NEWS – WEEKEND TO 16TH AUGUST 2020
NEWS – WEEKEND TO 16TH AUGUST 2020
TAX NEWS – WEEKEND TO 16TH AUGUST 2020
Investors hand over £9.5bn in CGT
Investors paid a record £9.5bn in capital gains duties in the 2018/19 tax year. This marked a 6% year-on-year increase, with HMRC’s CGT take climbing two thirds over the past five years as stock markets rose and property values increased. Analysis shows that CGT revenue came from duties levied against almost £63bn of profit made by 276,000 taxpayers – 4% fewer than in 2017/18. The Telegraph’s Harry Brennan notes that the Treasury’s record CGT intake comes as Chancellor Rishi Sunak reviews the levy, with it suggested the tax could be reformed in a bid to balance the nation’s books to help cover its coronavirus bill. Sarah Coles of Hargreaves Lansdown believes CGT is the “ideal candidate for a tax grab”, while Laura Suter of AJ Bell says the level of gains versus the actual tax take after all allowances and reliefs are taken into account is “an area that may pique the Government’s interest”. Ms Suter notes that while there were £63bn of total gains made by individuals in 2018/19, only £9.5bn of tax was taken, representing an average tax rate of 15%.
The Daily Telegraph The Times, Page: 56
HMRC boosts plea bargain revenue
HMRC has increased its revenue by 25% by agreeing out-of-court settlements with wealthy taxpayers, with the additional tax collected through bargain agreements hitting £119.4m in the 12 months to the end of March, up from £95.8m in the same period the year before. Plea bargain agreements see HMRC contact a taxpayer with the offer of a settlement when it suspects them of tax evasion, while a taxpayer who wants to come clean can apply to HMRC for a plea bargain through its contractual disclosure facility. Law firm Pinsent Masons, which collected the data, said such agreements have been popular with taxpayers as a way of “coming in from the cold” and avoiding much tougher sanctions from HMRC or the courts.
Tax advice for passing on a property
A Times reader asks for advice on passing a property to their children, seeking clarity on the tax implications. Jackie Hall of RSM details the capital gains tax liability, while Vanessa Lee from BDO comments on CGT and stamp duty.
For all your queries on CGT, SDLT and taxes generally contact Paul Southward, your accessible expert.
Older generations set to foot COVID-19 bill
Experts believe the Chancellor will target older generations with tax rises on pensions and property wealth as he looks to re-balance the books to cover the UK’s coronavirus bill, says the Sunday Telegraph’s Harry Brennan. Neela Chauhan of UHY Hacker Young believes tax rises are inevitable due to the £322bn deficit, but suggests policymakers would be wary of making younger generations cover the cost, while Sean McCann of insurer NFU Mutual says “intergenerational fairness” would be at the forefront of Rishi Sunak’s agenda. Mr McCann says the Chancellor is more likely to target property wealth and pension savings than increase income tax.
The Sunday Telegraph, Business, Page: 9
Tax rethink to ease national debt?
Hunter Davies in the Sunday Times looks at measures that could be taken to boost Government finances following the hit to the coffers brought about by the coronavirus crisis. He suggests that income taxes could rise, with “every expert and his dog” saying such a move is on the cards. He also moots the possibility of reform of property tax and the introduction of a wealth tax. On the latter, he says: “The wealthy would run screaming all the way to the Cayman Islands. Accountants will love it.”
INSOLVENCY NEWS – WEEKEND TO 16TH AUGUST 2020
Government support keeps insolvencies low
Corporate insolvencies fell by a third last month, with taxpayer-funded support helping support businesses put under pressure by the coronavirus crisis. Figures show there were 955 company insolvencies in England and Wales in July, a 34% dip on the total reported in July 2019, with the Insolvency Service noting the impact of “enhanced government financial support for companies and individuals”, as well as reduced operations in courts and less enforcement activity by HMRC amid the pandemic. Colin Haig, president of insolvency and restructuring trade body R3, said Treasury support “means we’re not much nearer to understanding how COVID-19 is truly affecting underlying corporate or individual distress”. Analysis shows that of July’s insolvencies, 590 were voluntary liquidations, 166 were compulsory liquidations, 182 were administrations and 17 were company voluntary arrangements.
