Figures from the Office for Budget Responsibility show that the Treasury earned £14.9bn from capital gains and inheritance tax in 2019-20. But with the Chancellor freezing the inheritance tax threshold and capital gains tax allowance, by 2026 it will make £21bn a year – a rise of 41%. The Mail cites Sam Collins, policy adviser at the Institute of Economic Affairs think-tank, who said that instead of increasing the tax burden on businesses and individuals, the Chancellor should focus on growth and simplifying the tax code, adding: “The Chancellor argues that investment is key to our economic recovery, but capital gains tax has the reverse effect. At high levels, it discourages investment, deters entrepreneurship and encourages tax avoidance. Inheritance tax is known as Britain’s most hated tax for a reason. It is not only immoral as a form of double taxation but is a bureaucratic nightmare for families.”
Daily Mail, Page: 6
Labour U-turn on personal allowance freeze
Labour will vote against the income tax personal allowance freeze, the shadow foreign secretary said on Sunday. The move comes just days after the shadow chancellor claimed the party would not “stand in the way”. Lisa Nandy said: “We are going to vote against it this week. We feel that now is absolutely the wrong time to be targeting low and middle-income-earning families for tax hikes and squeezing their incomes.” Nandy denied the party had made a U-turn on the issue, insisting Labour had already stated it wanted such tax hikes to be deferred.
Rishi Sunak takes an axe to Thatcher’s low-tax ideology
Martin Wolf says in the FT that Rishi Sunak’s tax policies represent a shift away from Conservative orthodoxy; may not encourage business investment, and serve to illustrate that bold reform is desperately needed.
Public sector pay anger illustrates appetite for giveaways
Writing in the Telegraph, Kate Andrews says the Conservative party has fostered the belief that public sector workers can continue to demand substantial pay rises despite the dire state of public finances – having discovered the “magic money tree” during the pandemic in the form of Bank of England financing. With Boris Johnson unable to find a spending project he’s willing to sacrifice in the name of fiscal responsibility and virtually vetoing public spending cuts, a hike in corporation tax was the most obvious target, says Andrews. Along with freezing personal income tax allowances, the Budget has brought “into question the party’s core philosophy that a low-tax, less intrusive state actually creates a better set of conditions for both the private and public sector to thrive.”
Victims of financial scams are losing £4,000 on average to criminals impersonating institutions, experts have warned. Financial scams are an “epidemic within the pandemic”, a former investigator has said, as the number of victims falling for fraudsters impersonating the likes of HMRC, the NHS and Royal Mail doubled last year. Criminals were swift to seize on the coronavirus pandemic, targeting members of the public with fake emails, texts and phone calls. Figures from UK Finance revealed that the number of impersonation scams, where fraudsters contact potential victims pretending to be a trusted authority, doubled in 2020 to 39,360 cases. A total of £150.3m was raided from bank accounts, meaning the average victim lost nearly £4,000. Fraud is the most likely crime that the British public will become a victim of, according to Helena Wood, a former investigator with the National Crime Agency, now at the Royal United Services Institute .
A study by Scottish Widows indicates the average woman in her twenties today will retire with £100,000 less in her pension than her male peers. The firm’s research pointed to women’s lower average earnings, higher probability of working part-time and heavier childcare burden as the reasons for the gap. According to the research, over the first 15 years of their careers, women on average save about £2,200 a year, compared to £3,300 for men. The difference only widens over a lifetime as wage increases lead to “significant inequalities in retirement income”. Jackie Leiper, managing director of pensions at Scottish Widows, said: “We know that young women have been some of the hardest hit by the short-term financial impact of the pandemic and this has only exacerbated the challenge of reaching pensions parity.” A Department for Work and Pensions spokesman commented: “Our groundbreaking pension reforms, including automatic enrolment, have helped millions more women save into a pension, many for the first time. Pension participation among eligible women working in the private sector has risen from 40% in 2012, to 86% in 2019.”
Restaurant tycoon Richard Caring has said he is willing to offer financial support to Bill’s Restaurants after it emerged the chain breached its banking agreements during the pandemic. BDO, the restaurant group’s auditor, warned that the effect of coronavirus on trading and future funding indicated that there was material uncertainty “that may cast significant doubt on the company’s ability to continue as a going concern”. The restaurant’s parent company Bill’s Stores has since secured a waiver on covenants with its bank, HSBC.
Sanjeev Gupta’s rivals are reportedly preparing to pick off the steel tycoon’s assets as his GFG Alliance comes under increasing scrutiny due to its massive debt. Greensill Capital has lent Gupta billions but was last week thrown into turmoil after Credit Suisse suspended its $10bn supply chain fund. Grant Thornton has declined to comment on reports it has been primed to oversee the administration of Greensill.
Smaller companies need clarity on how they will be able to access the Chancellor’s “super-deduction” tax break, the Times reports. The relief is intended to spur investment by providing 25p off company tax bills for every £1 of qualifying spending on plant and machinery. But investment incurred under “a hire purchase or similar contract” will have to meet “additional conditions” in order to qualify and over one in five SMEs use this kind of finance. Craig Beaumont, of the Federation of Small Businesses, said: “Not much thought has yet gone into access for smaller firms, who have a hugely important role to play in post-pandemic investment in smaller equipment that would improve Britain’s productivity.”
