White House says capital gains tax rise will hit only richest 0.3%
Following heavy criticism of new tax plans coming out of the White House, a Biden administration official has said only the richest 0.3% of Americans would have to pay the new levy on capital gains. The Mail reports that wealth advisers in the US are seeing a flood of inquiries as clients rush to sell assets, shift gains into retirement accounts or tax-deferred opportunity zone funds.
New research from Aldermore Bank indicates signs of recovery for small and medium-sized enterprises (SMEs), as they reveal plans to invest in their businesses in the next year, coinciding with the easing of lockdown restrictions. SMEs plan to spend an average of £97,000 to grow their business in 2021 and help kickstart their recovery from the COVID-19 pandemic. Over the next 12 months, one in four (25%) SMEs will invest in their online presence, with one in five (21%) advancing their digital marketing. A further one in four (21%) will spend on new equipment and 20% will invest in their staff through training. “It’s encouraging to see that SMEs are investing in their recovery from the COVID-19 pandemic”, said Tim Boag, group managing director, business finance at Aldermore. “Recent data reveals a vastly improved near term outlook for businesses, with the easing of restrictions. Confidence from SMEs is growing, and this is reflected in plans to invest in the growth of their businesses in order to recover effectively from the pandemic”.
Research by angel network Cornerstone Partners shows that entrepreneurs from black and ethnic minority backgrounds are being excluded from venture capital funding. Just 1% of founders who receive seed funding identify as black, according to the study. Only 3% of VC-funded founders identified as black and only 2.9% were Asian. The report also says that three quarters of founders come from advantaged socio-economic backgrounds and hardly any founders come from families living on welfare entitlements. Cornerstone Partners has made a number of recommendations, including the establishment of schemes that support angel groups and accelerators which invest in businesses led by minority founders. It also called for the introduction of early career development.
Figures from NAEA Propertymark show one in six homes sold in March went for more than the asking price – a seven year high – with just a third selling for below the original price. Mark Hayward, chief policy adviser at Propertymark, said: “The imbalance of supply and demand means it’s an extremely strong sellers’ market; properties are selling quickly and for over the asking price, and this is something we expect will continue in the coming months.” Homeowners reconsidering their lifestyle and the stamp duty holiday are seen as the main drivers of the increased demand.
A new report from LCP warns that it will take too long to save into defined contribution (DC) pensions to keep retirement savings steady and offset the loss of defined benefit (DB) income. The report, titled ‘The ski slope of doom – is this the most worrying chart in pensions?’, claims that the incomes of newly retired workers are set to fall at a much more dramatic rate in the coming decades than had previously been thought. The report found that for those working in the private sector, the decline of traditional “final salary” type pensions is more rapid than expected and that the rise of new-style workplace pensions will take longer to make a real impact than previously assumed.
Research from the Institute for Fiscal Studies shows that inheritances are likely to be larger compared with lifetime incomes for younger generations than was the case for their predecessors. For those born in the 1980s, average inheritances compared to lifetime income are projected to be almost twice as large as those born in the 1960s.
ECONOMY NEWS – TUESDAY 27TH APRIL 2021
UK growth forecasts boosted by vaccines rollout and extended state support
Analysis by Consensus Economics puts UK growth at 5.4% this year, up from 4.2% predicted in February. Others believe this remains pessimistic, however, with Oxford Economics going as high as 7.2%. The EY ITEM Club has predicted growth of 6.8% while Goldman Sachs goes as high as 7.8%. A bounce-back is not unexpected considering the UK suffered a 9.8% slump in 2020 – the worst performance among the G7 group of major advanced nations but forecasters are upgrading predictions following the “innovative and flexible” response of UK businesses and consumers to the pandemic.
Investors may have to wait until 2025 for dividend recovery
According to Link Group’s Dividend Monitor, British companies paid out £12.7bn in dividends in the first quarter of 2021, down 27% on the same period last year. Reduced payouts from oil giants Shell and BP were responsible for most of the drop. Link said dividends were down 42% over the last 12 months and its “best-case” forecast for this year was a rise of just 5.6% on last year’s total. Ian Stokes of Link Group said there were signs of recovery but “2025 still looks like the most realistic moment for dividends to match their 2019 high point.”
City bosses want payback after being left on Brexit sidelines
The Telegraph’s Lucy Barton looks ahead to what’s in store for the City post-Brexit as organisations including the Investment Association submit ideas to the Treasury for reform. The lobby group told ministers to consider a fully exempt tax regime for UK funds to keep them competitive with EU rivals. One banking executive who is in regular talks with ministers told the paper: “There will definitely be changes. Banking is completely exposed to politics and political changes – that’s always a huge risk – but I’ve never seen such commitment to change.” But although Rishi Sunak has told the City to brace itself for a “Big Bang 2.0” post-Brexit, TheCityUK’s CEO Miles Celic argues the sector is not chasing a “deregulatory agenda”. He says: “Competitiveness is about much more than regulation – it’s got to look at issues such as access to talent and a stable, predictable, simplified tax regime.” Finally, Barnabas Reynolds at Shearman and Sterling believes big changes are on the way, but it could take three to five years for the rule book to look significantly different.
