How will Biden’s tax plan affect investment in Ireland?
The BBC’s John Campbell talks to experts about the possible impact of the Biden administration’s global corporate tax proposals on Ireland, which has famously lured multinationals to its shores with a 12.5% tax rate. This tax advantage could be wiped out with a global minimum rate which could be set at 21%, according to a suggestion from US Treasury Secretary Janet Yellen. But Peter Vale, tax partner with Grant Thornton in Dublin, thinks a figure in the teens is more likely, adding that another key issue will be exactly how what rate a company is paying is worked out.
Supply chains will fight for tougher regulation if corporates fail them
Rashmi Dube asserts in the Yorkshire Post that it is small businesses that pay the price for corporate governance failings at large businesses, along with Big Four conflicts of interest. Companies such as Carillion and BHS are forced into insolvency by board-level failings and suppliers want to know how they are going to be protected going forward. “It’s time for regulation and legislation to become stronger and better.”
SME confidence soars
A survey of over 1,500 firms by the Federation of Small Businesses found that confidence was at its highest since 2014 with 51% expecting their revenues to grow over the next three months, the highest proportion since the summer of 2015. Only 24% expected sales to fall.
The Daily Telegraph profiles how savers have started hunting for £40bn in lost pension savings ahead of Government proposals to use forgotten pensions and other dormant assets to launch £800m of funding for charities and social enterprises in a bid to help local economies bounce back from the pandemic. Duncan Stevens of Gretel, an asset tracing firm, said there had been an increase in the number of people inquiring about lost savings during lockdown. “People have more time on their hands and financial concerns are at front of mind,” he said. The firm estimates that 20m people have a share of around £50bn in lost savings of some kind today.
Prospects improve as Brexit-related uncertainty wanes
New research from BDO indicates that employment prospects are improving amid the success of the vaccine rollout and extension of the job retention scheme. Although the pandemic has seen the number of payroll employees go down by 693,000 on a year ago, the absence of Brexit-related uncertainty has also helped to fuel renewed optimism, BDO said.
The Times, Page: 33 The Guardian, Page: 27 The I, Page: 8 Daily Express, Page: 43 The Sun, Page: 13
INDUSTRY NEWS – MONDAY 12TH APRIL 2021
Shared audits will not provide market resilience – Herbinet
David Herbinet, the head of audit at Mazars, has called for the eventual introduction of joint audits as part of a shake-up of the industry. He told the Telegraph that managed shared audits, which have been proposed in the Government’s white paper on audit reform, do not go far enough to increase competition and choice and he would only support them as a stepping stone to joint audits. These were proposed in a 2019 review by the Competition and Markets Authority and would mean two or more firms are appointed to take equal responsibility for an entire group. Mr Herbinet said: “The main concern is that, fundamentally, managed shared audits are not going to have any meaningful impact on the market’s resilience, which I think has got to be one of the key objectives in all of this.” Business Secretary Kwasi Kwarteng’s proposals for reform also include a requirement for Big Four firms to ringfence their audit and consulting arms to reduce conflicts of interest and the creation of the Audit, Reporting and Governance Authority, which will replace the Financial Reporting Council and could have power over large unlisted companies as well as those on the stock market.
A poll of FTSE 350 finance directors by Deloitte has revealed that the proportion expecting a reduction in capital spending over the next three years has fallen to 19% from 65% last summer. Additionally, 29% now expect to reduce hiring, down from 74% last summer. Hiring expectations have increased markedly while two-thirds of bosses expect the bulk of their workforces will return to the office by the third quarter of the year.
Letter: Mid-tier auditors fear the scrutiny of big mandates
Kingsley Napley’s Julie Matheson says not all mid-tier auditors want the extra regulation that comes with auditing listed companies, as per proposals for shared audits, and the prospect of significant sanctions.
Kwarteng makes concession on new UK takeover regime
The Business Secretary has revised the Government’s National Security and Investment Bill so fewer takeovers of British companies will need to be scrutinised by the state. Kwasi Kwarteng has revised the stake threshold at which the business department must be notified about a deal, from 15% to 25%. It follows a move last month when Mr Kwarteng narrowed the list of which type of foreign investments will fall foul of the new takeover regime. The business secretary will still have the power to call in deals below the 25% threshold if there is a suspicion that a minority stake could give the foreign investor material influence over a company. But the Henry Jackson Society think tank, said the change “risks very real security risks being allowed to sail by without scrutiny,” adding: “The Government must urgently explain its justification for this reversal.”
EY ‘s latest IPO Eye report shows the UK had the strongest first quarter for initial public offerings in 14 years with 12 main market and eight Aim IPOs raising a total of £5.6bn. This is more than half of the £9.4bn raised in the whole of 2020. The same period in 2020 saw just three IPOs on the main market and two on Aim, which raised a combined total of £615m. EY said confidence in the UK’s IPO markets as an exit route had been reinforced by significant private equity activity in the quarter. The report also showed that the UK has maintained both its position as the leading listing location in Europe and its third place position globally behind the US and China.
The Telegraph considers the fate of Bonmarché as administrators try to decide how many stores will reopen when Covid restrictions are lifted on Monday. Just over 70 of the chain’s stores were taken over four months ago and are set to reopen today but some or all of the remaining 148 stores may never reopen. Administrators at RSM have been reviewing the options but declined to say how many stores will reopen this week.
Full extent of pandemic’s high street casualties yet to be revealed
More than 17,500 chain store outlets disappeared from British high streets last year as the pandemic drove the worst decline on record. As the survivors prepare for reopening, figures compiled by the Local Data Company and PwC show fashion retailers were the hardest hit, followed by betting shops, pubs and bars and restaurants. Lisa Hooker, the head of consumer markets at PwC, commented: “The full extent will be revealed in the coming months as many of the [company restructures] and administrations in the early part of 2021 still haven’t been captured, including department stores, fashion retailers and hospitality operators that will leave big holes.” Separate figures from the British Retail Consortium show the closures wiped out 176,000 retail jobs at a rate of 484 jobs a day with a further 11,986 jobs were lost through CVAs.
Consumer confidence returns
New analysis by YouGov and the Centre for Economics and Business Research shows consumer confidence has risen to its highest level since August 2018. Employment security is close to pre-pandemic levels, the research found, and for the first time since the start of the pandemic, more households than not believe their finances will improve in the year ahead.
People who register their properties as holiday lets but don’t rent them out are facing a crackdown after the Treasury said it would seek to verify the number of days the property was let for. HMRC will rescind eligibility to pay business rates instead of council tax and force homeowners to pay their local authority any money owed. They may also have to repay any additional tax relief they might have claimed. “In the crudest sense the suspicion is that a lot of these owners who say they are trying to rent a property for 140 days and so benefit from this lucrative status aren’t actually interested in doing so at all,” said Adam Matthews, a manager at RSM. “The system is clearly open to abuse — it’s an easy way to save on tax.”
Some people applying for a simple tax rebate are being asked to prove their identity by an HMRC repayment credibility team, which has been granted extra powers to find fraudsters. They are being asked to fill in a three-page questionnaire and submit bank or building society statements, P60s, P45s and expenses receipts as well as one proof of address and two of identity. They have 30 days to comply, after which HMRC said they could be removed “from the self-assessment regime”. George Bull at RSM said the letters were often in response to very small claims and that the threats were “disproportionate”. Elaine Clark from Cheap Accounting adds: “The text of the letter is very heavy-handed. Does HMRC have a security problem? How easy is it for someone to hack a self-assessment account? I expect it may be easier than we’d like to think, especially in light of the significant Covid fraud.”
The Sunday Times, Business, Page: 13
Taxpayers have just days to act before penalties imposed
Individuals now have less than a week to sort out their Self-Assessment tax affairs or risk meeting potentially hefty penalties, HMRC has warned. The Revenue previously announced it would delay imposing penalties for the late payment of Self-Assessment by one month – to April 1st. But Graham Boar at UHY Hacker Young explains that interest payments of 2.6% on a delayed payment will have been building up since the January deadline and people who are not in a position to pay their bills now should take action urgently. He adds: “HMRC is actively encouraging taxpayers to make use of Time to Pay arrangements, this could be a lifeline for individuals who know they will struggle to pay their tax bill on time. If they choose to ignore it, they’ll only see the money owed increase even further.”
Managing IHT as £293bn is ‘earmarked’ for grandchildren
New research from The Openwork Partnership shows more people could be hit by IHT over the coming years as parents and grandparents have “earmarked” more than £293bn for early inheritance payouts to children and grandchildren. Commenting on the results, Mike Morrow, the Chief Commercial Officer at The Openwork Partnership, said: “The size of the gifts underlines the need for trusted advice on how best to use the money whether it is to pay for house deposits or pay off debt or to invest for the future. Parents and grandparents as well as children and grandchildren would benefit from an ongoing relationship with a financial adviser.” The Express goes on to talk with experts about how IHT liabilities can be reduced, including using gifts and well-constructed wills.
EMPLOYMENT NEWS – WEEKEND TO 28TH MARCH 2021
Working from home could boost output
Bank of England policymaker Michael Saunders has said remote working could boost productivity by saving companies money on office space, increasing staff satisfaction and providing access to a wider pool of workers. “While a shift to widespread compulsory full working from home probably is not optimal, working from home offers a range of possible advantages for some firms,” he said. Separately, Rishi Sunak, the Chancellor, is urging businesses to open up their offices and end remote working because young people need to convening with colleagues and seek out mentors as they embark on their career development.
UK and EU reach financial regulation deal in breakthrough on co-operation
The United Kingdom and the European Union have reached a deal to create a forum for cooperation on financial services regulation. The memorandum of understanding (MoU) sets the terms of engagement between the two parties but does not yet grant the City of London access to the EU’s Single Market. “Formal steps need to be undertaken on both sides before the MoU can be signed but it is expected that this can be done expeditiously,” the UK said in a statement, adding that the MoU created a “framework for voluntary regulatory co-operation in financial services” rather than any binding system.
Jessops has filed a notice to appoint administrators. The camera retailer, bought by Peter Jones’s PJ Investment Group in 2013, has hired insolvency specialists FRP and is considering a Company’s Voluntary Arrangement in a bid to survive after it was severely impacted by lockdown restrictions. Geoff Rowley, partner at FRP, said: “Jessops is a long-established British brand, but like many others, it has faced growing online competition, as well as the challenges faced by all high street retailers in operating through the restrictions imposed during the pandemic. We are working closely with PJ Investment Group and the wider Jessops management team to consider all options to secure a future for the retailer.”
Sanjeev Gupta, the owner of Liberty Steel has asked the government for £170m in financial support. The collapse of Greensill Capital, the company’s key financial backer, has put Gupta’s GFG Alliance and its 5,000 UK workers in jeopardy.
