NEWS – WEEKEND TO 23RD AUGUST 2020
NEWS – WEEKEND TO 23RD AUGUST 2020
TAX NEWS – WEEKEND TO 23RD AUGUST 2020
Tories row over tax rises to plug hole in public finances
The Telegraph reports that the Chancellor is under pressure from the Treasury to claw back some of cash spent on the furlough scheme using tax hikes, leading to a clash with those who advocate spending cuts instead, such as Boris Johnson’s chief adviser Dominic Cummings and Treasury select committee member Steve Baker, who said tax rises “would not be the right response.” He added: “The last thing we need is austerity for the private sector through higher taxes. We need to simplify taxes and lower taxes to remove every possible impediment to investment. We must incentivise the making of profit. The evidence of history is that there is a strict limit on taxable capacity of the UK economy and we hit that limit last year.”
Over 20 large companies probed for tax evasion
HMRC is investigating 23 of Britain’s largest companies for tax evasion, the Times’ Ali Hussain reports. Pinsent Masons says the businesses, which each have a turnover of at least £200m or assets worth £2bn, were referred to the HMRC tax evasion referral team, which the law firm says means “detailed investigations are almost certain to follow.” Andrew Sackey, a partner at the firm, suggests the taxman will step up its investigations into wealthy individuals it believes could be hiding funds offshore as it seeks to plug the hole in the Government’s finances, but HMRC has dismissed this as speculation.
HMRC probing over 10,000 reports of tax scams
HMRC is investigating more than 10,000 reports of tax scams designed to exploit the coronavirus pandemic, according to a freedom of information request by Lanop Accountancy. Scams included emails, text messages, social media posts and phone calls from fraudsters and typically offered tax refunds. Reports peaked at 5,152 in May falling to 2,558 the next month.
The Times, Page: 60
Chancellor considers ditching tax on tech giants
Rishi Sunak is planning to scrap the Digital Services Tax after concluding that the £500m it is expected to raise each year is insufficient to warrant maintaining the levy. The tax, which is set at 2% of UK sales on companies with a minimum of £25m in revenues, is also said to be an impediment to trade talks with Washington. One source told the Mail on Sunday: “At just half a billion quid, Rishi has concluded it is just more trouble than it is worth, given the anger of Trump and the Washington establishment.”
The Mail on Sunday, Page: 12
PENSIONS NEWS – WEEKEND TO 23RD AUGUST 2020
Johnson resists Chancellor’s call to limit pension rises
Boris Johnson is pushing back on proposals from Chancellor Rishi Sunak to remove the “triple lock” on pensions to prevent a considerable rise in costs fearing a backlash from older voters. A source told the Times the PM believes the “optics are terrible” for such a move, which would also break a manifesto promise. New analysis for the Times by the Resolution Foundation has found that the state pension could rise by 7.4% over the next two years, costing taxpayers an extra £2bn annually. For pensioners, it would mean an increase from £6,981 a year to £7,497 in the two years. Scrapping the triple lock and aligning the state pension with earnings over both years would see rises reduced to 4.4%, while pensions would rise by just 1.8% if kept in line with inflation over both years.
SMEs NEWS – WEEKEND TO 23RD AUGUST 2020
Post-lockdown surge in new companies
The Sunday Express reports that 75,000 new companies were formed in June, a rise of almost 25,000 on the same month last year. In the first seven days of August, 21,000 new companies were formed, which is equal to an annual rate of almost a million. Clive Rich, the chief executive of LawBite, an online platform which connects SMEs with affordable expert lawyers, said: “Even in the height of COVID-19, 80% of our inquiries were about SMEs wanting to get on and move their business forward. I think small businesses are more resilient than forecasters give them credit for.” He added: “I expected a surge after Covid as a lot of people finding themselves out of a company job can say to themselves this is the perfect opportunity to do something for myself, be my own boss and balance my work-life better, knowing they can now do it all remotely. Even the SMEs that have struggled in Covid may want to have another go with another venture.”
