises privacy concerns, commenting: “All the bodies required to report financial data to HMRC would have to obtain national insurance numbers from individuals. The consolidation of so much data raises the spectre of data-hacking and identity theft on an unprecedented scale.” An HMRC spokeswoman said the OTS study was “an own-initiative review” by the group, rather than one commissioned directly by the Chancellor. Meanwhile, James Coney in the Sunday Times says addressing the tax gap could help Rishi Sunak balance the books, post-pandemic. He says the Chancellor need not “change any taxes to rake more of this in, you just need to improve the system”, with HMRC “already heading in this direction” through Making Tax Digital, which he says “formalises many informal payments that used to slip through the taxman’s net”.
The Sunday Times The Sunday Times, Business, Page: 11
Davis warns Chancellor over ‘damaging’ tax increases
Former Brexit Secretary David Davis has urged Rishi Sunak not to increase taxes in his March 3 budget, telling the Chancellor: “Growth must be the clear aim of our economic strategy for the next two years – not spreadsheet conservatism.” Writing in the Mail on Sunday, he says the Government “must extend a helping hand to the self-employed and small business owners by ensuring that we don’t destroy jobs by increasing the tax burden”. Mr Davis calls on Mr Sunak to avoid “damaging tax increases” that could hit Britain’s post-pandemic recovery, saying: “The mutterings that keep emerging from the Treasury about increasing taxes to balance the books are economically incomprehensible.” With it suggested that Mr Sunak could increase taxes as he looks to balance the books following the economic hit of the coronavirus crisis, Mr Davis argues that such a move &ldquo ;would not only be wrong, it would be completely counterproductive.” Mr Davis has suggested the Chancellor could “’take his lead” from former president Ronald Reagan who cut income tax rates to revitalise the US economy, saying: “Reaganomics was heavily criticised by conventional economists, but it led to a growth in GDP, a resurgence of business confidence, and a fall in unemployment rates”.
The Mail on Sunday, Page: 6
PROPERTY NEWS – WEEKEND TO 14TH FEBRUARY 2021
Rishi Sunak considers six-week extension of stamp duty holiday
The Chancellor is considering extending the stamp duty holiday by six weeks, the Telegraph reports, in a move designed to prevent tens of thousands of buyers walking away from sales. The decision to raise the threshold for paying stamp duty from £125,000 to £500,000 in July was taken to bolster the economy and prop up the housing market. House prices have risen as a result and a conveyancing backlog now mean buyers are waiting months to complete. Rishi Sunak is looking at a limited extension through to mid-May which would help to alleviate fears that sales risk falling through after the March 31 deadline expires, but is said to oppose calls for a longer six month extension due to the “gratuitous” impact this would have on tax receipts. The paper also reviews property taxes overall, comparing levies in England with other countries and noting a push by Tory MPs to persuade Rishi Sunak to scrap stamp duty and council tax altogether and replace them with a proportional property tax.
The Daily Telegraph The Daily Telegraph, Money, Page: 4
FINANCIAL SERVICES NEWS – WEEKEND TO 14TH FEBRUARY 2021
UK should exploit EU’s war on ‘equivalence’
The Telegraph’s Ambrose Evans-Pritchard comments on the EU’s determination not to grant equivalence to UK financial services companies, arguing that Brussels risks violating international law if it continues with this selective treatment. The non-discrimination principle of the World Trade Organisation makes clear that selective treatment of one state for political reasons is strictly forbidden. The EU grants broad equivalence to Canada, Australia, the US, and others, Evans-Pritchard point out. “All WTO members with equivalent standards have to be treated equally. Refusal to do so goes against the whole Most Favoured Nation principle,” said one expert advising the Government. The consensus seem to be, however, that instead of a unilateral abrogation of the trade agreement (which the UK could rightfully pursue considering the EU’s parallel breach of the Good Friday Agreement), Britain should “focus on the cutting-edge areas of fintech where the UK already has a huge advantage” and be “super-aggressive in pushing for global trade deals elsewhere.”