Britain’s service sector has seen a spike in business confidence with BDO’s Services Optimism Index hitting 94.13 in February, up from 86.6 in January. The confidence boost has come from the ongoing vaccine roll-out and Budget pledges form the Chancellor. Kaley Crossthwaite, a partner at BDO, said: “With business lifelines extended in the shape of the prolonged furlough scheme, and an extra dose of support provided to hospitality via extensions in business rates relief and the VAT cut to 5%, there is reason to believe this optimism can be sustained as we gradually emerge from the depths of lockdown.” Separate research by the Centre for Economics and Business Research and YouGov found consumer confidence rose last month with the positive sentiment expected to “further aid the recovery over the coming months.”
Sunak warns of bill to be paid to tackle UK’s ‘exposed’ finances
In an interview with the FT, the Chancellor has said Britain’s finances are “exposed” to rising interest rates and the public need to be told the truth about the challenges facing the country. Meanwhile, a Treasury decision to hold a “tax day” three weeks after the Budget will be a bellwether for long-term changes in government policy, experts have said. Separately, Conservative party doners have warned Rishi Sunak that raising taxes in his Budget would be “utterly wrong” and risk sending Britain into another recession. Property developer Steve Morgan said: “One of the advantages of leaving the EU is that we can become a low-tax, dynamic society which can become Europe’s go-to country for investment. Increasing corporation tax and CGT flies in the face of this.” Banker Sir Henry Angest was particularly blunt, adding: “I suspect there is a mindset at the Treasury that just doesn’t believe in the capitalist economic model.”
The Times talks to accountants about the effect freezing tax thresholds would have on workers following speculation the Chancellor could use the tool in his Budget. PwC said that a 2% increase in wages would push the income of 1% of the working population over the £50,000 threshold. With 32m people in work, this would mean an extra 320,000 paying 40% tax on some income. If income tax thresholds were frozen until the next election, the average family would be £250 a year worse off by 2024-25. Pay rises for those who earn close to the £12,500 personal allowance could tip some of their earnings into the 20% tax zone – another blow for those who have suffered the most from the pandemic. Zena Hanks, an analyst from Saffery Champness, said: “The less that you earn, the more a frozen allowance will influence your take-home pay, so some may consider this a highly inequitable way of increasing tax revenue.”
The Times, Page: 60
Higher business taxes cost us all
The Telegraph’s Matthew Lynn reminds readers that a hike in corporation tax will ultimately mean higher prices and pay cuts for workers. He states: “Sure, the crisis needs to be paid for, but we need to do that with long-term restructuring of the national debt, by rethinking the role of the state and with faster growth – not with panicky tax rises on the one part of the economy that might lead us out of this mess.” Meanwhile, a poll for the paper reveals that nearly 60% of Tory voters polled said they supported an increase in corporation tax to help pay for the Government’s pandemic and recovery spending. Half said CGT should remain the same, 34% stated it should increase and just 16% think it should decrease. Elsewhere, the i suggests the Chancellor will leave tax rises for the autumn and focus on job support instead in his Budget on Wednesday.
Pandemic losers could cut future tax bills while Covid boomers pay more
Treasury officials have reportedly considered increasing corporation taxes on businesses that profited during the pandemic while expanding the so-called loss carry-back rules, which allow firms which previously made a loss to cut their tax bills when they return to profit. Chris Sanger, head of tax at EY, said: “If you’re incurring losses and you’ve got the history of taxable profits, then the banks can be pretty assured that you’re going to be able to get relief for those losses as you incur them. This would be quite an attractive move in order to help those kind of businesses move forward.” Ministers are also considering a shake-up of research and development (R&D) tax credits to help spur investment by firms after the pandemic.
Corbyn loyalists warn of Budget tax trap for Labour
Allies of Jeremy Corbyn have warned his successor that failure to back an increase in corporation tax in next week’s Budget would cost the Labour party dearly. Sir Keir Starmer has faced anger on the Labour left after he told MPs it was not the right time for tax rises on families and businesses.
The I, Page: 8
Chancellor considers tax raid on parcels and freelance workers
The Sunday Telegraph reports that the Chancellor will launch a series of consultations later in the month on tax increases to pay for the cost of the pandemic, including new levies on online retail including for internet deliveries and an increase in National Insurance Contributions paid by the self-employed. Treasury sources said Mr Sunak’s concerns about the different tax treatment of the employed and self-employed have not changed since his first Budget last March. The consultations will be launched on March 23rd – dubbed “tax day” in Whitehall. The Sunday Times runs over some of Rishi Sunak’s fundraising plans, including freezing income tax thresholds and hiking corporation tax rises, both of which are approved of by Mike Brewer, chief economist at the Resolution Foundation, who says the measures “would have the triple benefit of raising about £16bn a year by 2025, while also protecting families that have been hit hardest by the crisis, and not holding back the recovery.” The CBI is less than impressed with proposals to increase taxes on businesses, however, with its chief economist Rain Newton-Smith stating that any rise should wait until after the economy has recovered.