The Daily Telegraph, Business, Page: 2
OTHER NEWS – TUESDAY 27TH APRIL 2021
Johnson hopeful restrictions will lift on 21st June
Boris Johnson has said Britain had built “some pretty robust fortifications” against another wave of Covid and there is now a “very good chance” of completely ending coronavirus restrictions in England on June 21st, as planned. The prime minister said lockdown had helped get the number of cases down considerably but that did not mean Covid was over.
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.
Global corporate tax deal edges closer after US backs minimum rate
European countries have backed US plans for a global minimum corporation tax, but UK and EU leaders have reiterated that the taxation of digital services would need to be linked for a deal to succeed. Meanwhile, the International Monetary Fund’s chief economist Gita Gopinath has stated that the organisation has long favoured adoption of a global minimum tax on corporate profits. Gopinath said on Tuesday that current disparities in national corporate tax rates had triggered “a large amount” of tax shifting and tax avoidance, reducing the tax base on which governments could collect revenues to fund needed economic and social spending. Chris Sanger, head of tax policy at EY, points out that if lots of countries to agree to a global solution then “there will be an advantage to any headquarter location that does not implement a global minimum tax.” Meanwhile, Eamonn Butler, director of the Adam Smith Institute, warned the plans would “represent the creation of a cartel designed to minimise competition and disadvantage consumers”.
New laws have come into force meaning around 170,000 self-employed workers are set to pay more tax. The change to off-payroll working rules – IR35 – hits those working in the private sector who pay less tax by setting themselves up as private companies. For now, contractors who work for small businesses will continue to determine their own employment status. However, contractors providing services to medium or large-sized private sector clients will need to get an employment status determination from the client. Ed Molyneux, co-founder of accounting software firm FreeAgent, told The Sun he is worried the change will “come too soon” for many contractors. He said: “This is the most significant tax change in the freelance and contracting economy for years. It essentially pushes many people who are contracting within the private and private sectors into quasi-employment, albeit without any of the protections that they would receive if they were actual employees. But those who will be most impacted are the same freelancers and contractors who have been worst affected by the pandemic, and who are still dealing with the ongoing economic fallout from it.”
The Sun Daily Express
EMPLOYMENT NEWS – WEDNESDAY 7TH APRIL 2021
Pandemic turns finance professionals on to more flexible working
New research indicates that 54% of financial services employees want alternative working patterns offered to them, such as flexible hours or the option of remote working. The study by Deloitte of 2,000 financial services employees found half (52%) wanted their employer to let them work from wherever they liked in the UK, and a quarter (24%) wanted their employer to enable them to work outside the UK post-pandemic. However, 34% felt that remote working had made their relationships with colleagues more superficial, although 45% felt their sense of autonomy had increased during the same time. Payal Vasudeva, financial services future of work partner at Deloitte, said: “Changes to how people work need to be reinforced by meaningful employee experiences. This could be a sense of belonging, purpose or greater flexibility in the hours they work and where they work from. There is not a one-size-fits-all approach. The new world of work is not about presenteeism but empowerment. Employees should be able to make some choices in how and where they work that makes them their most productive.” Separately, Grant Thornton’s CEO David Dunckley reveals that 88% of the firm’s staff want to spend less than half of the working week in the office after the pandemic.
Peacocks bought out of administration by consortium of investors
All 1,850 store staff currently on furlough at Peacocks, as well as 150 head office and support roles are to be retained after it was announced that the chain is to be bought out of administration by a group of international investors, led by Peacocks’ former chief operating officer, Steve Simpson. Former owner Philip Day is providing the financial backing for the management buyout in the form of a deferred loan, while a group of unnamed investors are injecting cash into the business to allow it to restart trading. Tony Wright, joint administrator of the business from FRP Advisory, commented: “Jaeger and Peacocks are attractive brands that have suffered the well-known challenges that many retailers face at present. We are in advanced discussions with a number of parties and working hard to secure a future for both businesses.” Meanwhile, Mike Ashley’s Frasers Group said that it was frustrated with the unwillingness of administrators at FRP “to engage substantively” or “to provide key financial information” so it could make an informed offer for the chain. Frasers is to raise its concerns with the All Party Parliamentary Group on Fair Business Banking which is conducting an in-depth investigation into standards in the UK insolvency profession, in response to claims that some practitioners are prioritising lenders’ interests over those of business or other creditors.
The recovery loan scheme is now open to applications, with the aims of supporting smaller businesses with additional finance to manage cashflow, growth and investment as they steer a path towards a sustainable recovery. The maximum amount of a facility provided under the scheme is £10m per business and £30m per group. Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts. Businesses can choose from term loans, overdrafts, asset finance and invoice finance, subject to the lender being accredited for each of these finance types. Businesses that have taken out a CBILS, CLBILS or BBLS facility are able to access the new scheme, although the amount they have borrowed under a previous scheme may in certain circumstances limit the amount they may borrow under RLS. Interest and fees will be paid by the business from the outset and the annual effective rate of interest and upfront and other fees cannot be more than 14.99%.
FT Adviser reports that Pimfa has issued a warning to advisers on new regulations being introduced post Brexit, in particular the Investment Firm Prudential Regime. The warning comes as the Financial Conduct Authority, Prudential Regulation Authority and the Treasury are all bringing forward regulations which Pimfa says will have significant impacts on UK wealth managers and large advisory firms.
