NEWS – WEEKEND TO 19TH JULY 2020
NEWS – WEEKEND TO 19TH JULY 2020
TAX NEWS – WEEKEND TO 19TH JULY 2020
MPs to examine tax system
The Treasury Select Committee is conducting an inquiry into tax and will evaluate whether an overhaul of the tax system is required as the country looks to boost public finances in the aftermath of the COVID-19 pandemic. The committee will consider whether tax breaks can help the economy, long term pressures on the tax system and the level of taxation the economy can withstand. Committee chair Mel Stride, who said the pandemic has put the economy “under extraordinary stress”, suggested tax will “play a major role in the years ahead in restoring the public finances”. He also warned that the worst of the economic fallout of COVID-19 is “perhaps yet to come”. Glyn Fullelove, president of the Chartered Institute of Taxation, commented: “Whatever policies are adopted to meet the challenges ahead, being able to predict what the UK tax system will deliver under any given set of measures is vital for the Chancellor.”
The Daily Telegraph The Independent, Page: 11 Daily Express
Think-tank calls for end of CGT
The Institute of Economic Affairs (IEA) believes capital gains tax should be abolished. Speaking after Chancellor Rishi Sunak commissioned a review of levies on investment and property profits, the IEA’s Philip Booth suggested the duty should be scrapped. With some commenters suggesting the review will deliver an increase in the rate of the tax, Mr Booth said: “Capital gains tax is a complicated and damaging tax. Far from leading to it increasing, this review should lead to it being abolished.” The Institute for Fiscal Studies has proposed reforms to CGT including increasing rates in line with income tax at 20%, 40% or 45%. Nimesh Shah of Blick Rothenberg believes there is a case for scrapping CGT and inheritance tax as they account for less than 1% of the Treasury’s tax revenue but create significant administrative costs for HMRC.
The Daily Telegraph, Money, Page: 1
Opinion: CGT review long overdue
With the Chancellor calling on the Office of Tax Simplification to look at capital gains tax, Lauren Davidson in the Telegraph says such a move is “long overdue.” She says that CGT, “like other levies in desperate need of simplification”, such as stamp duty and inheritance tax – is “poorly designed and far too complicated.” Ms Davidson argues that if Rishi Sunak wants to simplify the tax system and stimulate the economy, scrapping CGT altogether may be the way to go. David Byers in the Times considers changes to CGT that the review may deliver, noting that Nimesh Shah of Blick Rothenberg and George Bull at RSM have suggested there is a case for low bandings to be aligned with income tax. Merryn Somerset Webb in the FT also considers the options for reform of CGT, which she describes as stealth wealth tax. Emma Agyemang in the same paper muses on the review, taking comment from Katharine Arthur of haysmacintyre, Tim Stovold at Moore Kingston Smith and Saffery Champness’ Zena Hanks.
Couples wedded to tax perks
The Times’ Kate Palmer looks at how being married or in a civil partnership can have an impact on taxes, noting that rules around inheritance tax benefit couples that have made their union formal.
Chancellor to turn to tax to drive recovery?
With Carys Roberts, director of the Institute for Public Policy Research think-tank, saying the Chancellor’s summer statement “fell a long way short of what was required” in regard to boosting the economy, Richard Partington in the Observer looks at issues Rishi Sunak still needs to address. Among these are tax increases, with Mr Partington pointing to Office for Budget Responsibility (OBR) analysis showing that Government borrowing is set to rise to £322bn this year. The OBR estimates that this will require an additional £64bn a year from tax rises or a return to austerity. Mr Sunak has warned that “tough choices” will have to be made in the autumn budget, while some analysts have suggested a review of capital gains tax launched by the Treasury could see tax rises designed to help cover the costs of the economic recovery.
The Observer, Page: 54
CGT in the Chancellor’s sights
With Rishi Sunak this week commissioning a review into capital gains tax and telling the Treasury Select Committee that “tough choices” lay ahead, the Mail on Sunday’s Jeff Prestridge says it was “inevitable that sooner rather than later” the Chancellor would “put the nation on red alert” that taxes will have to rise to cover the cost of Government support rolled out to boost economy through the COVID-19 outbreak. Suggesting Mr Sunak will not break a manifesto pledge to not increase income tax, national insurance or VAT, Mr Prestridge looks at the potential for reform of CGT. Elsewhere, Julian Jessop in the Sunday Telegraph says the Chancellor is right to review taxes, but suggests “this should go further than just a rethink of CGT.” Mr Jessop says it would be “a failure of imagination to assume that the only way to increase tax revenues is to incr ease tax rates or to introduce new taxes”, calling for a focus on economic growth and boosting productivity.