BoE warns banks against sudden halt to Covid-related lending
Lenders have been urged by the Bank of England to keep credit flowing to businesses once the state-backed COVID-19 loan schemes come to an end, warning that withdrawing funding would prove self-defeating.
Landlords fear growing use of “cram down” mechanism
The Sunday Times’ Sam Chambers reports on Virgin Active’s use of a new restructuring tool enabled by changes to the UK’s corporate insolvency regime, designed to ease restructurings. Under the rules, companies can ask a judge to force through restructurings if too few creditors vote to approve it – the so-called “cram down” mechanism. “Landlords are up in arms because this issue will be on the radar of every company sitting on a load of rent arrears,” said Zelf Hussain, restructuring partner at PwC, which is advising British Land and Land Securities in the Virgin Active case. Virgin, which is being advised by Deloitte, is seeking to force landlords to write off or defer rent arrears – and take a haircut on future rent. Will Wright, head of restructuring at KPMG, said the increasing number of legal challenges brought by landlords against CVAs had created uncertainty around the process. Subsequently, he expects cram down restructurings to become more common.
Scottish government calls in experts to examine Gupta deal
Ministers in Nicola Sturgeon’s administration have drafted in Deloitte to comb through state guarantees handed to GFG Alliance, the industrials conglomerate owned by Sanjeev Gupta. GFG’s biggest lender, Greensill Capital, recently collapsed leaving Gupta’s businesses in a precarious position. The Sunday Telegraph reports that the Scottish government guaranteed payments worth an estimated £360m to help Mr Gupta buy the Lochaber aluminium smelter and associated hydropower plant at Fort William five years ago. A source said Deloitte had been retained since 2017 to monitor the Lochaber guarantees.
A year of lockdowns and Zoom meetings has convinced UK corporates they can help limit pollution by restricting business travel after restrictions ease. With ever more companies committing to reach net zero emissions many are revising their corporate travel strategies. PwC’s UK chairman Kevin Ellis tells the Sunday Times that although corporate travel will spike once restrictions are lifted, and this will be “an important signal for business about recovery and the return to normality”, in the long term “there will be more of a pragmatic level of business travel.”
With financial collapse looming this summer, Eurostar is in emergency talks with lenders to restructure £400m in loans. The channel tunnel operator is in advanced discussions with NatWest, Santander and Credit Agricole to secure funding. Freshfields and financial specialists from KPMG are understood to be advising Eurostar. Linklaters is providing legal advice to the group of banks.
Car parks operator NCP is utilising a change in insolvency law to push through a controversial restructuring, the Sunday Times reports. Advised by Deloitte, the Japanese-owned company has told landlords that unless it can write off rent and potentially walk away from some sites it will go bust. The plans will save NCP up to £27m over the next two years.
Trust in UK corporate sector is low, admits chief of audit watchdog
Interim chair of the Financial Reporting Council, Keith Skeoch, tells the FT the watchdog is preparing for a raft of corporate failures this summer. British boardrooms should also get ready for governance changes.
One small step for man, one giant leap for ESG accounting standards
The FT reports on the World Economic Forum’s plan to mobilise CEOs’ support for the Sustainability Standards Board, which the international accounting standards setters at the IFRS Foundation are developing.
Would a flexible pension system really benefit the poor?
The Telegraph’s Sam Brodbeck considers the winners and losers from the state pension system, namely the wealthy who generally live longer. He notes a call from the Trades Union Congress for the pension age to be frozen and says such a flexible system may be fairer – where those who are unable to work or who don’t expect to live long enough to get a decent return can opt to access their pension early. However, it would carry terrible risk for those who misjudge their longevity and would introduce yet more complexity.
The Daily Telegraph, Money, Page: 2
1,000 people a day trigger pension tax charge
According to figures from Just Group, more than 1,000 people a day have been hit by punitive tax rules that limit what they can pay into their pension by 90%, after having to dip into their pension during the pandemic. Just Group found that more than 600,000 people accessed their pension pot for the first time in 2020, in order to make ends meet. Introduced in 2015, the “pension freedom” rules allow savers to access their cash from 55. However, withdrawing income from some types of pension triggers the “money purchase annual allowance”, which reduces the amount a saver can pay in and earn tax relief by 90%, from £40,000 to £4,000. In 2020, 206,000 workers triggered the new lower limit, bringing the total number of savers affected by the cap to 1.6m. Kate Smith of Aegon said the rules were outdated and called on the Government to increase the money purchase annual allowance from £4,000 to £10,000. She said: “Job insecurity and a volatile stock market have thrown the retirement plans of many over-50s into disarray. The ability to access their pension flexibly has thrown them a lifeline, but it comes with a sting in the tail.”
The Sunday Telegraph, Business, Page: 9
Increased living costs renders triple lock “worthless”
The rising cost of care for pensioners alongside tax hikes has left the Government’s “triple lock” for the state pension “worthless”, Jessica Beard reports in the Sunday Telegraph. One pensioner told the paper an increase in care costs and council tax had wiped out meagre gains in the state pension and income from savings, which had dwindled as interest rates are continually slashed. Ian Browne of Quilter said: “Retirement has never been more challenging financially. This is clear if you simply focus on the rocketing social care costs.” The Telegraph points out that Britain has the worst mandatory pension provision of all 36 countries in the OECD, with retirees’ pension income 28% of their pre-retirement earnings, about half the other countries’ average.
Data from the Office for National Statistics show a bounce back in sales last month following a sharp fall at the beginning of the year. Sales rose by 2.1% in February, up from an 8.2% fall in January, when the country went into its third lockdown. Non-essential retail in England is expected to reopen on April 12 and retailers “will be hoping that the wave of optimism sweeping consumers as a result of the successful vaccine rollout will translate into increased sales”, said Lisa Hooker, consumer markets leader at the consultancy PwC. Elsewhere, Howard Archer, chief economic adviser at the EY Item Club, said: “The modest rebound in retail sales adds to the evidence that the economy came off its January lows in February.”
U.S. trade chief prepares tariffs against countries over digital taxes
The Office of the United States Trade Representative (USTR) has said it will continue to evaluate options to impose tariffs on countries that have introduced taxes targeting in-country revenues of digital services platforms. Such tariff investigations were introduced by the Trump administration and on Friday U.S. Trade Representative Katherine Tai said she was maintaining the threat of tariffs on goods from Austria, Britain, India, Italy, Spain and Turkey in retaliation for their digital services taxes. “Today’s move by USTR is an important affirmation in pushing back on these discriminatory trade barriers as the U.S. continues to work to find a viable solution at the OECD,” the trade group said in a statement.
SMEs NEWS – WEEKEND TO 28TH MARCH 2021
Accelerating tax receipts poses risk to cash flow
The Sunday Times considers the impact of Rishi Sunak’s plan to require individuals and small businesses to pay tax as they earn. The changes mean that millions of high earners, investors and self-employed people may have to pay two years’ tax in one year after 2024, the paper explains. George Bull at RSM warns that when “dramatically accelerating the collection of taxes, the Government must take care not to damage small businesses’ cash flow. There’s no sense in killing the goose that lays the golden egg.” Nimesh Shah, the chief executive of Blick Rothenberg, agreed. “The cash flow impact could cause severe pressure and should be phased in over four years. HMRC really needs to start communicating now, so people can plan.”
The Sunday Times, Business, Page: 13
PERSONAL FINANCE NEWS – WEEKEND TO 28TH MARCH 2021
Parents forced to use their kids’ Isas amid savings boom
A surge in middle-class family savings during the pandemic has led parents to use their children to shelter more wealth from tax. Hargreaves Lansdown said a fifth more of its customers have paid into Junior Isas in 2020-21 than the year before, investing 45% more on average for their children. The firm’s Sarah Coles said: “Around one in six people have seen their finances improve during the pandemic, as the result of a combination of working from home and not being able to go out to do anything fun. At the same time the Government almost doubled the Jisa allowance, opening up a brilliant opportunity to squirrel away money.” Ms Coles added: “This particularly appeals to families where the adults have maxed out their £20,000 Isa allowance and are looking for further tax-efficient opportunities.”
Amazon clashes with Elizabeth Warren over taxes and unions
Amazon has become embroiled in a row with U.S. senator Elizabeth Warren over issues including its tax and employment practices. Last week, the Massachusetts senator posted a video accusing Amazon of “exploiting loopholes and tax havens to pay close to nothing in taxes”. In response, Amazon said it was simply following the laws made by Congress, insisting it had paid billions of dollars in corporate taxes in the last few years alone. Warren hit back saying: “I didn’t write the loopholes you exploit, @amazon – your armies of lawyers and lobbyists did. But you bet I’ll fight to make you pay your fair share. And fight your union-busting. And fight to break up Big Tech so you’re not powerful enough to heckle senators with snotty tweets.”
Rishi Sunak’s ‘super-deduction’ will benefit London twice as much as Yorkshire
A new report says the Government’s economic recovery policies will benefit the capital over the rest of the UK. The Centre for Progressive Policy (CPP) estimates that the ‘super-deduction’, which allows firms to claim a deduction from their tax bill if they invest in new equipment for their business, offers the greatest advantage to London – leading to a tax break per head of £512.89 in the capital but just £276.14 in Yorkshire and the Humber. Ben Franklin, Head of Research at CPP, says its analysis suggests the Government “has either failed to grasp the nature, scale and urgency of inclusive recovery or has given up on its own levelling up agenda.” A Treasury spokesman said: “We are totally committed to levelling up communities across the whole of the UK as we build back better.”
Labour to propose tax raid on Scotland’s high earners
The Labour party’s Scottish leader has indicated that he is in favour of a tax raid on high earners as the Holyrood elections loom. Anas Sarwar said that while full details of his policy would be unveiled in the party’s manifesto, he supported a “more progressive tax system” to better fund public services. The Telegraph notes that during the campaign for the Scottish Labour leadership, Mr Sarwar suggested a 5% tax rise for those earning more than £150,000 a year and 2% hike for those on salaries of more than £100,000. Separately, a study by the TaxPayers’ Alliance found an independent Scotland would need to more than double the basic rate of income tax to balance its books.
Self-employed urged to appeal HMRC penalties as tax deadline nears
The Express reports on the recent announcement from HMRC that it would delay imposing penalties for the late payment of self-assessment tax by one month to April 1 to help those whose finances have been affected by the pandemic. Additionally, late payments for outstanding tax bills which are charged six and 12 months after the deadline have also been pushed back to August 2021 and February 2022 respectively. However, people with an outstanding tax bill have been incurring interest of 2.6% since the January 31 self-assessment deadline expired, according to analysis from UHY Hacker Young. Partner Graham Boar urges those yet to pay to note the deadline and reassures those incorrectly charged with a penalty: “HMRC has proven that it will hold its hands up if it’s made a mistake.”