Tories to blame for 1,000 tax rises in the last ten years
Research by the TaxPayers’ Alliance shows Conservative prime ministers have pushed through more than 1,034 tax rises over the past decade. A total of 1,651 tax changes were made since 2010 with VAT, vehicle excise duty and Income Tax seeing the most adjustment. Income Tax was changed 180 times, going up 61 times while cuts were made 119 times. The Alliance is calling for a recovery budget on Wednesday, giving taxpayers a respite from rises. John O’Connell, chief executive of the Alliance, said: “The tax burden is at a 70-year high, and it’s not hard to see why after a decade of tax increases. All too often we’ve seen Conservative chancellors give with one hand but take back a good deal more with the other, meaning every aspect of every-day life comes with a sizeable tax bill.” Meanwhile, former Tory Chancellor Lord Ken Clark has said Rishi Sunak should not be afraid to raise income tax, VAT or national insurance because people would understand that when the Tory manifesto was written the pandemic could not have been predicted.
The Sunday Telegraph, Page: 2 The Sunday Express The Independent
Return deadline tonight
Self-assessment taxpayers have until midnight tonight, February 28th, to file their return and avoid a £100 fine. The deadline to submit tax returns for 2019/20 was January 31 but HMRC waived the late filing fine as long as they are submitted by February 28.
The Sun on Sunday
CORPORATE NEWS – WEEKEND TO 28TH FEBRUARY 2021
New ‘shareholder spring’ looms for companies tapping furlough scheme
Fidelity International has joined the Investment Association in calling for companies that used schemes such as furlough without repaying the money to show restraint when it comes to executive pay this year. “We are communicating that this is a red-line policy,” said Jenn-Hui Tan, Fidelity’s global head of stewardship. The Sunday Times notes that rows over taxpayer funds have already led to Tesco paying back £585m in business rates relief and BDO giving back £4.1m of furlough cash. In a letter to FTSE 350 companies the pension fund manager says it expects “companies that have participated in taxpayer-supported staff furlough schemes not to pay bonuses (cash or otherwise) to executive directors and senior management”. Stock-based long-term incentive plans should be scaled back, Fidelity says, and salaries for senior management should be frozen or increased only modestly.
The Sunday Telegraph reports on the challenges ahead for Britain’s automotive sector, with Covid and Brexit stunting production to 1984 levels the industry faces tough decisions regarding the investments required for the transition to electric vehicles. Andrew Burn, head of automotive at KPMG says CEOs of carmakers are likely to put off investments in the near term, adding: “Manufacturing in the UK is down to government’s appetite for it. Does it support it or not?”
The Sunday Telegraph, Business, Page: 7
SMEs NEWS – WEEKEND TO 28TH FEBRUARY 2021
Business leaders alert to task force transition
The Sunday Times speaks to businesses about the Brexit transition, with some expressing concern about Lord Frost replacing Michael Gove as chair of the Brexit business task force, suggesting his “sovereignty-first” ethos may put business second. Mike Cherry, the national chairman of the Federation of Small Businesses, comments: “Against a backdrop of continued trading restrictions, we need to see policy-makers pulling out all the stops to both introduce additional easements for small firms where the EU-UK deal is concerned and strike fresh deals with nations outside the bloc.”
Laura Miller in the Sunday Times looks at how the pandemic has widened the pension gap, with women more likely to have lost their jobs in the first lockdown. Kate Smith, the head of pensions at Aegon, comments: “There’s no escaping that Covid is widening an already extensive gender pension and savings gap.” Miller also touches on how maternity leave has affected pensions, with analysis from Aegon showing that women who had paused their pension saving for two years while on maternity leave and then reduced their hours had up to £50,000 less in their pot when it came to retirement.
Tom Knowles considers the threat to jobs from automation in the Times and reviews the book Futureproof: 9 Rules for Humans in the Age of Automation by Kevin Roose. The New York Times journalist argues that all types of AI are advancing so fast and appearing in so many fields that the only way humans will thrive and hold on to their jobs is to become more human rather than trying to compete directly with machines. “Most of the promising applications of AI and machine learning are in fields like accounting, law, finance and medicine, which involve lots of tasks like planning, prediction and process optimisation.” the book states. Knowles notes a study showing that accountants have a 99% chance of being automated, while solicitors and financial analysts are also in trouble. The less exciting AI is largely overlooked, Roose says, but we “underestimate boring bots at our peril”.
Downing Street hesitates over audit reform after bosses’ backlash
Proposals to hold directors responsible for inaccurate accounts have led to a backlash from business leaders who argue the move would stifle innovation and harm inward investment. The proposals form part of a series of reforms designed to improve audit standards that were recommended following three independent reviews. Legislation is needed to implement many of the proposals, including replacing the Financial Reporting Council with a tougher watchdog called the Audit, Reporting and Governance Authority and having the Big Four ensure their audit and consulting arms are independent. Delays in passing the law are frustrating the accounting sector with ICAEW chief Michael Izza saying: “We seem to be mired in treacle.” Now, the business community is hitting back at the crackdown on directors, rattling Downing Street and as a result, the audit reforms are said to be still awaiting the prime minister’s sign-off.
The Times carries news that Ron Kalifa is urging the Government to establish a high-profile taskforce to lead innovation in financial technology as part of the UK’s growth plans after Brexit. Mr Kalifa, the former boss of the payments processor Worldpay, was asked by the Treasury to review the sector in July. The Chancellor said yesterday that the review “will make an important contribution to our plan to retain the UK’s fintech crown, create more skilled jobs and deliver better financial services for people and businesses.” Rachel Kent, a partner at Hogan Lovells Financial, who led some of the work for the report, said: “While the UK’s position is well established its future is not assured. Being outside the EU has created an opportunity to re-examine and reshape our regulatory framework to ensure it remains attractive and enabling to fintechs.”
