NEWS – WEEKEND TO 28TH MARCH 2021
NEWS – WEEKEND TO 28TH MARCH 2021
TAX NEWS – WEEKEND TO 28TH MARCH 2021
HMRC cracks down on second-home owners
People who register their properties as holiday lets but don’t rent them out are facing a crackdown after the Treasury said it would seek to verify the number of days the property was let for. HMRC will rescind eligibility to pay business rates instead of council tax and force homeowners to pay their local authority any money owed. They may also have to repay any additional tax relief they might have claimed. “In the crudest sense the suspicion is that a lot of these owners who say they are trying to rent a property for 140 days and so benefit from this lucrative status aren’t actually interested in doing so at all,” said Adam Matthews, a manager at RSM. “The system is clearly open to abuse — it’s an easy way to save on tax.”
The Times, Page: 61 The Daily Telegraph, Money, Page: 2
Missed opportunities of ‘tax day’
Claer Barrett outlines in the FT what opportunities she thinks the Treasury missed with its Tax Day announcements, namely reducing and simplifying the UK tax code.
HMRC seeks to support taxpayers with overseas assets
Although HMRC only collects 5% of international tax debt, it says incorrect reporting is not always deliberate and so is now focussing on raising taxpayers’ awareness of their obligations.
HMRC unit checks rebate claims are legitimate
Some people applying for a simple tax rebate are being asked to prove their identity by an HMRC repayment credibility team, which has been granted extra powers to find fraudsters. They are being asked to fill in a three-page questionnaire and submit bank or building society statements, P60s, P45s and expenses receipts as well as one proof of address and two of identity. They have 30 days to comply, after which HMRC said they could be removed “from the self-assessment regime”. George Bull at RSM said the letters were often in response to very small claims and that the threats were “disproportionate”. Elaine Clark from Cheap Accounting adds: “The text of the letter is very heavy-handed. Does HMRC have a security problem? How easy is it for someone to hack a self-assessment account? I expect it may be easier than we’d like to think, especially in light of the significant Covid fraud.”
The Sunday Times, Business, Page: 13
Taxpayers have just days to act before penalties imposed
Individuals now have less than a week to sort out their Self-Assessment tax affairs or risk meeting potentially hefty penalties, HMRC has warned. The Revenue previously announced it would delay imposing penalties for the late payment of Self-Assessment by one month – to April 1st. But Graham Boar at UHY Hacker Young explains that interest payments of 2.6% on a delayed payment will have been building up since the January deadline and people who are not in a position to pay their bills now should take action urgently. He adds: “HMRC is actively encouraging taxpayers to make use of Time to Pay arrangements, this could be a lifeline for individuals who know they will struggle to pay their tax bill on time. If they choose to ignore it, they’ll only see the money owed increase even further.”
Managing IHT as £293bn is ‘earmarked’ for grandchildren
New research from The Openwork Partnership shows more people could be hit by IHT over the coming years as parents and grandparents have “earmarked” more than £293bn for early inheritance payouts to children and grandchildren. Commenting on the results, Mike Morrow, the Chief Commercial Officer at The Openwork Partnership, said: “The size of the gifts underlines the need for trusted advice on how best to use the money whether it is to pay for house deposits or pay off debt or to invest for the future. Parents and grandparents as well as children and grandchildren would benefit from an ongoing relationship with a financial adviser.” The Express goes on to talk with experts about how IHT liabilities can be reduced, including using gifts and well-constructed wills.
EMPLOYMENT NEWS – WEEKEND TO 28TH MARCH 2021
Working from home could boost output
Bank of England policymaker Michael Saunders has said remote working could boost productivity by saving companies money on office space, increasing staff satisfaction and providing access to a wider pool of workers. “While a shift to widespread compulsory full working from home probably is not optimal, working from home offers a range of possible advantages for some firms,” he said. Separately, Rishi Sunak, the Chancellor, is urging businesses to open up their offices and end remote working because young people need to convening with colleagues and seek out mentors as they embark on their career development.
REGULATION NEWS – WEEKEND TO 28TH MARCH 2021
UK and EU reach financial regulation deal in breakthrough on co-operation
The United Kingdom and the European Union have reached a deal to create a forum for cooperation on financial services regulation. The memorandum of understanding (MoU) sets the terms of engagement between the two parties but does not yet grant the City of London access to the EU’s Single Market. “Formal steps need to be undertaken on both sides before the MoU can be signed but it is expected that this can be done expeditiously,” the UK said in a statement, adding that the MoU created a “framework for voluntary regulatory co-operation in financial services” rather than any binding system.
CORPORATE NEWS – WEEKEND TO 28TH MARCH 2021
Jessops files for administration
Jessops has filed a notice to appoint administrators. The camera retailer, bought by Peter Jones’s PJ Investment Group in 2013, has hired insolvency specialists FRP and is considering a Company’s Voluntary Arrangement in a bid to survive after it was severely impacted by lockdown restrictions. Geoff Rowley, partner at FRP, said: “Jessops is a long-established British brand, but like many others, it has faced growing online competition, as well as the challenges faced by all high street retailers in operating through the restrictions imposed during the pandemic. We are working closely with PJ Investment Group and the wider Jessops management team to consider all options to secure a future for the retailer.”
