News Roundup Monday 14th May 2018

NEWS ROUNDUP

TAX NEWS

Social care funding – Older workers may have to start paying NI

The Government is considering plans to introduce national insurance (NI) payments for those working beyond the state pension age as a means to support the social care system. Currently, nearly 1.3m “silver strivers” are exempt from paying NI, but under a proposed “care tax”, the 12% charge would continue to be levied, raising about £2bn a year. The measure will be included in a Green Paper to be published by Health Secretary Jeremy Hunt next month and has the support of the Intergenerational Commission, which will release a report this week warning against burdening the young with the cost of social care. A Sunday Times editorial says hitting older workers with a large tax hike would be “like a kick in the teeth,” as many older people carry on working because they have to, as they cannot afford the cliff-edge drop in income that comes with retirement because of diminished pension expectations. A fair er policy would be to spread the burden “across all older people, working or not, including those on generous pensions.”

The Sunday Times, Business, Page: 1, 2 The Sunday Times, Page: 22 The Mail on Sunday, Page: 48

EMI blunder leaves start-ups wondering about Government support

Peter Evans reports on the fury expressed by UK start-ups following the Government’s announcement that they had to scrap the enterprise management incentive (EMI) scheme, a tax break used by start-ups to attract new recruits by giving them share options worth up to £250,000 over three years. HMRC last month said that EU state aid approval for the scheme would expire, but has so far failed to provide an explanation for the lapse in state aid approval. Tim Stovold at Kingston Smith said the EMI issue has meant start-ups “are suffering from being unable to move forward with key recruitment” while Matt Smith, director of the Centre for Entrepreneurs think-tank, said the blunder is indicative of a Government that appears to be more muted in its cheerleading of entrepreneurs.

The Sunday Times, Business, Page: 9

PENSIONS NEWS

HMRC gains from allowance breaches

HMRC collected an extra £70m from people breaching the lifetime pension allowance last year, the Times reports. When the £1.03m cap is breached a 55% tax is charged on lump sums and 25% if the pension is taken as income. The tax take has almost trebled in two years as the cuts to relief bite. Data from Retirement Advantage show the tax collected rose from £40m to £110m between 2014-15 and 2016-17 while Salisbury House Wealth says there has been a 24% increase in the amount collected through the 55% tax rate, from £33m in 2015-16 to £41m in 2016-17. The Times notes that HMRC had to repay £22m in the first quarter of this year after charging savers too much for withdrawals.

The Times, Page: 57 Financial Times, Money, Page: 2

Reform pensions tax relief to encourage saving

The Guardian’s Patrick Collinson argues for the closure of the loophole that allows those on final salary pension schemes to enjoy preferential tax treatment regarding the lifetime allowance. Collinson adds that the lifetime allowance in general is discouraging wise investors – the £1.03m limit is not difficult to reach and only brings £25,000-£26,000 a year of guaranteed income. People bumping up against it are being advised to stop paying in to avoid the 55% tax on amounts over the cap. He also calls for the removal of the 40% and 20% relief for high and low earners respectively, suggesting a 30% rate for both would be fairer and would “encourage pension saving for all without being a giveaway to the rich.”

The Guardian, Page: 48

INDUSTRY NEWS

CVA the best prospect of saving a business

Richard Fleming outlines the advantages of a CVA in the Sunday Telegraph, stating that the arrangement is perfectly suited to retailers and although it is not a panacea, it is a “life raft for businesses that are holed beneath the waterline”. Fleming, head of European restructuring at Alvarez & Marsal, says, “a CVA can, indeed often does, prefigure the ultimate failure of the business. But in the case of most distressed retailers it is the least-worst option, because it offers the best prospect of saving a business, the jobs and economic value embodied within it.”

The Sunday Telegraph, Business, Page: 5

Poorer graduates helped up with algorithms

Greg Hurst considers the use of algorithms to help City firms choose candidates from less advantaged backgrounds for jobs. Mike Buchanan, the headmaster of Ashford School in Kent and vice-chairman of the Headmasters’ and Headmistresses’ Conference of leading independent schools, says the use of “contextual data” means employers are missing out on people “who have got wider talents and skills and intelligences than merely the data might reflect”. But Emma Codd, managing partner for talent at Deloitte, defended the use of the data, arguing it “gives us the ability to consider attainment within the context that it was gained” allowing us to “continue to make sure that the people joining us at entry level are of the highest potential, and diverse.”

The Times, Page: 11

When an investor needs to hold their nerve

John Lee has questioned the legal basis that allows administrators of failed stockbroking firms to levy charges on clients’ assets held by those firms, in light of PwC’s estimated £100m administration fees for work on Beaufort’s collapse.

Financial Times, Money, Page: 7

National Grid’s CFO quits for Caterpillar

Andrew Bonfield, National Grid’s CFO, has quit to take up the same position at American machinery company Caterpillar.

The Times, Page: 54

WEALTH MANAGEMENT NEWS

Wealth manager slams FRC’s response to reporting complaint

Investment manager Alan Miller, husband of anti-Brexit campaigner Gina Miller, has written to the Financial Reporting Council’s chairman, Sir Win Bischoff, and CEO Stephen Haddrill arguing that they had failed to properly investigate his complaint regarding the way asset managers report their performance figures. Mr Miller, who runs SCM Direct with his wife, accused the regulator of making “intellectually bankrupt and morally indefensible” points that would not have been reached had his complaint been investigated by five or more specialists rather than one individual. Mr Miller had demanded a probe into how his complaint was handled but the FRC said it had found no wrongdoing. Mr Miller added in messages seen by the Sunday Telegraph: “I reserve my right to have this matter reviewed by a court of law.”