Amsterdam takes London’s trading crown
The Observer considers the climate for the UK’s financial services sector after it was revealed that Amsterdam has stolen London’s crown as Europe’s major share trading centre, with an average €9.2bn of shares a day bought and sold on the Dutch city’s three main exchanges last week compared with €8.6bn in London. Kevin Ellis, chairman of PwC, comments that London “has a scale that isn’t easily replicated” but suggests the City “does have to evolve to ensure its ongoing relationship with the EU and all of its trading partners.” The paper notes EY analysis showing that, up until October 2020, Dublin was the most popular location for financial services companies moving jobs out of London.
The Observer, Page: 55
CORPORATE NEWS – WEEKEND TO 14TH FEBRUARY 2021
Burberry hands back tax relief
Burberry is to voluntarily pay the Treasury tax it saved from an emergency business rates holiday, with this coming despite the fashion firm’s stores remaining shut. The move makes Burberry the first non-essential retailer to hand over tax on business premises forced to close under lockdown rules. Some retailers that have been able to trade throughout lockdown have given up the business rates tax relief, including a number of supermarkets. Analysis by Altus Group shows 14 retail groups have returned £2.2bn to the Treasury.
The Mail on Sunday, Page: 121
Night-time economy in support call
Representatives of nightclubs, music venues and bars – as well as a number of MPs – have written to Chancellor Rishi Sunak calling for a £4.5bn rescue fund for Britain’s night-time economy, warning that without help the sector “will all but collapse”. They acknowledge the “unprecedented interventions” the Chancellor has already made to support the economy and the wider hospitality sector, but warned that “significant parts” of the economy involving businesses that operate between 6pm and 6am had “fallen through the cracks of the support already offered”. The letter calls for a grant scheme, as well as extensions of the furlough scheme, business rates relief and a reduction in VAT.
The Mail on Sunday
PENSIONS NEWS – WEEKEND TO 14TH FEBRUARY 2021
Cost of cutting pension contributions outlined
Savers risk losing nearly £11,000 from their pension if they cut back on their contributions to get through the coronavirus pandemic. Nest, the government-backed work scheme, said that workers have reduced their average contributions by £8 a month since April 2020. Analysis by Interactive Investor reveals that cutting contributions by £8 a month would mean that a 21-year-old basic-rate taxpayer would have almost £11,000 less at retirement at 68. For a higher-rate taxpayer, who would get greater tax relief on contributions, cutting £8 a month would leave them with £12,500 less at retirement.
Sunak to target pensions?
Jessica Beard in the Sunday Telegraph says that with the Chancellor looking to restore public finances after the blow dealt by the coronavirus crisis, the tax benefits of pensions are under threat. Experts, she says, have warned that retirement savings “will make for rich pickings in a Treasury tax raid”. Tim Stovold of Moore Kingston Smith believes the 25% tax-free pension cash benefit is at risk and is “too generous”, warning it is “inevitable” the Government would cap the amount savers could withdraw under the rule. He added: “The risk of this happening eventually is high. It may not be in this budget though, as it doesn’t immediately collect large amounts of tax.”
The Sunday Telegraph, Business, Page: 9
ECONOMY NEWS – WEEKEND TO 14TH FEBRUARY 2021
UK economic contraction deepest since 1709
Data from the Office for National Statistics show that despite the economy growing by an unexpected 1% in the final quarter of last year, it still suffered its worst annual performance in more than three centuries with output down by 9.9% – wiping out seven years of economic growth. Most of the slump occurred during the first lockdown in the spring but a surprise recovery was seen in the final quarter of 2020. The Chancellor, Rishi Sunak, said that the figures underscored the “serious shock” that the economy was facing because of the pandemic. “While there are some positive signs of the economy’s resilience over the winter, we know that the current lockdown continues to have a significant impact on many people and businesses,” he said. The GDP figures are “less bad than expected”, says PwC chief economist Jonathan Gillham, but the economy is still 8%smaller than it was pre-Covid. “To put this into perspective, every person in the UK is roughly £3,300 worse off than they were in 2019 on a net basis.”
