NEWS – WEEKEND TO 17TH MAY 2020
NEWS – WEEKEND TO 17TH MAY 2020
TAX NEWS – WEEKEND TO 17TH MAY 2020
Economists warn against tax hikes
Economists have warned MPs that increasing taxes to cut the deficit would hurt the economy and risk extending a recession brought about by the coronavirus pandemic. This came after a leaked Treasury document predicted state borrowing could exceed £300bn this year and suggested spending cuts and tax hikes may help balance public finances. Karen Ward of JP Morgan Asset Management told MPs on the Treasury Select Committee that considering such measures at this point “does more harm because it adds to the uncertainty”. She added: “If you are a small business thinking about taking a loan to continue trading, and on top of it have to think about repaying it with higher tax bills, it will hinder that recovery.” Jagjit Chadha, director of the National Institute of Economic and Social Research, said: “The appropriate response to a large, temporary increase in public expenditure is tax smoothing”, adding: “We wil l do it at some point in the future, but to talk about it now would unduly restrain demand further.” Former Bank of England policymaker Adam Posen said the most important thing is “to get the economy so it is growing faster than the debt is growing,” adding that low interest rates and the management of the Bank of England means this “seems very possible in the next few years.”
Sunak could look to tax to ease deficit
The Times’ David Byers looks at the measures Chancellor Rishi Sunak could roll out to pay for a soaring national deficit amid the coronavirus crisis, noting that a Treasury document leaked this week pointed to options including a 1% increase in income tax, with it shown that this would generate £5.8bn a year. Nimesh Shah at Blick Rothenberg believes that income tax could rise as much as three percentage points on the basic and higher rates and five percentage points on the additional rate. Mr Byers says capital gains tax rates could go up to 28%, inheritance tax could be reformed, higher taxes could be imposed on landlords’ rental profits and higher-rate tax relief on pension contributions could be abolished. Elsewhere, Andrew Grice in the Independent says “when the fiscal reckoning comes” Mr Sunak should consider measures including raising taxes on wealth rather than income and reducin g tax relief of pensions for higher rate taxpayers.
The Times, Page: 53 The Independent, Page: 10
Unpaid tax disclosures increase
A crackdown on overseas tax dodging has led to a steep increase in the number of British expats declaring previously unpaid duty. The number of people living abroad in tax exiles who have admitted to previously failing to pay tax owed in Britain increased from 66 in 2017/18 to 867 in 2018/19, HMRC figures show. Of these, more than 40% came from individuals living in the Channel Islands, nearly one in ten were from people in the Isle of Man and 6% were from people based in Switzerland. Jason Collins of Pinsent Masons said the increase has provided HMRC with hundreds of new targets for investigations, adding: “Given the pressure the nation’s public finances are under due to the coronavirus crisis, we can expect many of these to be followed up on”.
Tax: How we will pay for the pandemic measures
Emma Agyemang considers the role taxation will play in covering the cost of the coronavirus crisis, saying the “massive surge” in public spending means taxes must rise at some point.
Fraud warning over pandemic
Fraudsters are using the ongoing COVID-19 pandemic to target potential victims, with Action Fraud saying more than £2m has been lost to coronavirus-related scams since early February. One example seen by the Telegraph involved a text message claiming that HMRC were offering a “goodwill payment” tax refund of £258 in light of the pandemic, with a link for recipients to click.
Tax rethink could leave Britons £906 worse off
With the Office for Budget Responsibility warning that Government borrowing could hit £298.4bn by the end of the year due to the coronavirus pandemic and Chancellor Rishi Sunak reportedly considering income tax rises, the Taxpayers’ Alliance has warned that such a move could leave taxpayers more than £900 a year worse off. With it suggested that the basic rate of income tax could climb from 20% to 25%, the independent economic think-tank calculates this would leave Britons out of pocket to the tune of £906.45 per year on average – or £75.54 a month. The Taxpayers’ Alliance said the average income tax contributions would increase from £3,625 to £4,532 per year. Duncan Simpson, research director at the TaxPayers’ Alliance, said this would be “a disaster for every family in Britain” and “a hammer blow”, arguing that reducing tax rates instead would “get the economy moving& rdquo;.