ECONOMY NEWS – WEDNESDAY 7TH APRIL 2021
UK economy expected to outperform US and Europe next year
The UK’s economic growth will outpace that of the US and Europe next year due to the Treasury’s vast spending programme and the successful rollout of vaccines, according to the International Monetary Fund (IMF). In its World Economic Outlook, the IMF predicted UK growth of 5.3% in 2021 and 5.1% next year, after taking one of the biggest GDP hits from the pandemic. Global growth is expected to bounce back to 6% this year, followed by a 4.4% rise in GDP in 2022. This comes after a 3% contraction in 2020. Despite its vaccine struggles, the eurozone will still enjoy growth of 4.4% in 2021, the IMF predicts. However, the organisation did warn of “multispeed recoveries” with the developing world lagging behind and growing financial risks from booming markets and high-levels of business borrowing.
Optimism rises for manufacturers as sales and orders improve
The manufacturing industry lobby group Make UK has revealed that almost half of businesses in the sector had seen sales and orders improve since the start of the year. Investment is also set to rise in direct response to the Chancellor’s “super-deduction” tax cut. However, Verity Davidge, policy director at Make UK, said: “One swallow doesn’t make a summer and, with the economy at a crossroads, there is an urgent need to consider how we make a structural change to permanently increase investment in the future.” The growing confidence of manufacturers is echoed by research from BDO, which said 86% of mid-sized businesses are planning to hire more staff in the next six months.
OTHER NEWS – WEDNESDAY 7TH APRIL 2021
Billionaires buoyed by crisis while businesses languish in debt
Despite the hit taken by corporates form the pandemic the wealth of the world’s billionaires has only risen, with the 10 richest people on the planet now worth a combined $1.15trn (£830bn) having grown their fortunes by around two thirds over the past year. According to Forbes’ annual world billionaires list, there are a total of 2,755 billionaires in the world whose fortunes add up to $13.1trn, a big jump on the year before when there were 660 billionaires worth a combined $8trn. For most businesses, however, the pandemic has led to increased debt with the Telegraph pointing out that Europe is now facing €1.8trn wall of debt, maturing in the next four years.
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.”
Paul Johnson, the director of the Institute for Fiscal Studies, writes in the Times that Rishi Sunak’s hike in corporation tax is unlikely to raise the additional £17bn a year that the chancellor is banking on. Indeed, the proposed increase could reduce foreign direct investment by 5% from 2023, says Professor Michael Devereux of the Oxford University, with a considerably bigger negative effect on investment overall. This, asserts Johnson, will push down wages and living standards over the long run.
Bootle: Let’s prove forecasters wrong and aim for tax cuts
Chairman of Capital Economics Roger Bootle says in the Telegraph that figures for the economy so far this year are better than expected and if forecasts from the OBR prove over pessimistic (and the Government should make sure they are just that) then the Budget’s raft of tax increases may yet turn out to be unnecessary. “In that case, the Chancellor would be in a good position to rescind them and even to introduce some judicious cuts before the next election.”
Higher taxes urged for Scots earning more than £40,000
The think tank IPPR Scotland has called on the next Scottish government to hike taxes for anyone earning more than £40,000 a year to avoid having to make spending cuts. IPPR is proposing to add about £260 a year to the income tax bill for higher rate taxpayers and reduce the threshold at which that rate becomes payable to £40,000. If those changes are carried out, it estimates that by 2024/25 they would be bringing in an additional £700m annually for Holyrood.
Government under pressure to strike EU deal for the City
The Telegraph’s Lucy Burton reports on bankers’ expectations ahead of an outline memorandum of understanding set to be drawn up between the UK and the EU on financial services at the end of this month. Whatever the outcome, EY‘s financial services head Omar Ali says, the risk of fragmentation in the sector is high, which is “bad for all users of financial services, not just in the UK.” Although the City has not yet experienced the predicted exodus of banking talent, if there is not some sort of equivalence without the threat of it being removed after only 30 days, bankers earmarked to relocate are unlikely to stay put, one bank executive said.
The Daily Telegraph, Business, Page: 2
SMEs NEWS – MONDAY 15TH MARCH 2021
Lockdown drives up number of new breweries
The number of breweries in the UK increased by more than 200 last year despite the impact of the virus crisis on pubs and bars, according to a new report. UHY Hacker Young said there were now more than 3,000 breweries across the country. The firm’s James Simmonds said: “Growth in breweries during a very difficult period for the drinks industry is a positive sign. Entrepreneurs clearly feel confident in the prospects for a bounce back once pubs and bars can open again. People’s appetite for trying new beers from different breweries has contributed to the long-term rise in new breweries being set up. The sector hasn’t fallen into the trap of discounting. With the closure of pubs and bars, smaller breweries have had to adapt to direct-to-consumer models.”
The Times, Page: 11 The I, Page: 40 Daily Express, Page: 46
EMPLOYMENT NEWS – MONDAY 15TH MARCH 2021
Graduates jostle in an overcrowded jobs market
University leavers in 2021 are facing a really tough jobs market, says EY’s Hywel Ball, who adds that applications for the firm’s graduate trainee programmes are up by 50% compared to February 2020.
Andrew Edgecliffe-Johnson says PwC data showing climate change as a low-level threat for CEOs illustrates the need for more consistent ESG reporting and for directors to be held accountable for progress on ESG goals.
