NEWS – WEEKEND TO 8TH NOVEMBER 2020
NEWS – WEEKEND TO 8TH NOVEMBER 2020
TAX NEWS – WEEKEND TO 8TH NOVEMBER 2020
Amazon’s membership of CBI tax team raises questions about influence
The policy positions of the Confederation of British Industry are being influenced by big businesses that sit on its committees, the Times suggests. American tech giant Amazon is a member of the tax committee of the lobby group, which has criticised the UK’s new digital services tax, arguing that it was “high risk”. The paper points out that Unilever and Barclays, which are in dispute with HMRC over tax bills, are also on the committee. The Times cites a former chief executive of a FTSE 100 company who says Amazon’s membership “seems astonishing.” They add: “Whatever they’re thinking, it will reinforce society’s view that businesses have an agenda not to pay their way. That’s pretty stupid in these times.” Elsewhere in the paper further details of multinational influence on the CBI are detailed, leading John Longworth, former director-general of the British Chambers o f Commerce, to comment: “The [CBI] is rammed with foreign multinationals who are obviously not going to have the national interest at heart.”
Self-employed face tax trap if they borrow company money
Company directors forced to draw monthly dividends despite a steep drop in income during the pandemic could face hefty tax bills as they are technically taking out “directors’ loans” and unless they are repaid the individual is liable for the debt. William Wilson of Price Bailey estimated that thousands could now be at risk of falling into a tax trap. “Many small business owners are holding a ticking time bomb. They could be facing unexpected five-figure tax bills, which they are unaware of and are in no position to pay,” he said. George Bull of RSM adds that borrowing more than £10,000 from company funds would also result in an income tax bill for the director and National Insurance costs for the company.
The Daily Telegraph, Money, Page: 1
Paying for Sunak’s handouts
The Sunday Times’ David Smith considers how the UK will pay for Rishi Sunak’s latest Covid bailout with the inevitable questions posed over which taxes will be hiked to raise funds. The Tory manifesto has a commitment not to raise income tax, VAT and national insurance, leaving tax hikes on businesses, or equalising the treatment of capital gains and income and abolishing higher-rate pension tax relief, for example. Whatever the solution, Smith says tackling the massive rise in government debt “is a job for the long haul.”
More people donating £1m or more when they die
A Freedom of Information request reveals that the number of people who leave charitable donations of more than £1m in their wills has risen by almost a third, to 3,043 in 2017-18, up from 2,328 the previous year. Eleanor Sepanski of Boodle Hatfield said wealthy individuals were probably leaving as much as 10% of their estate to good causes to make the most of generous inheritance tax breaks.
The Sunday Telegraph, Business, Page: 9
EMPLOYMENT NEWS – WEEKEND TO 8TH NOVEMBER 2020
Comments on Sunak’s latest furlough scheme
Both George Bull, senior tax partner at RSM, and Mike Warburton, former head of tax at Grant Thornton, comment on Rishi Sunak’s latest furlough scheme in letters published by the Times. Mr Bull says the opportunity to remedy the shortcomings of the first scheme has been wasted and points out that unless changes are made immediately “workers whose income collapsed during the first surge because of gaps in that support scheme will endure hardship throughout the second surge.” Mr Warburton says the Chancellor’s latest announcements “appear less sure-footed” than those he made in March and he hopes Mr Sunak is able to maintain a degree of independence from No 10. Separately, the FT explains that those unable to claim from the Self-Employment Income Support Scheme include people who did not file a 2018-19 tax return because they had just started working for themselves, company directors, those earning more than £50,000 and people who earned less than half of their income from self-employment. Pressure is growing on the Government to support these groups too. Finally, a worker self-employed via a limited company says in a letter to the Telegraph that the Chancellor should “review the support for the public sector, rather than raking through the dying embers of the contractor and self-employed sector for additional savings.”
CORPORATE NEWS – WEEKEND TO 8TH NOVEMBER 2020
Edinburgh Woollen Mill and Ponden Home collapse
Two retail chains owned by Philip Day have fallen into administration putting 2,900 jobs at risk. The Edinburgh Woollen Mill and Ponden Home chains collapsed on Friday after consultants failed to find buyers for the businesses. Tony Wright, joint administrator and partner at FRP, said: “The administrations will provide some further protection while we continue our search for buyers to secure the long-term futures for both businesses.”