Non-dom rules relaxed during lockdown
Questions have been raised over HMRC’s decision to offer millionaire non-doms stuck in the UK due to the lockdown a reprieve from paying higher tax bills. The taxman has said those registered as domiciled abroad for tax purposes can now spend 120 days in the UK, rather than 60, without higher charges if they are self-isolating, ill or unable to leave because of travel restrictions. Acting Liberal Democrat leader Sir Ed Davey said the extremely wealthy “should not be prioritised” and accused minsters of being “far too generous to the far too wealthy for far too long”. Jolyon Maugham, a tax law barrister at Devereux Chambers, said: “Effectively HMRC will pretend that you’re not here, despite the fact you are here.”
The Sunday Times, Page: 2
Opinion: It’s not the time for tax increases
Liam Halligan in the Sunday Telegraph looks at the impact the coronavirus crisis will have on public finances and the cost of support measures, with the Office for Budget Responsibility this week saying the annual budget deficit is set to hit £298bn. Mr Halligan says that while Treasury officials are lobbying for tax hikes and spending cuts, “this is no time for chunky tax rises” and argues that “Whitehall pressure to hike levies should be fiercely resisted.” He suggests taxes must remain low, urging the Government to instead take advantage of low borrowing costs to channel cash into growth-boosting infrastructure projects. Meanwhile, in the Sunday Times, David Smith suggests “nobody sane would suggest that tax rises are the right thing to do when the economy is emerging from its deepest recession in modern times,” adding that “in the short term, talk of higher taxes should be safely p ut to one side.” Writing in the same paper, James Coney considers the role taxation could play as the Government faces “a £300bn lockdown hangover.”
Opinion: Wealth tax not the way to go
A Sunday Times editorial highlights Office for Budget Responsibility calculations suggesting that Government borrowing is set to hit £298bn on the back of the COVID-19 pandemic, saying that ministers will seek to fill the “extremely large fiscal hole”. Taxation, it suggests, may be among options the Government turns to, noting that while the Conservative manifesto pledged that income tax, national insurance and VAT would not be increased, no such vow was made in regard to a wealth tax. The Sunday Times adds that it has “always opposed such a tax”, arguing it would risk driving successful entrepreneurs away from Britain and hit the moderately wealthy harder than the mega-rich “who can more easily jet off to tax havens”.
INSOLVENCY NEWS – WEEKEND TO 17TH MAY 2020
Insolvency rate set to surge
Ric Traynor, executive chairman of Begbies Traynor, has warned that there is likely to be a surge in insolvencies when the courts return to full operation and Government support schemes are wound down. He said: “The major catalyst for businesses going bust is creditor pressure, that they can’t pay wages – the Government is paying those – or the banks saying they want their money back and calling in loans.” He added: “When that creditor pressure disappears, the tough decisions are put off, the can is kicked down the road. We might not see the rise until September, but overall we will see an increase, there is no doubt in my mind about that.” Figures show that there were 1,196 corporate insolvencies in England and Wales during April – 17% fewer than the number recorded in April 2019. The Insolvency Service attributed the decline in part to the lockdown on the court system as liquidations need a winding up order gained from a court by a creditor, shareholder or director.
CORPORATE NEWS – WEEKEND TO 17TH MAY 2020
Mazars hunts bankers’ missing money
David Brown in the Times looks at Ilya Yurov and Nikolay Fetisov, Russian financiers who face the seizure of their wealth after being declared among Britain’s biggest bankrupts, with the pair believed to have siphoned off millions in customers’ savings from Russia’s National Bank Trust (NBT). The bulk of their assets are believed to be hidden in a web of companies which was used to hide the bank’s bad assets and conceal money moved out of Russia. Mazars has been appointed to trace the bankers’ money, with the firm’s Paul Rouse saying: “These individuals have amassed significant wealth and assets across the world … now the process of asset recovery will begin in order to compensate NBT and the other creditors.”