Sunday Express, Page: 2
Workspace firm forced start-ups to pay rent
A workspace company has come under fire for allegedly ordering start-ups to pay thousands of pounds a month for offices they did not use during the COVID-19 lockdown. IWG is said to have rejected tenants’ requests for full payment holidays when the Government had ordered workers to stay at home. Boss Mark Dixon said all 306 of the shared workspace offices run by his Regus brand in the UK had remained open and that it was up to tenants if they did not use them. “It is more of an ‘I don’t want to commute’ story’,” he said. A number of start-ups and entrepreneurs have set up a crowdfunding campaign to fund a group litigation against IWG.
Government urged to extend business grant deadline
The Local Government Association, the Institute of Directors, the Federation of Small Businesses and the British Independent Retailers Association are among a raft of groups calling on the Government to extend business support grants before the schemes are closed at the end of this week. Over £11bn has been distributed to some 880,000 small businesses since March by local authorities, but roughly £1.5bn remains unallocated. Many small businesses claim that they have been unfairly excluded from accessing the grants due to eligibility requirements and say that they still need financial help.
The Mail on Sunday, Page; 127
EMPLOYMENT NEWS – WEEKEND TO 23RD AUGUST 2020
Taxman to contact employers over furlough errors
HMRC is to contact some 3,000 employers asking them to review funds received as part of the Government’s Coronavirus Job Retention Scheme (CJRS), suggesting mistakes may have been made. Employers have 90 days from receiving the CJRS money they are not entitled to, to inform HMRC and then repay the money on time. Andrew Sackey, a tax partner at Pinsent Masons, said HMRC is “likely to come down hard” on employers which fail to use the amnesty to admit errors. Data obtained by the Times reveals over 30,000 applications for the scheme were rejected, with HMRC understood to believe that many were clear attempts to defraud the system.
Daily Express The Times, Page: 49
Check tax risks before going to work overseas
Shane Hickey reports in the Observer on the workers intending to jet off to paradise after proving to their employers that they can work from home. These so-called digital nomads are being offered special visas by countries such as Barbados and Estonia but are warned to check local tax laws to avoid being caught out. Lee Mcintyre-Hamilton, a specialist in global mobility tax matters at Blick Rothenberg, says that prospective digital nomads should work through the UK statutory residence test to see when they will become non-resident when they go to work overseas. “It is not always straightforward to determine your UK residence status, so you may want to take some advice at this stage, since there could be a significant financial impact if you get your residence status wrong,” he adds.
The Observer, Page: 51
Some 6m furloughed employees worked from home during lockdown
A study by academics at Oxford, Cambridge and Zurich universities suggests nearly two-thirds of the 9.4m workers put on furlough during the coronavirus pandemic broke the rules by doing their jobs from home during lockdown. Surveys involving almost 9,000 workers found about a third of those who broke the rules were “explicitly compelled” to carry on working by their bosses. MP Meg Hillier, chairman of the Public Accounts Committee which will question HMRC bosses on the issue next month, said: “HMRC needs to urgently get a grip on these issues around fraud of the furlough scheme. Employees are being put in incredibly vulnerable positions and employers need to face tough sanctions for this. We know people are trying it on and it’s right they should be tackled.”
The Mail on Sunday, Page: 8
PROPERTY NEWS – WEEKEND TO 23RD AUGUST 2020
Pent-up demand drives surge in property sales
July saw a jump in property sales, according to official data, but levels were still well below those seen last year. Figures from HMRC showed sales in July were up 14.5% on June as pent-up demand boosted activity. However, sales were still 27.4% lower than last July. July’s figures do not incorporate the expected “mini-boom” in transactions following the Government’s cut to stamp duty announced on July 8. Shaun Church, of mortgage broker Private Finance, said: “The Government urgently needs to start preparing for how it is going to maintain high levels of demand after the tax threshold reverts to normal. A phased reintroduction of the lower threshold would ensure buyer activity does not suddenly fall off a cliff.”
Eviction ban to be extended by four weeks
The ban on landlords evicting tenants in England and Wales, which was due to end on Sunday, has been extended until 20 September. Ministers were concerned that an estimated 230,000 renters were at risk of homelessness. The devolved administrations in Scotland and Northern Ireland have already banned convictions until next March.