Economists warn over Brexit disruption
Economists have warned that post-Brexit disruption to trade cannot be dismissed as mere “teething problems”, arguing that it points to structural issues which could hit UK GDP for several years. Andrew Goodwin, chief UK economist at Oxford Economics, said “non-tariff barriers” such as additional form-filling, queueing and regulatory obstacles to trade are hitting a number of sectors. He adds: “The onus now is on the Government to find ways of boosting growth in other ways.” Thomas Sampson, associate economics professor at the LSE, said there was “some truth” that disruption at the borders is down to “teething problems but added: “There are also permanent changes which are going to make trading harder, even once everyone understands the new system.” Prof Anand Menon, a political scientist at King’s College London, said: “Some of it is teething problems, but the vast majority isn’t”.
Javid: Factor nature into wealth of countries
Former Chancellor Sajid Javid has said that countries’ wealth can no longer be calculated on GDP and financial assets alone and must be overhauled to include the value of their nature as well. In an interview for the Sunday Telegraph, he calls for a new international financial organisation to price up biodiversity and carbon, in a major overhaul that would put a “cost to nature of the resources we use”.
SMEs NEWS – WEEKEND TO 14TH FEBRUARY 2021
Northern firms enjoy healthy VC backing
Research by KPMG reveals that northern businesses attracted more than £100m in venture capital investment in the fourth quarter of 2020. The firm’s Global Venture Pulse Survey found that £102m was raised across 47 deals, representing 12% of all UK deals by volume, but only 3% of all UK deal value. Nationally, the report found that £11.7bn of VC investment was made into UK scale-up businesses across 1,969 deals in 2020.
INTERNATIONAL NEWS – WEEKEND TO 14TH FEBRUARY 2021
Head of German accounting watchdog faces compliance probe
The German government is investigating whether the president of Germany’s accounting watchdog violated internal compliance rules when he joined the supervisory board of listed German wholesaler Metro AG in 2017.
REGULATION NEWS – WEEKEND TO 14TH FEBRUARY 2021
FRC expects further delays in transition to ARGA
The Financial Reporting Council (FRC) is postponing an expansion of its enforcement division due to the lack of Government action on audit reform, the Times reports. The FRC is due to be replaced by a tougher regulator but the Government has yet to confirm the timetable for bringing forward legislation to create the new watchdog. Although the FRC anticipates having to expand its supervision and enforcement team, it has decided to put this off until at least next year and “until the Government’s public policy position is clearer”. Sir Jon Thompson, its chief executive, said that the council had assumed a “further two-year transition period” to create the new watchdog, known as the Audit, Reporting and Governance Authority (ARGA), in 2023.
OTHER NEWS – WEEKEND TO 14TH FEBRUARY 2021
Bill Michael quits as chair of KPMG UK
KPMG UK chairman Bill Michael has resigned after a leaked conference call revealed how he’d told colleagues they were fortunate to have the jobs they had and should stop moaning about the pandemic. He also said he thought the concept of unconscious bias was “complete and utter crap”. Mr Michael’s no-nonsense approach was old fashioned and abrasive, the FT suggests, with some at the firm believing his temperament was counter to the culture they wanted to pursue. The Telegraph’s Ben Marlow also described Michael as direct – “a salt-of-the-earth Aussie” – but agrees with those who “think we could do with a few more Michaels in the world, and that his sacking is just another example of liberal wokery getting out of control.” Marlow points out that much of the discontent with Michael was due to the cost-cutting exercise he’d embarked on – relations became “toxic” as partner pay slumped to a mere £572,000 last year and underperforming staff were ejected. But Marlow too points to the generational differences many bosses will be experiencing, with younger workers requiring their job to be “fun” and for the company they work for to have a genuine social conscience. Perhaps, Marlow contends, if Michael is guilty of anything it is “failing to understand that the world he has been working in for decades has changed.” Or maybe, he concludes, “there’s an unconscious bias against straight-talking Australians?”
Give your loved one a tax break this Valentine’s Day
HMRC is encouraging married couples and people in civil partnerships to sign up for a tax break this year. Marriage Allowance offers individuals the chance to transfer part of their Personal Allowance to their husband, wife or civil partner, which could reduce their tax by up to £250 a year. For some couples, this could mean a backdated payment of up to four years of claims which could be as much as £1,188.
Luxury watch market clocks huge growth
The Sunday Times looks at the luxury watch industry, noting Deloitte research showing that it has more than doubled in size to £17bn since 2000.
The Sunday Times, Page: 24
Contact Paul Southward