The Mail on Sunday, Page: 122 The Sunday Telegraph, Business, Page: 2
CORPORATE NEWS – WEEKEND TO 19TH JULY 2020
Auditor flags concern over Pockit
Auditors have highlighted “material uncertainty” over Pockit’s status as a going concern, with Grant Thornton saying there is “significant doubt” over the financial services provider’s ability to remain in business. In annual accounts filed more than nine months late, Grant Thornton said that liabilities exceed assets by £653,285.
Administrators open Gate probe
Administrators of failed theatre business Gate Ventures are investigating discrepancies in creditor claims. Insolvency practitioners are looking at inconsistencies in the financial position Gate presented in High Court proceedings compared with claims later filed by creditors. Insolvency practitioners from Quantuma are investigating claims by Gate’s directors, while an administrator from Moore Kingston Smith is examining counterclaims.
The Times, Page: 50
Ask and Zizzi sold out of administration
Azzurri Group, owner of the Zizzi and Ask Italian restaurant chains, has been sold out of administration to TowerBrook Capital Partners. The move will see around 225 restaurants and shops continue to operate, protecting about 5,000 jobs. However, the 75 sites not included in the deal are set to close, with 1,200 roles set to go.
The Times, Page: 47 Daily Mail
More pubs and restaurants set to open
Tim Wallace in the Telegraph explores whether people are opting to return to pubs and restaurants as coronavirus lockdown measures ease. Will Hawley of KPMG says that while around only 45% of venues opened on the first weekend of the lockdown being lifted, 60% to 65% are expected to open this weekend.
The Daily Telegraph, Page: 31
Profit warnings close to record
Research from EY shows that London-listed firms are close to breaking the annual record for the number of profit warnings issued, with much of the surge attributed to the coronavirus crisis. The study shows 466 profit warnings were issued by UK-quoted companies during the first half of the year, with this nearing the 506 record seen in 2001. The pandemic saw a quarterly record of 301 warnings during Q1. Of the 165 in Q2, almost two-thirds came from companies that had not downgraded their profit expectations during the past 12 months. Alan Hudson of EY said that “the most immediate and dramatic impact” of COVID-19 has been felt by companies whose existing structural challenges have been exacerbated by the pandemic, but added that “many businesses that were sound before the virus, have also been forced to fundamentally reassess their expectations and business plans.”
Sunday Express, Page: 43 The Sunday Times, Business, Page: 2
Firms unprepared for no-deal Brexit, says think-tank
The Institute for Government has warned that the coronavirus crisis has left many UK businesses in a worse position to cope with a no-deal Brexit. A report from the think-tank says that government and business resources “have been focused on responding to the pandemic, rightly prioritising this over Brexit preparations”. It added that firms “reeling from the economic consequences of coronavirus are poorly placed to prepare for Brexit”. The report notes that three in five firms have not begun to prepare for the end of the transition period on December 31 due to ongoing uncertainty about the future relationship with the EU. “The UK will be adapting to the effects of Brexit for many years to come – which both business and government should be prepared for”, the report adds.
The Observer The Independent
OFFICE WORKER NEWS – WEEKEND TO 19TH JULY 2020
Firms in no rush for office return
Fewer than one in six workers has returned to the office, with a number of Britain’s biggest employers saying they will continue to allow staff to work from home for months to come. The Times notes that EY, which employs 17,000 people in the UK, will re-open its offices from September 7 but capacity will be “significantly reduced” and employees will return on a voluntary basis with a desk booking system. Elsewhere, the FT reports that PwC is set to increase its office presence from 15% to more than 50% by September, while the Telegraph notes that PwC UK’s chair Kevin Ellis has said: “Office life can be balanced with working from home.”
PROPERTY NEWS – WEEKEND TO 19TH JULY 2020
£230bn hit for commercial property
The Office for Budget Responsibility (OBR) predicts that the value of commercial buildings will fall by nearly 14% this year, with this representing a £230bn decline in value. It is predicting prices will fall by 13.8% in 2020/21, recovering slowly to rise by 0.9% in 2021/22, 2.6% in 2022/23, 1.5% in 2023/24 and 2% in 2024/25. Transactions are expected to slip by 23.7% in 2020/21
Daily Mail, Page: 99
Nearly a third of buyers won’t feel stamp duty cut
Just over 10% of homebuyers will gain the maximum benefit – a saving of 2.5% or more on the purchase price – as a result of the stamp duty changes brought in on July 8. This maximum benefit goes to those purchasing properties priced between £400,000 and £600,000. Overall, 29% of buyers won’t get any benefit from the cut, because they are either buying properties for less than £125,000, or have already benefited from the first-time buyer relief on homes costing less than £300,000. The average stamp duty saving varies across the country, from 1.75% in London to less than 0.45% in the North East.