Mears offloads data business
Mears Group has agreed the sale of its data division Terra Quest Solutions allowing the contractor to concentrate more on its core social housing business. KPMG advised Mears on the sale process.
The Times, Page: 58
Clarks CVA angers landlords
The 195-year-old shoemaker Clarks has been accused of abusing insolvency processes by pushing through a restructuring they have little chance of overturning. The CVA will result in most of its 320 UK stores moving to rents based on turnover and landlords are the only creditors whose debts, which total £160m, will be compromised by the CVA, yet they account for less than 25% of the votes. “This abuse of CVAs forces property owners to absorb significant losses with little attempt to build a recovery strategy they can support as economic partners,” said Melanie Leech, chief executive of the British Property Federation.
Deltic targeted by buyout funds
Private equity firms Greybull Capital and Aurelius are circling the UK’s biggest nightclub operator, Deltic Group, since it hired BDO to find a buyer last month. Deltic has attempted to stave off collapse by cutting 1,000 jobs – around half of its workforce – and reopening some clubs as bars. The company has also been mulling over a CVA, the Sunday Telegraph reports.
SMEs NEWS – WEEKEND TO 8TH NOVEMBER 2020
Unsustainable debt may stifle recovery
The Business Growth Fund is set to take stakes in growing SMEs to boost their survival chances during the pandemic, with the first investments of the £15bn National Renewal Fund expected to be made in the first quarter of 2021. But Stephen Welton, head of the BGF, warned the legacy of Covid could “materially affect the economy for generations”. He said: “We’re going to face the perfect storm of company failures, so increasing insolvencies and unemployment, combined with zombie companies that can survive but are just surviving to pay interest. Those two together will completely handicap the economy in terms of its ability to recover.” Separately, Sir Adrian Montague, head of the TheCityUK Recapitalisation Group, estimates that unsustainable corporate debt in the UK will hit £70bn by the end of March 2021 placing a “heavy drag” on the recovery.
Banks prepare for new bounce back loans boom
Following the decision by the Chancellor to extend the deadline for applications for bounce back loans and permit top-up loans from November to January banks are bracing for a flood of small business customers seeking access to the cash. NatWest estimated that about 100,000 businesses, or a third of its existing bounce back loan scheme (BBLS) customers, could be eligible for a top-up. Meanwhile, concerns have been raised over the high interest rates charged on debt accrued through the coronavirus business interruption loan scheme (CBILS), which can be as high as 14.99%, and big businesses are calling for the corporate financing facility (CCFF) to be extended for five years.
REGULATION NEWS – WEEKEND TO 8TH NOVEMBER 2020
Review of listing structures aims to motivate more London floats
Lord Hill, former British commissioner to the EU and a non-executive director of the Treasury, is in line to lead a review into stock market listing rules as the Chancellor seeks to attract more tech start-ups to the City after Brexit. UK start-ups such as online fashion retailer FarFetch have picked the US over London, the Sunday Telegraph reports, with companies saying it is not just the listings regime that is attractive but the ease with which they can sell themselves to investors. Proposals likely to be considered by the review include reducing the minimum number of shares that must be sold publicly as part of a premium listing, and allowing dual-class share structures. The paper suggests both moves could raise questions over governance and control.
INDUSTRY NEWS – WEEKEND TO 8TH NOVEMBER 2020
No 10 explores ‘Crown Consultancy’ to stem billions going to private firms
The UK Government aims to reduce its dependence on outside experts by creating an in-house unit dubbed the “Crown Consultancy”, which would recruit young graduates to work alongside civil servants.
Pandemic drives financial advisers to speed tech change
The FT looks at how Covid has pushed financial advisers and their clients to embrace technological change and how the shift could open up the sector to a broader range of clients.
PROPERTY NEWS – WEEKEND TO 8TH NOVEMBER 2020
Average house price exceeds £250,000 for the first time
The cost of the average UK home has risen to more than £250,000 for the first time, according to the Halifax, with prices in October up 7.5% on a year ago. The stamp duty holiday and a surge in demand for larger properties with outdoor space, driven by pandemic lockdowns, have contributed to the rise in prices. However, the lender said the economic fallout from the COVID-19 crisis would put “downward pressure” on prices in early 2021.
