UK facilitates a third of tax dodging

Analysis by the Tax Justice Network suggests that the UK and its overseas territories are responsible for more than a third of global tax avoidance each year. The report says abuse of tax systems by multinational firms and wealthy individuals deprived countries of $427bn, with more than $160bn facilitated by the UK and its territories and dependencies – with the UK itself responsible for $42bn of tax losses. The study says Europe lost the equivalent of one-eighth of its health budget to tax dodging last year. It also highlights that wealthy countries are responsible for 98% of tax avoidance. The Tax Justice Network is calling on governments to introduce an excess profits tax to recoup money from multinationals that have “short-changed” nations, with CEO Alex Cobham adding that a wealth tax alongside this “would ensure that those with the broadest shoulders contribute as they should”.

The Independent, Page: 40

Stamp duty receipts rise 27%

HMRC figures show that stamp duty receipts for Q3 were 27% higher than in Q2. Overall transactions were up 68%, with the easing of the coronavirus lockdown measures and the introduction of the stamp duty holiday driving activity in the property market. The number of residential transactions were up by 72%, with non-residential deals up 38%. However, year-on-year comparisons show transactions in Q3 were down 18% on the third quarter of 2019 to 228,900, while receipts dropped by 43% from £2.4bn to £1.35bn. Meanwhile, ministers have been warned that the housing market could go into sharp reverse next year if the stamp duty holiday is not extended beyond the current cut off at the end of March 2021. Andrew Wishart, a property economist at the consultancy Capital Economics, believes that policymakers should extend the holiday “to avoid a damaging downturn”.

The Times, Business, Page: 54 The Independent, Page: 42 Financial Times, Money, Page: 3 The Guardian Daily Express The Sun, Page: 2

CGT plan would make the UK ‘an outlier’

City AM ’s Hannah Buttle compares CGT to similar levies in other countries, saying that an Office for Tax Simplification recommendation that would double the CGT rate would make the UK an “outlier”. The proposed shift would see the rate for those in higher income tax brackets jump to 40%, a move Miles Dean at Andersen says would see wealthy foreigners “shunning” the UK and wealthy Brits leaving. Ms Buttle notes that Germany and France levy CGT at 25% and 30% respectively, while in Norway, Sweden, Finland and Denmark top rates range from 30% to 42%, while Iceland’s top rate is 22%. In the US, the top rate is 20% but individual states can levy additional CGT. Belgium, New Zealand, Singapore and Switzerland are among nations that have no capital gains tax.

City AM

Sunak plots pensions tax relief cut

The Times reports that Rishi Sunak is considering plans to cut pensions tax relief for higher earners in a bid to boost Britain’s coronavirus-hit finances. The paper says the Chancellor has been mulling an array of options for raising taxes as he looks to balance the books but his options are limited by the Prime Minister’s insistence that income tax, VAT and national insurance must not increase.

The Times, Page: 18

IDS: Spend and borrow binge would deliver a tax hit

Former Conservative leader Sir Iain Duncan Smith has warned that a “spending and borrowing binge” to help the country foot the coronavirus bill would only serve to “cripple the business sector with higher taxes”. His warning came in a report by the Centre for Social Justice think-tank which says the path to saving the economy post-pandemic is not “an ever-increasing rollercoaster of tax and spend”.

The Daily Telegraph, Page: 9

Wealth tax risks worsening the CGT regime

Edward Troup, a former first permanent secretary at HMRC, has told the Treasury Select Committee that “defects” in the existing tax system need to be fixed before a wealth tax is considered.

Financial Times, Money, Page: 3

Capital gains tax should be fairer and simpler

Paul Lewis in the FT says he was surprised that reform of CGT proposed by the Office for Tax Simplification has drawn criticism, arguing it could deliver a simpler and fairer tax.

