NEWS – WEEKEND TO 21ST MARCH 2021
NEWS – WEEKEND TO 21ST MARCH 2021
TAX NEWS – WEEKEND TO 21ST MARCH 2021
Treasury plans pay-as-you-go tax
The Treasury is planning a pay-as-you-go tax model in a bid to tackle evasion by freelance workers, landlords and investors, reports the Times. The measures, which will make it harder for people to hide their earnings, are based on a system used in New Zealand. The move will see annual or twice-yearly manual tax returns replaced with a system that sees tax paid throughout the year. Taxpayers would be given a digital tax account that is automatically updated by banks, investment managers, workplaces and pension providers, with information about earnings, investments and pensions logged. The reforms will be at the centre of HMRC’s ten-year tax strategy and will play a part in efforts to recoup the £31bn the Revenue believes people are not paying in tax each year. Chancellor Rishi Sunak believes the pay-as-you-go tax model could prevent people from failing to declare major earnings, including interest on investments and offshore bank accounts.
The Times, Page: 4
The truth is finally out as the government has always denied that Making Tax Digital was never about collecting tax earlier, but now we find it is.
Rate surge hits tax dividend
Analysis shows that a surge in market interest rates has wiped out more than two thirds of the £17bn the Chancellor sought to pull in via an increase in corporation tax. While Rishi Sunak is increasing the levy from 19% to 25% in 2023 as he looks to stabilise the national debt, market rates have moved higher on the back of a return of inflation and the possibility of a strong economic recovery, post-pandemic. HSBC economist Liz Martins said the increase in Government borrowing costs since the Office for Budget Responsibility fixed its forecasts will add £3.6bn to debt service spending in 2021/22, which rises to £12.2bn at the end of the parliament in 2025. Ms Martins said the Chancellor’s tax rise “might not reduce the deficit as much as he had hoped if those extra revenues end up going towards higher interest payments on government debt”.
City concerned over possible tax raid on pensions
The Telegraph reports that there is concern in the City that the Treasury is considering radical cuts to tax relief on pensions, with officials having signalled higher-rate tax relief on pensions contributions could be reduced. The paper says that while a pensions tax hike is not set to feature among measures being announced on March 23 – which has been dubbed “tax day” – reforms are being considered. The Chancellor is said to be considering limiting tax relief on pensions contributions to a flat rate of 20% or 25%. Experts have warned that a tax raid on pensions would hit millions of workers’ retirement prospects, leaving savers hundreds of thousands of pounds worse off in retirement. AJ Bell founder Andy Bell said: “Removing higher-rate tax relief would be politically toxic when people realise what it means for them”, while Peter Glancy of Scottish Widows said reform would be “horrendously difficult” to implement.
A third of firms not ready for IR35 changes
With IR35 changes coming into effect from April 6, new research suggests that many organisations are not ready for the rollout of new tax legislation that will make businesses responsible for setting the tax statuses of contractors they hire. A Grant Thornton survey of 605 senior decision makers from mid-market businesses conducted in late January shows that 38% are not fully prepared for the transition. It was found that 13% had done only “minimum preparation” or were in the early stages of planning, while 25% had preparations underway but said they were not ready for the deadline.
Wealthy savers rush to VCTs
Wealthy savers are turning to risky tax-efficient investment schemes, amid a crackdown on pensions and fears of an increase in capital gains tax. The amount being put into venture capital trusts (VCTs) is rising rapidly as investors hunt for tax breaks. Investors can put up to £200,000 into these trusts each year and get 30% income tax relief, as long as VCT shares are held for five years. Investment firm Wealth Club has overseen £112.7m invested this way in the 2020/21 tax year, up 42.4% from the £79.1m invested in 2019/20.
Self-employed boosted by tax clawback
Thousands of small business owners who have lost money during the coronavirus crisis can claim more than £1bn in tax rebates to help mitigate losses, with ministers having announced an emergency extension to “loss carry back” rules. Previously losses could only be carried back one year to offset historical tax bills but the new measures enable firms to claw back profit and income taxes paid in the past three years.