Carney’s green boasts highlight need for ESG audits
The former Bank of England governor has been accused of using an unrecognised and widely discredited definition of “net zero” to promote the green credentials of Brookfield Asset Management, the Canadian investment company he joined last year. The Times’ Patrick Hosking suggests Mark Carney has inadvertently drawn attention to the problem of ESG auditing: “Auditors pore over claims made for companies’ finances and there is still fraud and rule-bending. Why would unaudited environmental boasts be more reliable or honest?”
The Chancellor is set to funnel a further £126m into training and apprenticeship schemes in his Budget on Wednesday. Rishi Sunak said it was “vital” support continued to get people back into work. Currently, firms in England are given £2,000 for every new apprentice they take on under the age of 25, and £1,500 for those over 25, in addition to a £1,000 grant they are already getting under another project. The Government’s planned investment could therefore enable a further 40,000 traineeships.
Boris Johnson: Remote working won’t be the new normal
The Prime Minister has said in only a few months people will be commuting back into the cities and returning to their offices to work. Boris Johnson dismissed fears that Britain is facing a new age of remote working claiming in a video message that, as the economy reopens, “the British people will be consumed once again with their desire for the genuine face-to-face meeting.” The PM’s comments come after Goldman Sachs boss David Soloman rejected remote working as the new normal and labelled it an “aberration”.
PERSONAL FINANCE NEWS – WEEKEND TO 28TH FEBRUARY 2021
264,800 Help to Save accounts opened
More than 264,000 individuals have opened a Help to Save account and could be earning money on their savings, statistics from HMRC have revealed. Help to Save is the Government backed savings scheme that allows individuals to earn a 50 pence bonus for every £1 saved over four years. The 50% bonus is payable at the end of the second and fourth year and is based on how much account holders have saved.
PROPERTY NEWS – WEEKEND TO 28TH FEBRUARY 2021
Treasury to introduce mortgage guarantee scheme
The Chancellor will outline a new scheme on Wednesday that will see the Government guarantee part of a 95% mortgage for first-time buyers, up to a property value of £600,000. Banks are expected to have capacity to lend to about 3,000 individuals a month under the scheme. First-time buyers accounted for just 31% of all sales last year – the lowest proportion since 2016.
The Chancellor is to launch a £100m taskforce to crack down on Covid fraud. Based in HMRC, the new Taxpayer Protection Taskforce will focus on tracking down the criminal gangs thought to have stolen billions of pounds by posing as legitimate businesses.
Daily Mail, Page: 2
ECONOMY NEWS – WEEKEND TO 28TH FEBRUARY 2021
Government borrowing costs rise as inflation fears grow
Yields on US and UK government bonds rose yesterday hitting one year highs and driving further the worldwide equities sell-off. The FTSE 100 dropped 2.5% while the Cac 40 and the Dax were also off by 1.5% and 0.8% respectively as concerns about inflation grow. “In the short term, volatility is likely to persist, and yields may rise further still,” said Salman Ahmed, global chief investment officer at Fidelity International. “However, while further rises in real rates and tightening of financial conditions may be needed before any real action is taken by central banks, we are closer to a turning point than a week ago.”
Hospitality firms have warned that one in five businesses in the sector could run out of cash in the next week unless more emergency support is confirmed. In a letter to the Government, signed by companies including Carlsberg, Intercontinental Hotels, pub chain Wetherspoons and Legoland owner Merlin Entertainment, they warned they faced a “truly perilous” situation with months of continued restrictions ahead. The letter said: “There is a significant gap between the current support provided by the government and the fixed outgoings associated with a closed hospitality business.”
Sunak to pledge £5bn in grants for the high street
In his Budget on Wednesday, the Chancellor will announce a £5bn fund to help high street pubs, restaurants and non-essential shops that have remained closed as a result of the Covid lockdown. Nearly 700,000 companies will be eligible for new direct cash grants of up to £18,000. Rishi Sunak said on Saturday night: “Our local businesses have been hit hard by the pandemic, which is why we went big and went early with a multi-billion pound package of support. There’s now light at the end of the tunnel, and this £5bn of extra cash grants will ensure our high streets can open their doors with optimism.” Craig Beaumont, chief of external affairs at the Federation of Small Businesses, heralded the “significant cash injection”, which he said would “help thousands of businesses survive through these final restrictions, and then help drive the vaccine-enabled recovery”.
INTERNATIONAL NEWS – WEEKEND TO 28TH FEBRUARY 2021
US removes stumbling block to global deal on digital tax
Janet Yellen, the US Treasury secretary, has told G20 finance ministers the US will remove the “safe harbour” requirement from proposals for global digital taxation reforms, potentially unlocking long-stalled multilateral negotiations at the OECD. The measure, which Donald Trump’s administration insisted on in 2019, would permit US tech companies to opt out of having to pay such taxes abroad. The German finance minister Olaf Scholz said Ms Yellen’s statement was a major breakthrough.
The former King of Spain, Juan Carlos, has made a payment of close to €4.4m (£3.8m) in unpaid taxes to Spain’s authorities in a move designed to avoid an embarrassing lawsuit. It is the second settlement Juan Carlos has paid in less than three months. Under Spanish law, someone cannot be prosecuted for tax offences if they settle an outstanding debt before formal charges are brought.