British expats resident in Italy face steep rise in wealth tax bills
Britons resident in Italy face tenfold increases in overseas property duties under post-Brexit rule changes. Now that Britain is longer part of the EU, Italy’s 0.76% annual levy on the value of overseas properties will now be based on the current market value rather than calculated using council tax valuations dating back to the early 1990s. This means a property valued at £240,000 in 1991 but worth £3m now will produce a wealth tax bill of more than £20,000, compared to less than £2,000 before.
The Government has brought in KPMG to check over billions of pounds of government-backed loans to ensure that lenders have complied with the rules. The move comes after it emerged that Greensill, a collapsed supply chain financier accredited for two of the schemes, may have the Government guarantee on £400m of loans removed. Separately, Labour is calling on the Cabinet Secretary to investigate “serious concerns” about David Cameron’s efforts to lobby Whitehall officials on behalf of the collapsed lender.
UK bosses to invest in more sustainable initiatives
A PwC survey of UK chief executives reveals 70% are concerned about the impact of climate change, with almost a third “extremely concerned” about the issue. “Climate has become a fundamental business issue, and CEOs recognise they need to step up. Companies are starting to transform their business models, supply chains, products and services,” Kevin Ellis, PwC’s chairman and senior partner said. Some 60% of leaders plan to increase their investment in ESG initiatives over the next three years.
SMEs NEWS – FRIDAY 26TH MARCH 2021
COVID-19 lending schemes back over 1.6m businesses
HM Treasury figures show over 1.6m UK businesses borrowed more than £75bn through government-backed coronavirus lending schemes in the last year. The Bounce Back Scheme was accessed by more than 1.5m firms; the Coronavirus Business Interruption Loan Scheme (CBILS) has provided £23.3bn in financial support to more than 98,000 businesses; and £5.3bn in lending has been provided to 716 businesses through the Coronavirus Large Business Interruption Loan Scheme (CLBILS). Meanwhile, the British Chambers of Commerce has alerted Downing Street to the high levels of debt taken on by businesses, with a recent poll finding more than a quarter described debts as unmanageable or “high and manageable”.
The i reports that Treasury sources have indicated the Chancellor “is minded” to bring NICs for self-employed in line with payments made by employed staff. They said: “The Chancellor believes tax and National Insurance payments should be fair for all earners, and levelling up the National Insurance bands is being considered as one way of doing that.” Nimesh Shah, a partner Blick Rothenberg, suggested Rishi Sunak could make the change in his Autumn Statement, noting that the Government “has not been particularly sympathetic to the self-employed community. In recent years, successive governments have made no secret of their desire to increase taxes for the self-employed.”
The i, Page: 10
PROPERTY NEWS – FRIDAY 26TH MARCH 2021
Government sets aside £1.5bn of support as rates relief appeals denied
Thousands of companies are set to be refused business rates relief after the Treasury said it will legislate to “rule out” Covid-related business rates appeals. Instead the Government will provide a new £1.5bn pot of funding that will be distributed to sectors which have “suffered most economically” outside the retail, hospitality, and leisure sectors. The fund will be administered by local authorities, which will decide whether a business is eligible, and priority will be given to the worst-affected sectors.
EY warns of ‘financial cliff edge’ threatening listed British firms
Analysis by EY shows that between March 2020 and March this year, 63 UK listed companies issued at least their third profit warning within a 12-month period, which is almost double the 2019 total of 32. As many as one in five of these companies is likely to collapse into the hands of administrators within a year of the third warning. Once taxpayer-backed Government support comes to an end, the companies in jeopardy could face a “financial cliff edge,” EY warned.
INDUSTRY NEWS – FRIDAY 26TH MARCH 2021
Richard Houston: Significant audit reforms crucial for investor confidence in UK
Writing in City AM, the CEO and senior partner of Deloitte, Richard Houston, contends that the UK puts at risk its standing as a leading place to invest and do business if there are further delays to audit and corporate governance reforms. The Department for Business, Energy & Industrial Strategy (BEIS) recently published a consultation on Restoring Trust in Audit and Corporate Governance and the challenges facing Britain today are precisely why this is the right time to strengthen the system, Houston says, rather than using those hurdles as an excuse for putting reform off. “Change isn’t always easy. But the damage that corporate failures can inflict means that we, and all stakeholders, have a responsibility to ensure that whatever change lies ahead improves the quality, transparency and resilience of UK capital markets and generates greater trust in business.”
Sir Jon Thompson: Neds don’t get a free pass
The head of the Financial Reporting Council told an industry forum on Thursday that senior non-executive directors had complained about governance reforms that will see directors held responsible for a company’s accounts. Sir Jon Thompson said non-executive directors who did not believe they were responsible for running a company couldn’t pass the buck. He told an online event hosted by the ICAEW: “In law, you all run the company. You can’t simply turn up, take your fee, not do anything and say, ‘Well, it’s the chief executive’s fault.’ If you’re on the board, you’re on the audit committee, you have to take responsibility for the fact you’ve got obligations to the people who are investing in your company, or investing their pension money in your company.” The Times cites Roger Barker, head of policy at the Institute of Directors, who warns that if regulations are too heavy-handed then bosses will not have enough left to strategise.
Good Law Project finds Deloitte drafted parliamentary answers
Figures from the Good Law Project show that Deloitte has been awarded public sector contracts worth £323m since the start of the pandemic. The Government has been using Deloitte to help ministers draft parliamentary questions and media lines to defend the ‘test and trace’ system. Good Law Project legal director Gemma Abbott commented: “We have a government so addicted to outsourcing that it has even outsourced being held to account. Does anyone know where the Department for Deloitte ends and the Department for Health begins?”. A Department of Health and Social Care spokesperson responded: “The Government employs contractors in the same vein that private businesses do and responsibility for answering parliamentary questions, freedom of information requests and media enquiries rests firmly with a team of civil service communications professionals within the Department of Health and Social Care,” ; continuing: “Every single response is subject to the highest levels of scrutiny to ensure they are both factual and detailed.”
Contact Paul Southward
NEWS – THURSDAY 25TH MARCH 2021
NEWS – THURSDAY 25TH MARCH 2021
TAX NEWS – THURSDAY 25TH MARCH 2021
Self-employed face increased stresses with tax changes
IR35 tax changes will be introduced from April 6th meaning off-payroll workers will be treated as full-time employees with companies responsible for setting the tax status of contractors they hire. Experts warn that many freelancers are unprepared for the changes while interest in IR35 fell 71% since the Chancellor announcement last year that the tax change would be delayed due to the pandemic. Meanwhile, changes announced by Rishi Sunak on Tax Day could add further pressure to contractors with the Treasury saying they will review the feasibility of introducing a modern “pay-as-you-go” tax system. The Association of Taxation Technicians said that although some taxpayers may welcome the opportunity to pay their tax closer to real time, “a widespread move to more frequent, in-year calculation of income tax and corporation tax is very tricky to achieve.”
CORPORATE NEWS – THURSDAY 25TH MARCH 2021
Report force retailers to take ‘decisive action’ on diversity
A study of over 200 retailers by the British Retail Consortium, PwC and MBS Group reveals that 69% have only men in their top three leadership positions. More than one in five retailers have no women on their boards, and 15% have no women on their executive committees. This is despite women making up 58% of the retail workforce. Black or ethnic minority executives make only 4.5% of retail boards, compared with 12.5% of the general UK population. The report has prompted over 50 retailers, including John Lewis, Asda and Sainsbury’s to pledge “decisive action” to improve diversity. Alongside Morrison’s, WHSmith and Boots, they have signed up to the Diversity and Inclusion charter drawn up by the BRC to pledge their commitment to address the issue. Katy Bennett, director for inclusion and diversity consulting at PwC UK, said: “It’s very encouraging to see so many retail companies com-mitted to improving their diversity and inclusion at a time when issues surrounding gender, race and ethnicity in the workplace are in sharp focus.”
More resilient businesses will be the great hope for the next decade
Writing in City AM, Michelle Ovens, the founder of Small Business Britain, considers the lessons small businesses will have learnt over this past year. Although the Covid crisis was painful to go through, “it will be the bedrock of recovery and future growth,” she says. Business became more flexible as they adapted to lock downs and then restrictions lifting, supply chains became more localised while marketing and finance functions were automated and social media was utilised to the maximum. “COVID-19 has managed to do what years of intervention from government, business organisations, business schools and more could not: create a more productive business landscape,” Owens contends, adding: “More resilient businesses with greater digital skills and the knowledge that they have come through the fight of their lives will form the basis of economic recovery in the UK.”
PROPERTY NEWS – THURSDAY 25TH MARCH 2021
House prices climb 7.5% in England
Official figures from the Office for National Statistics (ONS) reveal that the average house price fell by £1,000 in January, from a record high the previous month. The average property value across the country in January stood at £249,000. Mark Harris, CEO of mortgage broker SPF Private Clients, commented: “The housing market continued to be buoyant in January, although annual growth slipped slightly to 7.5%, down from 8% in December. This was before the Chancellor announced the extension to the stamp duty holiday so there may have been buyers who took their foot off the gas in the belief that they were too late to take advantage.” House prices in the capital rose 0.1% in January to reach £501,320, representing an annual rate of increase of 5.3%.
INDUSTRY NEWS – THURSDAY 25TH MARCH 2021
City of London bosses warn against ‘gold plating’ new governance rules
A forum of senior financial services figures has welcomed new moves to improve corporate governance and audits, but sounded a note of caution about possible unintended consequences of the measures.
Young investors can only learn about risk by taking risks
Responding to a warning from the FCA about young people engaging in high-risk investments, Moira O’Neill says investing boldly can provide valuable lessons, adding: “The sooner young people start the better.”
Some 260,000 over-55s triggered steep cuts to their annual allowance after dipping into their retirement savings during the pandemic, spurring calls for the Financial Conduct Authority to provide better information about the risks of accessing pensions early.
The IHS Markit/CIPS Flash UK Composite PMI report for March was 56.6, as the economy showed strong signs of growth amid increasing consumer confidence and more demand for residential property services. Chris Williamson, chief business economist at IHS Markit, said the strong sentiment “hints at only a modest contraction of GDP during the first quarter, adding to evidence that the economy has shown far greater resilience in the third lockdown compared to the first.”