CORPORATE NEWS – WEEKEND TO 16TH AUGUST 2020
Yo Sushi and Jigsaw look to CVAs
Restaurant chain Yo Sushi has announced plans to cut 250 jobs as part of a major restructuring that is being handled by Deloitte. The firm has confirmed that a CVA will see 19 of its 69 UK outlets close. CEO Richard Hodgson said the firm, “like the rest of the sector”, needs to take decisive action to adapt to the lasting changes brought about by the coronavirus pandemic. Meanwhile, fashion chain Jigsaw has proposed store closures and a switch to turnover-linked rent through a CVA.
The Times, Page: 45 Daily Mail, Page: 93 Daily Mirror
McCloud’s housing company at risk of insolvency
TV presenter Kevin McCloud’s flagship housing company may be at risk of being forced into insolvency. In an email to investors, Grand Designs host Mr McCloud said HAB Housing owed £1.2m to another firm in his property empire, HAB Land, and HAB Land’s liquidators at KPMG had attempted to call in the loan. “HAB Housing cannot pay and could yet be forced into a formal insolvency process,” McCloud wrote, noting that he had informed KPMG that HAB Housing was in no position to honour the debt and was open to negotiation.
The Guardian, Page: 37 The I, Page: 72 The Independent, Page: 33
Gymshark tops £1bn valuation
Sportswear brand Gymshark has been valued at more than £1bn after founder Ben Francis sold a 21% stake in the company to US private equity firm General Atlantic. Gymshark was advised by PwC, while General Atlantic was advised by Royal Bank of Canada.
The Daily Telegraph, Page: 29 Financial Times, Page: 14
Quiz agrees banking deal
Fashion retailer Quiz has agreed an extension of its banking facilities with HSBC. It is noted that in June, Quiz placed the division that runs its 82 standalone stores in administration, with Blair Nimmo, joint administrator and head of restructuring for KPMG, citing the impact of the “highly challenging” environment for bricks-and-mortar retailers and the COVID-19 lockdown.
The Scotsman, Page: 29
Exodus hits town centres
Ismail Mulla in the Yorkshire Post looks at concern that town and city centres could be “hollowed out” due to an exodus of workers amid the coronavirus pandemic. Giles Taylor of KPMG says businesses are in “unchartered waters”, with most likely to look to reduce office space after successfully moving to home-working.
Yorkshire Post, Page: 1
Debenhams hires restructuring firm for potential liquidation
Debenhams’ owners have appointed restructuring specialist Hilco Capital to draw up plans for its potential liquidation. It is understood Hilco’s appointment is part of a “contingency plan” as bosses look to sell the 242-year-old department store chain. The retailer, which went into administration for the second time in a year in April, last week announced plans to cut a further 2,500 jobs, having confirmed 4,000 job cuts earlier this year. A spokesman for the department store said administrators from FRP Advisory have appointed advisors “to help them assess the full range of possible outcomes,” which include the current owners retaining the business, potential new joint venture arrangements or a sale to a third party.
The Observer The Mail on Sunday, Page: 2 Sunday Mirror
Ashley eyes DW Sports
Mike Ashley’s Frasers Group has reportedly made a bid for the collapsed sports retailer and gym-operator DW Sports. Mr Ashley’s firm, formerly known as Sports Direct, is understood to have offered BDO more than £30m, with the Sunday Times saying administrators are believed to have been asking for about £20m. BDO said it had “received a number of serious and credible offers”.
Entrepreneur in court battle with Saudi royals
British entrepreneur Gary Arnold is suing members of the Saudi royal family, saying their company, Harbor Holdings-Himmah Foods, failed to make good on a deal to acquire his London Business Group. Mr Arnold’s lawyers argue that a legally binding agreement was breached, even though the deal was ratified with a due diligence report from PwC.
