NEWS – WEEKEND TO 5TH JULY 2020
NEWS – WEEKEND TO 5TH JULY 2020
TAX NEWS – WEEKEND TO 5TH JULY 2020
Labour says wealth tax can help pandemic recovery
Labour has urged ministers to consider a wealth tax, saying rolling out a levy for wealthier people can help drive the recovery from the coronavirus pandemic. Shadow chancellor Anneliese Dodds said policymakers should “not increase taxes or cut support for low and middle-income people” during the crisis, saying those with “the broader shoulders” should be asked to make more of a contribution. She added that a “new settlement” was needed to address the injustice of the worst-off paying more tax proportionally than high earners. With Chancellor Rishi Sunak due to set out his latest update on the economy next week, Ms Dodds said the Government should consider imposing a wealth tax which would target assets rather than income.
The Guardian Financial Times, Page: 3 Daily Mail, Page: 6 Daily Express
Wealth levy a taxing matter
Patrick Hosking in the Times looks at calls for wealth taxes and complications that may arise, noting that while most proposals suggest that wealth taxes should be levied on assets less borrowings, and exclude pensions and primary residences, this causes an issue for the Government as it “immediately wipes out most of the tax base.” On taxation of wealth, he argues that taxing income from investments at the same rate as income from employment would be “a good start.” He also says that voters are “content for a wealth tax – just so long as they are not personally affected” and points to a poll showing that 61% of people favoured a levy on those with nest-eggs exceeding £750,000.
Sunak to act on VAT, business rates and stamp duty
Chancellor Rishi Sunak is expected to outline targets for cuts in VAT and stamp duty in a budget statement that will look to boost the economy. With Wednesday’s statement not a full Budget, the Chancellor’s options for rethinking taxes are limited, the Sunday Times notes, saying he will be able to change VAT rates without the need for a finance bill or a vote in parliament. Whitehall sources have told the paper that Mr Sunak is seeking cuts for a fixed period, with this likely to deliver six-month reductions in VAT on the hospitality industry. Business rates relief and a moratorium on businesses filing VAT returns rolled out to ease pressure brought about by coronavirus pandemic are expected to be extended. While stamp duty is unlikely to be altered this week, the Chancellor will reportedly outline plans for changes that will come in his autumn Budget. The Observer looks at what Mr Sunak may announce, saying he has faced calls to cut VAT to boost consumer spending.
The Sunday Times The Observer, Page: 55
Pay now or face a taxing time in January
Accountants have warned that taxpayers who pay through self-assessment may face a double bill in January due to support rolled out amid the COVID-19 crisis. With officials saying the July payment could be deferred until next January so as to help those whose finances have been put under pressure, Fiona Fernie at Blick Rothenberg says: “It is important to remember that the postponement of the July 31 payment on account merely delays the liability – it does not wipe it out.” “Taxpayers will still have the problem of how they pay their tax bills in January 2021. I would urge them, if they can, to pay now so that they are not faced with a potential multiple bill next January,” she added.
HMRC owed £1.5m for embassy rates
HMRC is owed £1.5m in unpaid business rates by more than 30 countries, according to research from real estate consultant Altus. Sudan owes the most at £164,178, followed by Iran at £143,217. The US embassy owes £23,694, while Russia’s bill is £47,642. “Many of these embassies operate from prime central London real estate and are intentionally refusing to pay their tiny tax contributions,” said Robert Hayton, head of UK business rates at Altus.
Sunday Express, Page: 43
INDUSTRY NEWS – WEEKEND TO 5TH JULY 2020
After Wirecard: is it time to audit the auditors?
The FT assesses whether reform of the audit sector is required, with ICAEW chief executive Michael Izza saying auditors need a “renewed focus on internal controls, going concern and fraud.”
FRC review set to show increase in inadequate audits
Oliver Shah in the Sunday Times reports that a Financial Reporting Council (FRC) review to be published in July 14 is expected to show that the number of audits considered inadequate has increased over the past 12 months. He says a third of the 88 audits inspected by the FRC either failed its quality test or required “material” further work, whereas a quarter of sample audits fell below the acceptable standard over the previous year. He notes that cases will be scrutinised to see whether they should be investigated, and firms penalised. A source tells Mr Shah that an area of FRC focus is “challenge to management,” adding: “Are auditors still believing what management tell them without kicking the tyres?” The review, it is noted, focuses on work carried out by Deloitte, PwC, EY, KPMG, BDO, Grant Thornton and RSM.