Taxing matters when selling a BTL property
The Telegraph’s Marianna Hunt and Rachel Mortimer offer advice on how landlords can save money on their tax bill, with guidance for those looking to sell a buy-to-let property. They note that some landlords may be able to reduce their CGT bill by claiming Private Residence Relief if the rental property has at some point been their main residence. Zena Hanks of Saffery Champness says the period where it was occupied as such will qualify for exemption from CGT, while Chris Etherington of RSM warns that moving into a rental property before selling it could store up CGT issues for the eventual sale of any other home the landlord owns.
Brussels sues Britain over Gibraltar tax breaks
The European Commission is suing the UK at the European Court of Justice over tax breaks given to companies in Gibraltar, saying Britain has failed to fully recover €100m of illegal state aid.
Will tax shake-up hit our FIC?
Mike Hodges of Saffery Champness advises an FT reader who has set up a family investment company on whether the Chancellor’s plans to raise corporation tax will affect their tax liability.
Tax day set to deliver a deluge of policy plans
Russell Lynch in the Sunday Telegraph says that while the “circus” surrounding the Budget “may be receding into the rear-view mirror”, Tuesday’s “tax day” means “the real action is still to come” for tax aficionados. With the ICAEW’s Anita Monteith saying she has cancelled all leave and is “waiting for the deluge to hit”, Mr Lynch says the deluge will take the form of around 30 consultations and calls for evidence on subjects including HMRC administration, taxation of the self-employed, and the future of capital gains tax and VAT. Ms Monteith says the Government “has actually been fairly clear that it wants to actually fix the tax system, rather than just fiddle”, adding that plans outlined on Tuesday could be a step toward “one of the biggest sea changes to our tax system that we have seen in a generation.” Chris Sanger, head of tax at EY, calls tax day the “thinking man’s Budget”, saying it is where the Chancellor “will imprint his vision on the future of the tax system.” On what tax day may bring, Richard Wild, technical head of tax at the Chartered Institute of Taxation, is expecting consultations on the sharing of information with HMRC by third parties, a move that would seek to improve the revenue harvested and cut out mistakes made by individual taxpayers. George Bull, a senior tax partner at RSM, says issues like indexing capital gains to inflation, as well as CGT’s interaction with inheritance tax, could feature.
The Sunday Telegraph, Business, Page: 6
Medical staff among biggest tax avoidance scheme users
Data from HMRC shows that health service staff are among the most prolific users of tax avoidance schemes, with one in five of people signing up to schemes designed to reduce their tax bills working in hospitals. Of those caught using tax avoidance schemes, bookkeepers were the most common participants, with healthcare workers second in the rankings. The HMRC report said: “There is a notable level of use of avoidance schemes within the healthcare sector. HMRC has already stepped in where promoters have targeted NHS workers returning to the workforce to support the UK’s COVID-19 response.” The tax office said it suspects that “the majority of people who used avoidance schemes didn’t look too deeply into the tax arrangements they were being offered.” HMRC noted that 30,000 workers are using avoidance schemes compared with 22,000 seven years ago, while nine in ten people who use the schemes earn under £50,000 a year. John Hood of Moore Kingston Smith notes that the use of such schemes can spread “like wildfire” in certain areas as workers in office jobs or big employment hubs copy each other.
Red tape to be cut in IHT reform plans
The Treasury is expected to cut the red tape around inheritance tax this week, with changes set to be detailed on “tax day” to reduce the amount of paperwork families are required to fill out. It follows recommendations from the Office of Tax Simplification calling for the administrative burdens for those dealing with inheritance tax to be reduced. Jesse Norman, the Financial Secretary to the Treasury, said: “We want to cut red tape and make the tax system as simple as possible for people to use, especially during difficult times. The change is part of our wider drive to remove unnecessary paperwork and obstacles so that taxpayers can manage their affairs with less effort.” The reform plans due to be outlined on Tuesday will also see the Treasury publish an update on its consultation for an online sales tax, outline harsher measures against those who promote tax avoidance schemes and propose a move to force tax advisers to hold professional indemnity insurance.
