NEWS – WEEKEND TO 7TH FEBRUARY 2021

NEWS ROUNDUP

TAX NEWS – WEEKEND TO 7TH FEBRUARY 2021

SATURDAY

Chancellor set to turn to taxes to balance the books

The Chancellor is considering raising taxes in his March budget as he looks to restore public finances that have taken a hit from the coronavirus pandemic. Harry Brennan in the Telegraph says much depends on the state of the pandemic, suggesting that whether taxes increase sooner rather than later will depend on the success of the vaccination programme and if lockdown measures can be eased. He highlights tax reform that Rishi Sunak could turn to, including a property tax that would replace council tax and stamp duty; higher rates and lower reliefs on capital gains tax; a one-off 5% wealth tax; and a 2% increase in corporation tax.

The Daily Telegraph, Money, Page: 1

No delay for IR35 reforms

Changes designed to stop workers hiding their pay from the taxman will go ahead as planned, despite calls for IR35 reforms designed to tackle disguised employment to be postponed for a second time as they will create extra work and costs. HMRC believes off payroll workers should be treated as full-time employees and as of April 6, medium and large businesses will be responsible for setting the tax status of contractors they hire, mirroring a system that has been in place in the public sector since 2017. The Treasury expects the change to raise £3bn by 2024.

The Daily Telegraph, Money, Page: 1

Pensions can cut IHT and income tax

The Telegraph’s Jessica Beard says savers passing down their wealth could make 90% tax savings and cut their inheritance tax bill by “funnelling money into a family member’s pension.” She says doing so is one of the most efficient ways of reducing an estate for IHT purposes “and comes with the added boost of income tax relief”.

The Daily Telegraph, Money, Page: 2

SUNDAY

Online giants face tax raid on booming sales

The Government is drawing up plans for a double tax raid on tech firms and online retailers that have profited from the Covid crisis, according to leaked emails seen by the Sunday Times. Treasury officials will meet with business leaders this month to discuss how an online sales tax would work while the Downing Street policy unit is also working up proposals for an “excessive profits tax” on companies that have seen profits surge as a result of the crisis. Neither tax rise is expected in the March 3 budget, but sources tell the paper the increases could form a centrepiece of efforts to cut Britain’s debts this autumn.

The Sunday Times, Page: 1, 2

Labour urges Sunak not to increase taxes

The shadow chancellor, Anneliese Dodds, has urged the Chancellor not to increase taxes in his March Budget because the economy is too fragile to withstand such a move. Ms Dodds instead called for tax cuts for businesses hit hardest by the pandemic, such as an extension to the business rates holiday and the reduced VAT rate for hospitality businesses. In an interview with the Sunday Telegraph Ms Dodds did however suggest that Labour might support a one-off tax raid on internet giants that have made billions during the pandemic.

The Sunday Telegraph, Page: 2

Budget tax ideas

The Sunday Times cites EY’s Chris Sanger in a piece reflecting on possible tax rises in the upcoming Budget. Sanger thinks a rise in corporation tax from 19% to 20% is the kind of thing the Chancellor could comfortably get away with. He also suggests an online sales tax that would hurt companies with bricks and mortar stores, which also trade online, less than those that are online only. Elsewhere, Johnny Leavesley, the chairman of the Midlands Industrial Council, calls on Rishi Sunak to merge NICs with Income Tax and remove it completely from the first £12,500 of salary as a boost to ordinary workers and small businesses.

The Sunday Times, Page: 9 The Sunday Telegraph, Page: 2

Close EU tax loopholes and earn extra £15bn, UK urged

Tax consultant Bob Lyddon, the founder of Lyddon Consulting Services, is urging Boris Johnson to scrap rules permitting companies to take advantage of low tax jurisdictions such as Ireland or Luxembourg while setting up subsidiaries in the UK where the majority of their business is done. If loopholes in the EU’s Freedom of Incorporation rules were closed the UK could reap £15bn more a year in taxes.

Sunday Express

SMEs NEWS – WEEKEND TO 7TH FEBRUARY 2021

SATURDAY

Firms given longer to repay coronavirus loans

Rishi Sunak has announced that small firms will be granted more time to repay state-backed loans taken out to help survive the coronavirus lockdown, with the Chancellor saying the move gives companies “breathing space to get back on their feet”. The new arrangements will allow those who have utilised the Bounce Back Loan scheme to extend the length of the loan from six years to ten; make interest-only payments for six months; and pause repayments entirely for up to six months. This came as Sam Woods, chief executive of the Bank of England’s Prudential Regulation Authority, said taxpayers faced a “significant loss” from the state-backed loans, warning that as many as half will go bad.