Figures show that almost 400,000 taxpayers, one in five, who call HMRC for help hang up after being left on hold for an average nine minutes. This compares to a rate of just 3% of calls four years ago. The figures come as the helpline is braced for unprecedented volumes of calls with the annual self-assessment deadline barely two weeks away.
The Sun, Page: 2
Paul Southward comments “this is an outrageous state of affairs especially at this time when the public need support more than ever”.
CORPORATE NEWS – WEDNESDAY 13TH JANUARY 2021
EWM and Ponden Home sold
It has been confirmed that the businesses of Edinburgh Woollen Mill (EWM), Ponden Home and Bonmarché have been acquired in a deal which saves more than 1,450 jobs. Joint administrators Tony Wright and Alastair Massey of FRP Advisory have marketed the pair in recent weeks and a deal has now completed.
The British Retail Consortium and the Federation of Small Businesses have cautioned that a three metre social distancing rule under consideration by government would make many smaller shops unviable. Tom Ironside at the BRC remarked: “Moving to a rule requiring greater distancing would inevitably limit the numbers of customers allowed into stores and could even undermine the viability of some shops,” while the FSB’s Mike Cherry noted that “Many will have spent hundreds if not more, ensuring they are COVID secure and this would be yet another hammer blow to small firms who are vital to getting the national economy back on track once again.”
With US prosecutors seeking to extradite billionaire Mike Lynch after he was accused of presiding over a multi-billion dollar fraud relating to the sale of his firm Autonomy in 2011 for £6.6bn, David Davis, Andrew Mitchell, Lord Maude of Horsham, Lord Deben and Sir Vince Cable, all former cabinet ministers in Britain have urged the government there not to allow the extradition to take place. In a letter they warn that “Any British businessman or woman who finds themselves at odds with a powerful US company could face the same fate. That means facing a system where prosecutors cut deals offering their own witnesses immunity, while those who want to testify for the defendant risk being dubbed ‘co-conspirators’ and prosecuted.”
The British Business Bank (BBB) yesterday announced it had recruited PwC to examine cases of possible fraud in its COVID-19 business loans programme. PwC has so far received almost £13.4m for its consultancy work on BBB, which has helped distribute loans to smaller businesses impacted by the pandemic.
Paul Southward says “let’s hope that some prosecutions come out of this exercise and that it is not just a bit of journalistic hyperbole from the BBC”.
PROPERTY NEWS – WEDNESDAY 13TH JANUARY 2021
Extend stamp duty holiday to prevent meltdown, Sunak told
Campaigners are calling on Chancellor Rishi Sunak to extend the stamp duty holiday amid warnings that over 320,000 current buyers will miss out on savings of up to £15,000 if it ends as planned on March 31st. more than 100,000 of them could subsequently pull out of deals – potentially hammering sales volumes, harming the economy and hitting prices. Chris Etherington, a partner at tax service provider RSM, said: “There is little logic in doing these measures and then pulling the rug out from under the feet of estate agents by having the cliff edge of the stamp duty holiday.”
Paul Southward asks “does this country put too much emphasis on property prices? The reduction in SDLT was bound to cause a spike in house prices and the well-publicised date of withdrawal of the reduction should come as no surprise to anyone. It is likely that prices will stabilise or even drop after the reduction ends, but an extension is only likely to exacerbate the problem when the inevitable correction is made”.
SPORT NEWS – WEDNESDAY 13TH JANUARY 2021
PFA wants collective response to tax probe
The Professional Footballers’ Association (PFA) has written to all professional footballers to notify them that the Government has launched a wide-ranging tax investigation into players and the fees paid to agents and that they should negotiate collectively with HMRC. Gordon Taylor, the PFA chief executive, said: “It has come to our attention that many elements of these enquiries are very similar in nature and that there are some common themes which may be best addressed centrally and on behalf of the players as a collective.” The PFA says it is seeking a “centralised” approach to dealing with HMRC to resolve “existing/historic matters”.
The Daily Telegraph, Sport, Page: 4
ECONOMY NEWS – WEDNESDAY 13TH JANUARY 2021
Economy faces ‘darkest hour’ warns Bailey
Andrew Bailey, the Governor of the Bank of England, has warned that the economic recovery will be delayed by the third lockdown and surging Covid cases. Although the economy was facing its “darkest hour”, Mr Bailey told the Scottish Chambers of Commerce that a recovery is in sight at last after almost 3m people were vaccinated against COVID-19. The Governor also suggested the jobless rate is probably closer to 6.5% than the current 4.9% shown by official figures. The MPC meets early next month to discuss how the central bank can help to protect the economy during the lockdown, including whether interest rates should be cut to below zero – a move that could ease borrowing costs on households and businesses.
New UK business secretary pledges to target Big Four audit reform
The UK’s new business secretary has said reforming the British audit market is “one of his initial priorities” following repeated delays. Kwasi Kwarteng made clear to officials on Monday that he was determined to push ahead with reforms. “It is back on track,” one industry figure told the FT. The news comes after the ICAEW on Monday said that the Government needed to make audit reform “an urgent priority”. Several government-backed reports have made recommendations on audit reform but ministers have so far failed to act on them. Sir Donald Brydon, John Kingman and the Competition and Markets Authority have all submitted proposals. Mr Kingman’s chief recommendation was to replace the Financial Reporting Council with a more powerful regulator called the Audit, Reporting and Governance Authority, and he has previously complained about the slow progress in implementing the change. The Telegraph points out that the FRC has gone ahead with some of its own reforms, including a requirement for the Big Four to ringfence their audit divisions from their advisory arms to reduce conflicts of interest and improve audit quality.