Wirecard scandal highlights need for audit reform
The Sunday Times’ Oliver Shah says the scandal at Wirecard, which fell into insolvency after it was found that €1.9bn of cash balances probably did not exist, is the latest sign that “something has gone systemically wrong with auditing.” He says the Wirecard fiasco is “like Groundhog Day”, arguing that “confidence in the simple checking of companies’ accounts … has never been lower.” Mr Shah highlights that of the six biggest firms in the sector, the Big Four and Grant Thornton have all been involved in headline-making corporate scandals, with only BDO not “tangled up in similar woes”. He says the Wirecard case, which has prompted criticism of EY, has “rightly renewed calls for a root-and-branch overhaul of the industry”, warning that any change “has to be cultural as well as practical, and it should be holistic”, including directors of audited companies as well as those doing the auditing. Mr Shah says that in commissioning the Kingman Review of the Financial Reporting Council, Sir Donald Brydon’s review of the audit industry and Lord Tyrie’s Competition & Markets Authority review, ministers “put cart before horse.” Considering reform measures Mr Shah says may be beneficial, he muses on a British version of Sarbanes-Oxley, saying it would show bosses and auditors “they are in it together”. Operational separation of accounting firms’ auditing and advisory businesses looks inevitable, he adds.
INSOLVENCY NEWS – WEEKEND TO 5TH JULY 2020
Pandemic revives the pre-pack
The Times looks at the pre-pack, saying the fast-track insolvency process that grew in prevalence during the financial crisis is making a return amid the coronavirus crisis. It notes that while critics suggest pre-packs reward incompetence at the expense of successful companies, supporters such as R3, the trade association for insolvency professionals, say they are an efficient way to rescue struggling businesses, save jobs and maximise returns to creditors. A poll by R3 found that a third of insolvency experts expected administration to be the insolvency and restructuring option they most commonly recommend over the next year. Richard Fleming of Alvarez & Marsal says the rise of pre-packs was “no surprise when some sectors are on fire”, while KPMG’s Will Wright praises the role of the Pre-Pack Pool, which is supposed to provide independent over-sight of connected-party sales, in ensuring transparency in such transactions.
CORPORATE NEWS – WEEKEND TO 5TH JULY 2020
Administrators investigate gambling link to Wigan woes
Wigan Athletic’s administrators have opened an investigation following allegations the football club falling into administration may be linked to a bet on the team’s relegation from the Championship. Gerald Krasner of Begbies Traynor has confirmed a case has been opened into the takeover four weeks ago, noting that “lawyers have been instructed.” This comes after Rick Parry, chair of the English Football League, was secretly filmed telling a fan that there “all sorts of rumours” about the club’s position, adding: “There’s rumours that there is a bet in the Philippines on them being relegated.”
Poundstretcher restructuring backed
Discount chain Poundstretcher is close to shutting nearly half of its stores with the likely loss of 2,000 jobs after landlords and other creditors approved a rescue restructuring. Will Wright of KPMG, the joint supervisor of the CVA, said: “The approval of the CVA provides a stable platform from which the company can continue to operate across a more focused store portfolio.”
The Guardian, Page: 38 Yorkshire Post, Page: 26
New Look plans CVA
Retailer New Look is said to be preparing its second CVA in as many years, having engaged advisers to explore restructuring options and negotiate with landlords on a switch to turnover-linked rent for its stores.
The Times, Page: 48
Restaurant group on the menu for investment firm
The Times reports that Azzurri, the casual dining group behind the Ask Italian and Zizzi chains, may be put through a pre-pack administration to facilitate a sale of the business to an American investment firm. Azzurri, which is being advised by KPMG as it weighs its options in the wake of the coronavirus crisis, is understood to be in negotiations over a sale to Towerbrook Capital Partners.
The Times, Page: 49
Intu chief steps down as restructuring begins
Intu CEO Matthew Roberts has stepped down, with his departure coming a week after the shopping centre group entered administration. Intu is in the process of a restructuring overseen by KPMG.
