NEWS – WEEKEND TO 29TH NOVEMBER 2020
NEWS – WEEKEND TO 29TH NOVEMBER 2020
TAX NEWS – WEEKEND TO 29TH NOVEMBER 2020
Treasury cashing in on excess deaths with IHT windfall
The Telegraph’s Matthew Lynn says the Treasury is benefitting from a rise in inheritance tax receipts due to early deaths from COVID-19, but to continue to profit from the wave of Covid deaths is “deeply immoral”. Instead, anyone with Covid on their death certificate should be exempt from death duties, argues Lynn. According to Government figures published alongside this week’s Spending Review an extra £800m is likely to be collected in death duties this year, pushing the total take up to an all-time high of almost £6bn.
HMRC and ASA launch action to disrupt promoters of tax avoidance schemes
HMRC and the Advertising Standards Authority have today launched new action to cut out misleading marketing by promoters of tax avoidance schemes. The joint enforcement notice aims to disrupt the activity of promoters and protect people from being presented with misleading adverts which may tempt them into tax avoidance. It requires promoters to be clear about the potential consequences of tax avoidance in any online adverts. Immediate sanctions include having their paid advertising removed from search engines and follow-up compliance action, which can include referral to Trading Standards.
Fraudsters jailed for £29m R&D tax relief claim
Three men involved in a fraudulent £29.5m claim for tax relief on a bogus IT project have been jailed for a total of 21 years. Matthew Sutherland, Mohammed Zeb Zaheer and Mohammed Iqbal Khan were prosecuted for Research and Development (R&D) tax relief fraud. Sutherland was the architect of the crime and used his company, Convergica (Clinical Information Systems) Ltd, to claim tax relief of £29.5m against a purported £137m spend on developing an IT healthcare system for two countries in the Middle East. Zaheer and Khan were the frontmen for companies used to carry out the fraud, which came to light when HMRC requested supporting documents for the claim.
The Tories cannot avoid the tax question forever
Camilla Cavendish predicts in a piece for the FT that Boris Johnson will end up presiding over two things he is instinctively against: big government and higher taxes.
Economic recovery could delay tax rises
Christopher Hope in the Sunday Telegraph reports that Treasury ministers hope that the economy will start to recover by mid-2021, delaying any consideration of significant tax rises until the following year. He says senior ministers want to ensure the worst of the coronavirus pandemic has passed before considering increasing taxes, adding that this realistically pushes any large-scale increases to March 2022 at the earliest. A senior Treasury source told the paper that people would have to wait “a bit longer” than the spring Budget to see whether tax increases are required. Mr Hope also highlights comments from Rupert Harrison, an executive at fund manager BlackRock and one-time adviser to former Chancellor George Osborne, who says: “Serious measures which probably will come at some point around taxation and on spending restraint are going to be in a year’s time at the earliest.” Meanwhile, a poll by ORB International for the Sunday Telegraph shows that 38% of people agreed that tax increases should be used to pay for the pandemic, while 31% disagreed and the remaining respondents were unsure.
Government warned over Crown preference
The Sunday Telegraph’s Michael O’Dwyer looks at the reintroduction of Crown preference, which puts HMRC ahead of other creditors waiting for payment. He notes calls for the change to be halted, with critics saying it may undermine Chancellor Rishi Sunak’s efforts to support businesses. Crown preference, which was abolished in 2003, means taxes collected by bust companies on behalf of third parties must be paid off before any funds can be repaid to banks that have given loans backed by a floating charge over assets. Nicky Fisher of insolvency and restructuring trade body R3 comments: “The Government is putting more than £1bn of floating charge finance at risk with the introduction of this policy.” She adds: “The Government could easily receive less in tax as a result of this measure, where firms fail because they haven’t been able to secure the funding they need to support expansion or rescue plans.”
Taxpayers set to cover coronavirus costs
Harvey Jones in the Sunday Express says the British taxpayer “will ultimately foot the bill” for the Government’s coronavirus-related spending and looks at what taxes may be targeted as ministers look to balance the books. He says Chancellor Rishi Sunak “has little room for manoeuvre” as the Conservative Party’s manifesto pledged that there would be no increase in income tax, National Insurance or VAT. He goes on to suggest changes to capital gains tax, inheritance tax and pensions tax relief may be possible targets. Elsewhere in the same paper, Kate Andrews reflects on the Chancellor’s Spending Review and says tax hikes seem to be “off the cards” for now. She says the absence of tax rises suggest Mr Sunak “is mindful that extra cash brought in by a tax hike wouldn’t outweigh the costs of slowing our economic revival.” Meanwhile, Katherine Denham in the Sunday Times looks at proposals that would see higher-rate tax relief on pensions removed, saying future middle-income families would be the hardest hit.