Jessica Beard details in the Telegraph how young high earners could start targeting Lifetime Isas as they attempt to skirt restrictions on the pensions lifetime allowance, which the Chancellor has just frozen. Tom Selby of AJ Bell said: “For those who qualify, the Lifetime Isa will be an obvious starting point as it benefits from a 25% bonus and tax-free withdrawals for a first home worth £450,000 or less, or from age 60.” Anyone in their 30s who thinks they may breach the lifetime allowance should consider opening a Lisa with a small contribution while they can, Mr Selby added.
A report from Make UK and BDO has revealed that domestic orders have risen in the first quarter of the year, helping to offset the impact of the COVID-19 crisis and Britain’s departure from the EU single market. A net balance of 9% of respondents said that they had increased output during the period, up from -5% in the previous quarter. The outlook for the coming months is even brighter, with a positive balance of 15% of respondents expecting output to grow. Stephen Phipson, chief executive at Make UK, said: “After the seismic shock to the sector last year, manufacturers are now beginning to move through the gears and accelerate into recovery as demand at home increases and major markets begin to pick up.”
Liam Halligan considers the effect on inflation of the UK Government’s ongoing quantitative easing programme, In his Telegraph column he differentiates between post-financial crisis QE which mostly circulated between the Bank of England and the banks; although it later served to keep asset prices up, it wasn’t inflationary in the way QE from the past year has the potential to be, says Halligan, with vast sums having been pumped out to businesses and households. Although lockdown means they aren’t spending much for now, they will, he contends. With the Chancellor and Bank of England Governor failing to outline an exit plan from QE, we must assume they intend for it to go on indefinitely, concludes Halligan.
Janet Yellen says Biden has yet to decide on a wealth tax
US Treasury Secretary Janet Yellen told ABC’s “This Week” program on Sunday that the Biden administration had yet to decide on whether to impose a new wealth tax. The comments follow a recent study by Oxfam showing billionaires such as Jeff Bezos, Mark Zuckerberg and Elon Musk had seen their fortunes spiral since the beginning of the pandemic. Ms Yellen said Biden “hasn’t proposed a wealth tax, but he has proposed that corporations and wealthy individuals should pay more in order to meet the needs of the economy, the spending we need to do.” She went on to forecast only a small risk of inflation as a result of stimulus spending.
Contact Paul Southward
NEWS – FRIDAY 12TH MARCH 2021
NEWS – FRIDAY 12TH MARCH 2021
TAX NEWS – FRIDAY 12TH MARCH 2021
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.
Dodds suggests Labour would back rise in corporation tax
Shadow Chancellor Anneliese Dodds has indicated that Labour would back a gradual increase in corporation tax across this parliament, saying that while the party would not back an immediate hike in tomorrow’s Budget it is open-minded about future increases. Ms Dodds, writing in the Guardian, says it is “hard to find a serious economist who believes that immediate tax rises would achieve anything other than damaging Britain’s recovery”, but says there is “a clear long-term case for rises in the rate of corporation tax”. She also said Labour would support reforms to tighten corporation tax loopholes. The Guardian reports that Labour would not automatically oppose the freezing of the income tax threshold. Meanwhile, Ms Dodds, in a speech to Bloomberg, said Labour would be “guided by the economic situation” on when taxes should be increased. She pointed to “tremendous anomalies” in the tax system, noting a “big gulf ” in the way high street stores and online retailers are taxed.
The Guardian, Page: 1 The Times, Page: 13 The I, Page: 8 Daily Mirror BBC News
Hague: Some taxes have to go up
Former Conservative leader Lord Hague has said that some business and personal taxes “have to go up” to keep the nation’s debt burden sustainable, arguing that those who oppose increases to taxes in the current climate are buying into “dangerous illusions”. Writing in the Telegraph, Lord Hague says: “It pains me to say, after spending much of my life arguing for lower taxes, that we have reached the point where at least some business and personal taxes have to go up”. Pointing to “press briefings and speculation”, Lord Hague says the Chancellor is set to use his Budget to announce tax rises while adding to the “colossal support he has given to households and businesses since the pandemic began”. Saying that while there are “certainly circumstances” where lower tax rates generate more revenue, this may not be the case with the levies Rishi Sunak is reportedly considering raising. Lord Hague argues: “If the Chancellor chooses his measures judiciously, he can certainly raise more revenue with some higher tax rates.”
Ministers are being urged to save Social Investment Tax Relief (SITR), a relief that helps social enterprises, community groups and charities deliver essential services. Big Society Capital is urging policymakers to protect SITR and give key organisations within the sector the power to reform it. The group has written to Jesse Norman, the Financial Secretary to the Treasury, outlining the reasons to keep SITR in place. They argue that the tax relief will help the Government fulfil its “levelling up” agenda by ensuring areas worst hit by the pandemic have access to funding. A poll shows that two-thirds of people support tax relief for businesses that aim to improve society and the environment.
Online sales tax may hit consumers
Connor Coombe-Whitlock in the Express considers the merits of an online sales tax, citing comments from KPMG’s Melissa Geiger who suggests that it is probable that such a levy “would be passed onto consumers rather than being borne by the retailer.” Suggesting that the Chancellor may see an online sales tax as a way to rejuvenate high street retail, Ms Geiger says it is “likely that something more comprehensive will be needed to help the high street.” Mr Coombe-Whitlock also notes the potential impact on smaller online retailers, with Beverley Wakefield of Vibrant Accountancy saying she is “concerned that small business owners will be penalised in new tax measures.”