Furlough rule sees directors ‘punished’ over accounting
A number of company directors who furloughed themselves have discovered they are not eligible to receive state grants under the Coronavirus Job Retention Scheme because of their use of a routine accounting method. The Telegraph says company directors often leave their tax affairs until the end of the tax year on April 5 so as to avoid hiring an accountant all year round. However, this means many will not have submitted payroll information to HMRC before the furlough cut-off date of March 19. Craig Driver of Goldblatts said those who chose to delay their salary submissions to HMRC until the end of the year “are being punished and unfairly excluded because of a simple convention in accounting.”
The Daily Telegraph, Money, Page: 2
Buyer’s rights clarified
A Times reader says they were told an item they bought from Laura Ashley that arrived damaged could not be replaced or refunded as the company was in administration. The paper says that under the Consumer Rights Act 2015, customers are entitled to a repair, replacement or refund on faulty items, even if a company is in administration but still trading. PwC, which is handling the administration, apologised, saying the customer service team mistakenly cited the exchange policy rather than that for faulty or damaged goods.
Pandemic sees firms turn to tech
Victoria Ward in the Sunday Telegraph looks at how the coronavirus pandemic may drive shops and restaurants to “embrace technology in ways they had not previously considered” as they look to reopen with measures in place to ensure minimal contact between people. Paul Martin, head of retail at KPMG, who says social distancing “is here to stay”, comments: “The core principle is, how do you avoid as much contact as possible? Technology will very much come to the fore.”
The Sunday Telegraph, Page: 5
Debenhams chair steps in over store row
Debenhams chairman Mark Gifford is believed to have personally intervened after landlord Hammerson held secret talks to hand some of its beauty departments to rival Next. Hammerson reportedly still plans to pass at least three of the five disputed contracts to Next under flexible lease contracts. Debenhams’ board, lenders and administrators at FRP Advisory are working to resuscitate the business after it was twice forced into administration and are using what they describe as “light touch” administration measures as they prepare to reopen after lockdown.
The Mail on Sunday, Page: 114
Court threat over Travelodge CVA plan
Landlord Combined Property Control Group has warned Travelodge that it could face court action if it pushes ahead with a restructuring to cut rents. The hotel chain has said that unless up to £146m in rent is waived, it will be forced to pursue a CVA.
Home bankers until 2021?
Some City bankers may be asked to work from home for the rest of the year, the Mail on Sunday reports. It notes that Canary Wharf has drawn up detailed plans to allow bankers, accountants and lawyers to return to work. These include limiting lift capacity, daily deep cleaning and one-way systems.
The Mail on Sunday, Page: 112
PROPERTY NEWS – WEEKEND TO 17TH MAY 2020
Homes sales jump as market opens
Analysis by property market website View My Chain shows 906 homes were sold on the day the housing market reopened, while 1,883 properties were listed for sale. While the total was still far short of 4,000 average number of daily sales seen before the coronavirus outbreak, it was double the daily average recorded during the lockdown. Rightmove saw almost 5.2m visits on Wednesday, while Halifax reported a 36% increase in mortgage applications.
The Times, Page: 7
No pause for bedroom tax
The Government has rejected calls to halt the bedroom tax during the COVID-19 pandemic. Shadow Work and Pensions Secretary Jonathan Reynolds had said there was an “urgent” need to scrap the policy which cuts housing benefits for anyone with a spare room. He said: “Continuing to impose this when claimants cannot move underlines how punitive the charge is and risks compounding the hardship people face in this crisis.” Despite the call, Conservative Minister Will Quince said: “There are no plans to change this policy.”
Daily Mirror, Page: 9
Property move delivers relief
The Observer’s Phillip Inman reflects on the decision to allow property viewings as part of an easing of the coronavirus lockdown, saying ministers feel the move will deliver a “much-needed boost to commercial life.” Howard Archer, chief economic adviser at the EY Item Club, describes the move as “relief for the housing market” that “should allow activity to progressively pick up” over the coming months. Mr Archer expects prices to fall 5% over the next few months and a flattening-out by the end of the year. He expects very low borrowing costs to help matters, “with the Bank of England unlikely to lift interest rates from 0.1% until well into 2021”, adding: “Even so, we expect house price gains to be no more than 2-3% in 2021.”