The Sunday Telegraph, Page: 2
Sunak urged to opt against tax raids
Ahead of this Tuesday’s “tax day”, which will see the Treasury outline a series of proposals to reform the tax system, a Sunday Telegraph editorial has called on Chancellor Rishi Sunak to refrain from tax hikes. It argues that after a “crippling, historic raid unleashed at the Budget”, the last thing needed is a further increase in taxes. It urges Mr Sunak to opt against increases in capital gains tax, an assault on pension tax relief and a pay-as-you-go tax model for freelancers and investors, arguing that the latter would be “bureaucratic, undermine their ability to manage their financial affairs and deter entrepreneurial effort.” Noting that the economy and the budget deficit need to be addressed after the blow dealt by the coronavirus crisis, the piece argues that governments “cannot tax their way out of an economic crisis”. If the Conservatives try to do so, it adds, “they will also destroy the opportunities opened by Brexit.”
Lib Dems call for tax break for small businesses
Liberal Democrat leader Sir Ed Davey has urged the Government to put small firms at the heart of a post-pandemic recovery, calling for a £5.5bn-a-year tax break for smaller businesses. He will today urge Chancellor Rishi Sunak to cut national insurance contributions for small firms by quadrupling the employment allowance from £4,000 to £16,000. Sir Ed will tell an online Lib Dem conference: “The UK’s economic recovery starts with small business. Small businesses are at the heart of every local community, and every local economy”. He will call on the party to “challenge the Chancellor to give small businesses a bold new tax cut to support thousands of new jobs.”
CORPORATE NEWS – WEEKEND TO 21ST MARCH 2021
Greensill sees job losses
Administrators of Greensill Capital have announced the first job losses since the lender collapsed into administration last week. Grant Thornton confirmed that 440 staff had been let go. The firm added that it is still seeking a buyer that could potentially save the rest of the Greensill business after a deal with private equity group Apollo Global Management fell through. It was also revealed that Greensill’s Australian parent company has been hit with claims for $1.35bn from creditors. Elsewhere, the FT looks at issues at Greensill, noting that auditors at KPMG were unable to verify the existence of certain invoices.
Conflict concern over Grant Thornton and Gupta
The Sunday Times reports that Greensill Capital administrator Grant Thornton faces conflict of interest claims after advising its biggest debtor, steel tycoon Sanjeev Gupta, on a string of deals. Shadow Chancellor Anneliese Dodds commented: “In the week that the Government launched what it called a major overhaul of the UK’s audit regime, it is important that the administration of Greensill Capital takes place transparently and that there is no question of any conflict of interest.” Grant Thornton said it had given “careful consideration to the code of ethics relating to such matters and satisfied ourselves that there is no threat to our independence as a result of any prior relationships.” Elsewhere, the same paper says that Grant Thornton will have to pursue Mr Gupta’s GFG Alliance for cash it did not pass on, adding that if GFG goes under, the situation “could descend into a legal battle between two sets of administrators”. Separate analysis of Mr Gupta’s affairs notes that he has tended to use small auditors for his accounts, including King & King and < strong>HW Fisher.
CEO cyber fears climb
A PwC poll of more than 5,000 chief executives has found that 91% are concerned about cyber threats, up from 80% last year. Richard Horne, PwC’s UK head of cybersecurity, said: “For many organisations, up until a few years ago cybersecurity was seen as this technical thing that we left to the chief information security officer to deal with … Where many organisations are getting to is realising that every big business decision will impact your cyber-risk.”
Societies warn on rents
A letter to the Sunday Telegraph warns that rents which have increased by 3,000% in a decade are forcing the Society of Antiquaries, the Geological Society and the Linnean Society towards costly relocations, threatening to disperse their priceless collections, libraries and archives. Signatories including Royal Academy of Arts chief executive Axel Rüger note a PwC estimate that the societies contribute £39.7m to the country every year in public value.