Firms fear taxing time and Budget battering
Matthew Lynn in the Telegraph says most businesses are expecting a “battering” in the Budget, pointing to speculation over an increase in corporation tax, an online sales tax and a rise in capital gains tax. He suggests that among the possible tax rises, the Chancellor should “at least throw a few morsels in the direction of business”, proposing increased incentives for investment and a “radical simplification that sweeps aside dozens of fiddly reliefs and allowances”. Mr Lynn, questioning the need for tax increases, says corporate taxes are “always passed on to individuals one way or another, it is just a question of how and when”.
The Times says that while the Budget will see fuel duty frozen for the 10th year in a row, the Chancellor is expected to announce “a series of stealth taxes”, with the basic rate and higher rate thresholds for income tax set to be frozen at £12,500 and £50,000 respectively, with the lifetime allowance for pension savings also in line to be frozen.
The Times, Page: 13 The I, Page: 9
Chancellor may plant the seed for increases
Nimesh Shah of Blick Rothenberg suggests the Chancellor could use tomorrow’s Budget to “plant the seed” for breaking a manifesto promise not to increase income tax, national insurance and VAT, citing the “unprecedented times”. He also suggests a temporary windfall tax taking in income and capital gains “may be tested”.
The Times, Page: 13 The I, Page: 9
Sunak abandons the goal of low corporate taxes
Reflecting on a possible rise in corporation tax, the FT suggests an increase for a year or two could serve as “a windfall tax on the businesses that thrived in the pandemic”.
The Financial Reporting Council (FRC) has delivered a second report into KPMG‘s audit work of collapsed construction firm Carillion, with the latest report covering the audit of Carillion’s financial statements for the year ended December 31, 2013. The FRC previously delivered findings on audit work between 2014 and 2017. The report will be published once KPMG has reviewed the findings. The regulator will then decide on appropriate sanctions
The Times, Page: 42
SMEs NEWS – TUESDAY 2ND MARCH 2021
£520m support for small businesses
Rishi Sunak is set to announce a £520m scheme that will help 130,000 UK SMEs access management training, technology advice and discounted software. The Help to Grow scheme will offer two streams, with the digital strand an online service offering free advice on how companies can improve their digital capability as well as vouchers for discounts on approved tech, while the management portion will provide subsidised training to “enhance the skills of leaders” in areas such as financial management and marketing. The Federation of Small Businesses welcomed the news but warned: “We cannot allow poor infrastructure through a lack of broadband or 5G to prevent small firms from getting a foothold on to important schemes like this.” The Chancellor said: “Brilliant small and medium-sized enterprises are the backbone of our economy – creating jobs and prosperity.” He added: “Help to Grow will ensure they are embracing t he latest technology and management training, fuelling our plan for jobs by boosting productivity.”
The Times, Page: 36 The Guardian, Page: 19 Daily Mail, Page: 8 The Independent, Page: 45 Daily Express, Page: 9
CORPORATE NEWS – TUESDAY 2ND MARCH 2021
Greensill funds frozen
Credit Suisse has suspended funds investing in Greensill Capital’s products, freezing $10bn worth of funds linked to Greensill, while SoftBank has substantially written down its $1.5bn investment in the lender. Greensill has appointed Grant Thornton to oversee a possible restructuring, saying it “could file for insolvency”. It is believed to be in talks over a $100m sale of its operating business to Apollo Global Management.
Halfords is to pay back £10.7m in furlough scheme cash to the Government after enjoying better than expected sales at the start of this year, however it has yet to confirm whether it will repay business rates relief, having previously said the issue was “under review”.
Barcelona CEO Óscar Grau is among four people who have been arrested as part of an investigation into an alleged misuse of funds and corruption at the Spanish football club. It is noted that PwC was last year employed to look into issues following an internal investigation.
The Telegraph looks at the market for anti-Brexit newspaper The New European, with KPMG’s David Elms noting that it could “carve out a corner of the market and make a small profit” due to a low cost base and “niche but quite loyal” audience, while musing on how it could “increase the top line”.
The Daily Telegraph, Page: 4
PROPERTY NEWS – TUESDAY 2ND MARCH 2021
Housing market faces pressure
With Bank of England data showing borrowers took on an extra £5.2bn of debt for home purchases in January, Howard Archer, chief economic advisor to the EY Item Club, has warned that support to the housing market coming from the rise in the stamp duty threshold “has recently started to wane”. With it reported the Chancellor could extend the stamp duty holiday until June, Mr Archer says this “would likely provide near-term support to housing market activity and prices” but adds that the housing market is “likely to come under mounting pressure over the coming months”, saying the recent strengthening in the market “has been disproportionate given the economy’s contraction over 2020 and rising unemployment.”
A consortium led by Hong Kong based real estate company Wing Tai Properties has agreed a £255m deal for London’s Athene Place, one of Deloitte’s UK bases. Henderson Park acquired the office in 2018 after Deloitte vacated the building, refurbishing the site and agreeing a pre-let back to Deloitte.