The Daily Telegraph, Page: 31 BBC News

SUNDAY

Alcohol-free pubs and restaurants could reopen in April

UK ministers are considering allowing pubs and restaurants to reopen as soon as April if they agree not to sell alcohol. A temporary “booze ban” is being considered as part of the Government’s roadmap for lifting lockdown, which will be unveiled on Feb 22nd. The ban on alcohol would allay concerns that people are less likely to abide by restrictions after drinking. Kate Nicholls, the chief executive of UKHospitality, said: “We welcome the opportunity to have sensible and pragmatic discussions with the Government about the pace and nature of reopening.”

The Sunday Telegraph

PROPERTY NEWS – WEEKEND TO 7TH FEBRUARY 2021

SATURDAY

House prices fall as end nears for stamp duty holiday

House prices fell 0.3% between December and January, figures from Halifax show, with this the biggest monthly fall since the housing market shutdown in April. The typical home sold for £251,968 in January, a 5.4% increase on January 2020’s average but a drop of £865 compared to the previous month. The annual price growth rate fell 0.6 percentage points from the rate recorded in December, the second consecutive month of decline for year-on-year growth, which was down 2.2 percentage points from a November peak. The dip in prices comes as demand eases, with buyers seeing their chances of finalising a deal before the stamp duty holiday ends on March 31 decreasing.

The Daily Telegraph

PENSIONS NEWS – WEEKEND TO 7TH FEBRUARY 2021

SUNDAY

Extra percentage point can wipe years of pension income

Retirees who use expensive pension providers have been warned they risk losing more than four years’ worth of retirement income unless they switch. Figures compiled for the Sunday Telegraph by LCP indicate that paying just one percentage point more in charges can wipe years of income from a pension pot. And pensioners who use “income drawdown” can be more than £70,000 poorer within 25 years on a £500,000 pension pot if they fail to switch from an expensive provider to another with average charges. Dan Mikulskis of LCP said someone who pays 2% on a £250,000 pension could save up to £35,000 by age 85 if they switched to a provider that charged 1%.

The Sunday Telegraph

EMPLOYMENT NEWS – WEEKEND TO 7TH FEBRUARY 2021

SATURDAY

Permanent recruitment falls in January

Research conducted by KPMG and REC shows that hiring of permanent staff fell in January, with the decline driven by the latest coronavirus lockdown. The report also said the increase in infection rates saw growth in short-term vacancies weaken in most sectors. Pay trends also took a hit as recruiters reduced starting salaries and wages for temporary staff. James Stewart, vice chair at KPMG, said: “There is cause for optimism as businesses carefully monitor the vaccine rollout and look forward to the Budget next month.” “It gives the Government the opportunity to further help the recovery in jobs and revive the UK’s productivity growth”, he added.

City AM

LEGAL NEWS – WEEKEND TO 7TH FEBRUARY 2021

SATURDAY

Lynch begins extradition battle

Autonomy co-founder Mike Lynch will this week start his fight against an extradition request, with the entrepreneur charged with 17 counts of wire and securities fraud in the US over the $11bn acquisition of Autonomy by Hewlett Packard. The US firm wrote $8.8bn off the value of the British company a year after the 2011 acquisition, attributing $5bn of that to an alleged accounting fraud. A High Court case in 2019 saw Mr Lynch deny falsifying Autonomy’s accounts, saying its auditor, Deloitte, had signed off on its treatment of hardware sales and contracts arranged through third-party resellers.

The Times, Page: 52

ECONOMY NEWS – WEEKEND TO 7TH FEBRUARY 2021

SATURDAY

Consumers likely to hold off certain spending, says Broadbent

Ben Broadbent, the Bank of England’s deputy governor for monetary policy, says concern over coronavirus variants could hit consumer spending, deterring people from certain financial decisions when restrictions have been relaxed. He warned that sectors where people interact socially could see weaker levels of demand for goods and services, saying: “I can certainly see why people might be fearful to spend on particular things, things that expose them to the risk of infection.” Despite this, Mr Broadbent said he anticipated a strong recovery in consumer spending as coronavirus restrictions are eased, saying: “Overall spending does come back pretty strongly when you remove these caps, at least initially”. He added that while some sectors have been hit hard by lockdowns and fears over infection – such as hospitality and leisure – consumers had reallocated spending to other sectors and online re tail, helping to offset damage to the wider economy.

