NEWS – WEEKEND TO 7TH MARCH 2021
NEWS – WEEKEND TO 7TH MARCH 2021
TAX NEWS – WEEKEND TO 7TH MARCH 2021
Fraud fears over super deduction
Rishi Sunak has been warned that the super deduction tax cut announced in the Budget could be used for tax avoidance and fraud, with concerns raised that it could be manipulated by those seeking large tax breaks. The super deduction allows companies to deduct 130% of the value of plant and machinery from profits, with the Chancellor saying that in the two-year window it is active, it will be “the biggest business tax cut in modern British history.” Stuart Adam, senior research economist at the Institute for Fiscal Studies, warned that the scheme will “create a risk of tax avoidance and even potentially fraud” as companies try to find ways to “dress things up” as the investment required to secure the deduction. Ian Dickinson of UHY Hacker Young said every tax relief is open to fraud, adding that is why “HMRC is focusing its efforts towards constantly combating tax avoidance and tax evasion”. “There will be avoidance provisions in the legislation to stop the relief being used for contrived schemes, designed to get an artificial tax advantage,” he added.
Middle earners hit by charges aimed at the rich
Analysis by Blick Rothenberg shows that the annual take-home pay of many middle-income families has gone up just £6 in a decade, despite huge rises in the tax-free allowance. The report shows that families just within the 40% higher rate tax band face a number of restrictions aimed at wealthy taxpayers and are effectively paying more than £60 in tax for every £100 they earn above £50,000 due to the child benefit cap. This, the study highlights, is a higher marginal rate than someone earning £150,000. The Times’ Ali Hussain says the findings raise concern over the “insidious” effects of the Chancellor’s freeze on income tax thresholds and the pressure it will place on some taxpayers. Nimesh Shah, CEO of Blick Rothenberg, comments: “There has been too much political toying with these tax thresholds over the past ten years.”
Kwarteng: Strong growth could shift tax plan
Business Secretary Kwasi Kwarteng says the economy is on track for recovery, saying he is “bullish” about the country’s economic prospects. When asked by the Times if he thought the plan to increase corporation tax from 19% to 25% in 2023 would come to fruition, he said: “You could have strong growth. And clearly, if the growth is very strong the fiscal situation can change very quickly. 2023 is a long time away.” He added: “Two years can change everything. If there are very strong tax receipts, who knows what the taxation rate will be?”
The Times, Page: 10
Subtle Sunak readies a stealth attack on taxpayers
The FT looks at a new penalty system for late filing and paying of taxes, with Graham Boar at UHY Hacker Young saying the new regime is going to be much tougher for some taxpayers.
Tax take plan ‘won’t cut it’
Philip Aldrick in the Times crunches the numbers on the nation’s finances, saying that to pay off debts while delivering the public services and basic level of income support that people want, the £29bn of tax rises set out on the Budget “won’t cut it.” He calculates that up to an extra £20bn of taxes “could easily be needed”.
Freeze a clever move around manifesto vow
Reflecting on the Budget, Sam Brodbeck in the Telegraph says freezing income tax allowances is a clever move as it means the Conservatives don’t break a manifesto promise of not raising income tax, national insurance or VAT but will still increase the tax take. “No one’s take-home pay is going to fall, but the bit HMRC keeps will slowly grow”, he adds.
N Ireland sets up tax body in wake of corporate rise
Northern Ireland is setting up a fiscal commission that could see the province opt against increasing corporation tax rates when UK rates go up in 2023.
Landlords shrug off corporation tax increase
Buy-to-let experts do not expect landlords holding properties via company structures to change ownership arrangements despite the Chancellor’s decision to increase the corporation tax rate.
What are the tax implications for someone working abroad?
Advising on the tax ramifications of working from abroad during the pandemic, Charlotte Hobrough of BDO says remote working overseas can result in obligations for an employer and an employee.
Sean Randall of Blick Rothenberg and Chris Etherington of RSM offer a Times reader advice on the implications of buying a property while still having part-ownership of the family home with his wife, with the subject of capital gains tax among issues raised.
