NEWS – WEEKEND TO 27TH SEPTEMBER 2020

SATURDAY

NEWS ROUNDUP

TAX NEWS – WEEKEND TO 27TH SEPTEMBER 2020

SATURDAY

Vestager to appeal judgement in Apple State aid case

The European Commission has said it will appeal a ruling from the General Court of the European Union (GCEU) in July which found the Irish government had not given a tax advantage to US tech giant Apple. The Commission’s team, led by the EU’s competition chief Margrethe Vestager, argued in 2016 that Apple had to repay €13bn euros in unpaid taxes to Ireland, after the latter granted “undue tax benefits” to the firm. The allegation was contested by Apple and the Irish government. The European Commission will now take the case to the European Court of Justice. Peter Vale, a tax partner at Grant Thornton, commented: “From Ireland’s perspective, the appeal by the EU Commission keeps the matter in the spotlight for a few more years, which could have adverse reputational implications for Ireland, regardless of the ultimate outcome. Had the commission decided not to appeal, closure would have been brought to the case, which would have been a positive development for Ireland, and indeed ironically for investment into the EU as a whole.”

The Times Financial Times, Page: 6 The Guardian Daily Mail, Page: 103

Sir Jim Ratcliffe moves to Monaco

Sir Jim Ratcliffe is to quit Britain for Monaco in a move that could save the petrochemicals magnate £4bn in tax. The Ineos founder is estimated to be worth £17.5bn. People who live in Monaco for at least 183 days a year do not pay any income or property taxes. The highest tax rate in the UK is 45% on income above £150,000-a-year.

The Times, Page: 5 Daily Mail, Page: 103 The Guardian Daily Express, Page: 16 The I, Page: 5

Vodafone wins long-running €3bn India tax battle

An international arbitration court has ruled in Vodafone’s favour ending its long-running tax dispute with the Indian tax authorities which had been seeking €3bn in back taxes and penalties related to its 2007 acquisition of a local operator.

Financial Times, Page: 18 The Times, Page: 54 The I, Page: 74

SUNDAY

PM could rebalance tax policy to rescue his levelling up promise

The Sunday Telegraph looks at the challenges Boris Johnson faces in trying to hold to his promise to level up the country after the coronavirus threw a spanner in the works. Experts point to the “widening generational divide” as a key source of discontent with Deutsche Bank analyst Henry Allen arguing that the anger felt by younger generations toward the older is “manifesting itself into political outcomes”. Liz Emerson, cofounder of the Intergenerational Foundation, says it is time for tax policies to be reshaped to ensure the young “are not left to foot the bill for the economic carnage”. Suggestions from the Foundation include a greater emphasis on taxing assets over income, moving more of the tax burden from earned to unearned income and the scrapping of capital gains tax exemptions on main residences. Chris Sanger, head of tax policy of EY, puts forward other potential measures, such as a higher personal tax allowance for younger workers, or changes to pensions that match the reliefs on money going in with the tax paid on the income that eventually comes out.

The Sunday Telegraph, Business, Page: 5

CORPORATE NEWS – WEEKEND TO 27TH SEPTEMBER 2020

SATURDAY

Report claims Boohoo knew of Leicester factory failings

An independent investigation reveals that Boohoo executives were aware of “endemic” problems at its Leicester suppliers, including that staff were not entitled to paid holiday or sick pay, were working brutally long hours and were paid less than the minimum wage. The review, conducted by Alison Levitt QC, found no evidence Boohoo had committed any crimes, but said the company failed to take action fast enough and warned that its supply chain is likely riddled with bad behaviour. It said that Boohoo’s monitoring of the factories was “inadequate” because of “weak corporate governance” and called the failure to assess the risk to workers during the coronavirus pandemic “inexcusable”. Several papers draw attention to reports that auditors witnessed large numbers of employees fleeing premises when they arrived to inspect them. Auditors found failures in identity verification, recording of hours, payment of wages, health and safety violations and instances of potential furlough fraud.

The Daily Telegraph The Times, Page: 52 Financial Times, Page: 18 The Guardian Daily Mail, Page: 103

Revolution mulls restructuring options

Revolution Bars has hired Alix Partners to explore options including a CVA following the “continuing challenging trading environment and exacerbated by the further COVID-19 related restrictions”. The company said in a statement: “No decisions have yet been made and there is much further work to complete before the board decides on any appropriate course of action.” Revolution has more than 2,800 staff and 74 bars.

The Times, Page: 53 The Guardian, Page: 35 The Daily Telegraph, Business, Page: 33

 

Private equity-owned companies win access to UK emergency funds

A concession on the part of the Treasury means companies owned by private equity firms can now access state-backed loans to help them ride out the coronavirus pandemic.