As before, businesses can use the scheme ‘if you cannot maintain your workforce because your operations have been affected by COVID-19’.
You can claim for employees that you have made a PAYE RTI submission to HMRC for between 20th March 2020 – 30th October 2020. You do not need to have previously furloughed the employee to claim under the extended scheme.
You must submit your claim for periods ending on or before 31st October 2020 by 30th November 2020.
You’ll be able to make claims for periods starting on or after 1st November 2020 from the 11th November 2020.
The extended scheme will remain open until 31st March 2020. For the period 1st November 2020 – 31st January 2021, the government grant will be 80% of wages, capped at £2,500, with employers required to pay NI contributions and pension contributions. We are therefore expecting to see some shift in contributions from 31st January 2021.
If you don’t have an agreement with your staff in place but are planning to claim for the period from 1st November 2020, you must put that retrospective agreement in place by 13th November 2020.
You can still fully furlough and flexibly furlough staff. Furlough arrangements can last for any amount of time, but the claim period continues to be for a minimum of 7 calendar days. Also, there is now no maximum for the number of employees you can claim for.
You can continue to claim for a furloughed employee who is serving a statutory notice period. However, a word of warning – the government is reviewing its position on this and will likely change the approach for claim periods starting on or after 1st December 2020 with further guidance published in late November 2020.
Staff can continue to take holiday during furlough (paid at their normal rate of pay).
Rishi Sunak has been warned that a move to align capital gains tax with income tax will elicit a furious response from entrepreneurs with business leaders warning any recovery would be stifled and innovators would flee the UK. Lord Leigh of Hurley, senior treasurer of the Conservative Party and a senior partner at Cavendish Corporate Finance, said: “Proposals to simplify tax by equating income and capital don’t reflect the differences between the two. Capital gains are rewards for a risk taken by investing in an asset which might become worthless. Income involves no risk at all. If you want people to move from a comfortable salary to invest in a new business, take a risk, employ people, as I did, they have to feel that tax on any success reflects that risk.” Elsewhere, the Centre for Policy Studies and the Centre for Policy Studies both said the plans were ill-advised. The Telegraph’s Jeremy Warner asserts that tax reform that undermines growth “merely leaves the Exchequer with a greater share of a shrinking pie, and is therefore ultimately at best a zero sum game.” Finally, in a letter to the FT, Andrew Joy asserts that what the proposers are really after is a wealth tax, but “CGT is a rotten proxy”. Equalisation is a “seductive but dangerous chimera,” he adds.
Treasury permanent secretary: New Budget to come in March
The Treasury’s permanent secretary says the Chancellor will announce a new government Budget in March as part of plans to raise income tax. Speaking at a Public Accounts Committee meeting on the government’s furlough scheme, Tom Scholar said: “We have to have a Budget before the end of the financial year otherwise the Government can’t continue to raise income tax”. The UK’s Budget deficit is expected to swell to £400bn this year, amid forecasts that the pandemic will push the country into a double-dip recession. The Government’s tax advisory body has urged the Chancellor to roll out a tax raid on buy-to-let properties and other forms of wealth in a bid to shore up more than £14bn to help repair the UK economy. The permanent secretary’s comments are the first clear signal that significant income tax hikes lie on the horizon.
Rishi Sunak extends investment relief for manufacturing firms
The Chancellor is to extend a temporary £1m cap on tax relief for manufacturing firms on investments in plant and machinery until January 2022. The annual investment allowance break had been due to end on January 1 when the cap would have reverted to £200,000.
Daily Express, Page: 8
CORPORATE NEWS – FRIDAY 13TH NOVEMBER 2020
Second lockdown puts Caffe Nero on brink of ruin
Caffe Nero has entered into a Company Voluntary Arrangement with KPMG hired to advise. The move was triggered by the second lockdown, said founder Gerry Ford. The chain has suffered from curbs on socialising, fewer shoppers in town centres and the government advice for workers to stay away from their offices. Will Wright, head of regional restructuring at KPMG, said: “Caffe Nero is an iconic brand on the UK’s high streets with a terrifically loyal customer base. However, like many others across the sector, the impact of measures introduced in response to the COVID-19 pandemic has been devastating.”
The Times, Page: 48 The Daily Telegraph, Business, Page: 3 Daily Mail, Page: 2
FRAUD NEWS – FRIDAY 13TH NOVEMBER 2020
Industry calls for crackdown on ‘dangerous’ clone scams
Finance experts have called for action to tackle clone scams, after analysis from Quilter revealed that an average of 45% of all warnings from the Financial Conduct Authority since 2015 involved the ‘clone’ of a financial services firm. Tom Selby, financial analyst at AJ Bell, warned that trust in financial services and saving would be “eroded” if an increasing number of people fell victim to scams.