Financial Times, Money, Page: 7


Sunak prepares to begin rebalancing finances this spring

In an interview ahead of the Government spending review this week, Rishi Sunak has revealed that he intends to begin “returning to sustainable public finances” by the spring. Figures on the state of the economy to be published this week will mean “people will see the scale of the economic shock laid bare”, he said. “Right now, the focus should be on supporting the economy, protecting as many jobs as possible and providing the money required to combat the coronavirus.” He added: “Obviously, you can’t sustain borrowing at this level indefinitely.” When asked whether returning to sustainable public finances meant tax rises were on the way, the Chancellor said: “Once we get through [the crisis], we’ll have to figure out what the best way [forward].” The Sunday Times points out that Mr Sunak is looking at raising capital gains tax and cutting higher-rate pensions tax relief. In a speech on Wednesday, he is expected to announce £3bn of new money for the NHS to help it cope with the COVID-19 crisis.

The Sunday Times, Page: 1 The Sunday Telegraph, Page: 2

HMRC has little chance of recovering stolen furlough cash

HMRC would need to double its work force in order to pursue fraudsters who stole billions in furlough and bounce back loan cash, according to analysis carried out by the legal services firm, Integrated Dispute Resolution. Kevin Humphreys, tax expert at IDR, said: “HMRC would need 54,500 staff to claw the coronavirus losses back, broadly speaking, its entire UK workforce.” He said one solution might be for the Government to work with private firms to target fraudsters and tax dodgers. Separately, Blick Rothenberg has warned small businesses that have claimed under the furlough scheme that they could face extra tax scrutiny. It warns clients to be prepared for “random or selective” investigations.

The Sunday Telegraph, Page: 12

Taxing our way out of crisis will backfire, Sunak told

The Chancellor has been warned that using tax rises to extricate the UK from its financial woes “would massively backfire” on the Government and risks permanent economic stagnation. David B Smith, a former City economist, argued in a Politeia paper that Britain’s tax burden already appeared close to the upper limit of “historic sustainability” before the pandemic, with public spending at the “high end of danger zone”. He adds: “The concern now is that the recent UK growth trend of around 1.5% each year will collapse to zero, or remain negative, even after the COVID-19 crisis has burned itself out.”

Sunday Express, Page: 12 The Sunday Telegraph, Page: 2



Britain and Canada sign post-Brexit Continuity Agreement

The UK and Canada have signed a trade agreement designed to provide continuity for businesses and workers in both countries post-Brexit in a move expected to pave the way for negotiations on a tailor-made deal between the two countries next year. The UK-Canada Trade Continuity Agreement, which is subject to final legal checks, will not only protect the flow of £20bn worth of goods and services between the countries after Brexit, but is “also part of a much bigger strategic play to deepen trading ties with nations beyond Europe,” the Department for International Trade said. Mike Cherry, Federation of Small Businesses chairman, said: “There was always a danger that the end of the transition period would mean losing wider international market access that we enjoyed as part of EU membership. The fact that this new agreement upholds the small business chapter that was previously in place is very welcome.”

The Sunday Telegraph, Page: 2 Reuters Sunday Express, Page: 8



Majority of over-55s unaware of triggering Covid tax trap that cuts pension limit by 90%

Hundreds of thousands of savers have dipped into the pension during the coronavirus pandemic. However, NFU Mutual notes that 80% of those aged between 55 and 64 are unaware their future pension contributions will be capped after making a withdrawal. Withdrawing income from some types of pension triggers the money purchase annual allowance (MPAA), which reduces the amount a saver can pay in with tax relief by 90%, from £40,000 to just £4,000. More than 347,000 people made a withdrawal from their nest egg between June and September, an increase of 20,000 compared with 2019, according to data from HMRC. Ian Browne from Quilter called on the Chancellor to relax the MPAA triggers for at least the current tax year so people were able to recover the funding gap when their finances were in better shape. However, Aviva’s Alistair McQueen said the Treasury was unlikely to listen to these calls as the Government deficit was approaching £ 400bn. Mr McQueen advised savers against relying on Mr Sunak to relax the purse strings further while the ­pandemic was still ongoing.