The Treasury has launched a series of proposals as part of the Government’s “Tax Day” consultations. Chief among them is a tightening of rules for second home owners who will now only be able to register for business rates if their properties are genuine holiday let businesses. Currently, second home owners are able to declare they intend to make their property available to let but there is no requirement to verify that it is actually being used commercially. Owners may then also claim small business rates relief. New legislation will mean a second home’s qualification business rates will depend on the actual number of days the property was rented for. Treasury officials also said some owners may have claimed coronavirus support grants of up to £9,000 each to replace lost income. Paul Falvey, tax partner at BDO, said the change “will create clarity and certainty”. Chris Etherington, a partner at RSM, called the measures a “sensible step” and “welcome news for local authorities” while Nimesh Shah at Blick Rothenberg added that a rise in coronavirus grant applications would probably have raised eyebrows at HMRC. A Treasury source said: “We are going to force people to account for the claims they make.” Full details of the crackdown and the penalties home owners will face will be published in the coming weeks.
Treasury’s “Tax Day” consultations a missed opportunity
After the Treasury failed to deliver proposals for fundamental tax reforms yesterday, campaigners such as Robert Palmer, executive director of Tax Justice UK, said “tax day has turned out to be a bit of a flop”. With many key decisions delayed until the autumn, the announcements amount to a mere tweaking with Tom Selby, senior analyst at AJ Bell, describing the policy papers as “the dampest of squibs”. “While reforms to modernise the way tax is administered in the UK, reduce the inheritance tax rates burden on non-taxpaying estates and deal with tax avoidance are all laudable, this feels like a missed opportunity to tackle some fairly obvious flaws in the system,” he said. Ahead of the Treasury’s announcements there was widespread speculation that higher and additional rate tax relief on pension contributions would be abolished and capital gains would be more closely aligned with income tax, but neither of these materialised.
From January 1 2022, the requirement to complete inheritance tax paperwork will be dropped for estates whose value is significantly under the threshold after probate – a change expected to cover more than 90% of estates. A measure introduced during the pandemic allowing trustees to provide an inheritance tax return without physical signatures of all of those involved will also be made permanent. Commenting on the changes, Sean McCann at NFU Mutual said the Government should simplify the IHT process further by having more concise rules on lifetime gifts and making life insurance pay-outs free of inheritance tax, for example.
City AM The Sun Daily Express, Page: 17
Calls for broader definition of online sales tax
The outcome of a consultation on business rates reform, which campaigners for the high street hoped would result in lower taxes for physical stores coupled with a possible 2% tax on online purchases, has been delayed until the autumn. The Chancellor is reportedly keen on the plan which could raise an initial £2bn extra a year. A number of submissions to the Treasury’s business rates review called for the scope of its proposed online sales tax to be extended, from sales made through internet retailers to any online sales that could have been made on the high street. This would include accommodation, travel and software. The Treasury said that internet retailers account for around £100bn of the total £700bn value of all online sales excluding financial services.
Companies promoting tax avoidance schemes will face tougher measures under Treasury plans, with Kate Ison, tax partner at, BCLP, pointing out that HMRC was seeking “extensive new powers” and would “strike the core of a promoter’s finances at best and entire business at worst”.
The Treasury has suggested changing the timing of almost all tax payments after 2024 to realise its “vision [for] a tax system that works closer to real time”. Under the “making tax digital” programme, the Treasury will seek to use up-to-date digital tax return data to “bring the calculation and payment of tax closer to the point where the income or profit arises”. The plans will see and small companies and self-employed people pay tax more frequently, and closer to the point at which they make the money. Andy Chamberlain of the freelancer trade body IPSE commented: “We have early concerns that in-year tax payments simply won’t be practical for many self-employed businesses as it is not clear how the system would account for their volatile incomes.”
Former PM ‘lobbied on behalf of failed financial firm’
Opposition MPs have called for a probe after it was revealed that former Prime Minister David Cameron lobbied the Bank of England in a bid to secure assistance for Greensill Capital, which employed him as an adviser. Greensill appointed Grant Thornton as its administrators on Monday, warning it is in “severe financial distress”.
PENSIONS NEWS – WEDNESDAY 24TH MARCH 2021
Technical updates expected for pension rules
The Treasury has said it will be making a slew of “technical updates” in areas where the state pension system doesn’t work but there was no sign in its “Tax Day” announcements of substantial reform for pensions, something James Jones-Tinsley, pensions expert at Barnett Waddingham. described as “disappointing”. He added: “The Treasury has squandered the opportunity to make real change – and the clock is ticking. If we don’t see action soon, the UK’s looming pensions crisis is only going to get worse.”
PERSONAL FINANCE NEWS – WEDNESDAY 24TH MARCH 2021
Dormant assets scheme expanded
The Government’s dormant assets scheme is to be expanded to include insurance, pensions and investments. Currently, the scheme only covers old current and savings accounts. The Treasury claims the expansion could unlock more than £800m in lost funds which would be spent helping vulnerable people and communities across the UK.
ECONOMY NEWS – WEDNESDAY 24TH MARCH 2021
ONS reports fall in jobless rate
The Office for National Statistics (ONS) has released data showing that the jobless rate in the UK has decreased for the first time since the onset of the coronavirus pandemic. The rate of unemployment returned to 5% between November and January, from 5.1% in previous months, with Chancellor Rishi Sunak noting: “Coronavirus has caused one of the largest labour market shocks this country has ever faced, which is why protecting, supporting and creating jobs has been my focus throughout this crisis. We have taken decisive action with a £352bn package of support.” Suren Thiru at the British Chambers of Commerce added: “With many firms struggling with the damage done to their cashflow by a year of COVID restrictions, unemployment is likely to remain on an upward trajectory until well beyond a full reopening of the economy.”
Evening Standard City AM
Liz Truss announces four new investment hubs
The UK is creating four regional trade and investment hubs to boost economic growth across the UK. Hubs would be located in Edinburgh, Cardiff, Belfast and Darlington, Secretary of State for International Trade Liz Truss said. The Government explained that the new hubs will provide support and advice to help regional businesses to access major trade markets and boost exports.
Yellen: US wants to stop a “global race” to the bottom
Treasury Secretary Janet Yellen has said the US wants to stop a “global race” to lower taxes on corporations. Speaking at a hearing of the House Financial Services Committee to discuss the country’s recovery from the pandemic, Ms Yellen said her staff were working with the Organisation for Economic Co-operation and Development to coordinate the potential tax changes with other countries. “We’ve had a global race to the bottom in corporate taxation and we hope to put an end to that,” she said. Her comments come as White House prepares to unveil plans to raise taxes on businesses and the wealthy to help pay for $3trn of new spending on infrastructure and green jobs. Separately, Mathias Cormann, the incoming head of the OECD, has told the FT that he is “quietly optimistic” he can secure a global deal on taxing multinationals. Meanwhile, UK Chancellor Rishi Sunak told an event with Bloomberg yesterday that a multilateral solution to taxing global tech giants is “in our grasp” adding that he was “very keen to see a resolution” on the issue reached when G7 finance ministers meet in July.
Illegal money exchange business owner ordered to pay £1m
A man who set up an illegal Money Service Business (MSB) and bought a £700,000 house with the profits, has been ordered to pay back nearly £1m. Shunjian Jiang, 30, was arrested in August 2016 after HMRC investigators found that he was operating an unregistered and unregulated MSB.
Contact Paul Southward
NEWS – WEEKEND TO 21ST MARCH 2021
NEWS – WEEKEND TO 21ST MARCH 2021
TAX NEWS – WEEKEND TO 21ST MARCH 2021
Treasury plans pay-as-you-go tax
The Treasury is planning a pay-as-you-go tax model in a bid to tackle evasion by freelance workers, landlords and investors, reports the Times. The measures, which will make it harder for people to hide their earnings, are based on a system used in New Zealand. The move will see annual or twice-yearly manual tax returns replaced with a system that sees tax paid throughout the year. Taxpayers would be given a digital tax account that is automatically updated by banks, investment managers, workplaces and pension providers, with information about earnings, investments and pensions logged. The reforms will be at the centre of HMRC’s ten-year tax strategy and will play a part in efforts to recoup the £31bn the Revenue believes people are not paying in tax each year. Chancellor Rishi Sunak believes the pay-as-you-go tax model could prevent people from failing to declare major earnings, including interest on investments and offshore bank accounts.
The Times, Page: 4
The truth is finally out as the government has always denied that Making Tax Digital was never about collecting tax earlier, but now we find it is.
Rate surge hits tax dividend
Analysis shows that a surge in market interest rates has wiped out more than two thirds of the £17bn the Chancellor sought to pull in via an increase in corporation tax. While Rishi Sunak is increasing the levy from 19% to 25% in 2023 as he looks to stabilise the national debt, market rates have moved higher on the back of a return of inflation and the possibility of a strong economic recovery, post-pandemic. HSBC economist Liz Martins said the increase in Government borrowing costs since the Office for Budget Responsibility fixed its forecasts will add £3.6bn to debt service spending in 2021/22, which rises to £12.2bn at the end of the parliament in 2025. Ms Martins said the Chancellor’s tax rise “might not reduce the deficit as much as he had hoped if those extra revenues end up going towards higher interest payments on government debt”.
The Telegraph reports that there is concern in the City that the Treasury is considering radical cuts to tax relief on pensions, with officials having signalled higher-rate tax relief on pensions contributions could be reduced. The paper says that while a pensions tax hike is not set to feature among measures being announced on March 23 – which has been dubbed “tax day” – reforms are being considered. The Chancellor is said to be considering limiting tax relief on pensions contributions to a flat rate of 20% or 25%. Experts have warned that a tax raid on pensions would hit millions of workers’ retirement prospects, leaving savers hundreds of thousands of pounds worse off in retirement. AJ Bell founder Andy Bell said: “Removing higher-rate tax relief would be politically toxic when people realise what it means for them”, while Peter Glancy of Scottish Widows said reform would be “horrendously difficult” to implement.
With IR35 changes coming into effect from April 6, new research suggests that many organisations are not ready for the rollout of new tax legislation that will make businesses responsible for setting the tax statuses of contractors they hire. A Grant Thornton survey of 605 senior decision makers from mid-market businesses conducted in late January shows that 38% are not fully prepared for the transition. It was found that 13% had done only “minimum preparation” or were in the early stages of planning, while 25% had preparations underway but said they were not ready for the deadline.
Wealthy savers rush to VCTs
Wealthy savers are turning to risky tax-efficient investment schemes, amid a crackdown on pensions and fears of an increase in capital gains tax. The amount being put into venture capital trusts (VCTs) is rising rapidly as investors hunt for tax breaks. Investors can put up to £200,000 into these trusts each year and get 30% income tax relief, as long as VCT shares are held for five years. Investment firm Wealth Club has overseen £112.7m invested this way in the 2020/21 tax year, up 42.4% from the £79.1m invested in 2019/20.