The Sunday Telegraph, Business, Page: 1
Wigan look to score a new owner
The Sun looks at efforts to secure a new owner for football club Wigan Athletic, saying administrators Begbies Traynor want a £1.3m fee for doing so, with this set to increase if a new backer is not found this month. There have reportedly been six bidders but none were prepared to pay a non-refundable £100,000 deposit.
The Sun, Page: 60
Musings on Monzo
Emma Dunkley in the Sunday Times considers the climate for digital bank Monzo, noting that auditor EY has warned of “significant doubt” over the bank’s ability to stay in business beyond 12 months due to uncertainty caused by COVID-19.
The Sunday Times, Business, Page: 8
FINANCIAL SERVICES NEWS – WEEKEND TO 16TH AUGUST 2020
PE investors could lead M&A recovery
The Sunday Times’ Jill Treanor looks at private equity, saying the sector is “likely to be doing more buying than selling” in the “COVID-19 climate”, pointing to City sources who suggest firms are “waiting to pounce on weakened businesses”, with bankers working on potential deals that could revive the mergers and acquisitions market. Jonathan Boyers, head of corporate finance at KPMG, believes “private equity investors will probably lead the recovery in the M&A market”.
EMPLOYMENT NEWS – WEEKEND TO 16TH AUGUST 2020
Pandemic set to cost 1m jobs
With the latest Office for National Statistics figures showing that the number of workers on company payrolls has fallen by 730,000 since March, employment experts believe total coronavirus-related job losses will pass the 1m mark by the start of September, with some commentators suggesting the milestone has already been surpassed. Melissa Davies, chief economist at consultancy Redburn, said: “At this pace, the number of jobs lost could easily reach one million by September, and comfortably by the time the furlough scheme is wound up in October.” She went on to warn that losses were “unlikely to stop at one million”, calculating that if 30% of workers currently furloughed do not return to work, it equates to around 2.25m job losses. Paul Dales of research firm Capital Economics believes the 1m mark has already been hit, suggesting “lags in the data mean it hasn’t been confirmed yet.” Kirsty Rogers of law firm DWF warns that the “true scale of the problem is masked by the job-retention scheme”, adding that unemployment numbers could reach record highs when the initiative is wound up.
NEWS – WEEKEND TO 16TH AUGUST 2020
Sales and prices surge following stamp duty cut
The Times’ Carol Lewis looks at the impact the stamp duty cut has had on the property market, with Bank of England data showing sales are up 20% and average asking prices have risen by £10,000 in the four weeks since Chancellor Rishi Sunak increased the threshold for the levy. The Office for Budget Responsibility predicts that the stamp duty cut will lead to a 0.5% increase in property prices. Ms Lewis also looks at how economic uncertainty has prompted caution among mortgage lenders, with George Bull at RSM saying first-time buyers and second steppers may see difficulties in securing a mortgage, with furloughed workers and those in high-risk sectors reporting “extra steps in the application process and delays in decision-making by lenders.”
Yorkshire leads on house price growth
Analysis from property website Home shows that amid the post-lockdown recovery in the property market, Yorkshire is leading the way with 8.1% year-on-year price growth. The North West of England is also performing well, with growth of 6.7%, while the Asking Price Index for August shows Scotland has seen growth of 6.6%. Asking prices in July were up for a third consecutive month in all English regions, Scotland and Wales. The lowest level of growth was seen in Greater London, where asking prices were up 0.5%, while the South East was just ahead at 0.6%.
PENSIONS NEWS – WEEKEND TO 16TH AUGUST 2020
Many UK companies delay investing worker pension contributions
FT analysis shows that a number of employers have not invested employees’ pension payments during the pandemic, with pension companies flagging a spike in missed payment deadlines.
Furlough fraud reports increase
Reports of furlough-related fraud have continued to rise and now number nearly 8,000, HMRC figures show. The latest data show that HMRC has been sent 7,791 reports of potential fraud linked to the Coronavirus Job Retention Scheme, marking an increase on the 6,749 reported on July 22. Whistleblowing charity Protect has highlighted a number of instances where companies appear to be deliberately flouting the rules. HMRC says it will target companies that have abused the system, with those who deliberately ignore or try to find a way around the rules potentially facing criminal charges.