The Guardian

Lockdown hits retail sales

Ministers have been urged to offer a roadmap out of lockdown so retailers can plan toward their post-pandemic recovery. This came after figures revealed that retail sales fell 10.1% last month – the worst January result since records began in 2017. BDO warned that the future for non-essential retailers, which have been forced to close amid the latest lockdown, is “currently clouded with uncertainty”. The firm’s head of retail, Sophie Michael, said retailers have “the additional problem of predicting how and when consumers will return, and at what level of spending.” She added: “Providing a roadmap out of lockdown is a tall order, but one that retailers desperately need.”

City AM

SUNDAY

Gove accused of ignoring Brexit trade warnings

The Observer reports that exports to the EU through British ports fell by 68% last month compared with January last year, with Brexit deemed the chief reason for the slump. The Road Haulage Association says it reported the figures to Michael Gove, the Cabinet Office minister at the beginning of the month but had been largely ignored. The RHA’s chief executive, Richard Burnett, asserts that ministers have repeatedly ignored warnings from industry while Richard Ballantyne, chief executive of the British Ports Association, warns that worse is to come when the UK introduces full import checks on goods from the EU on 1st July.

The Observer

Bank braced for a post-Covid spending binge

Bank of England governor Andrew Bailey believes that once Covid restrictions are lifted Britons will embark on a spending spree and provided the supply side can cope with demand the public are likely to splash out with the estimated £125bn in extra savings they have accumulated since the start of the pandemic. Mr Bailey’s comments echo those of his deputy Ben Broadbent who also anticipates a strong recovery in consumer spending as coronavirus restrictions are eased, although concern over coronavirus variants could dampen demand.

The Observer

REGULATION NEWS – WEEKEND TO 7TH FEBRUARY 2021

SATURDAY

New audit watchdog delayed until 2023

Michael O’Dwyer in the Telegraph reports that reform which will see the Financial Reporting Council replaced by the Audit, Reporting and Governance Authority will not be launched until April 2023. He cites sources who say that while Business Secretary Kwasi Kwarteng has pledged to prioritise reform of the audit sector, plans “put on the back burner” by his department due to the coronavirus crisis and Brexit will not be placed before Parliament until next year. Sources say a delayed consultation on the Government’s recommendations for reforming the sector is set to run for an extended period of up to six months. Labour’s Darren Jones, chair of the Business Select Committee, says ministers should not delay “long-overdue legislation” longer than necessary, arguing that there is “industry-wide consensus on the necessity of reform in many areas and recognition by many that strengthening the reporting framework could help to deliver more robust and reliable financial reporting.” David Herbinet of Mazars said further delay was “not helpful for anyone”, while ICAEW chief executive Michael Izza said getting the new regulator up and running as soon as possible is a key part of the reform agenda. “We’d really like to see it in 2022 but it’s all a question of priorities,” he added. A Government spokesman said Mr Kwarteng “has been clear that audit reform is a priority”, adding that comprehensive proposals w ill be published shortly.

The Daily Telegraph, Page: 32

Bosses question plans to punish directors for accounting errors

A number of prominent business leaders have commented on Government plans to impose fines and bans on directors for inaccuracies in their companies’ accounts. Sir Martin Sorrell, founder of advertising firm S4 Capital, warned against a move that could “strangle initiative” at companies trying to survive the pandemic, while Pimlico Plumbers chairman Charlie Mullins warned that the policy would be “a huge disincentive to start a business.” Tim Martin, chairman of JD Wetherspoon, said increasing the burden on directors will “put the frighteners on boards” and “discourage risk-taking”. The Institute of Directors stressed that it is important policy does not “place extra and unnecessary burdens on directors”. ICAEW CEO Michael Izza said making directors personally liable “is going to really focus the mind on being a director of a public interest entity, as it should”. Matthew Fell, chief policy director at the CBI, said: “Improving the quality of audit to enhance public trust and investor confidence is paramount.”

The Daily Telegraph, Page: 31

Firms fear the burden of new regulation

The Telegraph’s Tim Wallace looks at Government strategy and the impact on business, highlighting fears that plans to make directors take more responsibility may hurt firms, with Douglas McWilliams at the Centre for Economics at Business Research saying: “If I was in Government, I wouldn’t want to make businesses’ lives tougher”. Tej Parikh, chief economist at the Institute of Directors, warns of pressures firms potentially face, saying: “It is important to increase standards, but we are also looking at tax increases, and stories of capital gains tax increases, which add to the burden”. Mr Wallace cites a Government spokesperson who says strengthening the corporate governance and audit regime will “help to ensure that the UK remains a world leader in corporate transparency and advance its status as a place of the highest standards in audit.” The spokesperson added that ministers are committed to acting on recommendations stemming from three independent reviews into audit and corporate reporting.