Thousands of small business owners who have lost money during the coronavirus crisis can claim more than £1bn in tax rebates to help mitigate losses, with ministers having announced an emergency extension to “loss carry back” rules. Previously losses could only be carried back one year to offset historical tax bills but the new measures enable firms to claw back profit and income taxes paid in the past three years.
The Telegraph’s Marianna Hunt and Rachel Mortimer offer advice on how landlords can save money on their tax bill, with guidance for those looking to sell a buy-to-let property. They note that some landlords may be able to reduce their CGT bill by claiming Private Residence Relief if the rental property has at some point been their main residence. Zena Hanks of Saffery Champness says the period where it was occupied as such will qualify for exemption from CGT, while Chris Etherington of RSM warns that moving into a rental property before selling it could store up CGT issues for the eventual sale of any other home the landlord owns.
Russell Lynch in the Sunday Telegraph says that while the “circus” surrounding the Budget “may be receding into the rear-view mirror”, Tuesday’s “tax day” means “the real action is still to come” for tax aficionados. With the ICAEW’s Anita Monteith saying she has cancelled all leave and is “waiting for the deluge to hit”, Mr Lynch says the deluge will take the form of around 30 consultations and calls for evidence on subjects including HMRC administration, taxation of the self-employed, and the future of capital gains tax and VAT. Ms Monteith says the Government “has actually been fairly clear that it wants to actually fix the tax system, rather than just fiddle”, adding that plans outlined on Tuesday could be a step toward “one of the biggest sea changes to our tax system that we have seen in a generation.” Chris Sanger, head of tax at EY, calls tax day the “thinking man’s Budget”, saying it is where the Chancellor “will imprint his vision on the future of the tax system.” On what tax day may bring, Richard Wild, technical head of tax at the Chartered Institute of Taxation, is expecting consultations on the sharing of information with HMRC by third parties, a move that would seek to improve the revenue harvested and cut out mistakes made by individual taxpayers. George Bull, a senior tax partner at RSM, says issues like indexing capital gains to inflation, as well as CGT’s interaction with inheritance tax, could feature.
The Sunday Telegraph, Business, Page: 6
Medical staff among biggest tax avoidance scheme users
Data from HMRC shows that health service staff are among the most prolific users of tax avoidance schemes, with one in five of people signing up to schemes designed to reduce their tax bills working in hospitals. Of those caught using tax avoidance schemes, bookkeepers were the most common participants, with healthcare workers second in the rankings. The HMRC report said: “There is a notable level of use of avoidance schemes within the healthcare sector. HMRC has already stepped in where promoters have targeted NHS workers returning to the workforce to support the UK’s COVID-19 response.” The tax office said it suspects that “the majority of people who used avoidance schemes didn’t look too deeply into the tax arrangements they were being offered.” HMRC noted that 30,000 workers are using avoidance schemes compared with 22,000 seven years ago, while nine in ten people who use the schemes earn under £50,000 a year. John Hood of Moore Kingston Smith notes that the use of such schemes can spread “like wildfire” in certain areas as workers in office jobs or big employment hubs copy each other.
The Treasury is expected to cut the red tape around inheritance tax this week, with changes set to be detailed on “tax day” to reduce the amount of paperwork families are required to fill out. It follows recommendations from the Office of Tax Simplification calling for the administrative burdens for those dealing with inheritance tax to be reduced. Jesse Norman, the Financial Secretary to the Treasury, said: “We want to cut red tape and make the tax system as simple as possible for people to use, especially during difficult times. The change is part of our wider drive to remove unnecessary paperwork and obstacles so that taxpayers can manage their affairs with less effort.” The reform plans due to be outlined on Tuesday will also see the Treasury publish an update on its consultation for an online sales tax, outline harsher measures against those who promote tax avoidance schemes and propose a move to force tax advisers to hold professional indemnity insurance.
The Sunday Telegraph, Page: 2
Sunak urged to opt against tax raids
Ahead of this Tuesday’s “tax day”, which will see the Treasury outline a series of proposals to reform the tax system, a Sunday Telegraph editorial has called on Chancellor Rishi Sunak to refrain from tax hikes. It argues that after a “crippling, historic raid unleashed at the Budget”, the last thing needed is a further increase in taxes. It urges Mr Sunak to opt against increases in capital gains tax, an assault on pension tax relief and a pay-as-you-go tax model for freelancers and investors, arguing that the latter would be “bureaucratic, undermine their ability to manage their financial affairs and deter entrepreneurial effort.” Noting that the economy and the budget deficit need to be addressed after the blow dealt by the coronavirus crisis, the piece argues that governments “cannot tax their way out of an economic crisis”. If the Conservatives try to do so, it adds, “they will also destroy the opportunities opened by Brexit.”
Liberal Democrat leader Sir Ed Davey has urged the Government to put small firms at the heart of a post-pandemic recovery, calling for a £5.5bn-a-year tax break for smaller businesses. He will today urge Chancellor Rishi Sunak to cut national insurance contributions for small firms by quadrupling the employment allowance from £4,000 to £16,000. Sir Ed will tell an online Lib Dem conference: “The UK’s economic recovery starts with small business. Small businesses are at the heart of every local community, and every local economy”. He will call on the party to “challenge the Chancellor to give small businesses a bold new tax cut to support thousands of new jobs.”
CORPORATE NEWS – WEEKEND TO 21ST MARCH 2021
Greensill sees job losses
Administrators of Greensill Capital have announced the first job losses since the lender collapsed into administration last week. Grant Thornton confirmed that 440 staff had been let go. The firm added that it is still seeking a buyer that could potentially save the rest of the Greensill business after a deal with private equity group Apollo Global Management fell through. It was also revealed that Greensill’s Australian parent company has been hit with claims for $1.35bn from creditors. Elsewhere, the FT looks at issues at Greensill, noting that auditors at KPMG were unable to verify the existence of certain invoices.
The Sunday Times reports that Greensill Capital administrator Grant Thornton faces conflict of interest claims after advising its biggest debtor, steel tycoon Sanjeev Gupta, on a string of deals. Shadow Chancellor Anneliese Dodds commented: “In the week that the Government launched what it called a major overhaul of the UK’s audit regime, it is important that the administration of Greensill Capital takes place transparently and that there is no question of any conflict of interest.” Grant Thornton said it had given “careful consideration to the code of ethics relating to such matters and satisfied ourselves that there is no threat to our independence as a result of any prior relationships.” Elsewhere, the same paper says that Grant Thornton will have to pursue Mr Gupta’s GFG Alliance for cash it did not pass on, adding that if GFG goes under, the situation “could descend into a legal battle between two sets of administrators”. Separate analysis of Mr Gupta’s affairs notes that he has tended to use small auditors for his accounts, including King & King and < strong>HW Fisher.
A PwC poll of more than 5,000 chief executives has found that 91% are concerned about cyber threats, up from 80% last year. Richard Horne, PwC’s UK head of cybersecurity, said: “For many organisations, up until a few years ago cybersecurity was seen as this technical thing that we left to the chief information security officer to deal with … Where many organisations are getting to is realising that every big business decision will impact your cyber-risk.”
A letter to the Sunday Telegraph warns that rents which have increased by 3,000% in a decade are forcing the Society of Antiquaries, the Geological Society and the Linnean Society towards costly relocations, threatening to disperse their priceless collections, libraries and archives. Signatories including Royal Academy of Arts chief executive Axel Rüger note a PwC estimate that the societies contribute £39.7m to the country every year in public value.
The Sunday Telegraph, Page: 17
Brewers serve up a pandemic success story
The Sunday Times looks at how craft brewers have navigated the challenges brought about by the coronavirus pandemic, highlighting UHY Hacker Young estimates that there are now more than 3,000 breweries in the UK, an increase of 200 over the past year.
The Sunday Times, Business, Page: 2
Fashion house calls in administrators
Sam Chambers in the Sunday Times muses on the issues that led to the collapse of fashion brand Ralph & Russo, which has appointed administrators from Begbies Traynor and Quantuma.
The Sunday Times, Business, Page: 2
FINANCIAL SERVICES NEWS – WEEKEND TO 21ST MARCH 2021
Post-Brexit deal for the City nears
Britain and the EU are said to be close to striking a limited deal on post-Brexit financial services co-operation following months of negotiations, with partial regulatory equivalence on some financial products and a memorandum of understanding on regulation reportedly on the horizon. The Telegraph reports that the memorandum of understanding is expected to include agreement that regulators keep each other informed of their plans for taxation and measures to counter financial crimes.
A poll by EY suggests that financial services firms are struggling with net zero targets, with 51% saying they do not yet have a target in place to achieve carbon neutral status. The survey of financial services firms including 45 banks, 44 insurers and 29 asset managers saw 57% say the climate change regulatory agenda was proceeding at the right speed, while 34% said “very few” companies in the sector currently have the appropriate focus on sustainability. Gill Lofts of EY said: “While advancements have undoubtedly been made across the financial services sector, progress on sustainability is somewhat uneven amongst firms.”
EMPLOYMENT NEWS – WEEKEND TO 21ST MARCH 2021
More than half of staff travelled to work last week
More than half of Briton’s workers returned to the office last week, according to Office for National Statistics analysis. In the week ending March 14, 53% of workers travelled to the office, with the move away from remote working coinciding with the reopening of schools in England and a decline in coronavirus cases. The report shows that the proportion of people who worked exclusively from home decreased six percentage points from the previous week, to 30%.
Super-rich utilise furlough scheme
An investigation by the Mail on Sunday reveals that a number of wealthy business owners have used the taxpayer-funded furlough scheme to pay staff. Analysis of official documents show that companies owned and run by super-rich individuals with a combined personal wealth of £19.4bn have taken money from the emergency scheme rolled out to protect jobs during the pandemic. MP Alexander Stafford, who sits on the Commons Business Select Committee, commented: “Those who could afford not to take the money should not have done so, and if they did they have a moral duty to pay the money back.” The Mail report follows a separate probe showing that billionaire tax exiles, Saudi royals and oil-rich Gulf states have claimed millions in taxpayer-funded furlough money. Robert Palmer, executive director for campaign group Tax Justice UK, said: “It’s pretty galling that tax exiles who have minimised their contributions in the good times are asking for a handout when things get tough.”
The Mail on Sunday The Observer
City firms eye office returns
US Investment banks are set to lead the return to the office, with the first wave of City workers preparing to head back to their desks. Several banks are preparing to open their offices again as soon as March 29, with Goldman Sachs, JP Morgan and Credit Suisse among those leading the charge as the Government’s ‘stay at home’ rule comes to an end. Amid the coronavirus lockdowns, only key traders and staff who have not been able to work from home have been allowed into offices. With official advice suggesting people should still work from home where they can, some firms are concerned they could be penalised for bringing more staff back to the office so soon. However, a banker has told the Mail on Sunday the Government gave “a nod and a wink” that they will not be punished for allowing staff to return.