The Times, Page: 10
Sunak eyes agreement on tax for online firms
Rishi Sunak is hoping international agreement on how to tax online companies’ profits can be achieved in the coming months, with the Chancellor hoping consensus on a levy can be in place by June’s G7 meeting. He said: “One of my priorities in the G7 this year, which I’ve already started work on, is to try and get international agreement on a new way to tax these companies.” Mr Sunak, who has already held talks about the new tax with US financial secretary Janet Yellen, said: “I spend a lot of time talking to my finance minister colleagues around the world about this issue.” Meanwhile, the Chancellor is also looking at a new online sales tax as part of a review of business rates, with the levy set to be included among measures outlined in the Treasury’s Tax Policies and Consultations Update on March 23.
1.1m miss tax filing deadline despite extension
HMRC figures show that around 1.1m people have still not filed their taxes and will now face fines, having missed the cut-off despite it being pushed back from January 31 to the end of February. Those filing late will not face the 5% surcharge for late tax payments this year, as long as they file and pay what they owe by April. They will, however, have to pay the 2.6% interest charge. Some who are struggling to pay can opt for a monthly payment plan, with over 665,000 payment plans already in place. Analysis shows that tax debts currently exceed £65bn, with around two fifths of this unmanaged debt.
IHT freeze to pull in £1bn
A five-year freeze on inheritance tax allowances revealed in the Budget will bring in £985m in extra revenue and result in thousands more people paying the 40% duty. More than 36,000 estates a year will pay the death duty by 2026, up from fewer than 25,000 in recent years, according to figures from the Office for Budget Responsibility. The Sunday Telegraph’s Harry Brennan says increased death rates amid the pandemic and booming house prices will push the IHT take to all-time highs by next year, pulling in £6.6bn a year by 2026, up from £5.1bn in 2020.
The Sunday Telegraph, Business, Page: 9
£8bn extra tax since pension freedoms
Ian Cowie in the Sunday Times considers the tax implications of pension reform, with HMRC data showing that nearly 1.6m people paid more than £8bn extra tax since pension freedoms were rolled out. Nimesh Shah, chief executive of Blick Rothenberg, comments: “Government propaganda around flexible pensions was all about choice, but their backdoor motive was to generate additional and accelerated tax revenue.” Meanwhile, Harvey Jones in the Sunday Express looks at the impact a freeze on personal allowances announced in the Budget will have, pointing to PwC calculations that someone aged 50 now could be £85,000 worse off in tax by the time they reach retirement if it stays fixed.
The Sunday Times, Business, Page: 11 Sunday Express, Page: 53
Tax return rethink
Self-employed workers who file their tax returns late may pay lower fines under plans being drawn up HMRC, with the tax office launching a points-based system to make the system “fairer and more consistent”. Andy Olymbios of PwC said the change “distinguishes between taxpayers with good governance who occasionally get things wrong and those who are persistently noncompliant.” UHY Hacker Young ’s Graham Boar said that while there is “quite a lot of help and support” for those struggling to pay, “if you bury your head in the sand and do not pay up, then you will get clobbered.”
The Sunday Times, Business, Page: 10
Self-employed voice Budget concerns
Changes in the Budget have left some self-employed people concerned they will end up paying higher taxes, with critics also concerned over exclusions in the £33bn coronavirus lifeboat fund for the self-employed. Victoria Price of EY comments that the Chancellor’s comments around ending tax breaks for the self-employed in the future “may signal a significant change in tax policy with tax treatment of employees and the self-employed possibly being equalised at some point.”
Commission could examine NI tax powers
Northern Ireland’s Finance Minister Conor Murphy has proposed an independent commission that would examine the case for more devolved tax powers. A report commissioned by the Northern Ireland Council for Voluntary Action in 2015 suggested that income tax and stamp duty could be potential candidates for devolution.
Super deduction to boost investment?
Russell Lynch in the Sunday Telegraph weighs the potential impact of the super deduction announced in the Budget, considering whether the move to allow firms to write off 130% of equipment and machinery outlay against their corporation tax bills will drive investment. The Office for Budget Responsibility predicts a 10% surge in business investment, he notes. Paul Falvey at BDO comments: “If you’re in a business which has relatively low capital expenditure … this sort of relief doesn’t really have a great deal of impact.” “What really matters to you is the rate of tax”, he adds.
The Sunday Telegraph, Business, Page: 5
Budget points to rethink of party principles?