BBC News Daily Mail The Mirror
Gupta asks UK Government for £170m bailout
Sanjeev Gupta, the owner of Liberty Steel has asked the government for £170m in financial support. The collapse of Greensill Capital, the company’s key financial backer, has put Gupta’s GFG Alliance and its 5,000 UK workers in jeopardy.
BoE warns banks against sudden halt to Covid-related lending
Lenders have been urged by the Bank of England to keep credit flowing to businesses once the state-backed COVID-19 loan schemes come to an end, warning that withdrawing funding would prove self-defeating.
Landlords fear growing use of “cram down” mechanism
The Sunday Times’ Sam Chambers reports on Virgin Active’s use of a new restructuring tool enabled by changes to the UK’s corporate insolvency regime, designed to ease restructurings. Under the rules, companies can ask a judge to force through restructurings if too few creditors vote to approve it – the so-called “cram down” mechanism. “Landlords are up in arms because this issue will be on the radar of every company sitting on a load of rent arrears,” said Zelf Hussain, restructuring partner at PwC, which is advising British Land and Land Securities in the Virgin Active case. Virgin, which is being advised by Deloitte, is seeking to force landlords to write off or defer rent arrears – and take a haircut on future rent. Will Wright, head of restructuring at KPMG, said the increasing number of legal challenges brought by landlords against CVAs had created uncertainty around the process. Subsequently, he expects cram down restructurings to become more common.
Scottish government calls in experts to examine Gupta deal
Ministers in Nicola Sturgeon’s administration have drafted in Deloitte to comb through state guarantees handed to GFG Alliance, the industrials conglomerate owned by Sanjeev Gupta. GFG’s biggest lender, Greensill Capital, recently collapsed leaving Gupta’s businesses in a precarious position. The Sunday Telegraph reports that the Scottish government guaranteed payments worth an estimated £360m to help Mr Gupta buy the Lochaber aluminium smelter and associated hydropower plant at Fort William five years ago. A source said Deloitte had been retained since 2017 to monitor the Lochaber guarantees.
Pandemic persuades bosses they should fly less
A year of lockdowns and Zoom meetings has convinced UK corporates they can help limit pollution by restricting business travel after restrictions ease. With ever more companies committing to reach net zero emissions many are revising their corporate travel strategies. PwC’s UK chairman Kevin Ellis tells the Sunday Times that although corporate travel will spike once restrictions are lifted, and this will be “an important signal for business about recovery and the return to normality”, in the long term “there will be more of a pragmatic level of business travel.”
Eurostar must restructure debts to stay on track
With financial collapse looming this summer, Eurostar is in emergency talks with lenders to restructure £400m in loans. The channel tunnel operator is in advanced discussions with NatWest, Santander and Credit Agricole to secure funding. Freshfields and financial specialists from KPMG are understood to be advising Eurostar. Linklaters is providing legal advice to the group of banks.
NCP plans to force through rent cuts
Car parks operator NCP is utilising a change in insolvency law to push through a controversial restructuring, the Sunday Times reports. Advised by Deloitte, the Japanese-owned company has told landlords that unless it can write off rent and potentially walk away from some sites it will go bust. The plans will save NCP up to £27m over the next two years.
INDUSTRY NEWS – WEEKEND TO 28TH MARCH 2021
Trust in UK corporate sector is low, admits chief of audit watchdog
Interim chair of the Financial Reporting Council, Keith Skeoch, tells the FT the watchdog is preparing for a raft of corporate failures this summer. British boardrooms should also get ready for governance changes.
One small step for man, one giant leap for ESG accounting standards
The FT reports on the World Economic Forum’s plan to mobilise CEOs’ support for the Sustainability Standards Board, which the international accounting standards setters at the IFRS Foundation are developing.
PENSIONS NEWS – WEEKEND TO 28TH MARCH 2021
Would a flexible pension system really benefit the poor?
The Telegraph’s Sam Brodbeck considers the winners and losers from the state pension system, namely the wealthy who generally live longer. He notes a call from the Trades Union Congress for the pension age to be frozen and says such a flexible system may be fairer – where those who are unable to work or who don’t expect to live long enough to get a decent return can opt to access their pension early. However, it would carry terrible risk for those who misjudge their longevity and would introduce yet more complexity.
The Daily Telegraph, Money, Page: 2
1,000 people a day trigger pension tax charge
According to figures from Just Group, more than 1,000 people a day have been hit by punitive tax rules that limit what they can pay into their pension by 90%, after having to dip into their pension during the pandemic. Just Group found that more than 600,000 people accessed their pension pot for the first time in 2020, in order to make ends meet. Introduced in 2015, the “pension freedom” rules allow savers to access their cash from 55. However, withdrawing income from some types of pension triggers the “money purchase annual allowance”, which reduces the amount a saver can pay in and earn tax relief by 90%, from £40,000 to £4,000. In 2020, 206,000 workers triggered the new lower limit, bringing the total number of savers affected by the cap to 1.6m. Kate Smith of Aegon said the rules were outdated and called on the Government to increase the money purchase annual allowance from £4,000 to £10,000. She said: “Job insecurity and a volatile stock market have thrown the retirement plans of many over-50s into disarray. The ability to access their pension flexibly has thrown them a lifeline, but it comes with a sting in the tail.”