The Mail on Sunday, Page: 121
Tech shift set to stay
The Sunday Times reflects on the impact of the coronavirus crisis, noting changes to working life. KPMG economist Yael Selfin expects some technology that has been utilised amid the pandemic to have a lasting change, saying she expects long-haul flights and business trips to be less common. She adds: “We’re going to come out of the pandemic much more environmentally and socially conscious, and more aware of our work-life balance”.
The Sunday Times, Business, Page: 2
SMEs NEWS – WEEKEND TO 21ST MARCH 2021
Staff and owners apart on return expectations
Research shows that a third of SME owners expect staff to come back full time when lockdown ends in June, with this double the figure for employees, where 16% expect to return to work as soon as restrictions are lifted. In a survey conducted for Cignpost ExpressTest, it was found that 38% of 1,100 employees polled do not expect to return to the office for the foreseeable future, with a further 20% not expecting to return until the entire workforce has been vaccinated. By contrast, 51% of employers said they expect those who have been vaccinated to return to the office immediately.
The Mail on Sunday
INDUSTRY NEWS – WEEKEND TO 21ST MARCH 2021
UK audit reforms fail to address the real problem behind scandals
Professor Karthik Ramanna reflects on the Government’s audit reform plans, arguing that issues stem from boards and auditors’ lacking a systematic culture to “challenge chicanery when it presents itself”, not badly designed rules.
The Local Government Association (LGA) has urged ministers to look into new funding sources for councils, with the body warning that a planned shake-up of the business rates system must “recognise the importance of this income stream for funding key local services”. With the Treasury set to publish a number of consultations on future policy on March 23, officials are expected to deliver an interim report on a proposed overhaul of business rates. A quarter of council spending is funded by the levy but Richard Watts, chair of the LGA’s Resources Board, says local government confidence in business rates “as a reliable income source with a future has reduced”.
Office for National Statistics (ONS) data shows that public sector borrowing hit £19.1bn in February, with this £17.6bn more than in the February 2020 and the highest February borrowing since monthly records began in 1993. While the coronavirus pandemic drove up government spending, February’s borrowing came in below expectations, with City economists having forecast that the deficit would hit £21bn. The ONS data showed borrowing is on course to match the Office for Budget Responsibility’s forecast of £355bn for the 2020/21 financial year. The total for 2020/21 reached an estimated £278.8bn, pushing the UK’s total debt to £1.125tn and the debt-to-GDP ratio to 97.5%. The ONS report shows that the cost of financing the UK’s debts had remained stable over the last year, climbing from £4.2bn to £5.3bn.
Helen Dickinson, chief executive of British Retail Consortium, says shopping has “changed dramatically” in the year since the first coronavirus lockdown was put in place, saying the retail environment feels “a world apart” from a year ago and noting the “degree of uncertainty” felt in March 2020. With the lockdown seeing increased demand for online retailers while high street competitors have been hit by enforced closures and lower footfall, BDO’s Sophie Michael says that while online has seen “five years’ growth in one”, it has not offset lost in-store sales.
March PMI expectations drive GDP hope
Economists believe GDP could beat growth forecasts for the year as the economy weathers the latest lockdown better than had been expected. Initial readings from the Markit/CIPS purchasing managers’ indices (PMI), due to published on Wednesday, are expected to show that the service sector has edged back into growth while manufacturing continues to show expansion. On an index where a score above 50 indicates growth, the service sector is expected to post a 51 reading for March, up from 49.5 on February, while manufacturing is likely to repeat the 55 score seen the month before. Howard Archer, chief economic adviser to the EY ITEM Club, believes Britain’s 2021 growth forecast could be upgraded, saying: “Our forecast currently is for 5% GDP growth this year but that might go up by a reasonable amount. That is because we thought that GDP would contract by 4% in the first quarter, but we now think it will be lower than that.”
Sunday Express, Page: 51
Contact Paul Southward
NEWS – FRIDAY 19TH MARCH 2021
NEWS – FRIDAY 19TH MARCH 2021
TAX NEWS – FRIDAY 19TH MARCH 2021
IFS: Budget black hole may mean higher taxes
The Institute for Fiscal Studies (IFS) says a £4bn black hole in Rishi Sunak’s spending plans mean Britain faces tax hikes, with the think-tank saying the shortfall for the 2022/23 financial year went “entirely unmentioned” in the Chancellor’s recent Budget. The IFS says tax rises and borrowing are likely to increase as the Treasury looks to tackle the shortfall, with officials against the idea of another period of austerity. The think-tank said that under current plans, spending on some areas of government would be 3% lower in 2022/23 than a year earlier, and 8% lower than what was planned pre-pandemic.
EMPLOYMENT NEWS – FRIDAY 19TH MARCH 2021
South-west leads Women in Work Index
PwC ’s Women in Work Index has seen south-west England come out on top in regard to female participation in the workforce. Scotland came second place in the rankings on an index with gauges areas such as the gender pay gap, female full-time employment, female unemployment and labour force participation. PwC has warned that the pandemic is expected to have a disproportionately negative effect on women, setting back their progress in work. “Even if job market growth returned to pre-pandemic rates by 2022, PwC estimates that progress would still be four years behind where it would have been by 2030. To reverse this damage, progress will need to proceed at twice the pre-pandemic rate,” the report said. Laura Hinton, chief people officer at PwC, commented: “There is absolutely no time to lose in addressing the very real impact of the pandemic on women”, urging governments, policymakers and businesses to work together “to empower women and create opportunities for meaningful participation in the workforce.”
Property agent CBRE has predicted that firms will occupy an extra 13m square feet of office space in central London by 2026, adding to the 232m square feet already used. This come s despite some firms looking to reduce workspace after the pandemic drove a shift toward greater remote working. CBRE’s estimate is based around a forecast that office-based employment in central London could increase by almost 190,000 in the five years to 2025, equivalent to annualised growth of 1.8% per year between 2021 and 2025.
CORPORATE NEWS – FRIDAY 19TH MARCH 2021
OSB reveals suspected £28.6m fraud
OneSavings Bank has delayed its results after disclosing that it has been the victim of a suspected £28.6m fraud by a corporate customer. The bank has reported the matter to Action Fraud and informed the Financial Conduct Authority and Prudential Regulation Authority. It has also called in Smith & Williamson, which specialises in forensic investigations. The Times reports that it is not clear whether the suspected fraud was discovered internally or by the bank’s auditor Deloitte.
Andy Turner, a partner at Mercer & Hole, says the Premier League and its clubs may be concerned ahead of the auction for TV rights for 2022 to 2025, saying they are likely to go for less than the £5.1bn high seen in 2015 and the £4.5bn secured in 2018. He suggests that a rights auction needs aggressive bidders and new entrants to maximize the price, adding that if Sky and BT are happy with their existing packages and there are no new entrants, this is likely to be reflected in the price.
Lookers sees profits ahead
Car dealership Lookers has published an update on its 2020 financial results to say it expects to report underlying profit before tax of £10m, compared to analysts’ consensus of a small loss. The firm, which has recently switched auditor from Deloitte to BDO, said it was still working on its full accounts for the last financial year. Lookers had faced a Financial Conduct Authority probe after a £19m hole was discovered in a past set of accounts.
INTERNATIONAL NEWS – FRIDAY 19TH MARCH 2021
German tax revenues slip 7.2%
German tax revenues slipped to €54.67bn in February, a 7.2% fall compared to the same period last year due to the economic fallout of the coronavirus crisis. The dip marks a slightly slower rate of decline than the 11.1% drop recorded in January. Data from the finance ministry shows that sales tax was down by almost 19% last month due to a lockdown which has kept most shops shut.
ECONOMY NEWS – FRIDAY 19TH MARCH 2021
BoE keeps rates steady
The Bank of England has held interest rates at 0.1% and its bond-buying programme at £895bn, with its Monetary Policy Committee (MPC) voting unanimously to keep rates at record-low levels. The Bank said the outlook for the economy remained unusually uncertain, adding that it depends on the evolution of the pandemic and how households, businesses and financial markets respond to developments. Noting that plans for the easing of lockdowns suggested restrictions being lifted “somewhat more rapidly” than had been assumed in its February report, the Bank said this “may be consistent with a slightly stronger outlook for consumption growth” in the April-June period than had been previously suggested. Meanwhile, the Bank’s chief economist has said a rapid economic recovery could soon be underway. Andy Haldane said he believes that it is “more likely than not” that a “rapid-fire recovery” is on the cards. “That is coming, and I think that is coming soon,” he told a Women in Business and Finance awards ceremony. Mr Haldane, however, warned that there are risks of more persistent damage to people’s job prospects as a result of the pandemic, saying: “It seems very likely, based on the evidence we have so far, that the deepest and the most damaging of those scars will be felt by those least advantaged in the job market”.
GfK’s monthly consumer confidence index shows British consumer morale has hit a one-year high, rising to -16 in March from -23 in February. GfK client strategy director Joe Staton said: “If this improved mood translates into spending, it might help reverse some of the economic damage the UK has suffered”. Howard Archer, chief economic adviser at the EY Item Club, said the rise in consumer confidence “fuels belief that the consumer can play a leading role in robust recovery”.
The audit industry has urged the Government to set out a timetable detailing when it plans to implement changes outlined in an audit reform consultation that sets out measures to reduce the dominance of the Big Four and deliver an industry regulator with greater powers. John Wood, CEO of the Chartered Institute of Internal Auditors, commented: “It is disappointing that there is no detailed legislative timetable in the white paper and we need to see a clear roadmap for reform without delay or else we risk further corporate collapses.” He added that the reforms “need to be implemented with urgency to protect and enhance the UK’s enviable reputation for good corporate governance.” Mazars’ head of audit David Herbinet highlighted a need to “focus upon establishing clarity on timings and the process of implementation to move forward at pace and seize this generational opportunity”. Meanwhile, PwC chairman Kevin Ellis has welcomed the reform proposals, saying the UK “has an opportunity to lead the world on corporate governance” and describing the consultation as a “crucial step in driving trust and confidence in our reporting and regulatory frameworks.” EY chair Hywel Ball commented: “The introduction of a new regulator alongside tighter accountability for directors as part of a UK equivalent of the US Sarbanes-Oxley framework is essential.” Jon Holt, head of audit at KPMG, said: “It is an ambitious package of strategic reform. Prioritising and clarifying the audit reform agenda is an important step to rebuild trust in the profession.”