The Sunday Telegraph, Page: 17
Brewers serve up a pandemic success story
The Sunday Times looks at how craft brewers have navigated the challenges brought about by the coronavirus pandemic, highlighting UHY Hacker Young estimates that there are now more than 3,000 breweries in the UK, an increase of 200 over the past year.
The Sunday Times, Business, Page: 2
Fashion house calls in administrators
Sam Chambers in the Sunday Times muses on the issues that led to the collapse of fashion brand Ralph & Russo, which has appointed administrators from Begbies Traynor and Quantuma.
The Sunday Times, Business, Page: 2
FINANCIAL SERVICES NEWS – WEEKEND TO 21ST MARCH 2021
Post-Brexit deal for the City nears
Britain and the EU are said to be close to striking a limited deal on post-Brexit financial services co-operation following months of negotiations, with partial regulatory equivalence on some financial products and a memorandum of understanding on regulation reportedly on the horizon. The Telegraph reports that the memorandum of understanding is expected to include agreement that regulators keep each other informed of their plans for taxation and measures to counter financial crimes.
Half of firms have no carbon neutral targets
A poll by EY suggests that financial services firms are struggling with net zero targets, with 51% saying they do not yet have a target in place to achieve carbon neutral status. The survey of financial services firms including 45 banks, 44 insurers and 29 asset managers saw 57% say the climate change regulatory agenda was proceeding at the right speed, while 34% said “very few” companies in the sector currently have the appropriate focus on sustainability. Gill Lofts of EY said: “While advancements have undoubtedly been made across the financial services sector, progress on sustainability is somewhat uneven amongst firms.”
EMPLOYMENT NEWS – WEEKEND TO 21ST MARCH 2021
More than half of staff travelled to work last week
More than half of Briton’s workers returned to the office last week, according to Office for National Statistics analysis. In the week ending March 14, 53% of workers travelled to the office, with the move away from remote working coinciding with the reopening of schools in England and a decline in coronavirus cases. The report shows that the proportion of people who worked exclusively from home decreased six percentage points from the previous week, to 30%.
Super-rich utilise furlough scheme
An investigation by the Mail on Sunday reveals that a number of wealthy business owners have used the taxpayer-funded furlough scheme to pay staff. Analysis of official documents show that companies owned and run by super-rich individuals with a combined personal wealth of £19.4bn have taken money from the emergency scheme rolled out to protect jobs during the pandemic. MP Alexander Stafford, who sits on the Commons Business Select Committee, commented: “Those who could afford not to take the money should not have done so, and if they did they have a moral duty to pay the money back.” The Mail report follows a separate probe showing that billionaire tax exiles, Saudi royals and oil-rich Gulf states have claimed millions in taxpayer-funded furlough money. Robert Palmer, executive director for campaign group Tax Justice UK, said: “It’s pretty galling that tax exiles who have minimised their contributions in the good times are asking for a handout when things get tough.”
The Mail on Sunday The Observer
City firms eye office returns
US Investment banks are set to lead the return to the office, with the first wave of City workers preparing to head back to their desks. Several banks are preparing to open their offices again as soon as March 29, with Goldman Sachs, JP Morgan and Credit Suisse among those leading the charge as the Government’s ‘stay at home’ rule comes to an end. Amid the coronavirus lockdowns, only key traders and staff who have not been able to work from home have been allowed into offices. With official advice suggesting people should still work from home where they can, some firms are concerned they could be penalised for bringing more staff back to the office so soon. However, a banker has told the Mail on Sunday the Government gave “a nod and a wink” that they will not be punished for allowing staff to return.