Zoopla: House prices will keep climbing next year
House prices will continue to rise in 2021 even if the economy is rocked by soaring unemployment, Zoopla is predicting. Richard Donnell, Zoopla’s research and insight director, said prices could grow 4% this year and are unlikely to drop in 2021. He believes the property market will stay strong as wealthy people sell expensive city centre homes and move to the country. Prices will also be propped up for the first three months of next year by the stamp duty holiday and the extension of the Government’s furlough scheme until March. “I don’t see prices falling year-on-year by the end of next year. I just think they are going to slow down,” said Mr Donnell. “I don’t think we will see a lot of forced sellers next year and that limits the downwards pressure coming through on prices.”
FINANCE NEWS – WEEKEND TO 8TH NOVEMBER 2020
Reduced risk appetite causes borrowing rates to rise sharply
Interest rates for riskier borrowing hit multi-year highs during the pandemic with economists warning that rate cuts were failing to filter through to borrowers. The average interest rate on overdrafts for households has leapt 10 percentage points since February, while costs on high loan-to-value mortgages have risen as much as 140 basis points. Sanjay Raja, Deutsche UK economist, says policymakers at Threadneedle Street may need to intervene to ease credit conditions for borrowers. The Sunday Telegraph notes that a Bank of England survey found lenders were bracing for a sharp rise in mortgage defaults in the fourth quarter.
ECONOMY NEWS – WEEKEND TO 8TH NOVEMBER 2020
Markets rally at prospect of gridlock in Washington
The FTSE 100 recorded its best weekly performance since June on Friday, with gains for the week totalling 333 points, or more than 6%. Stock markets shot up on Wednesday and Thursday as it became clear that the late counting of absentee and mail-in ballots meant a big swing to the Democrat presidential candidate Joe Biden across key battleground states. Wall Street boasted its best week since April while the S&P 500 rose some 7.3% through the week. Markets were relieved by the prospect of a Democrat-led White House being constrained by a Republican Senate, preventing Mr Biden from introducing corporate tax rises and curbs on oil producers. Technology shares rallied amid predictions they would no longer face changes to competition law. Additionally, unemployment fell by a full percentage point, to 6.9%, beating forecasts of a decline to 7.7%. Chris Rupkey, an analyst at MUFG, said: “Surprisingly, the recovery from the recession for the labour market is more V-shaped than many thought. The job market is opening back up and will continue to do so as long as the economy doesn’t lock back down.”
Third-quarter GDP expected to have risen by 15.5%
The Chancellor’s “eat out to help out” scheme launched in August drove a rise in consumer confidence and with it GDP between July and September, analysts believe. Andrew Goodwin, chief UK economist at Oxford Economics, said without this increase in hospitality spending the 2.1% month-on-month growth in August would have been closer to the modest rise he expects took place in September, of 0.9%. Goodwin expects the continued reopening of the economy in July and the return of pupils to school in September will have pushed third-quarter GDP up by 15.5%. Philip Shaw of Investec puts his estimate at 15.8% following a more-optimistic growth forecast for September of 1.5%. The Office for National Statistics will on Thursday reveal the GDP growth rate for September and, with it, the figure for the entire third quarter.
The Observer, Page: 61
OTHER NEWS – WEEKEND TO 8TH NOVEMBER 2020
Will Trump be charged with tax evasion after he leaves office?
Nick Akerman, a prosecutor during the 1970s Watergate investigation which led to the resignation of Richard Nixon, has predicted that President Trump will be charged with tax evasion after he leaves office. He claims that Mr Trump “has done a whole series of activities that could qualify as tax fraud.” New York prosecutors have been given permission to seek years of the President’s financial documents as part of an investigation into alleged “financial improprieties” within the Trump organisation which has been going on since 2017. A legal source familiar with the case said: “Trump has immunity from prosecution as long as he is President but come January 20, that immunity ends. No President has ever pardoned themselves but there’s always a first time.”
The Mail on Sunday, Page: 9
Contact Paul Southward