Following recommendations from the Office of Tax Simplification that the Chancellor equalise capital gains tax and income tax as part of efforts to pay for the Government’s response to the pandemic, experts have warned the move could crash the property market by sparking a fire sale of second homes and investment properties. Jonathan Schuman of Luton landlord Magnet Properties said small buy-to-let landlords would be hit hardest after already enduring stamp duty hikes and the loss of mortgage interest relief. Mr Schuman said: “It will massively distort the market. Landlords will be rushing to sell before the capital gains tax (CGT) rise, but after, higher taxes would be a big incentive to hold on to properties.”
The Daily Telegraph, Business, Page: 1
EMPLOYMENT NEWS – FRIDAY 13TH NOVEMBER 2020
Letter: Job retention must be the aim in Brexit countdown
Recruitment & Employment Confederation CEO Neil Carberry urges the Government to reduce employers’ NICs to help struggling businesses retain jobs and encourage hiring.
Official data shows that the UK economy grew at a record pace in the third quarter of the year. The country’s emergence from the first lockdown saw GDP rise by 15.5% between July and September. However, growth was weaker in September than in the preceding months, while the country’s economy is still 8.2% smaller than before the virus struck. Despite the rebound in July to September, analysts warned that the economy was likely to shrink again in the final three months of the year because of the impact of renewed lockdowns in different parts of the country.
Rishi Sunak has hinted the Government could take steps to boost consumer spending in the run-up to Christmas, telling Sky News that “we’ll look at a range of things to see what the right interventions are at that time”. He added: “We’ll talk about specific measures, but more broadly I think it’s right when we finally exit this [lockdown] and hopefully next year with testing and vaccines, we’ll be able to start to look forward to getting back to normal.”
Big Four dominance continues to put market at risk – FRC
The Financial Reporting Council has raised renewed concerns about the fallout from the potential failure of a Big Four firm. The accountancy regulator said it had requested detailed information from firms including Deloitte, KPMG, EY and PWC on their responses to the pandemic and financial resilience. “The concentration of the FTSE 350 audit market, the limited choice available for these companies to obtain a high quality audit, and the market’s vulnerability to the failure of one of the Big Four firms remain risks to market resilience,” the regulator said.
The Financial Reporting Council (FRC) has published its annual end of year letter to CEOs, CFOs and Audit Committee Chairs setting out its reporting expectations for preparers of reports and accounts for the year ahead. The FRC said this year’s letter is of particular significance given the continuing backdrop of economic uncertainty and the impact of COVID-19 on the scope and timing of company reporting, while companies are also dealing with commercial and operational change associated with the UK’s exit from the EU. The letter covers what disclosures should be made to understand the impact of particular events on the company’s position and financial performance, as well as any judgements involving significant estimation uncertainty. The FRC expects increased disclosure of relevant sensitivities or ranges of possible outcomes to help users understand the assumptions underlying those estimates and the extent of the changes that might be reasonably possible in the next twelve months. The regulator also outlines its expectations of companies’ climate disclosures including the impact of climate change on their activities, their own environmental impact as well as explanations of how directors are discharging their section 172 duties.
Green business reporting rules at risk of pale response
The UK aims to become the first country in the world to require climate risk disclosures across the economy. However, critics have questioned whether the rules will make enough difference to investors.
Chancellor Rishi Sunak has announced a new Job Support Scheme to help stave off mass unemployment amid the ongoing coronavirus crisis. The scheme, which will run for six months, will subsidise the pay of employees who are working fewer than their normal hours due to lower demand. Employers will pay for the hours actually worked and one third of the wages lost. The Government will pay for another third of the lost pay while the employee will forego the final third. Only staff who can work at least a third of their normal hours will be eligible for the scheme. Large companies applying for the scheme will need to show that their turnover has been affected by the pandemic. Paul Johnson, director of the Institute for Fiscal Studies, said the Chancellor was “trying to plot a difficult path between supporting viable jobs while not keeping people in jobs that will not be there once we emerge from the crisis”. Mr Sunak’s new wage subsidy scheme will slash state support from 60% per job at the end of October, when the furlough scheme ends, to a maximum of 22%. Separately, the Government announced fresh support for self-employed workers but only at 20% of average monthly trading profits, down from 70% before. Mr Sunak’s move was praised by the Trades Union Congress, the Confederation of British Industry and the British Chambers of Commerce, which said the plan was a “shot in the arm” for businesses. However, Mike Cherry, chairman of the Federation of Small Businesses, said: “The Chancellor had nothing to say for those left out of the first round of support measures – not least the newly self-employed and company directors.”
As part of the Chancellor’s winter economic plan, self-assessed income taxpayers can extend their outstanding tax bill over 12 months from January. Rishi Sunak also announced that restaurants, hotels and cinemas would continue to pay VAT at 5% rather than the usual 20% until March 31 next year. The Chancellor suggested after his Commons statement that there would have to be tax rises in the long term to help balance the books. He said: “We need to have an eye on our public finances and make sure we stay in a strong and sustainable position. I will have to make some of the difficult decisions in the future as we get back on a path to sustainability.” He went on to say that a smaller state would be ideal following the crisis: “The state being as nimble and agile as possible means it doesn’t have to raise as much tax revenue from people and people can keep more of the money they own. That is in general a good thing. As we g et through this we can get back to a normal situation.”
Brussels ready to clamp down on sweetheart corporate tax deals
Paolo Gentiloni, the EU’s economics commissioner, has said that Brussels wants to pressure capitals to root out “structures that facilitate aggressive tax planning” in order to level-up the single market’s playing field.