SMEs NEWS – WEEKEND TO 16TH AUGUST 2020
Small firms missing out on support grants
Analysis from the British Independent Retailers Association (Bira) shows that small businesses are missing out on millions of pounds of financial support, with £1.5bn of the £12bn allocated for emergency grants to cover coronavirus-related disruption still unclaimed from local authorities. Bira chief executive Andrew Goodacre says some firms may not realise they are eligible, while others may not have been contacted as their local council has outdated information. He has urged firms that have yet to make a claim to “step forward or risk losing out.”
The Mail on Sunday, Page: 133
Pension savers overcharged £627m in tax
Data from HMRC show that pension savers have been overcharged £627m in tax since pension freedoms commenced in 2015. The figures show that in Q2 pension savers were owed an average of £3,500. The analysis suggests that many savers overpay tax the first time they withdraw from their pension due to HMRC calculations which are conducted on a Month 1 Basis, which charges savers as though a lump sum withdrawal is the first of monthly withdrawals. Issues can also arise if a pension provider is unaware of a person’s tax code or details of any other income they have, with some defaulting to an emergency tax code, which is set at a higher rate.
INTERNATIONAL NEWS – WEEKEND TO 16TH AUGUST 2020
Greece offers tax perk for retirees
Considering the appeal of Greece and its response to the COVID-19 pandemic, Chris Blackhurst notes that it is introducing a 7% flat rate of income tax for retirees looking to relocate, with this applying to all sources of income, not just pensions. The rate will be offered to those who reside in Greece for more than six months in the year and while it bars people from taking a Greek job, remote workers do qualify.
The Independent, Page: 32
ECONOMY NEWS – WEEKEND TO 16TH AUGUST 2020
Record borrowing decline on the cards
A report from EY Item Club suggests demand for consumer credit will fall by a record 15.9% and Britain’s unsecured debt pile is unlikely to recover to 2019 levels until 2022. The report also suggests mortgage lending will grow just 2.6% this year, the slowest rise in half a decade. Dan Cooper, UK head of banking at EY, said: “Even assuming the economy bounces back in the short term, we’re likely to see very weak growth in loans to home buyers and consumers for some time to come.” Andrew Hagger, the founder of personal finance site Moneycomms, said: “The coronavirus crisis has made many people re-evaluate their spending and savings habits … It’s been a game changer to such an extent that consumer spending and borrowing habits will have changed permanently for some.” Sarah Coles, a personal finance analyst at Hargreaves Lansdown, said borrowing would “eventually” return to pre-coronavirus levels, but the question was “how long it’s going to take.”
BoE economist sees signs of rapid recovery
Britain’s economy is on course for a rapid recovery from the coronavirus crisis, Bank of England chief economist Andy Haldane has predicted. Noting that strong consumer spending has already helped claw back as much as half of the losses seen in the wake of the pandemic, Mr Haldane says the economy is expected to expand by more than a fifth in the second half of the year. This, he adds, would be “by far the fastest rise” since quarterly records began. Saying that economic activity is rising “sooner than anyone expected”, he insists that the “foundations for an economic recovery – a rapid one – are already in place, hiding in plain sight.”
The Mail on Sunday
Government borrowing nears record
Figures from the Office for National Statistics are expected to show that Britain’s all-time annual record for borrowing is close to being broken due to the coronavirus pandemic. Data set to be published on Friday is likely to show that the Government borrowed £28.6bn to fund its operations during July, taking official borrowing for the current financial year up to £156.4bn. Howard Archer, chief economic adviser to the EY ITEM Club, comments: “The deterioration of public sector finances slowed a little recently and the economy did better in June but a lot of the Government support schemes are still running and are very expensive.”
Sunday Express, Page: 43
OTHER NEWS – WEEKEND TO 16TH AUGUST 2020
Carbon capture requires investment
Rachel Millard in the Sunday Telegraph looks at Carbon Capture and Storage (CCS) projects, with Steve Jennings, head of energy at PwC, saying CSS “will require private investment which will need some certainty of return – just as with offshore wind many years ago”.
The Sunday Telegraph, Business, Page: 8
Contact Paul Southward