Covid-crippled property markets ring the alarm for banks
The FT’s John Plender reports on the threat to banks from a commercial property market in crisis, asking if central banks and financial watchdogs have underestimated the risk to the financial system.
Landlords facing crunch as remote working gains traction
Estate agency Savills predicts that vacancy rates at City office buildings will rise from 6.5% this year to 7.2% next year, before peaking at 8% in 2022. The forecast comes as businesses shrink their headquarters in the wake of the coronavirus pandemic as workers prove they can work from home productively. For some companies, the enforced switch to remote working is likely to be a springboard to permanent change, says Sam Chambers in the Sunday Times, pointing to expectations at PwC that most of its 22,000 UK staff will work flexibly after the pandemic and plans by KPMG for staff to be allowed to spend part of the week working remotely permanently. Anna Purchas, head of people at KPMG UK, comments: “This is a chance to break free from engrained, traditional routines, and say goodbye to presenteeism.” But a shrinking London office market will prove tough for landlords such as British Land and Land Securities, already hit hard by the collapse in retail property values.
Time to revise business rates system
The British Retail Consortium (BRC) and the Federation of Small Businesses (FSB) are calling on the Chancellor to reform business rates arguing that high street shops need a fairer tax system to help them compete against online giants. FSB chief Mike Cherry said: “It clobbers those with shop fronts and barely touches the out-of-town warehouses of online-only giants.” He added: “Smaller, independent high street businesses are at the heart of their communities and remain on-trend with millions of savvy consumers.” BRC chief executive Helen Dickinson comments: “Government must ensure a more sustainable long-term tax system – avoiding retailers being hit by a sudden end to the business rates discount in April.”
The Sun, Page: 10
CORPORATE NEWS – WEEKEND TO 23RD AUGUST 2020
Wasabi to close up to 12 stores
Wasabi has announced that up to 12 stores could be permanently closed as part of the sushi chain’s company voluntary arrangement (CVA) restructuring plans, after the COVID-19 pandemic and subsequent lockdown measures “profoundly” impacted sales. The store closures depend on talks with landlords. Advisers from KPMG were appointed in May to explore strategic options. The move comes as rival sushi retailers Itsu and Yo! also announced similar proposals in recent weeks.
The Times, Page: 49 Daily Mail, Page: 95
STA Travel collapses
The student travel agency STA Travel has ceased trading with 500 staff set to lose their jobs as a result. The company said all its 50 shops will close due to the impact of the coronavirus crisis, with customers told they would be contacted in the coming days regarding their bookings.
The Daily Telegraph Daily Mail
Link delays accounts for Woodford’s failed fund again
The Sunday Times reports on the announcement by Link Fund Solutions last week that there will be a further delay in publishing the accounts of the failed Woodford Equity Income fund, now called Equity Income. Link is facing lawsuits from investors over the way it has managed the fund, which was shut down in October last year. Grant Thornton, Link’s auditor, said the delay in publication “should not cause any undue concern” and that it would “ensure the accounts are thorough and correct, especially given the volume of post balance sheet events”.
Debenhams owner calls in advisers as administration looms
The parent company of Debenhams has brought in FRP Advisory to work on its administration. Celine UK Newco 1 Limited, which is controlled by Debenhams’ lenders, bought the department store chain’s operating subsidiaries when it collapsed in April. Celine is the issuing entity of Debenhams’ £200m of 5.25% notes due in 2021, the coupon payments for which will now not be paid.
Harvey Nichols brings in restructuring experts
Harvey Nichols has called in restructuring experts from PwC as depressed footfall and an absence of tourists takes its toll. The group is understood to be reviewing the viability of its store estate and financing requirements.
PERSONAL FINANCE NEWS – WEEKEND TO 23RD AUGUST 2020
Investors in property funds must prepare for fall in assets
Analysis by the data company Morningstar has found that people who invested property funds that have since been frozen have seen the value of their savings dwindle by more than £338m in four months. Laura Suter, a personal finance analyst at the investment platform AJ Bell, said: “Investors need to brace themselves for a sharp reduction in the value of the assets when the funds do reopen.” She pointed out that property investment trusts are down about 18% since the start of the year. This compares with an average decline of about 3% in their open-ended counterparts.