The Sunday Times, Home, Page: 23 Sunday Express, Page: 45 The Observer, Page: 58
PERSONAL FINANCE NEWS – WEEKEND TO 19TH JULY 2020
Majority of homeowners restart payments
The majority of homeowners who took mortgage holidays due to the economic challenges brought about by the coronavirus outbreak have resumed making repayments. Analysis shows that just a fifth of those who took a three month mortgage holiday asked for an extension when banks offered a second quarter-year payment break in May. NatWest and Royal Bank of Scotland said 16% of borrowers who originally requested a mortgage break had asked for it to be extended, while at Nationwide 20% have asked for a second payment holiday. Figures from UK Finance show that 1.9m homeowners had asked for a mortgage holiday at the peak of the initiative, a total equivalent to one in every six UK mortgages.
Banks reject borrowers who took payment breaks
Banks are turning away some mortgage applicants who took repayment holidays amid the coronavirus crisis, despite ministers and credit agencies saying pausing repayments would not impact their ability to borrow, reports the Mail on Sunday’s Helen Cahill. In March, Business Secretary Alok Sharma said banks had negotiated rules around payment breaks with the Financial Conduct Authority, saying they would not affect a customer’s credit score, while Jonathan Westley, chief data officer at Experian, said the credit agency – as well as TransUnion and Equifax – would make sure payment holidays or other arrangements would be reflected in credit reports so payment freezes would not hit credit scores. MP Siobhain McDonagh, who sits on the Treasury Select Committee, said she intends to write to Chancellor over the matter.
The Mail on Sunday, Page : 20
FINANCIAL SERVICES NEWS – WEEKEND TO 19TH JULY 2020
Financial advisers remain unseen
A study by wealth manager Bancroft suggests that many people go years without meeting their financial adviser. It was found that 53% of 1,000 people who have between £50,000 and £1m invested with a financial adviser had not had a face-to-face meeting with them for two years or more. The poll also revealed that investors paid on average 1.5% a year in fees, or £2,835 based on the average portfolio size of £188,948.
The Daily Telegraph, Money, Page: 3
Banks urge leniency over coronavirus debts
Banks have urged ministers to take a lenient approach to recovering debts linked to coronavirus support loans. Lenders have suggested the Government should resist chasing small business owners through the courts where possible, while also proposing that customers in default should be contacted on two or three occasions before the loan is written off and taxpayers are left to foot the bill. Banks are said to be assessing the support measures they could put in place before chasing businesses for loan repayments, while the Treasury is considering a proposal put forward by TheCityUK which suggests businesses could repay coronavirus support loans as a tax on their profits.
The Mail on Sunday, Page: 117
EMPLOYMENT NEWS – WEEKEND TO 19TH JULY 2020
Self-employed hit by pandemic
Holly Thomas in the Times considers the climate for the self-employed, saying that with around 5m people, it is the nation’s fastest- growing workforce. She says that while there are many benefits to setting up on your own, including tax perks, the financial impact of the coronavirus crisis on freelancers and small businesses has been substantial. On support rolled out by ministers, Richard Churchill at Blick Rothenberg says: “The Self-Employment Income Support Scheme would have been better serving had it been a tapered support rather than cutting off at £50,000, and for small business directors paid primarily through dividends a similar scheme should have been implemented”.
Laura Hinton, chief people officer at PwC, offers a Sunday Times reader advice on a work-based dilemma. She tells a reader worried that their working-class background is holding them back that “difference is good”, saying that being of a different background and culture herself made her opinion valuable. Ms Hinton says that while she initially “spent years trying to be like everyone else”, she found that “sharing something of who you are and what you truly think helps to build relationships.”
SMEs NEWS – WEEKEND TO 19TH JULY 2020
Scotland sees disparity in SME closures
A study by the Association of Chartered Certified Accountants shows that 13% of SMEs have gone into liquidation in Scotland amid the coronavirus crisis, compared to 5.4% across the whole of the UK. Craig Vickery, head of ACCA Scotland, said cashflow concerns and uncertainty about when the economy would open up explained the disparity, saying: “The concerns over cash in particular has led to many SMEs deciding it would be easier to just close”. He added that Scotland seeing a slightly slower release from lockdown than England and having a heavier reliance on tourism and hospitality “have been factors in the results.”
Small firms’ confidence grows
A small business confidence survey by Hitachi Capital Business Finance shows that the proportion of UK-based firms expecting growth in the next three months has risen from 14% in April to 27% in July. The proportion of firms who foresee contraction or collapse in the next quarter has dipped from 31% to 19%. Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance, said: “It shows what an immediate and positive impact the easing of lockdown has had on the small business community.”
