Economist: Pandemic can drive revamp of taxation

With Rishi Sunak believed to be considering tax increases as he looks to boost public finances that have taken a hit from the coronavirus crisis, Mark Littlewood, director general of the Institute of Economic Affairs (IEA), has suggested that the Chancellor could use the pandemic to revamp the tax system. Mr Littlewood, musing on whether taxes should be cut or increased to support the economy, said: “My own view is to increase tax in order to deal with the immediate deficit this year might actually be cutting off your nose to spite your face.” Suggesting that “we don’t need to solve the mess in the public finances overnight,” Mr Littlewood argues that the economic hit from COVID-19 could be treated like a war debt, saying that if ministers believe the crisis has delivered a once in a generation shock, “we could realistically pay that off over a generation.” He also says the pandemic could serve as a starting po int to revamp and simplify a system of taxation that is “very complicated” and probably unbalanced. Mr Littlewood goes on to say a reworked system that sees “those with the broadest shoulders … carry the heaviest burden” may hurt growth, warning against a system centred on “drawing all of the enhanced tax revenue from a relatively small albeit affluent part of the population”.

Daily Express

Taxing times for the Chancellor

Philip Aldrick in the Times considers the Chancellor’s options as he looks to fix the nation’s finance in the wake of the coronavirus crisis, arguing that tax will need to rise at some point but debate remains on when. He points to analysis from economists who suggest Rishi Sunak may “wait until the recovery is entrenched before unveiling new fiscal rules”. A Guardian editorial says reports that Mr Sunak is contemplating a radical and redistributive budget that includes steeper taxes for the wealthy “have to be taken with a pound of salt”. Lauren Davidson in the Telegraph says the dent to public finances stemming from the COVID-19 crisis clearly has to be paid for, but raising taxes to the extent some reports claim “is not the way to do it” and is not guaranteed to boost revenues. Juliet Samuel in the Telegraph also muses on mooted tax increases, saying it will be hard as the Tory manifesto ruled out any big increases and Boris Johnson “doesn’t believe in raising taxes”. Merryn Somerset Webb in the FT warns that the taxes discussed as targets for increases “won’t raise enough to touch the sides of the problem.”

The Times, Page: 50 The Guardian, Page: 49 The Daily Telegraph, Money, Page: 2 The Daily Telegraph, Money, Page: 19 Financial Times, Page; 16

MP in Budget rebellion threat

Amid ongoing speculation over an increase in taxes being considered by the Chancellor, Conservative MP David Davis has warned that he would be willing to rebel over the content of the Budget. He told BBC Radio 4’s The Week in Westminster: “I’m not exactly the most virtuous person in terms of not voting against my party. But I’ve never voted against a Budget in my life. If it’s a tax-raising Budget I will.”

The Daily Telegraph, Page: 8 The Sun, Page: 2

Investors act on tax shift fears

Harry Brennan in the Telegraph says wealthy individuals are selling off investment portfolios and second homes in fear of tax increases the Chancellor is said to be lining up for his autumn Budget, while others are pumping cash into pensions to take advantage of tax breaks and low rates before changes come into force.

The Daily Telegraph, Money, Page: 1

Can I avoid tax on gifts of over £3,000 to my children?

An FT reader’s request for advice sees Richard Jameson of Saffery Champness offering guidance on a matter related to inheritance tax.

Financial Times, Money, Page: 10


PM and Chancellor forge pact on tax

Boris Johnson and the Chancellor have come to an agreement on taxation that will likely mean a hike in taxes in November’s budget, with tax cuts to follow in 2023 or 2024, ahead of the next election. The Sunday Times reports that Mr Johnson is not prepared to sanction rises in income tax, national insurance or VAT, but Rishi Sunak could equalise rates of capital gains tax with income tax and is said to be determined to suspend the “triple lock” on state pensions. Removing higher-rate tax relief on pension contributions is also likely to go ahead in November, the paper says. The Mail on Sunday describes the “fury” of Tory party donors who warn they will “turn off the funding taps” if Sunak hikes taxes on the wealthy to pay for the pandemic while Daniel Hannan in the Sunday Telegraph likens raising taxes to a second trauma for an economy already in a coma. Finally, the Observer&rs quo;s business leader says the time for “a big tax-raising budget has not yet arrived” and that, if anything, “the reverse is needed – an expansive budget with an increase in funding to protect the jobs of millions of workers. Concerns over the national debt should be sidelined.”