EMPLOYMENT NEWS – TUESDAY 2ND MARCH 2021
CIPD: Apprenticeships levy ‘has failed on every measure’
The Chartered Institute of Personnel and Development (CIPD) says employer investment in training has fallen since the introduction of an apprenticeship levy in 2017, with a decline in apprenticeship starts and fewer going to young people. The HR industry body says total apprenticeship starts have fallen from 494,000 in 2016/17 to 322,500 in 2019/20, with the number of apprenticeships going to under-19s falling from 122,800 to 76,300 in the period. Peter Cheese, chief executive of the CIPD, said: “On all key measures the apprenticeship levy has failed and is even acting to constrain firms’ investment in apprenticeships and skills more broadly.” He warned: “Without reform it will act as a handbrake on employer investment in skills, damaging firms’ ability to recover from the pandemic.”
A report from PwC shows that the coronavirus crisis has halted and reversed years of women’s progress in the workplace, with women more likely to lose their jobs or be furloughed. The report says female-dominated industries have the highest share of furloughed jobs, with more than half of those on the scheme women, even though only 48% of the workforce is female. The report says the pandemic has halted nine years of “consistent gains towards women’s economic empowerment”, with PwC’s Laura Hinton saying the findings reveal the “very real” impact of the pandemic on women.
Daily Mail, Page: 12
Office return off the agenda?
Hugo Rifkind in the Times considers whether the end of restrictions will see a broad return to offices, noting that a number of large UK firms, including PwC, are looking into moving toward hybrid working. On what a shift toward remote work could mean for cities, he cites PwC analysis suggesting the population of London could decline by up 300,000 this year.
A report from EY shows that 7,600 jobs in the financial sector have moved abroad because of Brexit, with 100 relocated since October. In total, 43% of businesses in the sector have moved or plan to move some of their operations or staff to the EU. EY found that Dublin and Luxembourg were the most popular alternatives to Britain. The firm’s Omar Ali commented: “Financial services firms across Europe have a number of chapters still to write before they can close the book on Brexit.” Meanwhile, more than a quarter of firms polled by EY said that Brexit was having a negative impact on their business.
Bank of England data released yesterday shows that consumer borrowing fell at its fastest pace since May 2020 in January. The £2.4bn decline in unsecured lending to consumers was the steepest fall since the £4.5bn recorded in May 2020. January’s total takes the year-on-year fall to 8.9%, the biggest decline since monthly records began. The figures show that British lenders approved almost 99,000 mortgages in January, down from 102,800 in December. British households paid back £2.4bn of borrowing on credit cards, personal loans and overdrafts in the first month of 2021. The total amount outstanding on credit cards and loans shrank to £199.4bn, falling below £200bn for the first time since April 2017.
The IHS Markit/CIPS Purchasing Managers’ Index for February increased to 55.1 in February from 54.1 a month earlier, with UK manufacturing activity returning to its highest levels since the start of the most recent lockdown. The index, where a reading above 50 signifies growth, shows that optimism rose to a 77-month high last month. Despite this, 58% of companies reported longer delivery times from suppliers. Rob Dobson, director at IHS Markit, commented: “The UK manufacturing sector was again hit by supply chain issues, COVID-19 restrictions, stalling exports, input shortages and rising cost pressures in February.” He added: “Look past the headline PMI and the survey reveals near stagnant production, widespread shipping and port delays and confusion following the end of the Brexit transition period.”
The Guardian City AM
OTHER NEWS – TUESDAY 2ND MARCH 2021
Ministers urged to invest in schools
A letter to the Times says disruption to education bought about by the coronavirus crisis means young people, especially those from low income or disadvantaged backgrounds, are “less equipped to demonstrate their potential and gain access to the opportunities they deserve.” Signatories including Deloitte chair Nick Owen urge the Chancellor to set out a national recovery plan for young people in the Budget, calling for extra investment in schools serving the hardest-hit communities for at least five years as a first step.
Cameron joins calls to resist tax increases in Budget
Rishi Sunak will call for “honesty” about the need to reduce spending when he delivers his Budget speech on Wednesday, Treasury sources have said. “You will hear the word honesty used a lot. He will be very clear to people that we’ve spent at wartime levels to get people through this, which was the right thing to do, but this can’t go on forever,” they said. Meanwhile, senior Conservatives including former prime minister David Cameron are warning the Chancellor not to use major tax hikes to balance the books. In an interview with CNN, Mr Cameron said that tax increases “wouldn’t make any sense at all” before the economy was up and running again. His comments come as Tory and Labour MPs plot to thwart an increase in corporation tax, leading Downing Street to threaten to remove the party whip from Tory MPs who rebel against the Budget. Meanwhile, the left-leaning think tank the Institute for Public Policy Research should use increases in CGT, corporation tax, wealth tax and a land value tax to raise £55bn while injecting a further £190bn into the economy to lay the ground for a “balanced recovery.”
Sunak likely to freeze lifetime allowance, higher tax rate
The Times reports that Rishi Sunak is expected to announce that the lifetime allowance will be frozen for the rest of this parliament at just over £1m. If the lifetime allowance rose in line with inflation it would increase by £88,900 by the end of this parliament. However, freezing the allowance means the additional pension savings will face the 25% levy – equivalent to £22,225. It is also understood that the Chancellor will freeze the £50,000 threshold for the higher rate of income tax, but resist freezing the £12,500 threshold amid concerns it will hit low earners. Freezing the higher rate would create 800,000 more higher-rate taxpayers, according to the Resolution Foundation.