The Sunday Telegraph



FRC calls for end to easing of pre-emption rules

The Financial Reporting Council (FRC) says listed companies will have to resume first-refusal rights for existing shareholders when they raise capital, bringing an end to a relaxation of pre-emption rights rolled out in March. The FRC-based Pre-Emption Group has said the relaxation in pre-emption rights, which was designed to speed up capital-raising for companies hit by the pandemic, will not be extended beyond the November 30 deadline. This means that as of December, firms will have to resume giving existing shareholders first refusal on new share issues.

Financial Times The Times, Page: 51 Reuters City AM


City should have been championed in Brexit talks

The Lord Mayor of London, William Russell, has accused the Government of “missing the point” of the City as a key national asset after failing to champion financial services in Brexit talks. Russell said the Government’s approach to financial services in the talks was “disappointing” as the Square Mile faces up to the loss of passporting rights and regulatory equivalence from January. He said the City “would have loved to have had more representation”, claiming that the UK’s financial sector has been a victim of its own success. A Treasury spokesman said the Government planned to “renew the UK’s position as the world’s pre-eminent financial centre”. The spokesman added: “By bolstering the dynamism, openness and competitiveness of the sector, we will ensure the UK moves forward as an attractive and well-regulated market, leading the world in pioneering new technologies and shifting finance towards a net-zero future.”

The Sunday Telegraph, Business, Page: 3



Treasury: Banks best placed to chase coronavirus loans

The Treasury insists banks should be responsible for chasing up and restructuring loans made to struggling businesses during the coronavirus crisis, despite City lenders calling for government help in dealing with the issue. With analysis suggesting that around £35bn of lending could become unsustainable, lobby group TheCityUK and EY had called on ministers to offer support, saying a ‘UK Recovery Corporation’ could turn risky debts into more manageable forms like tax liabilities. Responding to a Treasury Committee report highlighting the issue, the Treasury said: “We remain of the view that accredited lenders, not the government, are best placed to support borrowers [to] repay government-guaranteed loans.”

City AM



Landlords approve Clarks’ rent plan

Shoe business Clarks has seen landlords back its rescue plan, with 90% of its creditors voting in support of a CVA that will see the firm pay no rent on a number of stores. The retailer, which was rescued in a £100m investment by private equity firm LionRock Capital earlier this month, says that all 320 stores will remain open, with rent cut to zero at 60 while the rest will see rent calculated on the store’s earnings. Deloitte’s Gavin Maher said the CVA and proposed investment from LionRock “will provide a stable platform upon which the management’s transformation strategy can be delivered.”

The I, Page: 78 Daily Star, Page: 2 Daily Mail


KPMG hired to probe Russian gold miner’s deals

London-listed Russian miner Petropavlovsk has hired KPMG to conduct a forensic probe into several related-party transactions over the past three years as the company’s refreshed board attempts to move on from its troubled past.

The Sunday Times, Business, Page: 2



House building falls by a third

Housebuilders are set to deliver a third fewer new homes this year, with some of the decline attributed to the impact of the coronavirus crisis. Britain’s seven largest house builders – who account for 43% of the country’s new housing supply – have reported property completion figures that are down by 35% on average from a year ago. A survey from the Home Builders Federation and development finance provider Close Brothers Property Finance saw 44% of developers identify the pandemic as a barrier to new completions, while 83% cited delays in securing planning permission or discharging conditions as a factor.

Daily Mail



Youth unemployment at four year high

One in twenty young people are currently unemployed, according to the Office for National Statistics, with this the highest level in four years. The analysis shows that 350,000 people aged 16-24 were classified as unemployed between July and September. The report says 7% of young men are unemployed, with the rate at 3% among young women.