The Sun, Page: 44
SMEs using coronavirus loans to pay bills
Barclays research shows that half of small businesses who have taken support loans amid the coronavirus pandemic are using the emergency funding to pay their suppliers. The study also revealed that 35% have used some of the money to pay rent on their premises, while a third spent part of their loans topping up the wages of furloughed staff. On future intentions, 26% of SMEs plan to increase spending on product development, with 15% looking to increase their investment in automation to boost their productivity. Hannah Bernard, head of business banking at Barclays, said: “SMEs are thinking about how to boost their profits through investment in technology and marketing.”
Sunday Express, Page: 44
Small firms look to recovery after pandemic hit
The Sunday Times looks at how small firms are preparing to bounce back after the disruption and challenges brought about by the COVID-19 crisis. It says SMEs “have felt the most immediate pain ” from the crisis, citing figures from the ACCA and Corporate Finance Network showing that at the start of May, just 42% of SMEs had enough cash to last four weeks. The report details the support measures that the Government rolled out to help small firms through the pandemic and says recovery is now the main focus for business leaders and politicians. On mooted measures that could drive this, it notes that lobby group TheCityUK has suggested that the Government takes minority stakes in small companies, while the Business Growth Fund has suggested the launch of a £15bn equity fund. Federation of Small Businesses chief of external affairs Craig Beaumont, who says there has been “extraordinary support” from the Government, comments: “Now we need to switch to the recovery, including extending some of the schemes.”
Small firms owed stamp duty refunds over transfers
Cornerstone Tax says a number of small firms that have transferred property into their pensions are owed stamp duty refunds. It says mistakes on the part of solicitors and pension advisers as far back as 2007 had led to small firms needlessly paying more than £1bn in tax on property transactions.
The Sunday Telegraph, Business, Page: 11
INTERNATIONAL NEWS – WEEKEND TO 19TH JULY 2020
Apple case highlights tax battle
The Observer’s business leader column looks at Apple’s legal victory over the European Commission, which claimed the tech firm had saved £11.8bn due to a sweetheart tax deal in Ireland that the EU’s executive arm said was a clear breach of state aid rules. It notes that campaigners including the EU’s Competition Commissioner, Margrethe Vestager, have sought to prevent corporations playing EU countries off against each other to drive down effective tax rates, saying some states have been “determined to attract international businesses that would consider the countries too small for an international headquarters without juicy tax cuts on offer.” The piece notes that the coronavirus crisis is “highlighting gaps in the tax take of many countries and giving those who pursue a remedy greater leverage”, with the Organisation for Economic Cooperation and Development’s ef forts to end the erosion of tax rates and the shifting of profits to low-tax regimes having helped.
The Observer, Page: 56
ECONOMY NEWS – WEEKEND TO 19TH JULY 2020
Bailey: Uneven economic recovery has started
Bank of England governor Andrew Bailey says that while the UK economy is starting to recover from the coronavirus lockdown, the rebound seen so far has been uneven. Mr Bailey said that activity in the housing and car markets is resuming “quite strongly” but the hospitality and entertainment sectors, which employ large numbers of people, many of whom are on low pay, are struggling. Speaking during a webinar yesterday, he said a “very big question” remains over whether people would return to their pre-pandemic habits and spending patterns. When asked if the UK economy would see a V-shaped recovery, he said: “We don’t yet know the full story of this.” He also said the impact company failures could have on the economy is unclear.
City AM Reuters
Britain’s economic prospects ahead of G7 average
Analysis by the Organisation for Economic Co-operation and Development (OECD) suggests Britain’s economic prospects for the rest of this year and into 2021 are stronger than the average for the G7. The OECD’s forward looking index has rated the UK at 97.4, while the average across the G7 advanced economies is 96.7. The index looks at six areas: a consumer confidence index, confidence indices for manufacturing and services businesses, share prices, short-term interest rates and new car registrations. These elements are deemed to be future facing, whereas figures relating to growth, employment, inflation and retail sales are focused on past activity. Meanwhile, the IHS Markit/CIPS Purchasing Managers’ Index for July could bring fresh optimism this week, with Howard Archer, chief economic adviser to the EY Item Club, saying the figures “may show a bit of an improvement”. While the index saw services dragging down the economy in June, Mr Archer said: “I hope the lifting of restrictions on July 4 will have allowed the service sector to pick up.”
The Mail on Sunday, Page: 118 The Sunday Times, Business, Page: 2
Contact Paul Southward