Financial Times

EMPLOYMENT NEWS – WEEKEND TO 27TH SEPTEMBER 2020

SATURDAY

Thinktank warns of ‘major squeeze’ on living standards

The Resolution Foundation predicts that six million poor households will be £1,000 a year worse off from next April after the Chancellor failed to extend the £20-a-week boost to tax credits and universal credit. The thinktank has urged Rishi Sunak to rethink the move and reinstate the financial help he introduced at the start of the COVID-19 pandemic. Torsten Bell, the Resolution Foundation’s chief executive, added that the Chancellor’s winter jobs package provides little incentive to top up the wages of those working part time because it was cheaper to employ one full-time worker than two workers on short time. He went on to say that the “poorly targeted” £7.5bn job retention bonus should be scrapped with the cash redirected “to ensure the new support scheme gives firms the right incentives to cut hours rather than jobs.”

The Guardian

SUNDAY

More that 1m British workers set to lose jobs

Economists have warned that a further 1m people will lose their jobs by the end of the year with the Chancellor’s latest intervention deemed inadequate to prevent the likely surge in unemployment. Capital Economics said Rishi Sunak’s plan “won’t be enough to counter the economic impact of fresh restrictions” and that unemployment would rise to “at least 7%”. Deutsche Bank agreed that it “won’t do very much to stem the rise in unemployment”.

Financial Times The Times

PROPERTY NEWS – WEEKEND TO 27TH SEPTEMBER 2020

SUNDAY

Business rates must not be re-imposed, ministers warn

Ministers are warning the Chancellor that it will be “politically impossible” to reimpose business rates after the coronavirus crisis and he should scrap the levy altogether. Alok Sharma’s business department and Robert Jenrick’s communities department are leading the push while others want business rates replaced with a fairer tax. One minister told the Sunday Express: “We cannot reintroduce business rates. The trouble is once you take them away people get used to operating without them, and then if you reintroduce them it feels like a massive tax rise. It will be deeply unpopular and could put many people out of business.”

Sunday Express, Page: 6

Regus threatens landlords with insolvency if they don’t cut rents

The serviced offices giant IWG, formerly known as Regus, is threatening to dump hundreds of lease commitments unless landlords agree to swingeing rent cuts. Boss Mark Dixon is set to put Jersey-based subsidiary Regus plc into insolvency dissolving £790m of lease guarantees across 500 centres. The Times points out that in January last year IWG extracted a £635m dividend, all but wiping out its assets, so this move has infuriated landlords, one of whom said: “This was not about Covid — this was clearly pre-determined … It is immoral at best.”

The Sunday Times, Business, Page: 1

SMEs NEWS – WEEKEND TO 27TH SEPTEMBER 2020

SUNDAY

Small businesses in pain as insurers mull appeal

The Sunday Telegraph considers some of the long and short-term implications of insurers appealing the case brought against them by the Financial Conduct Authority concerning Covid-related business interruption claims. The High Court ruled they should pay out on business interruption contracts and if insurers decide not to appeal some cash could start flowing to small businesses forced to shut during the pandemic. Experts predict insurers, partly influenced by reinsurers, will inevitably contest some of the judgement’s findings because the outcome is going to determine how contracts are written and interpreted for some years to come. If the High Court does grant permission to appeal, the fear is that by then thousands of firms could be forced to close before the case is resolved.

The Sunday Telegraph, Business, Page: 6

PENSIONS NEWS – WEEKEND TO 27TH SEPTEMBER 2020

SUNDAY

Retired Brits abroad could face Brexit charges on pensions

British expats in Europe could face punitive charges to access their pension pots if their UK bank accounts are closed after Brexit. With increasing numbers of banks telling expats their accounts would be closed by the end of the year, expats who are paid their pensions through UK bank accounts could have to pay fees to money transfer companies and get poor exchange rates. A spokesman for UK Finance said: “The impact on each customer will vary depending on the operating model of their bank or provider, the product or service being provided, and the legal and regulatory framework in the country in which they are resident.” Ros Altmann, a former pensions minister, added that the fees facing pensioners were a “potential hidden cost of Brexit. It will increase costs for UK citizens living in the EU who may now need their pensions paid in to an EU bank account.”

The Sunday Times, Business, Page: 12

PERSONAL FINANCE NEWS – WEEKEND TO 27TH SEPTEMBER 2020

SATURDAY

Poor money skills fuelling ‘rise in debt and despair’

The Independent’s Kate Hughes cites new research which shows that almost 40% of people who say they lack money management skills are in more debt now than they were six months ago. A third are eating into their savings and 41% are struggling to pay bills. However, people with stronger financial skills have far fewer problems, with just 9% reporting problems covering their everyday costs. Hughes adds that almost 80% of people who have used a financial adviser have savings and investments of less than £100,000. Steven Cameron, pensions director at Aegon, comments: “We need to set the record straight that taking financial advice isn’t just the preserve of high earners or those who’ve already built up large amounts of savings and investments.”