The Daily Telegraph

Director rules could deter talented executives

Lucy Burton in the Telegraph reflects on proposals that would make directors responsible for inaccuracies in their companies’ accounts, likening the move to efforts to punish banks in the wake of the 2008 financial crash with the rollout of the senior managers regime in 2016. She says a debate which arose then and may resurface in discussions on the mooted audit reforms centres on whether tougher rules scare off talented executives. Rhian-Anwen Hamill, managing director of executive search and consulting firm RAH Partners, said the senior managers regime “absolutely put very good people off” in both executive and non-executive roles, while Paul Lynam, CEO of Secure Trust Bank, says regulators should not be “so scary” that only “the reckless types” take up top jobs.

The Daily Telegraph, Page: 32

Liability plan could freeze corporate Britain

A Telegraph editorial suggests that plans to make company directors personally liable for the accuracy of their financial statements “would freeze corporate Britain in its tracks”. It notes that it is against the law to publish deliberately misleading accounts and says that there have been too many corporate scandals, but says the remedy is to better enforce existing rules and to “shake up the audit market, long dominated by overly comfortable accountancy giants”. It adds that the one of the unintended consequences of imposing strict liability on directors would be a surge in demand for lawyers and internal auditors. Elsewhere, Matthew Lynn in the same paper questions the proposed reform, saying that while “there is nothing wrong with going after the auditors … this is surely the worst possible moment to saddle directors with a whole new range of responsibilities.” He says a number of scandals suggest there is a case for reforming the way firms are audited, arguing that “some auditors are just box-ticking, and don’t know what to look for.”

The Daily Telegraph, Page: 19 The Daily Telegraph, Page: 32

SUNDAY

Kwasi Kwarteng urged to rethink plans to make company directors liable

Cabinet ministers are calling for the Business Secretary to rethink plans to make company directors personally liable for business failures, the Sunday Telegraph reports. As part of the package being proposed by Kwasi Kwarteng, the Financial Reporting Council will be replaced by the Audit, Reporting and Governance Authority, with new powers to clamp down on auditors and directors. Those directors will be held personally responsible for the accuracy of their company’s financial statements. But senior Conservatives including Iain Duncan Smith say existing regulations should be sufficient while further compliance costs were unwise as Britain heaves itself out of the coronavirus slump. Ministers meanwhile say the reforms are necessary to ensure high corporate standards. A government spokesman said: “Audit reform is a priority and we will publish comprehensive proposals shortly. Strengthening our corporate governance and audit regime will h elp to ensure that the UK remains a world leader in corporate transparency and advance its status as a place of the highest standards in audit.”

The Sunday Telegraph, Page: 2

Reforms should ensure auditors do their job

Liam Halligan contends in the Sunday Telegraph that the Government’s White Paper on audit reform proves the Big Four lobby machine is alive and well. Halligan says although the White Paper proposes the operational separation of audit and advisory work, it is a shame that it does not insist on “joint audits” of listed firms, a move proposed by the Competition and Markets Authority in 2019 and designed to break the stranglehold of the Big Four. Halligan is also concerned about moves to bring ESG into a formal audit arguing that this speaks to “an exercise in ministerial posturing”; that the new Audit, Reporting and Governance Authority will gain oversight of firms beyond those listed on the stock market, and that ARGA may be given scope to pursue directors themselves if a company’s accounts are found to be misstated. Halligan asserts that auditors “should also be on the hook for the numbers they sign-off – so incentives are aligned. Onerous new sanctions aimed only at directors – the vast majority of whom do the right thing – once again suggest the mighty Big Four audit lobby has succeeded in telling ministers what to do.” The Sunday Times Oliver Shah briefly touches on the topic, saying he welcomes news that the joint audit idea has been scrapped and that a Sarbanes-Oxley style regime holding directors to a higher standard is in.

The Sunday Telegraph, Page: 2 The Sunday Times, Page: 9

OTHER NEWS – WEEKEND TO 7TH FEBRUARY 2021

SUNDAY

Contactless limit to rise to £100

The contactless card payment limit is set to rise to £100 from the current maximum of £45. The change, which will be made in the next Budget, was not possible while Britain was bound by EU rules, which cap payments at €50.

The Sunday Times

Contact Paul Southward

Paul Southward