Government to launch ‘Pay As You Grow’ loan payback scheme
The Government is to launch a ‘Pay As You Grow’ loan payback scheme to provide flexibility for businesses who took out loans amid the coronavirus crisis. Speaking in the Commons on Thursday, Chancellor Rishi Sunak said the repayment time will be extended from six years to a decade, nearly halving the average monthly repayment. He added that businesses can now choose interest only loans and that those who take on the initiative will not see their credit rating affected. The Government is also starting work on a successor loan plan to begin in January. The application deadline for coronavirus loan schemes has been extended to November. Charlotte Crosswell, chief executive of Innovate Finance, which represents fintech and non-bank lenders, said she was “encouraged” by plans for a “long-term solution for SME financing.” Elsewhere, Miles Celic, chief executive of TheCityUK, said the loan extensions would help “to preserve many viable firms, allowing them the chance to return to growth after the pandemic has passed”.
The European Commission has warned that the EU will have problems setting rules and regulations in the financial sector unless it weans itself of its dependence on the City of London for access to capital. The development of a capital markets union has become more urgent because of Brexit, Valdis Dombrovskis, an executive vice-president of the European Commission said on Thursday. In a communication to EU governments, the European Commission said: “An enhanced single rulebook and effective supervision will be crucial to prevent regulatory arbitrage, forum shopping, and a race to the supervisory bottom.” Emma Reynolds of lobby group TheCityUK said: “The UK’s capital markets have been – and will continue to be – essential for firms across the EU seeking to raise capital to fund growth and create jobs. Britain’s financial services industry has some of the highest standards in the world and is clear about maintaining that position.”
The FT’s Gillian Tett says heightened concerns over an impending financial crisis is hurting business confidence, and a rise in defaults as the coronavirus crisis moves into its insolvency stage could tighten credit conditions.
Retailers have warned they face an £8bn hit when business rates relief comes to an end. A 12-month pause on shops’ business rates was brought in when coronavirus struck, giving firms vital breathing space after they were forced to close their doors and reopen to far lower footfall than normal. However, Rishi Sunak has not extended the relief and from April companies will have to once again start paying rates based on the rental value of properties last assessed five years ago – many of which will be disproportionately high due to a plunge in the value of high street real estate as shoppers head online instead. The Government has already said that the next revaluation will take place in 2023, meaning firms could be stuck with massive bills for years.
Pension contributions left out of job support scheme
The Treasury has confirmed that its new Job Support Scheme will not cover employer pension contributions, which has raised concerns about how employers will comply with auto-enrolment obligations. FT Adviser understands that under the new scheme, unveiled by Rishi Sunak yesterday, the Government will not cover pension contributions or class one employer NI contributions, which will remain payable by the employer.
Debora Price, professor of social gerontology at the University of Manchester, has warned that COVID-19 has set pensions equality back by a decade. She claimed that any previous improvements to bridge the gender gap in pension provision have now been ruined as a result of the coronavirus pandemic.
Redcentric’s former boss Fraser Fisher has been charged with two counts of making a false or misleading statement by the Financial Conduct Authority. Timothy Coleman and Estelle Croft, formerly CFO and FD respectively, face the same charges and further counts relating to the firm’s 2015 accounting scandal. The company’s auditor, PwC, has already been fined £4.6m for its work.
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PwC not so confident in Cineworld
Cineworld has revealed a $1.6bn loss of the first six months of the year amid the ongoing coronavirus. PwC is unable to appropriately present the firm as a going concern.
More than 15,000 impersonation scams were reported in the first half of 2020, according to a new report by trade body UK Finance, an 84% increase on the year prior. Criminals exploiting the increased use of technology among the public during the COVID-19 pandemic stole around £208m from fake government loan forms, phishing emails and bogus websites. Scams listed by HMRC included fake tax rebate links and text messages issuing fake £250 fines for breaking quarantine rules.
Hawkish Sunak says we must learn to live with virus “without fear”
Rishi Sunak urged the nation to live with coronavirus “without fear” yesterday when he launched his winter economy plan. The Chancellor said Britain can no longer put normal life on hold, adding that the country could not carry on ignoring the economic impact of the pandemic. Pointing out that “the price our country is paying is wider” than the coronavirus death toll, he added: “As we think about the next few weeks and months, we need to bear all those costs in mind.” The Telegraph’s Camilla Tominey says this has been interpreted as a message to Boris Johnson and the Health Secretary, with one senior parliamentarian saying: “The message was clear – we cannot gamble any further with the economy.” The Chancellor admitted the economy was now “likely to undergo a more permanent adjustment”, with some jobs disappearing for good. Mr Sunak suggested his wage subsidy scheme could cost £300m a month, compared with £6bn a month for the furlough scheme.
Haulage groups have criticised the Government for putting responsibility for avoiding queues of lorries heading to Dover onto them while its new customs IT systems remain incomplete. The Road Haulage Association and Logistics UK both said it was Michael Gove’s responsibility to give firms the “details of and access to” the promised new IT systems. Simon Sutcliffe a partner at Blick Rothenberg, said: “It’s all very well for Mr Gove to say that unless the hauliers get their paperwork in order there will be huge delays and confusion at UK ports, but the Government have still not put the electronic systems that they promised in place.” A HMRC spokesperson said: “The development of border systems necessary for the end of the transition period is on track.”