The Sunday Times, Page: 2 The Mail on Sunday, Page: 42 The Sunday Telegraph, Page: 18 The Observer, Page: 57

Reform property tax to level up the UK

A letter published in the Sunday Times calls for reform of Britain’s property taxes. Signatories including Matthew Lesh of the Adam Smith Institute; Carys Roberts, executive director at the Institute for Public Policy Research, MPs and others assert that: “Replacing council tax and stamp duty with one simple property tax, based on actual property value and people’s ability to pay, will result in a fairer system of taxation for most of us.” They continue: “The government is promising to “level up” Britain. It should make a start by conducting a thorough review of our residential property taxes.”

The Sunday Times, Page: 22

Paolo Gentiloni: Tech giants should pay more tax

Paolo Gentiloni, European Commissioner for economics and taxation, told CNBC on Saturday that Big Tech have been the winners from the coronavirus pandemic and that it is time they started paying a fair amount of tax in Europe. “The giants of the digital platforms are the real winners of this crisis, from the economical point of view,” Gentiloni stated. “We all experience this in our own lives.” If negotiations on a proposed new digital tax collapse at the OECD-level collapse by the year-end, the European Commission “will come out next year with our own a proposal,” Gentiloni said.


Tax hikes would damage City of London, warns private equity veteran

City veteran Jon Moulton has warned that tax rises proposed by the Treasury would only benefit rival financial centres such as New York or Singapore, as London-based entrepreneurs with in-demand skills would be lured abroad.

The Sunday Telegraph, Business, Page: 3



Chancellor unlikely to create toxic loan vehicle

The Telegraph reports that Chancellor Rishi Sunak is set to ignore calls to create a state-backed organisation that would refinance toxic business loans handed out as part of coronavirus support initiatives. Proposals put together by a taskforce led by trade body TheCityUK and EY would see the Government take responsibility for debts, easing the burden on banks. Lloyds chairman Norman Blackwell has warned that bankers will be expected to do “everything they can” to recover toxic coronavirus loans, with firms possibly put into administration or assets being sold off. Lord Blackwell suggested that “the best thing” for firms that remained viable would be to “take the loans off the banks, pay out their guarantee and put them in a vehicle which will over time try and recoup money from the companies.”

The Daily Telegraph, Page; 35 Financial Times, Page: 3

LCF directors sued over alleged fraud

Thirteen people are being sued in connection with an alleged fraud at London Capital & Finance, where administrator Smith & Williamson claims almost 60% of investors’ cash was channelled to executives. The investment firm collapsed last year when the Financial Conduct Authority said it was misleadingly promoting high-risk bonds. The scandal is the subject of an investigation by the Serious Fraud Office, while a separate regulatory probe is looking at EY, PwC and Oliver Clive & Co, LCF’s accounting firms.

The Times, Page: 52 Financial Times, Page: 16

Frasers in Debenhams gag claim

Mike Ashley’s Frasers Group says Debenhams’ advisers are blocking it from rescuing the retail chain due to a gagging order preventing it from talking to landlords. CFO Chris Wootton said Frasers is not formally involved in the sale because it refused to sign a nondisclosure agreement that would prevent it from talking to Debenhams’ landlords for 18 months. The Times cites a source close to Debenhams who points to concern that Frasers could use confidential data to strike separate deals for Debenhams’ best stores with landlords – with Debenhams’ administrators at FRP saying this would reduce the value of the business for creditors.

The Times, Page: 55

Redde Northgate snaps up repair business

Nationwide Accident Repairs group has been partially rescued by Redde Northgate in a pre-pack administration led by PwC. Under the terms of the deal, Redde Northgate will buy 77 of the company’s 102 bodyshops and a fleet of mobile repair vans for up to £16m. The deal saves around 2,300 jobs.