The Independent MSN

FINANCE NEWS – WEEKEND TO 27TH SEPTEMBER 2020

SUNDAY

Officials race to build £15bn bailout fund by Christmas

The Treasury is in talks with a “significant range of institutions”, such as pension funds and insurers, over a private sector led fund to bail out struggling businesses. Stephen Welton, chief executive of the Business Growth Fund, is in talks with investors to create a £15bn pot, potentially backed up with taxpayer cash, to take equity stakes in companies laden with debts following the lockdown. Mr Welton said the longer it takes to act the harder it will be to recover. “These businesses can run on empty for three to six months, but they cannot keep doing that indefinitely,” he added. The fund would take equity stakes of up to £10m in mid-sized businesses where there is an “obvious and significant” funding gap. The move comes as restructuring experts brace for an insolvency surge next year. Ric Traynor, chairman of Begbies Traynor, states: “Those that are hanging on and had the advantage of furlough won’t have it any more and the modest contribution of the Government won’t make much difference.”

The Sunday Telegraph, Business, Page: 3

Covid loan lifeline delays reckoning

The Sunday Times’ Emma Dunkley considers how Rishi Sunak’s extension to emergency finance for businesses has provided a lifeline for businesses and relief for under-pressure banks concerned about the prospect of bad debts. David Cumming, chief investment officer for equities at Aviva Investors, says future lockdowns will risk wiping out the benefit of the extension, due to the economic impact, but banks also expect loan impairments will not be as bad as expected. The Chancellor has said new support schemes will be available from the start of next year and Stephen Pegge of UK Finance says the breathing space he’s provided means there is more time to discuss what comes next. “What will be important for the new phase is that it supports a broader range of businesses with more flexible finance,” says Pegge. “Some sectors will be hit more than others and there will be local lockdowns, so you’ll want that flexibility.”

The Sunday Times, Business, Page: 5

ECONOMY NEWS – WEEKEND TO 27TH SEPTEMBER 2020

SATURDAY

UK national debt soars £36bn in August

Figures from the ONS show that the UK’s national debt surged by £35.9bn in August, £30.5bn more than the same month last year, as the price tag for support measures to help the economy through the pandemic rose. The extra borrowing took Britain’s total debt to a record of £2.024trn. Receipts from VAT, corporation tax and income tax all dropped substantially, the ONS said. The total tax take was £37.3bn in August, £7.5bn less than a year before. Day-to-day expenditure came in £19.5bn higher than in the same month last year at £78.5bn. Paul Craig, portfolio manager at Quilter Investors, said that although debt is now more than 100% of GDP, the Government should remain “comfortable” because interest rates remain low and may even turn negative.

The Times, Page: 52 Financial Times, Page: 3 The Daily Telegraph, Business, Page: 34 The Guardian, Page: 33 Daily Express, Page: 8 Daily Mail, Page: 12

SUNDAY

MPC’s Silvana Tenreyro defends negative interest rates

Silvana Tenreyro, an external member of the Bank of England’s Monetary Policy Committee, has rejected criticisms about negative interest rates insisting the evidence from other countries was “encouraging” and that banks would cope with further pressure on their finances. Ms Tenreyro’s comments come after the Bank last week stirred observers with news it had launched formal talks with the Prudential Regulation Authority about the operational practicalities of the policy. But analysts think such a move remains unlikely, with Rob Wood, chief UK economist at Bank of America predicting zero rates rather than negative while Kallum Pickering, senior economist at Berenberg Bank expects an additional £100bn of QE in November instead, adding: “There are more merits for yield curve control in the UK than there are for negative interest rates.”

The Sunday Telegraph

Banks hold steady amid unemployment threat

Analysis by the EY Item Club indicates that another full lockdown would blow a £100bn hole in the UK economy. Howard Archer, chief economic adviser to the Item Club said the fall in GDP during Q2 wiped more than £104bn off UK output. The full extent of a similar shock would depend on how long any new measures lasted, he said. But a bigger threat to the economy was rising unemployment, with the fear of job losses leading to a reduction in consumer spending. On the upside, Sir Howard said the “banking system is open for business and there’s no sense of an impending credit crunch” and if “the mists cleared sufficiently” by the fourth quarter they will probably return to paying dividends.

The Mail on Sunday, Page: 123

OTHER NEWS – WEEKEND TO 27TH SEPTEMBER 2020

SATURDAY

Fraudster banned from giving financial advice

Convicted fraudster Simon Oakley has been banned from giving financial advice. Oakley, who was an authorised adviser from 2009 until May 2018, was sentenced to 30 months in jail in November 2017 after admitting making misleading, false or deceptive statements. The FCA said that Oakley was no longer a “fit and proper person to perform any function in relation to any regulated activity”.

The Times

Restaurant owner must pay £1.2m or face 7 years behind bars

A restaurant owner who laundered cash stolen by his VAT fraudster wife has been ordered to hand over £1.2m within three months or face an extra seven-and-a-half years in jail. Yong Hong Lu of Farnham, Surrey, was jailed for two years last May after an HMRC investigation found he had laundered more than £1m.

Press Release

Millennial investors would go against morals

One in four millennial investors would go against their personal beliefs if the returns were high enough, according to research by Schroders. The study of more than 23,000 people around the world revealed that 25% of investors aged 18-37 would be willing to compromise for a return of 21%.

The Times

Contact Paul Southward