Curtain comes down on theatres
Nuffield Southampton Theatres will not reopen after the lockdown ends after administrators failed to find viable buyers for its two venues. Smith and Williamson said theatres located in the city centre and at the University of Southampton will be closed permanently, with 86 people being made redundant.
Daily Express, Page: 11
Insurance support to get cameras rolling
Ministers are said to be preparing taxpayer support to get film and television productions back underway after the COVID-19 lockdown, with producers saying they are unable to secure insurance. Treasury officials are reportedly being advised by specialists from PwC and Frontier Economics, which is chaired by former Cabinet secretary Gus O’Donnell, on how best to “unlock” insurance for productions, with taxpayer guarantees likely to be used to underwrite policies.
The Sunday Telegraph, Business, Page: 1
Sports bar chain plots survival
Sports bar firm Rileys is working with FRP Advisory on options to secure its survival, but has filed notice of intent to appoint administrators. Private equity firm Weight Partners Capital bought the chain in December 2014 after it was put into administration by Greybull Capital, who had bought Rileys out of insolvency in 2012.
The Sunday Telegraph, Business, Page: 3
New Look lands loan extension
New Look has agreed terms on an extension to an £80m credit facility. This comes with the fashion chain looking to agree a deal with landlords that would see a switch from fixed rent contracts to turnover-linked payments. Sources in the sector say a CVA remains a possibility, with New Look, likely advised by Deloitte, not expected to make a final decision on how to proceed until next month.
The Mail on Sunday, Page: 122
SMEs NEWS – WEEKEND TO 5TH JULY 2020
Bounce Back initiative drives SME loans
While lending to small businesses has seen flat growth in recent years, with a record of £589m seen in September 2016, the Government’s coronavirus support initiative has delivered a huge jump. Loans to SMEs rose 11.8% in May, with the Bounce Back Loan Scheme seeing borrowing soar.
The Sunday Times, Business, Page: 16
PERSONAL FINANCE NEWS – WEEKEND TO 5TH JULY 2020
Inheritance battles soar
Ministry of Justice figures show that the number of inheritance battles at the High Court hit an all-time high last year, with 188 cases brought by people claiming they were entitled to a share or a larger portion of an estate in 2019. This marks a 47% increase on the 128 claims made in 2018, with the Sunday Times saying there has been a greater incentive to challenge wills as increasing house prices over recent years have driven up the value of estates, while an increase in unmarried couples, who do not have automatic legal inheritance rights, may have contributed to the rise in case numbers.
EMPLOYMENT NEWS – WEEKEND TO 5TH JULY 2020
CEBR chief in jobs warning
While the Centre for Economics and Business Research says unemployment is expected to peak at a record 3.3m this year, chief executive Doug McWilliams has warned this could get far higher amid growing job losses. Mr McWilliams said: “What we don’t know is what happens after furlough ends. If there are job losses and companies fail and there is quite a long period of nothing happening, it will all unwind pretty damn quickly.”
The Daily Telegraph, Page: 33
Furloughed workers gain protection from redundancies
The Sunday Telegraph reports that employers planning mass redundancies of furloughed workers face restrictions that may see them forced to pay back taxpayer money. The Treasury has reworded the purpose of the Coronavirus Job Retention Scheme to say it is “integral” that the money is “used by the employer to continue the employment of employees”. This, the paper says, has panicked some businesses while giving campaigners hope that bosses may now think twice before cutting jobs. MP Huw Merriman is tabling an urgent question asking the Treasury to clarify the changes. Eleena Misra, employment barrister at Old Square Chambers, said the rewording could be interpreted as signalling a crackdown on fraud, while law firm Lewis Silkin notes that HMRC had said the furlough scheme could be used during both redundancy consultation and notice periods, but not for redundancy pay. HMRC told the Telegraph: “This change is just setting out the intended purpose of the scheme … employees remain eligible while on their statutory notice period.”
Sunak urged to extend furlough
Chancellor Rishi Sunak has been urged to extend the furlough scheme, with Nye Cominetti, senior economist at the Resolution Foundation, calling on the Treasury to extend support to the sectors hardest hit by the virus, such as retail, hospitality and leisure. “With the scheme due to be phased out between August and October, a second wave of unemployment is expected later this year. How big will depend a lot on how Government responds to the next phase and if the Chancellor extends support for the hardest hit sectors,” he added. EY Item Club analysis suggests the unemployment rate will rise from 3.9% during the first quarter to 7.5% in Q3, with chief economic adviser Howard Archer warning: “The jobs situation looks increasingly worrying.”.