The Times, Page: 55

Fraud hit THG float

The Hut Group, an e-commerce company that this week announced plans for a £4.5bn float, cancelled a stock exchange listing planned for 2011 when auditor PwC discovered a multimillion-pound fraud.

The Guardian, Page: 37


The City is prone to group-think, too

Oliver Shah considers how Japan’s corporate culture helped to enable the Olympus scandal and the reaction of the German establishment to the Wirecard fraud, asserting that both countries appear better able to reflect on their failures than the UK, where the prevailing attitude in the City to those burnt by fraud is simply: “Caveat emptor, mate — hard luck.”

The Sunday Times, Business, Page: 9

Busaba set for restructuring pain

Duff & Phelps has been hired by Thai restaurant chain Busaba to handle its CVA as the business looks to restructure. Busaba has 13 restaurants and 350 staff and plans to close one restaurant permanently. Five others will stay closed until it is viable for them to reopen, and seven will keep trading.

The Sunday Times, Business, Page: 2



Savers at risk of double tax on pensions

Jessica Beard in the Telegraph expresses concern that a mooted cull of higher-rate pensions tax relief could leave more than half a million workers at risk of being charged “double tax” on retirement savings. Noting that Chancellor Rishi Sunak is considering cutting relief from 40% for higher-rate taxpayers to a flat rate of 20%, she argues that reform would see higher rate taxpayers who remain in the upper bracket after they retire receive 20% tax relief on pension contributions during their working years but charged a 40% tax rate in retirement.

The Daily Telegraph, Money, Page: 3

Case for pensions tax rise to aid Covid recovery

Paul Johnson, head of the Institute for Fiscal Studies, has told the Treasury Select Committee there is a case for “at least a modest increase” in tax on pensions in payment.

Financial Times, Money, Page: 2


Advisers set to exit pension transfer market

The Sunday Telegraph reports that savers who want to transfer out of their final salary pensions will struggle to do so in future, with nearly half of all advisers unsure if they will still be in the market in a year’s time. A report by Royal London and Lane Clark & Peacock reveals advisers are concerned they will no longer be able to afford the costs and risks of transfer advice. It comes after the Financial Conduct Authority stepped up its efforts to stamp out poor advice and raise awareness of the risks of switching to more flexible pension schemes. From October 1, firms will no longer be able to offer “contingent” charging models and this ban will prompt a fresh wave of advisers to flee the market, the report warned. The Personal Finance Society has urged the Government to consider a temporary, state-backed alternative to indemnity insurance to ensure advisers are not squeezed on costs.

The Sunday Telegraph The Mail on Sunday, Page: 104



Tech has potential to be the engine of our economy for years to come

Tony Spillett, tax partner and UK head of technology and media at BDO, writes in the Sunday Times on how the UK’s technology sector has emerged faster and stronger from lockdown than most other areas of the economy and calls for a boost to the UK’s innovative reputation, “which must be enabled rather than impeded by Brexit.”

The Sunday Times, Tech Track 100, Page: 6



Fall in insolvent business debt

A report from Red Flag Alert shows that the coronavirus crisis led to a drop of £189m in insolvent business debt during the last quarter, with total insolvent business debt at £1.577bn at the end of June, down 10.7% from £1.766bn at the end of March.

Yorkshire Post, Page: 24



CBI boss urges UK Government to adopt new jobs support scheme

CBI boss Carolyn Fairbairn has said the Government needs a successor to its furlough scheme as she warned against a rise in corporate taxes, calling instead for an extension of business support schemes. Ms Fairbairn’s comments come as MPs from across the political spectrum call for the Chancellor to introduce a more targeted support scheme to help the areas hardest hit by COVID-19 – particularly, hospitality and the media and creative industries.

Financial Times . The Sunday Telegraph, Business, Page: 1

Rise in minimum wage ‘unaffordable’ after pandemic

The Sunday Telegraph reports that certain members of the Low Pay Commission are warning that Britain will not be able to afford a planned increase in the minimum wage due to the coronavirus pandemic. The rate was expected to rise from £8.72 to £9.21 per hour in April but experts now believe the pay hike could now be unaffordable for many companies and result in increased unemployment.