Mel Stride, the chairman of the Treasury Select Committee, has warned of a backbench rebellion if the Rishi Sunak raises capital gains tax. “If you were going to align income tax rates to capital gains tax, I think it would be extremely problematic,” he said. Landlords would be hit particularly hard by a hike in CGT, the Telegraph notes, with those in London potentially facing an average bill of £27,000, according to Hamptons. Separately, Bridget Phillipson, shadow chief secretary to the Treasury, said now was not the time to be putting up taxes on families and businesses that are struggling. She added: “Not only can they not bear that, but it would hamper the recovery that we want to see.”
Asda has launched a restructuring that could put 5,000 jobs at risk, the group has said. A spokesman said that the shake-up was not linked to Asda’s new ownership after the £6.8bn takeover by EG Group and TDR Capital, but was part of a new focus on the online grocery market. EG released financial results for its petrol forecourt empire and also told investors that its accounts would be late as KPMG, its new auditor, required more time “to complete their period of transition and to establish an audit team that is capable of preparing for and carrying out an audit of the size and scale of EG Group”. Deloitte resigned as auditor of the group in October over corporate governance concerns.
New figures from the Department for Business show that councils across Britain failed to hand out more than £1.6bn of emergency Covid grants to struggling businesses, causing fury in Whitehall. Craig Beaumont, of the Federation of Small Businesses, said: “We should be seeing local authorities in a big race to stop supply chain businesses going bust, yet most are still at the start line and have not got discretionary grants out the door. Full discretion has made councils afraid of making mistakes and wanting more guidance from government, while government insists all instruction has been given.”
The Social Market Foundation estimates that some 770,000 families are at risk of losing their homes if they suffer a loss in income when a ban on repossessions ends in April. A quarter of the homeowners at risk of having their property repossessed work in the retail and manufacturing sectors, the SMF said. Scott Corfe, research director at the SMF, warned the Government needs to prepare for “a possible spike in evictions and repossessions” given many households will not be able to pay their mortgage if they lose their jobs.
Latest lockdown saw businesses furlough 900,000 in January
New figures show that the latest lockdown saw businesses furlough another 900,000 jobs last month. A total of 4.9m wage bills were paid by the Treasury under the furlough scheme at January’s peak, surging from below 4m for most of December when more businesses had been allowed to open. It took the number paid to stay at home to its highest level since the end of July. Data from HMRC show that number fell to 4.7m by the end of last month.
Global financial system skewed in favour of wealthy, UN panel says
The UN panel on financial integrity for sustainable development has urged governments to overhaul tax rules and the banking system to help end poverty and tackle the climate emergency. Systemic tax abuses, corruption and money laundering are leaving billions of people trapped in poverty. The panel of world leaders, central bank governors and business and civil society representatives said up to 10% of the world’s wealth could be hidden offshore at a time when governments were under growing financial strain because of the Covid pandemic, and as inequality soars.
ECONOMY NEWS – FRIDAY 25TH FEBRUARY 2021
Return to growth expected in second half
PwC is predicting growth of up to 4.6% for Scotland this year as the country’s economy recovers from the pandemic. After an estimated drop of 10.6% in GDP last year, the economy north of the Border is expected to grow by between 3.6% and 4.6% in gross value added (GVA) terms in 2021, depending on the speed of the recovery. For the UK as a whole, PwC believes the economy will see negative growth in the first quarter of up to -2.8%, followed by a gradual return to growth from the second quarter.
INTERNATIONAL NEWS – FRIDAY 25TH FEBRUARY 2021
Head of EY Germany set to step down amid Wirecard scandal
The FT reports that EY Germany head Hubert Barth, the longstanding auditor of disgraced payments firm Wirecard, is expected to step down from the role.
London has overtaken New York as home to the highest concentration of dollar millionaires in the world, according to a report by the property consultants Knight Frank. Some 874,354 people in London have assets, including property, worth more than $1m compared with 820,000 in New York. The Knight Frank wealth report shows that despite the economic destruction wrought by the pandemic on millions of people with modest incomes, those who were already very rich have been able to increase their fortunes.
Art sell off pre-empts CGT rise
Artworks by Vincent van Gogh, Lucian Freud and Henry Moore are being sold off by a British family concerned about an imminent rise in capital gains tax. Thomas Gibson, a London art dealer, and his three sons have decided to sell the work which has a total valuation of almost $23m in New York. La Mousmé, a drawing by van Gogh, is valued at up to $10m by Christie’s.
For anyone who missed filing their 2019/2020 self-assessment tax return, a reminder that the extended filing deadline ends on 28th February 2021. Filing after this date could lead to a £100 penalty. A reminder also to pay any tax due by 1st April 2021 at the latest, to avoid a 5% late payment surcharge.
If you need help with your tax affairs – contact Paul Southward or your usual KSK contact.
TAX NEWS – THURSDAY 25TH FEBRUARY 2021
Sunak to use US example for corporate tax increase
Rishi Sunak is expected to announce a sharp rise in Britain’s corporation tax rate with officials suggesting the rate could rise to 25% or more over the course of the parliament. The Chancellor will point to US plans to hike the tax and the fact that the UK’s rate will remain competitive within the G7. Meanwhile, Labour leader Sir Kier Starmer indicated that his party would oppose any rise in corporation tax. Sir Kier, who stood on a 2019 manifesto to raise corporation tax to 26%, told MPs it was “not the time for tax rises for families and for businesses.” After a backlash, the position was softened with a Labour source saying last night that the party would back a steady minimal increase later in the parliament. The Mail reports that the Chancellor is expected to shelve plans to raise fuel duty and intends to extend the stamp duty holiday until the end of June. The Express leads with news that senior Tory figures and business groups are urging Mr Sunak not to increase the tax burden and focus instead on freeing businesses to spur a recovery.