Sunday Express, Page: 53, 14 The Sunday Times, Business, Page: 13
EU sought to control UK tax policies
A leaked memo suggests the EU wanted to control Britain’s tax policies after the Brexit transition period, with a document written by the European Parliament’s TAX3 secretariat – the EU’s special committee on taxation – in 2018 stating: “The objective is that the UK will abide by the tools adopted at EU level to fight tax evasion/avoidance.” The Sunday Express’ Martina Bet says the desire for alignment on tax reflected a fear in Brussels that Britain could become a low-tax economy and a magnet for business and investment.
REGULATION NEWS – WEEKEND TO 29TH NOVEMBER 2020
HMRC probing 5,000 furlough fraud cases
Tax officials are investigating more than 5,000 cases of suspected furlough fraud, with these including cases identified as high risk at the time of payment and a number stemming from 1,033 calls made to a hotline between August and October. While HMRC has 5,079 Coronavirus Job Retention Scheme fraud investigations running, just 58 have been concluded with formal requests for repayment. The HMRC data, which was revealed following a Freedom of Information request by OnePoll, shows that Birmingham has the most live investigations, with 188, followed by Belfast (141), east London (115), west London (114) and Manchester (104).
Sunday Express, Page: 2
CORPORATE NEWS – WEEKEND TO 29TH NOVEMBER 2020
Arcadia on brink of collapse
Sir Philip Green’s Arcadia Group, which owns Topshop, Topman, Miss Selfridge, Burton, Dorothy Perkins and Evans, is understood to be on the brink of administration, putting 13,000 jobs at risk. The retail group, which has been working with advisers at Deloitte on survival plans for months, is expected to formally appoint them as administrators as soon as Monday. Arcadia said it been “working on a number of contingency options to secure the future of the group’s brands,” but added that stores would be open again as soon as the Government COVID-19 restrictions are lifted next week. It is thought that the administration will lead to a break-up of Arcadia, with the fashion brands sold off individually. The collapse of the group would leave a pension deficit estimated to be as much as £350m by John Ralfe, a pensions expert.
Four in five businesses worry they are not ready for Brexit
An EY poll of more than 1,700 businesses shows that four in five are not ready for the end of the Brexit transition period, with 80% saying they did not “know the full extent of Brexit risks” or “have sufficient preparations in place”. Sally Jones, EY’s Brexit strategy and trade leader, said: “There is an alarming number of businesses expecting ‘business as usual’ after the transition period ends, despite the inevitability of significant disruption and upheaval”. Meanwhile, businesses have been warned there will be significant disruption and bureaucracy, even if a trade deal with the EU is agreed, with Deloitte analysis showing that a company moving goods around the single market will have to fill in 54 forms rather than the current nine. Elsewhere, the Sunday Times looks at the impact of Brexit on several sectors, with Tim Sarson of KPMG offering insight into what the pharmaceutical industry can expect.
Ashley offers Arcadia a rescue loan
With Arcadia said to be preparing to appoint Deloitte as administrators, Mike Ashley’s Frasers Group has reportedly offered a rescue loan of £50m to Sir Philip Green’s retail empire. Meanwhile, former CEO Lord Rose believes breaking up Arcadia – which owns Topshop, Topman, Burton, Dorothy Perkins, Miss Selfridge, Wallis and Evans – is “the only way” forward. He told BBC Radio 4’s Today programme the while people will “come and pick over the carcass”, not all Arcadia brands are likely to sell. Elsewhere, Sir Philip has been urged to ensure Arcadia’s pension scheme is fully funded if administrators are called in, with Lucy Powell, shadow minister for business and consumers, saying he “should do what is right” and cover Arcadia’s pension deficit to ensure “hardworking people don’t pay the price.” Separately, Oliver Shah in the Sunday Times looks at Sir Philip’s career, noting that issues which arose at BHS under the tycoon saw PwC fined £6.5m.
The Observer, Page: 15 The Mail on Sunday, Page: 16 The Sunday Telegraph The Sunday Times, Page: 2 The Sunday Times, Business, Page: 9 The Independent, Page: 12 Sunday Express, Page: 2 The Sun, Page: 21 Sky News BBC News
JD’s Debenhams bid uncertain
JD Sports is considering backing away from a proposed rescue of Debenhams, with the retailer’s chairman Peter Cowgill understood to be concerned over uncertainty around further pandemic-prompted restrictions in the new year. Restructuring firm Hilco has been lined up to liquidate Debenhams if a buyer for the entire business cannot be found. JD, which entered into exclusive talks with Debenhams adviser Lazard and its administrator FRP Advisory last week, is expected to clarify its intentions in the coming days.