ECONOMY NEWS – WEEKEND TO 23RD AUGUST 2020
Retail sales climb while manufacturing and services soar
Retail sales rose above pre-pandemic levels in July, according to Office for National Statistics (ONS) figures, with volumes up 3.6% between June and July and sales now 3% higher than February. Ruth Gregory, senior UK economist at Capital Economics, said the figures suggested that “the recovery in physical shops was more impressive than the headline figure and that shoppers are starting to return to the High Street”. But Helen Dickinson, chief executive of the British Retail Consortium, warned the results “mask a crisis under way in some parts of the retail industry.” Separately, activity in the UK’s manufacturing and service sectors during August grew at the fastest rate for nearly seven years, according to the IHS Markit/CIPS composite purchasing managers’ index (PMI), which gave a preliminary reading of 60.3, the highest figure since October 2013. A figure above 50 indicates expansion. However, IHS said the companies it spoke t o “continued to note that levels of demand remained well below those seen prior to the pandemic”. Samuel Tombs, an economist at Pantheon Macroeconomics, warns that the slump in the composite PMI in the eurozone, where the rebound is roughly one month further advanced, “suggests that the UK’s recovery soon will lose momentum too.”
UK public sector debt goes above £2trn
Public sector debt has exceeded £2trn for the first time following extraordinary borrowing measures by the Government to support the economy during the coronavirus pandemic. Total debt hit £2.004tn in July, £227.6bn more than last year, the Office for National Statistics (ONS) said. Spending on measures such as the furlough scheme means debt has risen above 100% of GDP for the first time since the 1960-61 financial year, with July’s borrowing at £26.7bn marking the fourth highest borrowing in any month since records began in 1993. Chancellor Rishi Sunak commented: “This crisis has put the public finances under significant strain as we have seen a hit to our economy and taken action to support millions of jobs, businesses and livelihoods. Without that support, things would have been far worse. Today’s figures are a stark reminder that we must return our public finances to a sustainable footing over time, which will re quire taking difficult decisions.”
Sunak to launch war on waste
The Chancellor Rishi Sunak has moved to bolster the Treasury’s grip on infrastructure projects as part of a new Whitehall war on waste, the Sunday Telegraph reports. The move comes amid mounting concern over the state of public finances and growing pessimism over the prospect of a V-shaped economic recovery. A Government source said: “The UK economy has taken a huge hit and it’s fair to say our public finances are now under significant strain. So now we really have got to get to grips with how money is being spent and scrutinise in close detail on what. The Chancellor is determined to ensure that in these difficult times taxpayers’ money is spent efficiently and that government projects deliver good value for money for people.”
SMEs prove their resilience
Small retailers are the most bullish of all SMEs, according to data from Barclays, which show retail SMEs expect their revenues to grow 16% over the July to September period, compared to just 5% for all sectors. A third maintain a positive outlook for their sector, versus a 24% average for all businesses. SMEs in general are more optimistic as second quarter losses came in lower than expected. Rob Cameron, chief executive of Barclays Payments, said: “SMEs are once again proving their resilience and role at the heart of the UK economy, especially in the face of coronavirus.”
Sunday Express, Page: 44
REGULATION NEWS – WEEKEND TO 23RD AUGUST 2020
Lack of trading data hits ETF growth in Europe
A report from PwC has found that Mifid II rules have had only a limited effect on improving transparency, and a lack of data standardisation was impeding the distribution of ETFs in Europe.
OTHER NEWS – WEEKEND TO 23RD AUGUST 2020
Wirecard break-up begins as it sells off UK and Brazil businesses
Wirecard has agreed to sell its UK payment card technology business to Visa-backed UK start-up Railsbank. The sale of its Brazilian offshoot also marks the beginning of break-up of the collapsed German payments company. The UK deal requires the approval of the Financial Conduct Authority.
Pandemic triggers wave of billion-dollar US bankruptcies
US corporate bankruptcy filings are set to surpass levels reached during the financial crisis in 2009 with a record 45 companies each with assets of more than $1bn filing for Chapter 11 bankruptcy.
Contact Paul Southward