The Government has considered extending the self-employed income support scheme to new freelancers, the Telegraph reports, but civil servants raised concerns over the number of freelancers yet to file their returns. Reportedly, some 1.5m people are yet to sort out their taxes, after HMRC said no one would face fines as long as they filed by the end of February. Andy Chamberlain of IPSE, a freelancer trade body, said: “It would be a major kick in the teeth for people who have taken advantage of lenient tax return rules to be penalised.”
Stephen Barclay, the Chief Secretary to the Treasury, told MPs on Wednesday that free ports planned for the UK would not be allowed to provide tax breaks to those wanting to import luxury goods. Those bidding to host the ports must demonstrate that they will help regenerate the local area, Barclay added, while other officials warned that ministers had the power to “de-designate a tax site if there is lots of non-compliance”.
Express & Star
Surge in phone scams recorded
Reports of fraudsters calling taxpayers pretending to be from HMRC surged 200% between December and January – from 10,997 to 33,053 – the Revenue said. Scammers usually offer fraudulent rebates but they have also threatened legal action over unpaid tax or sent emails or texts offering fake government support or grants.
TheCityUK has called for the launch of a tax simplification programme in Rishi Sunak’s Budget, which it says would “have a positive impact on inward investment and the overall attractiveness of the UK’s business environment”.
REGULATION NEWS – THURSDAY 25TH FEBRUARY 2021
BoE governor warns EU over derivatives clearing power grab
Attempts by Brussels to force banks to move all clearing of euro-denominated derivatives from London to the eurozone risks a “serious escalation” in tensions in its relations with the UK, Andrew Bailey warned yesterday. Brussels has granted EU banks temporary access to UK-based clearing houses but expects them to move their euro-denominated trades into the bloc by mid-2022 when equivalence lapses. The governor of the Bank of England told MPs the EU have their eye on forcing other overseas banks to shift their euro-denominated trades to the eurozone too in a resurgence of the EU’s location policy. “The issue of location policy is not a new one,” he said. “It would be very controversial in my view because legislating extraterritorially is controversial anyway, and obviously of dubious legality frankly.” Mr Bailey went on to say that an agreement with the EU on financial services was preferable, but “there ’s a point beyond which the deal is not worth having”.
High Court orders FCA to halt Danish tax fraud probe
The High Court has ruled that the FCA should stop disciplinary proceedings against a businessman accused of defrauding Danish authorities while judges decide a lawsuit brought by the country’s Tax Administration.
Asda’s new owners appoint another heavyweight director
The Issa brothers have appointed another senior director to their petrol station empire as they move to assuage concerns over corporate governance. Dame Alison Carnwath will join the board of EG Group as the head of the audit committee, Mohsin and Zuber Issa announced. The Mail notes that Deloitte resigned in October as auditor due to concerns over governance and internal controls.
Daily Mail, Page: 79
Ratesetter may need more financial support
Ratesetter faces “material uncertainty” over its status as a going concern, according to its latest accounts. EY said that the company “may not have sufficient capital to continue to meet its regulatory capital requirements” unless Metro Bank, which bought the peer-to-peer lender last year, injects more funds.
The future promises a ‘hybrid’ approach of working
The Scotsman considers the future of work since the pandemic has altered practices so acutely. A report from specialist recruiter Robert Half found that about 90% of UK firms expect hybrid workforces to become a permanent part of working life. The report comes after PwC said in December that it was reviewing the layout and technology of all of its offices to ensure they were “best equipped for a hybrid working world”. KPMG later said it was “preparing for a future of hybrid working,” and this year will spend a further £44m to transform its offices and invest in new home working technology for staff.
PENSIONS NEWS – THURSDAY 25TH FEBRUARY 2021
Cut to pension tax relief inevitable
The Express reports that Rishi Sunak could slash pension tax relief, citing Tim Stovold of Moore Kingston Smith who said a cut was inevitable as the benefit was too generous. However, the change may not necessarily come in this Budget as it doesn’t immediately collect large amounts of tax.
ECONOMY NEWS – THURSDAY 25TH FEBRUARY 2021
Lifting restrictions should see economic bounceback
The governor of the Bank of England told MPs on Wednesday that the economy was performing better than expected considering the Covid restrictions, citing the adaptability of the British people. Andrew Bailey said the Prime Minister’s reopening roadmap should result in the economy growing rapidly over the next six months, getting GDP back to its pre-Covid levels by early 2022. Ben Broadbent, Deputy Governor for Monetary Policy, added that experience from last summer suggested that when restrictions are lifted there should be a bounceback in spending.
KPMG has entered into exclusive talks with private equity firm HIG Europe about the sale of its UK restructuring business, according to Sky News. Reports indicate that HIG has lined up John Connolly, the former chairman of Deloitte, to chair the business. If the deal goes ahead, it will represent the most valuable disposal to date by one of Britain’s big four auditors. The news comes a week after Deloitte confirmed that it was selling its restructuring arm to Teneo. Sky News notes that the Big Four have all submitted plans to the Financial Reporting Council demonstrating how they intend to ‘operationally separate’ their audit and consulting arms during the next four years.