City AM


Scrapping duty-free shopping could cost 40,000 jobs

The Association of International Retail (AIR) has warned Rishi Sunak that 25,000 retail staff and 15,000 factory workers who make luxury goods for top British brands face redundancy after the decision to axe the tax-free perk at the end of the year.

The Mail on Sunday, Page: 17



Government borrowing set to hit £400bn

The cost of the coronavirus pandemic has seen the national debt climb to its highest level in 60 years. Government borrowing totalled £214.9bn in the first seven months of the financial year, putting it on track to reach almost £400bn over the full year. This would be a record and more than double that seen following the global financial crisis a decade ago. The UK’s national debt has risen to £2.08trn and has exceeded the size of the economy since May. It is now worth 100.8% of national income, a level not seen since the start of the 1960s. Howard Archer, chief economic adviser to the EY Item Club, said it was difficult to estimate the annual deficit amid uncertainty over coronavirus restrictions, but said he expected it to hit £400bn. He added: “The likely renewed economic contraction in the fourth quarter, caused by lockdown in England, will reduce receipts and further put up the deficit”. Dr Jonathan Gillham, chief economist at PwC, said people should not be “overly concerned” by the debt levels, with the Bank of England having committed to buy another £150bn of public debt, while the UK’s credit rating is relatively stable and borrowing remains cheap.

The Times, Page: 52 Daily Mail, Page: 99 The Guardian, Page: 40 The Independent BBC News

Retail sales rise by 1.2% in October

Figures from the Office for National Statistics show that retail sales rose in October, with sales volumes climbing 1.2% compared to September to deliver the sixth consecutive monthly increase. Year-on-year, October’s sales were up 5.8% on October 2019. While instore sales fell 3.3% year-on-year as some regions were placed under tougher restrictions due to coronavirus case numbers, online sales were up 52.8% on last October. Some of the increase recorded last month has been attributed to people bringing forward Christmas shopping in anticipation of further restrictions being rolled out. Ian Geddes, head of retail at Deloitte, said 2020 has seen “significant behavioural change” among consumers, adding that some lockdown habits look set to stay, with the shift to online shopping the most notable. Lisa Hooker, consumer markets leader at PwC, comments: “Looking ahead to December, with online delivery capacity already stretched to its limits, retailers will be hoping for a swift lifting of lockdown restrictions and that consumers continue to show they can bounce back into spending mode. ”

The Daily Telegraph, Page: 38 Daily Express, Page: 73 The Independent, Page: 39 Daily Mail The Scotsman, Page: 39


Treasury set to borrow almost £500bn this year

The Office for Budget Responsibility is expected to confirm this week that the Treasury will borrow almost £500bn this year, more than double the £227bn gilt sales in the year after the financial crisis. The Treasury’s Debt Management Office committed to at least £385bn in gilt sales by the end of November, already more than double its original March pre-Covid £156.1bn estimate for the entire financial year. Antoine Bouvet, senior rates strategist at ING, said: “The total figure could well rise above the £500bn market depending on the length and take-up of the furlough scheme, among other factors.” Meanwhile, Paul Johnson, the director of the Institute for Fiscal Studies, said he did not see “any possibility of the books being balanced this decade, if not for longer”.

The Sunday Telegraph, Business, Page: 1



Sage to invest in expansion

Accountancy software group Sage has revealed an intention to expand its cloud-based business. CEO Steve Hare said it plans to invest an extra £50m to £60m in research, development, sales and marketing to grow the business and improve its offering across accounting, payroll and human resources. Sage said that its investments would squeeze profit margins next year but “drive recurring revenue growth and new customer acquisition, generate efficiencies and, over time, lead to significant value-creation through sustainable profit and cash generation”. Sage reported a 3.7% decline in underlying operating profit to £391m for the year to September.

The Daily Telegraph, Page: 36 The Times, Page: 57

Contact Paul Southward

Paul Southward