Analysis suggests that plans to reform the audit sector and crack down on poor practices at large firms could add more than £430m to businesses ’ costs. The analysis of reform set out in a Department for Business, Energy and Industrial Strategy report says the largest cost to business would come from extending the number of companies that fall within the proposed rules, while strengthening internal controls would also deliver another large bill. The calculations made by the FT suggest that the creation of the Audit, Reporting and Governance Authority could cost £39m per year. The Times says bringing 2,000 large private and Aim-listed companies under tougher reporting standards will cost business up to £1.7bn over ten years. It says companies affected would have to appoint an audit committee if they do not have one and undertake a re-tendering exercise and rotate their auditor more frequently. It notes that a Government cost analysis does not take into account a likely increase in audit fees for new public interest entities. Bob Neate of Mazars said extra quality control processes around public interest entity audits “will enhance the cost of delivering the audit and somebody has to pay for that.”
With the Treasury set to detail consultations on future tax policies on March 23, the Telegraph’s Harry Brennan looks at what the event that has been dubbed “tax day” may bring. He notes that officials have said the proposals usually set out in the Budget have come later this year to allow for greater scrutiny. While much of the focus is expected to be on technical administration of the tax system, Mr Brennan says the Chancellor may also “lay the groundwork” for possible tax changes that could come after April 2022. Nimesh Shah of Blick Rothernberg is preparing for “significant” announcements that were delayed because of the latest coronavirus lockdown, saying he expects tax day to “give a real insight into Rishi Sunak’s intentions.” On the changes Mr Sunak could outline, Mr Brennan says reform of the capital gains tax system is possible, while Richard Wild of the Chartered Institute of Taxation says he expects to see changes to Business Assets Disposal Relief which discounts CGT for people selling shares in their own firms. With it suggested that the lower rates of National Insurance paid by the self-employed could be reviewed, BDO’s Paul Falvey said it is likely the Government will look to more closely align the tax treatment of the self-employed and employees in the coming years. Mr Brennan also says changes to property tax may be on the cards, with business rates potentially in line to be reformed or replaced.
Faith Glasgow considers what freezes on certain taxes mean for investors and pension savers. She notes that March 23 is set to see changes to tax administration announced but not broad tax policy changes.
Firms miss target for women in senior roles amid pandemic
The fourth annual review from think-tank New Financial says the Women in Finance Charter faced its biggest test yet after the coronavirus pandemic struck in 2020. Over 70% of the 209 signatories, including the Treasury, have met their self-imposed targets, or were on track to meet future targets. The review shows that 35% of signatories have met their target and 36% are on track to meet the future deadlines they have set themselves. Just over 60% of the signatories have set a target of at least 33% of female representation in senior management. According to the review, a group of 81 firms were due to hit their target by the end of 2020, but 44 of them failed to do so, citing deliberately ambitious targets, as well as recruitment or promotion freezes due to the pandemic. Among those who missed the target were the Financial Conduct Authority, which set itself a target of 45%; the Financial Reporting Council, which set a goal o f 33%; and the Bank of England, which had aimed for 35%.
The largest listed companies in London may have to appoint a minimum number of diverse board members or face regulatory scrutiny under measures being weighed by the Financial Conduct Authority (FCA). The City watchdog will consider whether diversity of management teams at the firms it regulates should form part of its senior managers regime. Noting that listing rules for New York’s Nasdaq require all companies to have at least two “diverse” directors – or explain why they do not, FCA chief executive Nikhil Rathi said: “As part of our regulatory work on diversity and inclusion and the listings framework, we will be exploring whether we should make similar requirements part of our premium listing rules”.
The UK has placed 12th in estate agent Knight Frank’s global index of house price increases, with the average value of UK homes climbing 8.5% in 2020. Turkey topped the rankings, having seen property prices surge by almost a third last year. It saw a consistent increase in values in 2020, leading the index for four consecutive quarters. It was followed by New Zealand, where prices went up by nearly 19% last year, and Slovakia, where values climbed 16%. The UK’s 8.5% price growth saw it outdo several European neighbours, including Germany (7.8%), France (6.4%) and Ireland (2.2%). Spain was among the worst-performing countries, with typical prices down 1.8%. Of the six countries in the index which saw house prices decline, India saw the steepest fall at 3.6%. Overall, prices across the globe increased 5.6% on average in 2020, up from 5.3% in 2019.
CORPORATE NEWS – THURSDAY 18TH MARCH 2021
Designer close to collapse
Fashion brand Ralph & Russo is on the brink of collapse and is said to have lined up Begbies Traynor and Quantuma to oversee a possible administration.
A panel of leading economists have voiced a belief that the Bank of England (BoE) should leave policy unchanged when it announces its latest monetary policy decisions today. All nine members of the Times’ shadow monetary policy committee – a panel of former central bankers and economists – recommended the Bank holds off taking any action until a clearer picture of the economic climate emerges. Analysts expect the Bank to hold interest rates at 0.1% and leave quantitative easing at £895bn. Reflecting on BoE chief economist Andy Haldane’s suggestion that the economy is a “coiled spring”, Sir John Gieve, a former deputy governor at the Bank, said that “inflation may be about to wake up”. Bronwyn Curtis, non-executive director at the Office for Budget Responsibility, adds: “Any coiled spring recovery will be temporary”, while Sir Steve Robson, a former Treasury mandarin, said he was “not entirely convinced” by the coiled spring, suggesting that the unpredictability of COVID-19 “may lead a lot of people to be quite cautious”.
Research by EY points to “significant pent-up demand for consumer spending post-pandemic”. However, with 55% of people polled as part of EY’s future consumer index saying COVID-19 will only stop affecting their lives after most people are vaccinated, the firm said it suggests “the big unlock in consumer behaviour will come later in the summer rather than when non-essential stores open on April 12.”
The Government has said the Financial Reporting Council should be replaced by the Audit, Reporting and Governance Authority (ARGA), with the new regulator to be given legal powers to improve the quality and standards of the auditing profession. Officials have launched a consultation that will deliver rules designed to help avoid company collapses and ensure auditors uncover problems sooner. The proposals include plans to break up the dominance of the Big Four to avoid conflicts of interest. This could see large businesses required to use smaller auditor firms to conduct part of their annual audit. Large companies will also face greater scrutiny from regulators, with tougher penalties for individual company directors where serious failings occur, with it to be made easier to claw back bonuses paid to executives of failed companies. The consultation accepts the vast majority of recommendations made by reviews into auditing and corporate reporting by Sir Donald Brydon, Sir John Kingman and the Competition and Markets Authority. Business Secretary Kwasi Kwarteng said a series of high-profile corporate collapses show that “Britain’s audit regime needs to be modernised with a package of sensible, proportionate reforms.” Shadow Business Secretary Ed Miliband welcomed some of the measures but suggested there are “real questions about whether this package is sufficient to reform the broken audit market”. He said it is “regrettable” that the package “waters down” some of the independent recommendations made in regard to competition in the sector, including on mandatory joint audits between the Big Four and challenger firms. Welcoming the reform, the ICAEW said the establishment of ARGA should be the top priority, with chief executive Michael Izza adding that he would like to see “the reform agenda taken forward with some pace”.
Alistair Osborne in the Times weighs Kwasi Kwarteng’s audit shake-up, saying that the proposals “are a bit of a smorgasbord” and voicing concern that the Business Secretary is “trying to do too much”, warning that “rule changes, like accounts, should not be overly complicated.” He says a plan to force big companies to use a challenger firm to conduct a meaningful portion of their annual audit looks unworkable, while reporting obligations on both auditors and directors “look like being a bureaucratic minefield”. However, Mr Osborne says replacing the Financial Reporting Council with the Audit, Reporting and Governance Authority is a “no-brainer”, adding that giving the watchdog the clout to force an operational split between audit and non-audit functions of accountancy firms in a bid to cut conflicts of interest is “overdue”.
Long road to audit reform leaves path littered with questions
Helen Thomas says proposed audit reforms do not address how 97% of FTSE 350 audits are undertaken by the Big Four, with officials opting against mandating joint audits.
OTHER NEWS – THURSDAY 18TH MARCH 2021
Deloitte eyes AI to spot crime
Deloitte is to use artificial intelligence systems to help clients detect financial crime. It will utilise systems developed by Quantexa which scan company data for signs of financial crime disguised by payment flows. Deloitte’s Andrew Oates said: “Our economic crime expertise, combined with Quantexa’s analytics, will enable clients to identify trends, monitor known risks and detect new threats more effectively.”
Private business owners hurt more by corporation tax hike
Analysis by Blick Rothenberg indicates Rishi Sunak’s corporation tax increases post April 2023 will hurt private business owners harder than the major corporations the Chancellor said it was aimed at. Nimesh Shah, chief executive of Blick Rothenberg, said: “The increase to corporation tax may have been badged to target big business, but the effect for the self-employed is clear. It may not be an obvious attack, but it achieves the Chancellor’s previous warning that the self-employed would face higher taxes. The tax impact for private business owners receiving dividends is far more severe.”
The i, Page: 10
Letter: Fear of Amazon should not drive UK tax policy
Miles Dean asserts that whether Amazon might benefit from the super-deduction tax break announced by Rishi Sunak is “neither here nor there.” Does the policy stimulate the economy?
Greensill spoke to insolvency advisers in December
The Telegraph reports that Greensill Capital called in Grant Thornton for restructuring advice as early as December last year, just two weeks after founder Lex Greensill revealed he was “carefully considering” a multibillion dollar listing. Elsewhere, risk managers at Credit Suisse were over-ruled by senior executives who approved a $160m loan to Greensill Capital. Credit Suisse is thought to be exposed to Greensill to the tune of $1bn-$2bn. Meanwhile, the FT details how Greensill tried to raise $1bn despite having lost the insurance that was crucial to its business model. Elsewhere, in the Telegraph, Ben Marlow says Greensill’s collapse should serve as a warning for fintech wannabes: “The lender claimed to be revolutionising small business financing with technology, but all it did was offer IOUs.”
Crowe ’s managing partner for the Midlands says entrepreneurs are still facing barriers to opening business bank accounts. Johnathan Dudley points out that start-ups and the self-employed launching new businesses played a key role in the recovery from previous recessions, and the exit from the coronavirus pandemic would be no exception. “It is absolutely vital we turn the tap on to provide essential business banking facilities if we are to achieve the rapid return to growth which is vital to the UK’s economic recovery,” he explains.
Express & Star
PERSONAL FINANCE NEWS – FRIDAY 12TH MARCH 2021
Government has ‘no plans’ to reduce Lifetime Isa withdrawal penalty
The Government has said that savers who need to raid their Lifetime Isa pot will soon be charged their own money to do so again to “discourage withdrawals” and “protect its status as a long-term savings product”. The Government said the penalty for withdrawing money from the tax-free account would be increased back up to 25% from 6 April and that it had “no plans to permanently reduce this charge to 20%”. Nathan Long, an analyst at DIY investment platform Hargreaves Lansdown, said: “Given the nation seems to be steeling itself for anticipated job losses as furlough unwinds, the case for the reduced penalty must surely be as strong now as when they first signed off on it.”