Liam Halligan in the Sunday Telegraph highlights that the combination of higher corporation tax and frozen personal allowances will raise the tax burden to 35% of GDP by 2025 and asks if the Budget means the Conservative Party has “abandoned its small-state, pro-enterprise principles”, answering: “Potentially, but not yet.” Elsewhere, Martin Wolf in the FT muses on the Government’s economic vision, saying that the Chancellor’s decision to raise taxes, specifically those on business, moves away from Conservative orthodoxy.
The Sunday Telegraph, Business, Page: 2 Financial Times
Poll shows backing for Budget
A post-Budget poll by Opinium shows that 52% of respondents approved of it and only 12% disapproved, with 65% backing the freezing of personal tax allowances. Meanwhile, a YouGov survey saw 55% of respondents describe the Budget as “fair”.
EMPLOYMENT NEWS – WEEKEND TO 7TH MARCH 2021
ONS reveals high-vulnerability jobs
Office for National Statistics (ONS) analysis has identified the workers most likely to have suffered a pay cut due to the coronavirus pandemic, classifying non-key workers unlikely to have been able to work from home as being in “high-vulnerability jobs”. These include bricklayers, restaurant staff and IT engineers. The report says 32.4% of UK employees fall into the category and are more likely to have seen a reduction in working hours or wages, with 53% of furloughed staff employed in high-vulnerability jobs. It was found that 41.4% of jobs in the category saw pay reductions in the last year. The ONS report notes that more than a quarter of employees work in low vulnerability jobs, meaning they are likely to be able to work from home or are considered a key worker. Most professional occupations, including accountancy roles, fall into this category.
Daily Mail BBC News
‘Woke agenda’ warning
The Telegraph’s Matthew Lynn argues that by “embracing a politically correct agenda, firms are creating anarchy where there should be leadership”, before warning that “by embracing a woke agenda, firms are empowering staff to remove any senior manager they don’t like.” He also reflects on Dimple Agarwal stepping down from her leadership roles at Deloitte after complaints from staff of bullying and harassment and notes Bill Michael’s exit from KPMG.
The Daily Telegraph, Page: 34
UK leads diversity and inclusion charge
Michael O’Dwyer looks at how the UK is becoming the diversity and inclusion capital of the business world, with LinkedIn data showing that UK firms employ twice as many inclusion professionals per capita as any other country. He says that with Dimple Agarwal standing down at Deloitte, “the City lost one of its most powerful diversity champions.”
The Daily Telegraph, Page: 35
Job losses show gender imbalance
Jessie Hewitson in the Times questions why the Chancellor did not acknowledge that women have borne the brunt of pandemic-related job losses in his Budget, citing PwC analysis showing that 78% of roles lost in the first wave had been held by women.
Women hit hardest by furlough and redundancy
Looking at the impact of the coronavirus crisis on employment, the Sunday Times’ Laura Miller cites PwC analysis showing that of the 15.3m people furloughed between July and October, 52% were women despite them making up 48% of the workforce, while between January to November redundancy increased 13% more for women than men. Larice Stielow of PwC said while jobs will return, they will not necessarily be the same, adding that without Government intervention “women will return to fewer hours, lower skilled, and lower paid jobs”.
SMEs NEWS – WEEKEND TO 7TH MARCH 2021
Chancellor to be quizzed on small firms’ debt
The Treasury Select Committee will this week ask Rishi Sunak how he expects small firms to repay debt taken on in the pandemic, with MPs to ask the Chancellor about the risk the issue poses to the economy. Committee chairman Mel Stride has warned: “The issue of debt recovery among small firms is particularly important because, if it goes wrong, vast waves of companies are going to go under.” Mr Stride has proposed a scenario where profitable firms repay loans earlier than struggling ones.
The Mail on Sunday, Page: 122
Free rapid coronavirus tests for all firms
England’s smallest firms have been included in an initiative that will see firms provided with free coronavirus testing kits, with officials announcing that all businesses, including those with fewer than 50 employees, will be able to sign up to the workplace testing programme. Mike Cherry, national chair of the Federation of Small Businesses, said workplace testing would be “fundamental” to bringing the pandemic under control. He added that it is “vital” that small firms are given the support they need “as they focus on staying afloat in extremely changing circumstances.”