The Observer, Page: 51
EMPLOYMENT NEWS – WEEKEND TO 17TH MAY 2020
Self-employed reminded to use SEISS
HMRC has urged self-employed workers to apply to the Government’s new Self-Employed Income Support Scheme if they have not already done so. To be eligible, workers need to have filed a tax return for the tax year ending April 5, 2019, before April 23 this year. They must also have traded in the tax year just ended and intend to trade during the current tax year.
The Mail on Sunday, Page: 118
ECONOMY NEWS – WEEKEND TO 17TH MAY 2020
What shape will the recovery take?
City AM ’s Harry Robertson looks at forecasts for Britain’s recovery from the economic blow being dealt by the coronavirus pandemic, with some saying a V-shaped recovery that sees a steep decline followed by a sharp rebound is on the cards, while others foresee a W-shaped recovery where a rebound is followed by a fresh recession prompted by a second wave of COVID-19 and measures to tackle it. The Bank of England has pointed to a scenario where GDP falls 14% this year before climbing 15% in 2021, regaining its pre-coronavirus size in H2 of next year. Capital Economics predicts GDP will fall 12% in 2020 before rebounding 10% in 2021; Goldman Sachs believes the economy will shrink 8.5% this year before growing 7% in 2021; while KPMG sees a 7.8% slide in GDP in 2020 and a rebound of 8.4% next year.
BoE economist in unemployment warning
Andy Haldane, the Bank of England’s (BoE) chief economist, has warned that Britain is facing an unemployment crisis, with up to half the workforce set to see incomes hit by the coronavirus pandemic. He said that more than half of the 33m strong workforce is currently unemployed, furloughed or working fewer hours as a result of the shutdown. He added that the “scarring experience” of unemployment in the early 1980s was the “very reason” he got into economics and public policy, warning “we’re going back to that, basically.” Mr Haldane says there is a need to “find a way of reabsorbing all of that labour as quickly as possible in good jobs.” He also said that the BoE is weighing options such as negative interest rates and expanding the scope of quantitative easing “with somewhat greater immediacy” as it looks to boost the economy.
Think-tanks support steeper public spending
Free-market think-tanks have backed public spending increases to confront the coronavirus outbreak and state-funded investment to boost recovery, with the Adam Smith Institute, the Centre for Policy Studies, the Institute of Economic Affairs and Policy Exchange supporting intervention to rescue the economy. They also believe the Treasury should examine tax-cutting measures to promote innovation and entrepreneurial activity. Tom Clougherty, head of tax at the Centre for Policy Studies, comments: “I’d usually be wary of big public investment schemes. But with borrowing costs very low and little prospect of crowding out private investment, I think the pros outweigh the cons.”
The Observer, Page: 1
OTHER NEWS – WEEKEND TO 17TH MAY 2020
Ed’s tour sees £200k a week tax
It has been revealed that singer-songwriter Ed Sheeran has paid out £207,692 a week to the taxman in the last two years. Having made £108m from tours to promote his Divide album, the cash goes to his Nathan Cable Touring company, with 20% of profits paid out in corporation tax. This means £21.6m has gone to the Exchequer – or £29,670 a day. The musician paid himself £17m in dividends in 2018.
Daily Star, Page: 3 The Sun
Dyson tops Sunday Times Rich List
Sir James Dyson has been named top of the Sunday Times Rich List for the first time. This came as his wealth grew by £3.6bn over the past year, hitting £16.2bn. Analysis by the Sunday Times shows the overall wealth of the 1,000 richest people in the UK is down by £29bn on last year at £743bn, while £54bn has been wiped off of the total in two months due to coronavirus. Where it had been estimated in February that the number of billionaires would rise to nearly 160, the number has fallen to 147 due to the pandemic, a decline of four. The analysis also reveals that at least 63 people to have made the list have sought to furlough some of their staff under the Government’s job retention scheme, including 20 billionaires and five of the country’s 10 richest people. Meanwhile, a record 25 female billionaires have made the list.
Contact Paul Southward