The Sunday Telegraph, Business, Page: 3

SMEs NEWS

Suppliers call for end to “unethical” late payments culture

A report to be published this week by YouGov and the payments business Basware shows 61% of British SMEs support new legislation that would force companies to pay suppliers within 45 days. Just 11% would oppose legislation. The Federation of Small Businesses (FSB) estimates that 50,000 companies close each year as a result of late payments, costing the UK about £2.4bn in lost output. Public bodies are among the worst offenders, with research released last week by the FSB revealing that 89% of suppliers to government had been paid late. “Big businesses and government think it is acceptable to pay late,” said Mike Cherry, the FSB’s national chairman. “It is unethical and immoral to force small business owners to chase payments and to turn to personal credit cards, overdrafts or even laying off staff just to keep their head above water.”

The Sunday Times, Business, Page: 2

Yorkshire firms win big at FSB awards

Businesses from Yorkshire brought home two of the 11 awards from the FSB UK Celebrating Small Business Awards 2018 in London on Thursday. IGO Pets, a Doncaster-based pet pampering firm, scooped the UK Start-up Business of the Year award, and Rosewood Farm, an environmentally-minded meat box delivery company in the East Riding, was named UK Ethical/Green Business of the Year.

Yorkshire Post

ECONOMY NEWS

Rates could stay at 0.5% for two more years

Analysts expect the Bank of England to row back on plans to raise rates next week after figures showed inflation was falling and economic growth had weakened. James Smith, an economist at banking group ING, says a rise now “could be one headwind too many for the faltering consumer-facing sector.” EY ITEM Club said that instead of seeing two interest rate rises in 2018, it is likely that there will only be one in August now and two increases next year, pushing it up to 1.25% by the end of 2019. But other economists believe the Bank may have to cut back its longer-term inflation forecasts due to weak global growth as well, potentially pushing back a rate rise to two years’ time.

The Sunday Telegraph, Business, Page: 3 The Mail on Sunday, Page: 44 Sunday Express, Page: 56

Manufacturing’s new dawn may sadly be a false one

David Smith considers whether the slump in manufacturing growth to 0.2% in Q1 indicates the promise of a revival for the sector over the past two years was in fact a false dawn. The benefits of stronger global growth and sterling’s depreciation last year are beginning to fade while investment is held back due to ongoing uncertainty over the Government’s Brexit strategy and the sense that the much-vaunted industrial strategy has been kicked to one side, he says.

The Sunday Times, Business, Page: 4

High Street woes chill UK’s northern retailers

A PwC/LDC report shows northern retailers are being hit particularly hard by high street woes, while EY found a sharp increase in companies based in Yorkshire and the north-east issuing profit warnings in Q1.

Financial Times, Page: 18

April rebound in UK car sales obscures underlying downtrend

UK car sales climbed 10.4% last month compared with a year earlier, the SMMT said, but overall sales for the first four months of the year remain down by close to 9%.

Financial Times, Page: 3 The Independent, Page: 15 The Sun, Page: 48 The Times, Page: 51

OTHER NEWS

What fate for Lynch after US Autonomy judgement?

Simon Duke runs over the Autonomy story in the Sunday Times following the conviction of former FD Sushovan Hussain last week on 16 charges of wire and securities fraud. The case was brought by Hewlett-Packard, which bought Autonomy in 2011 only to write off $8.8bn of its value due to the software firm’s alleged creative accounting. Hussain faces 25 years in a US jail but HP has also filed a $5bn fraud suit against founder Mike Lynch and Hussain in London, set to start next year, and is likely to be emboldened by the result in San Francisco. Hussain’s lawyer John Keker said he would appeal. He said: “Defence evidence of Hewlett-Packard’s conduct in the year following the acquisition, which would have shown that HP was not in fact misled at all, was excluded from evidence and will be one basis for the appeal.”

The Sunday Times, Business, Page: 7

City grandees say leaving CU would damage economy

About 76% of FTSE 100 chairmen believe Britain must stay in the customs union to avoid inflicting damage on the economy, according to a poll by headhunter Korn Ferry.

The Sunday Times, Business, Page: 2

Paradise Papers claim against the Guardian and BBC settled

A claim brought by Ashurst against the Guardian and BBC over the Paradise Papers investigation has been settled. Michael O’Connell, the group managing partner of Appleby, said it had started the legal action to understand which of its confidential and privileged documents had been taken. “From the outset we wanted to be able to explain to our clients and colleagues what information of theirs had been stolen. That was our duty. As a result of this legal action we are well on our way to achieving our objectives.”

The Guardian, Page: 2

Graham Corbett, British business leader, 1934-2018

The FT carries an obituary of Graham Corbett, described as a moderniser of accountancy and audit and by Mike Rake as “the most inspiring leader in KPMG for whom I worked”.

Financial Times, Page: 11

Contact Paul Southward for all the latest news.

Paul Southward