FINANCIAL SERVICES NEWS – WEEKEND TO 7TH MARCH 2021
HK’s future as a hub uncertain
The Sunday Telegraph’s Louise Moon says uncertainty over how Chinese policies will fundamentally change Hong Kong raises questions over its future as a financial hub. She cites a KPMG report showing that the Hong Kong Stock Exchange ranked as the world’s second-largest IPO market in 2020, raising £36.3bn from 140 listings, trailing only New York’s Nasdaq.
The Sunday Telegraph, Page: 14
PROPERTY NEWS – WEEKEND TO 7TH MARCH 2021
House prices up 5.2% in February
Figures from Halifax show that house prices rose 5.2% year-on-year in February, hitting an average of £251,697, although prices fell month-on-month, with a 0.1% decline on January’s average. Property values were 0.5% higher in the December to February quarter than in the September to November quarter. Halifax has welcomed the extension of the stamp duty holiday announced in the Budget, with managing director Russell Galley saying the move “has removed a great deal of uncertainty for buyers with transactions yet to complete.” He also said the new mortgage guarantee scheme will help buyers by increasing the availability of loans requiring a 5% deposit, adding that while mortgage approvals have reached record highs in recent months, “raisin g a deposit continues to be the single biggest hurdle for first-time buyers to overcome.”
The Guardian Daily Mail City AM BBC News
Duty holiday extension could drive prices up
House prices are expected to hit record highs after the Chancellor announced an extension of the stamp duty holiday. With the cut-off pushed back from the end of this month to the end of June and the threshold tapered until September, Rightmove predicts the move will save an additional 300,000 home buyers up to £15,000 each. While the current stamp duty holiday has helped push house prices to a record high, the extension is likely to drive further increases. Office for National Statistics data show that prices rose 8.5% to an average of £252,000 last year. The Office for Budget Responsibility says 2021 could see a 5% climb, having increased its November forecast of 3.5%.
The Mail on Sunday
CORPORATE NEWS – WEEKEND TO 7TH MARCH 2021
Frasers hits out at rate relief cap
Frasers Group, the owner of Sports Direct and House of Fraser, has warned it could be forced to close stores because of a limit to business rates relief introduced in the Budget. The Chancellor announced that a rates holiday will run until June 30 and then charges will be reduced to a third until March 2022. However, Frasers said that with relief capped at £2m, the support measure is “near-worthless” for retailers with lots of stores. It said it will have to review its portfolio to “ascertain stores that are unviable due to unrealistic business rates”, adding that the cap would make it “nearly impossible” to take on empty Debenhams sites.
Aprirose seeks buyer for QHotels
Aprirose is reportedly seeking to sell QHotels, a chain of four-star properties which it spent £525m acquiring in 2017. The property investor is said to be working with advisers at PwC to offload the business.
Gupta owes struggling Greensill billions
Analysis shows that Sanjeev Gupta owes more than £3bn to Greensill, the finance house on the brink of administration. Mr Gupta’s GFG Alliance has bought steel and aluminium assets from a number of companies via invoice discounting, with the acquisition spree fuelled by Greensill’s supply chain finance funds. Greensill has been thrown into turmoil after Credit Suisse suspended its $10bn supply chain fund and Grant Thornton has been lined up to handle the imminent administration.
Babcock CEO orders accounting policies review
Sabah Meddings in the Sunday Times looks at engineering services group Babcock International, highlighting that CEO David Lockwood has ordered a review of the group’s accounting policies by an independent firm. It will, she notes, examine the profitability of contracts and their value on the balance sheet, adding that PwC, Babcock’s auditor of 19 years, is “reportedly being shown the door”.
Covid damaging but not disastrous for English football
Martyn Ziegler in the Sunday Times says the coronavirus pandemic has had a “damaging but not disastrous” impact on English professional football. He notes Deloitte estimates that Europe’s top 20 clubs will have missed out on more than €2bn of revenue across the 2019/20 and 2020/21 seasons due to the absence of fans, rebates to broadcasters and commercial impacts.
Shoe firm won’t step away from stores
The Sunday Telegraph’s Oliver Gill reflects on shoemaker Clarks following its takeover by private equity fund Lionrock Capital. Looking at its commitment to the high street as retail increasingly shifts online, he cites PwC’s Kien Tan who says: “For shoes, there will always be some customers who prefer shops as part of their purchase journey, even if they either do the research or complete the transaction online.”