The Sunday Telegraph, Business, Page: 9
Increased living costs renders triple lock “worthless”
The rising cost of care for pensioners alongside tax hikes has left the Government’s “triple lock” for the state pension “worthless”, Jessica Beard reports in the Sunday Telegraph. One pensioner told the paper an increase in care costs and council tax had wiped out meagre gains in the state pension and income from savings, which had dwindled as interest rates are continually slashed. Ian Browne of Quilter said: “Retirement has never been more challenging financially. This is clear if you simply focus on the rocketing social care costs.” The Telegraph points out that Britain has the worst mandatory pension provision of all 36 countries in the OECD, with retirees’ pension income 28% of their pre-retirement earnings, about half the other countries’ average.
ECONOMY NEWS – WEEKEND TO 28TH MARCH 2021
Retail rebounds from January slump
Data from the Office for National Statistics show a bounce back in sales last month following a sharp fall at the beginning of the year. Sales rose by 2.1% in February, up from an 8.2% fall in January, when the country went into its third lockdown. Non-essential retail in England is expected to reopen on April 12 and retailers “will be hoping that the wave of optimism sweeping consumers as a result of the successful vaccine rollout will translate into increased sales”, said Lisa Hooker, consumer markets leader at the consultancy PwC. Elsewhere, Howard Archer, chief economic adviser at the EY Item Club, said: “The modest rebound in retail sales adds to the evidence that the economy came off its January lows in February.”
INTERNATIONAL NEWS – WEEKEND TO 28TH MARCH 2021
U.S. trade chief prepares tariffs against countries over digital taxes
The Office of the United States Trade Representative (USTR) has said it will continue to evaluate options to impose tariffs on countries that have introduced taxes targeting in-country revenues of digital services platforms. Such tariff investigations were introduced by the Trump administration and on Friday U.S. Trade Representative Katherine Tai said she was maintaining the threat of tariffs on goods from Austria, Britain, India, Italy, Spain and Turkey in retaliation for their digital services taxes. “Today’s move by USTR is an important affirmation in pushing back on these discriminatory trade barriers as the U.S. continues to work to find a viable solution at the OECD,” the trade group said in a statement.
SMEs NEWS – WEEKEND TO 28TH MARCH 2021
Accelerating tax receipts poses risk to cash flow
The Sunday Times considers the impact of Rishi Sunak’s plan to require individuals and small businesses to pay tax as they earn. The changes mean that millions of high earners, investors and self-employed people may have to pay two years’ tax in one year after 2024, the paper explains. George Bull at RSM warns that when “dramatically accelerating the collection of taxes, the Government must take care not to damage small businesses’ cash flow. There’s no sense in killing the goose that lays the golden egg.” Nimesh Shah, the chief executive of Blick Rothenberg, agreed. “The cash flow impact could cause severe pressure and should be phased in over four years. HMRC really needs to start communicating now, so people can plan.”
The Sunday Times, Business, Page: 13
PERSONAL FINANCE NEWS – WEEKEND TO 28TH MARCH 2021
Parents forced to use their kids’ Isas amid savings boom
A surge in middle-class family savings during the pandemic has led parents to use their children to shelter more wealth from tax. Hargreaves Lansdown said a fifth more of its customers have paid into Junior Isas in 2020-21 than the year before, investing 45% more on average for their children. The firm’s Sarah Coles said: “Around one in six people have seen their finances improve during the pandemic, as the result of a combination of working from home and not being able to go out to do anything fun. At the same time the Government almost doubled the Jisa allowance, opening up a brilliant opportunity to squirrel away money.” Ms Coles added: “This particularly appeals to families where the adults have maxed out their £20,000 Isa allowance and are looking for further tax-efficient opportunities.”
OTHER NEWS – WEEKEND TO 28TH MARCH 2021
Amazon clashes with Elizabeth Warren over taxes and unions
Amazon has become embroiled in a row with U.S. senator Elizabeth Warren over issues including its tax and employment practices. Last week, the Massachusetts senator posted a video accusing Amazon of “exploiting loopholes and tax havens to pay close to nothing in taxes”. In response, Amazon said it was simply following the laws made by Congress, insisting it had paid billions of dollars in corporate taxes in the last few years alone. Warren hit back saying: “I didn’t write the loopholes you exploit, @amazon – your armies of lawyers and lobbyists did. But you bet I’ll fight to make you pay your fair share. And fight your union-busting. And fight to break up Big Tech so you’re not powerful enough to heckle senators with snotty tweets.”
Contact Paul Southward