The Sunday Telegraph, Business, Page: 1, 6



Investors look to holiday lets

The Times’ Jessie Hewitson says that while the Treasury has “radically pruned” the tax breaks available on most mainstream investments, holiday homes are the one money-making venture that lets an investor potentially avoid the “accounting holy trinity” of income tax, capital gains tax and inheritance tax. Heather Powell from Blick Rothenberg says some investors are opting to convert their buy-to-let properties to holiday lets.

The Times, Page: 60




Investors urge start-ups to return to offices

Prominent technology investors have urged start-ups to return to offices, voicing concerns that continued working from home could harm their productivity. Brent Hoberman, co-founder the firstminute Capital investment fund, said: “I think it’s going to be very detrimental if we keep people apart and we lose the team spirit and learning by osmosis that happens in offices”. Tim Levene, CEO of venture capital business Augmentum, has called on CEOs to “recognise that we cannot continue to operate as we have been these past few months,” warning of dangers to the mental health of start-up employees if they continue to work from home.

The Daily Telegraph


Warning over stress of late payment

Small Business Commissioner Philip King has written to large businesses warning them that if they reduce the credit they make available to small suppliers many SMEs will go bust. Mr King urged small businesses to get in touch with his office if they are experiencing late payment problems and said that many of the companies he has written to promptly paid up.

Sunday Express, Page: 43



BoE policymaker: Further QE may be needed to hit inflation target

Senior Bank of England (BoE) policymaker Michael Saunders has warned an economic recovery could stall, pushing the Bank to increase quantitative easing measures. Mr Saunders, who votes on interest rates as a member of the Bank’s Monetary Policy Committee, voiced concern that the end of the furlough scheme will drive an increase in unemployment, while the initial boost from lockdown measures being eased could subside. While the economic rebound has recently exceeded BoE expectations, Mr Saunders said: “I would be cautious about extrapolating much from this apparent outperformance.” He also said he suspects that government support measures – such as the job retention scheme, tax payment deferrals, and mortgage holidays – “turned out to be more powerful than expected in supporting household incomes and spending.” Mr Saunders thinks it is “quite likely” that additional monetary easing will be required for inflation to see a “sustained re turn” to the 2% target.

The Daily Telegraph Financial Times, Page: 3

Stress test reveals potential blow to borrowing cost

Stress tests by the Treasury show that if the interest rate were to increase from 0.2% to 1%, the Government’s borrowing costs would be driven up by between £30bn and £40bn a year. The Telegraph says the analysis is likely to prompt calls for the Bank of England to continue with quantitative easing, which is currently only guaranteed until the end of the year.

The Daily Telegraph, Page: 8


Pubs and restaurants help economy to 6% growth in July

Figures due out on Friday are likely to show Britain’s economy grew by 6% in July compared with June with GDP bolstered by the re-opening of pubs, restaurants, hairdressers and other services from the beginning of the month. The EY Item Club expects economic growth to have continued in August thanks to the Eat Out to Help Out scheme, but Howard Archer, the group’s chief economist warns: “The big question mark is what happens in the fourth quarter. There is only so much pent-up demand and with the furlough scheme coming to an end we can expect job cuts, the scale of which is a big unknown.”

The Mail on Sunday, Page: 98

Remote working will cost Britain £15bn a year

A report by PwC warns that the economy could be dealt a £15.3bn blow every year due to impact of remote working on cleaners, coffee shops and security guards. Jonathan Gillham, PwC’s chief economist, said that while suburbs and smaller towns stood to benefit from home-working, the overall economy would suffer because of the impact on bigger cities such as London and Manchester.

The Sunday Times, Business, Page: 1



Monzo limits fee-free cash withdrawals

Monzo has capped the amount of cash that customers can withdraw without incurring a fee at £250 amid concern over the digital bank’s financial health. Customers will be charged a 3% fee for withdrawals over this amount. Auditors at EY warned of “significant doubt” over the bank’s ability to operate as a going concern because of the uncertainty caused by COVID-19.

The Sunday Times, Business, Page: 14

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