ESG moves up the agenda
ESG has “moved steadily up the political and social agenda”, says Laura Onita in the Sunday Telegraph, with analysis suggesting that around 87% of UK investors expect their firm to prioritise ESG when it comes to deploying money. Sue Bonney, head of ESG at KPMG, says the “pressure around it makes it non-optional”. Noting that firms face pressure from consumers, employees, shareholders and lenders, Ms Bonney says: “If you are an organisation sitting in the middle of all those interest groups, it’s almost a business imperative to address it and not to kick the can down the road.”
The Sunday Telegraph, Business, Page: 8
PENSIONS NEWS – WEEKEND TO 7TH MARCH 2021
Pension savers face steeper tax bills
The Telegraph’s Jessica Beard says “huge numbers” of pension savers will be hit with higher tax bills due to a freeze on the lifetime allowance. She cites figures suggesting that more than 290,000 workers already have pension wealth above the lifetime allowance but have not yet triggered the tax charge, while a report by Royal London suggests 1.25m non-retired people are projected to breach the allowance.
The Daily Telegraph, Money, Page: 1
Altmann: Boldness needed on fund assets
In a letter to the Times, former Pensions Minister Baroness Altmann commends the Chancellor for the “approach of spending today while promising tax rises tomorrow” apparent in his Budget but says the “main missing stimulus” was a “lack of boldness” in pushing more of the UK’s £2trn defined benefit pension fund assets into growth projects. This, she argues, would provide much better long-term returns for both the country and each scheme.
ECONOMY NEWS – WEEKEND TO 7TH MARCH 2021
Capital exodus could lift GDP
Mazars economist George Lagarias believes that UK GDP could be boosted if changes seen during the coronavirus crisis take hold in the long term. Saying that a shift toward permanent remote working could see regional towns and cities grow, he suggested that “if the UK had a more even spread then GDP would rise,” although he warned that “there would be a lot of pain along the way.” Such a shift would hit central London property values and see job losses in retail, he suggested, noting that this would see a rise in the “frictional” rate of unemployment – the number of people unemployed for a short period as they move into a different role. The temporarily higher unemployment rate would be likely to trigger deflation, Mr Lagarias notes, even if GDP rises on the back of UK regions expanding.
OTHER NEWS – WEEKEND TO 7TH MARCH 2021
Agarwal resigns over bullying allegations
Dimple Agarwal has stepped down from her leadership roles at Deloitte following reports hat she is under investigation over accusations of bullying and inappropriate working practices. The firm said Ms Agarwal, its diversity and inclusion champion, will give up her roles as deputy chief executive and head of people and purpose. Richard Houston, Deloitte’s UK chief executive, told staff that while he cannot comment on any of the allegations, he “will not tolerate behaviours or actions that are inconsistent with our global shared values.” The Mail notes the issue marks “the latest scandal to hit the Big Four”, highlighting that KPMG chairman Bill Michael last month quit after telling staff in a virtual meeting to “stop moaning” about the effects of the pandemic and lockdown.
The Daily Telegraph, Page: 33 The Times, Page: 39 Daily Mail, Page: 24 City AM
A Deloitte survey shows that 16% of 25 to 34-year-olds in the UK now have three or more subscriptions, with a jump in the numbers in the last three months of 2020.
The Sunday Times, Business, Page: 3
Accountants warn of ‘one-size-fits-all’ director rules
A survey of mid-sized UK accountants by law firm Kingsley Napley has found that half of the bosses polled fear plans to make company directors personally liable for misinformation in accounts will result in a drain on talent in boardrooms. While ministers are set to consult on proposals to shake up audit and corporate governance after a string of scandals, half of the accountancy bosses polled said existing rules are adequate and tighter regulation will discourage talented people from becoming directors. Julie Matheson, a regulatory partner at Kingsley Napley, said there is concern that firms may have to switch auditors because their current ones are not equipped to carry out public interest audits, adding: “Mid-market accounting firms would like to see a future regulatory regime that is proportional.” The Sunday Telegraph cites a boss from a Big Four firm who says that change is needed but regulations must reflect the differences between big and small firms, arguing: “A one-size-fits-all almost certainly doesn’t work”.
Contact Paul Southward