Netflix to declare revenues to HMRC
Netflix is to start declaring the revenues it makes from British subscribers to UK tax authorities, a change that is likely to increase the amount it pays in UK corporation tax. Netflix’s UK-generated revenue has gone through accounts at its European headquarters in the Netherlands since the streaming service launched in Britain in 2012. Netflix received a €57,000 tax rebate from the UK government in 2018, despite making £700m from UK subscribers, and declared just €48m in UK revenues in 2018. Revenue from British subscribers is estimated to have hit £1.14bn this year. The Observer says Netflix’s move is “likely to ramp up pressure” on tech firms which funnel revenues through overseas tax jurisdictions.
Founder prepares bid for Deltic
Stephen Thomas, founder of Deltic Group, is working on a potential bid for the nightclub owner with Shoreditch Bar Group. Deltic last month hired BDO to run a sale after the coronavirus crisis hit business and saw it cut 1,000 jobs. Private equity firms Greybull Capital and Aurelius have shown interest in Deltic, which is owned by its management team.
Hospitality bosses call for greater support
In an open letter to the Prime Minister, a number of Britain’s biggest hospitality companies have warned that financial support being offered by the Government is not enough to ensure the survival of the sector amid the latest coronavirus-related restrictions. Voicing concern that existing grants are not enough to compensate for sales lost under Tier 2 and Tier 3 restrictions, bosses across the sector have called on ministers to consider extending the business rates holiday and VAT cut for the entirety of next year.
FINANCIAL SERVICES NEWS – WEEKEND TO 29TH NOVEMBER 2020
Brussels raises doubts over City access
Diplomats were told in a behind-closed-doors meeting in Brussels that the British Government’s failure to offer assurances over the future regulatory outlook for the City of London after January 1st was holding up decisions on equivalence. Additionally, the UK had not revealed what new regulators would be established, making understanding of future policy more difficult. Chris Chapman, a partner at the international law firm Mayer Brown, points out that the equivalence mechanism is seen by some as protectionist and that even if it was granted, the EU can unilaterally revoke it, providing Brussels with leverage on an ongoing basis. The Guardian notes that the European Commission has agreed time-limited equivalence for clearing houses, and a decision was made in favour of continued access to the European market for UK-based central securities depositories on Wednesday owing to concerns over Europe’s financial stability.
The Guardian, Page: 46
PROPERTY NEWS – WEEKEND TO 29TH NOVEMBER 2020
Landlord tax campaign hauls in less than hoped
Efforts by HMRC to chase unpaid tax from landlords, begun in 2013 with its Let Property campaign has fallen way short of its target but has persuaded overseas owners to come clean about what they owe, writes the Times’ David Byers. Landlords are more likely to be expats who still have property in the UK than foreign citizens. Luci Parry, a partner at Moore Stephens, said: “The tax affairs of buy-to-let landlords has been a key area of focus for HMRC and it shows no signs of letting up. HMRC’s latest initiative involved thousands of letters to landlords asking them to declare their income.” HMRC originally estimated that up to 1.5m landlords had underpaid or failed to pay up to £500m in the tax year 2009-2010. But in August, the taxman revealed that 58,779 landlords, including those living overseas, had come forward and paid a total of £163m since the start of the campaign.
The Times, Page: 68
90% home loans trickle back
First-time buyers’ hopes of getting on to the property ladder have been boosted as banks have started to relaunch 90% mortgages. Moneyfacts analysis shows that the number of 90% loans available fell from 779 in March to 56 at the start of November but with smaller lenders testing the water in recent weeks, larger lenders including TSB and Yorkshire Building Society have started to expand their offerings, with 80 deals requiring a 10% deposit now available.
The Sunday Telegraph, Business, Page: 9
SMEs NEWS – WEEKEND TO 29TH NOVEMBER 2020
Amazon backs charity’s support for small firms
Amazon has signed up as a donor to the Tide Charity, which will provide grants of £1,000 to businesses hit hard by the pandemic. The charity, a partnership between small business bank Tide and the Federation of Small Businesses (FSB) has raised just over £200,000 since the Mail helped to launch it earlier this month. John Boumphrey, UK country manager at Amazon, said: “These grants will help companies most at risk and provide access to much-needed funds.”
Daily Mail, Page: 1019
They’ve saved Christmas — now save small businesses
Politicians, it would appear, have saved Christmas writes Claer Barrett, but now it’s time to focus on supporting the millions of self-employed who were excluded in Wednesday’s Spending Review.
Starting a business in the midst of a pandemic
Former EY accountants Luke and Rebecca Tonks feature in an FT piece providing advice for aspiring entrepreneurs thinking about setting up a business during the pandemic.