The Mail on Sunday, Page: 121
Tech shift set to stay
The Sunday Times reflects on the impact of the coronavirus crisis, noting changes to working life. KPMG economist Yael Selfin expects some technology that has been utilised amid the pandemic to have a lasting change, saying she expects long-haul flights and business trips to be less common. She adds: “We’re going to come out of the pandemic much more environmentally and socially conscious, and more aware of our work-life balance”.
The Sunday Times, Business, Page: 2
SMEs NEWS – WEEKEND TO 21ST MARCH 2021
Staff and owners apart on return expectations
Research shows that a third of SME owners expect staff to come back full time when lockdown ends in June, with this double the figure for employees, where 16% expect to return to work as soon as restrictions are lifted. In a survey conducted for Cignpost ExpressTest, it was found that 38% of 1,100 employees polled do not expect to return to the office for the foreseeable future, with a further 20% not expecting to return until the entire workforce has been vaccinated. By contrast, 51% of employers said they expect those who have been vaccinated to return to the office immediately.
The Mail on Sunday
INDUSTRY NEWS – WEEKEND TO 21ST MARCH 2021
UK audit reforms fail to address the real problem behind scandals
Professor Karthik Ramanna reflects on the Government’s audit reform plans, arguing that issues stem from boards and auditors’ lacking a systematic culture to “challenge chicanery when it presents itself”, not badly designed rules.
BUSINESS RATES NEWS – WEEKEND TO 21ST MARCH 2021
Cash concern for councils
The Local Government Association (LGA) has urged ministers to look into new funding sources for councils, with the body warning that a planned shake-up of the business rates system must “recognise the importance of this income stream for funding key local services”. With the Treasury set to publish a number of consultations on future policy on March 23, officials are expected to deliver an interim report on a proposed overhaul of business rates. A quarter of council spending is funded by the levy but Richard Watts, chair of the LGA’s Resources Board, says local government confidence in business rates “as a reliable income source with a future has reduced”.
ECONOMY NEWS – WEEKEND TO 21ST MARCH 2021
Government borrowing hits record February high
Office for National Statistics (ONS) data shows that public sector borrowing hit £19.1bn in February, with this £17.6bn more than in the February 2020 and the highest February borrowing since monthly records began in 1993. While the coronavirus pandemic drove up government spending, February’s borrowing came in below expectations, with City economists having forecast that the deficit would hit £21bn. The ONS data showed borrowing is on course to match the Office for Budget Responsibility’s forecast of £355bn for the 2020/21 financial year. The total for 2020/21 reached an estimated £278.8bn, pushing the UK’s total debt to £1.125tn and the debt-to-GDP ratio to 97.5%. The ONS report shows that the cost of financing the UK’s debts had remained stable over the last year, climbing from £4.2bn to £5.3bn.
Shopping habits shift since lockdown
Helen Dickinson, chief executive of British Retail Consortium, says shopping has “changed dramatically” in the year since the first coronavirus lockdown was put in place, saying the retail environment feels “a world apart” from a year ago and noting the “degree of uncertainty” felt in March 2020. With the lockdown seeing increased demand for online retailers while high street competitors have been hit by enforced closures and lower footfall, BDO’s Sophie Michael says that while online has seen “five years’ growth in one”, it has not offset lost in-store sales.
March PMI expectations drive GDP hope
Economists believe GDP could beat growth forecasts for the year as the economy weathers the latest lockdown better than had been expected. Initial readings from the Markit/CIPS purchasing managers’ indices (PMI), due to published on Wednesday, are expected to show that the service sector has edged back into growth while manufacturing continues to show expansion. On an index where a score above 50 indicates growth, the service sector is expected to post a 51 reading for March, up from 49.5 on February, while manufacturing is likely to repeat the 55 score seen the month before. Howard Archer, chief economic adviser to the EY ITEM Club, believes Britain’s 2021 growth forecast could be upgraded, saying: “Our forecast currently is for 5% GDP growth this year but that might go up by a reasonable amount. That is because we thought that GDP would contract by 4% in the first quarter, but we now think it will be lower than that.”
Sunday Express, Page: 51
Contact Paul Southward