Daily Express, Page: 43
PROPERTY NEWS – WEEKEND TO 5TH JULY 2020
Sunak mulls stamp duty holiday
The Sun reports that a six-month stamp duty holiday may be introduced in a bid to revive the housing market, with Chancellor Rishi Sunak understood to be considering raising the levy’s threshold as part of his autumn Budget. While under current brackets, nothing is paid on the first £125,000, then 2% up to £250,000 and 5% up to £925,000, a source has told the paper that the new lower limit could be £300,000 – but may be set as high as £500,000. Another measure reportedly under consideration is removing stamp duty land tax on vacant plots to boost the development of new housebuilding projects.
The Sun, Page: 2
ECONOMY NEWS – WEEKEND TO 5TH JULY 2020
Consumer confidence rising
UK consumer confidence is beginning to pick up, according to Growth from Knowledge’s (GfK) fourth flash report, which indicates that, with lockdown restrictions easing, confidence increased three points over the last two weeks to -27. The small rise, recorded between 18-26 June, comes after the index fell to its lowest ever level of -36 last month. The overall score is based on five measures, four of which improved over the 14-day period. The biggest rises were in the major purchase index, which climbed seven points to -25, and in the 12-month general economic situation, which rose six points to -42. GfK client strategy director Joe Staton comments: “Economic headwinds could easily blow any recovery off-course with confidence remaining fragile and volatile amid few signs of stability.”
Services sector sees turnaround
The IHS Markit/Cips purchasing managers’ index (PMI) for the services sector rebounded to a reading of 47.1 in June from 29 in May, which had followed an all-time low of 13.4 in April on a scale where any reading below 50 denotes contraction. Tim Moore, economics director at IHS Markit, said: “June data highlights that the worst phase of the service sector downturn has passed as more businesses start to reopen and adapt their operations to meet social distancing requirements.”
The Times, Page: 50 The Daily Telegraph, Business, Page: 33 Daily Express, Page: 58 The Scotsman, Page: 33
Danker: Smart thinking can add £130bn to economy
Tony Danker, the incoming director general of the Confederation of British Industry (CBI), says the coronavirus crisis can be a catalyst for a move toward a more efficient economy. Mr Danker, who will replace Dame Carolyn Fairbairn at the CBI in November, says that Britain has struggled to address productivity issues since the financial crisis , and identifies infrastructure spending and improving skills as important, but slow-burning, boosters for productivity. With this in mind, he suggests: “Government can’t fix the productivity problem; business has to”. Mr Danker says firms are showing a thirst for efficiency, technology and innovation, adding that it is “a tragedy that it’s taken a global pandemic” to stimulate new ways of thinking. He adds that a 10% increase in productivity across the smallest 75% of firms could add £130bn to the economy.
The Mail on Sunday, Page: 125
OBR chair in debt warning
Robert Chote, chairman of the Office for Budget Responsibility, has warned Chancellor Rishi Sunak over the risks of taking on large amounts of debt. With state support amid the coronavirus pandemic of around £132bn driving up the nation’s debt as a share of the economy, Mr Chote said: “A sensible government is not merely going to look how cheap it is for governments to borrow today but what difficulties will be created if it became more expensive.”
The Sunday Telegraph, Business, Page: 1
OTHER NEWS – WEEKEND TO 5TH JULY 2020
Tax adviser dodged £30k in stamp duty
Tax adviser David Hannah, who avoided paying £30,000 in stamp duty, has been fined £60,000 for failing to warn a client that HMRC was clamping down on a similar tax avoidance scheme. Last year, First Tier Tax Tribunal judge Victoria Nicholl ruled that Mr Hannah avoided paying £30,600 in stamp duty on a £765,000 home, having participated in a complex overseas-based annuities scheme that misrepresented the house’s value as £38,250 to the taxman. It has now emerged that he has been ordered to pay nearly £60,000 in penalties, fines and court costs after the Taxation Disciplinary Board found that he had downplayed the risks of a stamp duty avoidance scheme to a client.
The Sunday Times, Business, Page: 11
Contact Paul Southward