SME confidence climbs
A poll by Hitachi Capital Business Finance saw 55% of SMEs say they are borrowing to finance their 2021 plans, a two-percentage point increase on a year ago, while more than a quarter are predicting growth over the next three months, up from 13%. Hitachi Capital Business Finance’s head of insight, Joanna Morris, said: “Despite a bruising year for small business in the UK, confidence levels are starting to return among some sectors, not far off levels we saw before the pandemic outbreak.”
Sunday Express, Page: 52
PENSIONS NEWS – WEEKEND TO 29TH NOVEMBER 2020
Why cutting pension tax relief is not that simple
James Coney in the Times says that if pension tax relief were reduced, contributions to government departments would go down too, forcing them to find extra money to fund pensions. LCP partner Steve Webb says: “The question would be where these additional funds would come from. Would you ask taxpayers to pay a greater contribution, or would you expect individual government departments to take it out of their existing budgets?”
INTERNATIONAL NEWS – WEEKEND TO 29TH NOVEMBER 2020
Deutsche Bank’s head of accounting probed over Wirecard
Deutsche Bank’s head of accounting, Andreas Loetscher, is being investigated by Germany’s audit watchdog over potential misconduct in his previous role at EY, where he was one of the partners responsible for the audits of Wirecard. Alexander Geschonneck, a KPMG partner who led a special audit of Wirecard, told lawmakers on Thursday that EY should have spotted the fraud earlier. “What we did [in the special audit] was not rocket science,” he said.
ECONOMY NEWS – WEEKEND TO 29TH NOVEMBER 2020
Capital Economics upbeat about vaccine impact on economy
Capital Economics has posted bullish economic forecasts for the UK, saying “game-changer” vaccines will wipe out the damage of coronavirus by the middle of the decade, meaning tax rises will be unnecessary. Capital’s chief UK economist, Paul Dales, said that “by this time next year much of our lives may have returned to normal”, while the consultancy is unconvinced that Covid will cut the economy’s growth potential. He said: “Permanent hits to supply are most likely to happen after recessions associated with financial crises and wars, as they reduce the supply of credit or destroy large parts of the capital stocks. Neither of those things have happened this time.”
New tax-free shopping regime carries economic risk, says OBR
The Office for Budget Responsibility (OBR) has warned that scrapping duty-free shopping will lead to tourists abandoning Britain whilst only raising £195m a year – £300m less than original estimates. The Treasury has said that as of January 1, tax savings on goods bought by outbound travellers will apply only to alcohol and tobacco. Ministers are also abolishing the VAT rebate scheme for tourists, which will hit shopping centres across the country and put up to 70,000 jobs at risk. A spokesman for the UK Travel Retail Forum commented: “The OBR’s analysis of the Treasury’s decision to remove airside tax-free sales shows the Treasury can expect to recover only a very minor amount of revenue – and almost certainly less than the combined economic impact travel retail could have had on the economy if tax-free sales had been extended to travellers after Brexit.”
Daily Mail, Page: 29
CEBR: Tiers will cost £900m a day
Analysis by the Centre for Economic and Business Research (CEBR) suggests the latest round of coronavirus restrictions will cost the UK £900m a day. The report says the tiers being rolled out across England this week will see the country’s GDP fall by 13% compared to December 2019, a decline of more than £20bn over the month. The forecast reflects the fact that 31% of England’s economy will be placed in Tier 3, while 68% will be in Tier 2. CEBR deputy chairman Doug McWilliams said: “My suspicion is that the shutdowns imposed by Whitehall will end up doing more economic damage than can be justified on medical grounds.” Elsewhere, Andrew Goodwin, chief UK economist at Oxford Economics, said it expects GDP to fall by almost 3% in the fourth quarter. Saying that the tier system “should be less damaging” to activity than November’s lockdown, he added: “Therefore, we should see a modest recovery in activity when we switch from lockdown to the tiered system.”
The Sunday Telegraph, Page: 7 The Mail on Sunday
OTHER NEWS – WEEKEND TO 29TH NOVEMBER 2020
Graham Brady: Government’s Covid plans are destroying Britain
Writing in the Mail, Sir Graham Brady says he will be voting against the Government’s new Tier system of Covid restrictions. “In practice, the new regime is just as heavy-handed as lockdown,” he says, adding: “Riddled with contradictions and unsupported by compelling scientific evidence, these restrictions will cause immense further damage to the economy, cripple our civil liberties and worsen the nation’s health. In short, they threaten to destroy the social fabric that makes up Great Britain.”
Daily Mail, Page: 4-5
Contact Paul Southward