Pensions Regulator consults on criminal sanctions policy
The Pensions Regulator (TPR) has published for consultation guidance on how it will use new criminal powers given to it by recently passed legislation, with pensions industry representatives saying it was helpful but unlikely to dispel concerns about unintended consequences. Punishable by an unlimited fine and/or up to seven years in prison, the criminal offences – avoidance of a statutory employer debt and conduct risking accrued defined benefit (DB) savings – have caused considerable industry alarm given that the criminal powers have been widely drawn.
The Chancellor told MPs on Thursday that a reversal of low-cost borrowing would have a “significant impact” on the public finances over the next few years. Explaining his Budget decisions to lawmakers, Rishi Sunak acknowledged the risk of rising bond yields and that the Bank of England’s QE programme amplified these. Ben Wright in the Telegraph explains that the UK’s margin for error when it comes to rates is “vanishingly small” and cites BlackRock’s Vivek Paul who says the country has the least sustainable deficit of any developed nation. “If and when investor sentiment begins to turn, it is likely to hit the UK faster and harder than any other major economy.”
BDO predicts strong manufacturing M&A activity throughout the year with many deals driven by a desire to make supply chains more resilient. Roger Buckley, UK industrials mergers and acquisitions partner at BDO, said: “Deal activity held up remarkably well in 2020, and the market looks set to remain active in 2021. Many corporates have significant cash reserves to invest and private equity firms sitting on considerable stores of dry powder are competing to acquire quality manufacturing businesses that have proven their resilience over the last year.”
Consumer businesses expect to reduce capital expenditure
Research by Deloitte has shown that 73% of CEOs and CFOs in the consumer business sector are planning to accelerate cost reduction programmes this year due to the pandemic.
REGULATION NEWS – FRIDAY 12TH MARCH 2021
Ministers plan overhaul of capital market rules to boost City
The Treasury is planning a wide-ranging review of UK financial markets rules to improve the City’s competitiveness. City minister John Glen told Bloomberg that the review would be “as broad and as inclusive as possible so that we really look at everything”. The overhaul in the immediate term is likely to focus on Mifid II rules, which critics say have had only marginal benefit and created layers of red tape. The FT reports that the Government wants to hand the Financial Conduct Authority powers to shape future rules, rather than continue to make changes by parliamentary legislation. Rules making it easier for banks to hold capital are also being considered, along with scrapping the share-trading obligation and the cap on the amount of trading that investors can execute on private marketplaces. A Treasury spokesperson said the Government wanted “to make the UK the most open and dynamic financial centre in the world [and] reduce burdens for firms whilst maintaining high standards of regulation”. Separately, entrepreneur Brent Hoberman writes in the FT that a shake-up of UK rules for listed companies is long overdue.
Helen Brand: Work towards genuine equality still urgently needed
The ACCA’s chief executive Helen Brand answers questions from City AM on her career and why equality is so important for the ACCA. Brand explains how the Black Lives Matter movement accelerated change and the processes the ACCA subsequently put in place to better understand all members. “It’s a never-ending commitment to do this well,” she says, “which involves listening and engagement.”
Test and Trace consultants coached on how to apply for honours
A blunder by the Department for Business, Energy and Industrial Strategy has revealed the names and email addresses of more than 500 business leaders who had been invited to come up with nominations for the 2022 new year honours list. The breach has caused public anger after it was shown that many of the companies offered tips on improving their chances of honours success had profited from the pandemic. The Times points to Serco and Deloitte which both did well from contracts for the £37bn coronavirus test-and-trace system, which was blasted by Sir Nicholas Macpherson, permanent secretary at the Treasury until 2016, as the most wasteful and inept public spending programme ever.
This and the wider issues of the whole cost of government reaction to the pandemic should be the subject of a full Public Enquiry. Surely there must be some official recognition of the true costs and accountability for those responsible?
TAX NEWS – THURSDAY 11TH MARCH 2021
CBI: UK needs tax system that rewards green alternatives
The CBI has called on the Government to institute wholesale reform to the UK’s tax system in order to hit its 2050 net zero target. Instead of tinkering with individual taxes, the business lobby group said ministers should instead pursue “fundamental change with a holistic, coherent tax plan” in consultation with business and the private sector. The CBI has set out nine principles which it says should guide the development of a new tax system with a “polluter pays” policy at the heart of the prospectus. CBI chief economist Rain Newton-Smith said: “A tax system which discourages polluting behaviours and rewards greener alternatives is critical to unlocking the right kind of investments.” Jason Collins, head of tax at Pinsent Masons, agreed stating: “Activity in environmental taxes and green tax incentives has been marginal at best, window dressing at worst.”
Government defends “super-deduction” scheme
Following concerns that the Government’s £25bn “super-deduction” scheme could wipe out any taxes paid by large companies such as Amazon, the secretary of state for digital, culture, media and sport defended the policy. Oliver Dowden said: “It is a good thing if companies are going to be investing in tech: that’s the point, to encourage companies to invest heavily while many of them, particularly in the tech sector, are sitting on very large amounts of cash. That will help drive tech growth. I don’t have a problem with that but I do want to make sure that everyone pays a fair share.” Mr Dowden went on to argue that there needed to be a “global approach” to resolving Amazon’s low UK tax bill, citing “complex intellectual property-licensing regimes”. He said: “It has to be done at an international level and the chancellor is making it a priority for the G7.”
A survey of 5,000 global business leaders by PwC has found that Britain is a more attractive investment proposition for multinational companies than it was before Brexit. Writing in the Times, Kevin Ellis, chairman of PwC UK, says: “The UK’s positive standing highlights what matters most to global business leaders. The EU trade deal drew to a close much of the uncertainty around Brexit. It’s hard to overestimate the importance of political certainty and stability when it comes to CEO decision making.” America, China and Germany remain the top three targets, but the UK has overtaken India as the world’s fourth most promising growth opportunity. Mr Ellis added that the UK’s tax regime is still competitive despite plans to increase corporation tax. PwC also found that business confidence was rebounding quickly with a three-year forecast showing continued growth in positive sentiment.
Research from the Association of Professional Staffing Companies (APSC) has found that vacancies in the financial services sector are well on their way to recovery after a sharp slump at the start of the pandemic. APSC found that hiring fell by 58% in the second quarter of 2020 as Covid battered employment prospects. Accountants were the least impacted of all financial professionals, while recruitment marketing was hit the hardest – down 41% compared to 2019. However, numbers improved towards the end of the year, with recruitment levels up 15.2% year-on-year in December 2020. The insurance sector dominated hiring within financial services in 2020, accounting for almost a third of the total vacancies. In contrast, the hardest-hit sector, consumer finance, saw jobs plummet 43% year-on-year. Fintech was the least impacted division, as roles dipped only 12.6% compared to the same period in 2019.
Pandemic accelerates a long-term move towards home working
The chief economist at Deloitte, Ian Stewart, has suggested people in jobs they can do at home are planning to return to work in the office for at least two days a week after restrictions are lifted. Mr Stewart told the Treasury select committee that a poll of 800 clients found very few people want to work entirely at home or in the office, but on average they would like to work in the office around two days a week. He added: “I think there is going to be a step change. There has been a long-term move towards greater flexible, agile home working. This is going to cause a significant acceleration of it.”
New sustainable finance disclosure rules come into force
European investment managers claiming to be green, must now also include new, black-and-white disclosures. The Sustainable Finance Disclosure Regulation (SFDR) requires financial companies and big investors to disclose the risk they face from ESG issues — such as climate change and human rights — as well as how their investments impact these same issues. This comes as the IFRS Foundation announces its intention to create a blueprint for corporate climate reporting, an initiative Larry Bradley, global head of audit at KPMG believes could be the “unifying force” that finally makes universal ESG standards a reality.
The Government has extended the ban on housing evictions enforced by bailiffs in England until May. But ministers indicated this could be the final such extension, promising a “new approach” from June. The current ban was due to expire at the end of March. The Government also extended the ban on commercial evictions until 30 June, which it says will help firms as they re-open after lockdown. But the British Property Federation criticised the move with its CEO Melanie Leech declaring: “The scandal of those well-capitalised businesses who can pay rent, but have chosen not to, cannot be allowed to continue.” Kate Nicholls, UKHospitality chief executive, said on the other hand that the move was “a sensible and positive step.”
According to The British Seniors State of Retirement Report, women have 83% less than men in their retirement pot, while nearly half of women over 50 believe they will struggle financially when they retire. The research found that women have an average total retirement pot of £113,520, compared to £206,990 among men – a disparity of £93,470.
CORPORATE NEWS – THURSDAY 11TH MARCH 2021
Flybe’s operating licence revoked
The Civil Aviation Authority has revoked Flybe’s operating licence preventing administrators EY from transferring the airline’s take-off and landing slots to Thyme Opco, a company that was plotting the airline’s revival.
The Daily Telegraph, Business, Page: 3
ECONOMY NEWS – THURSDAY 11TH MARCH 2021
Higher-earning Brits set for post-lockdown spending spree
Britons have amassed some £160bn in excess savings, according to new calculations by Deutsche Bank economists, who predict £16bn of this will be spent as lockdowns ease, double what the OBR expects to be pumped into the economy. Deutsche analyst Sanjay Raja said he wouldn’t be surprised if the figure hit £20bn. However, Raja pointed out that many on low incomes bore the brunt of the pandemic and were more likely to be going into debt: “These households, some may be on furlough and their costs are similar to before but their income is lower, are still reliant on credit, welfare, debt or family”.
Brexit knocks revenues at third of manufacturers
Since Britain left the EU in January more than a third of manufacturers have lost revenue according to Make UK, heightening worries over border delays and red tape. Separately, Brussels will make UK food manufacturers producing multi-ingredient products fill out new health assessment forms from April 21st, adding extra costs to exporting to the EU.
Upcoming auditors and corporate reporters are keen to perform a function that is beneficial to society, says Leonid Sokolovskyy, PhD researcher at Alliance Manchester Business School. “They want to perform a function that creates value and doesn’t destroy value,” he adds, explaining how their priorities were reflected in their collective submission to the Financial Reporting Council’s (FRC) future of corporate reporting initiative. In it they write: “A better form of socially responsible capitalism is possible if only we have the courage to pursue it.” They add that “public interest matters” when doing business and warn the regulator that should they not take the lead in developing corporate governance rules that put public interest at the forefront, then the FRC itself is in danger of becoming “irrelevant and detached” from the broader needs of society.