in the spotlight

In the spotlight: Our monthly news round-up (January 2019)

Posted by
Rouse Partners
03.01.2019

Now it is easy to keep up-to-date, with our monthly ‘In the Spotlight’ news round-up – a hand-picked summary of key tax news and industry developments. If you have any questions on how any of these affect you personally, please do not hesitate to contact us.

Brexit

Brexit withdrawal deal rejected: So what next? – As the Brexit withdrawal agreement was rejected by MPs, what could this mean for Brexit and what might we expect to happen next? Following the Brexit vote, Kate Nicholls, Chief Executive of UK Hospitality, of which Rouse Partners are members, concluded a briefing with No 10, the Chancellor, Business Secretary and Brexit Secretary on the vote and next steps. Our article goes through the key points from the discussion, click here to read.

Brexit transition risks lower VAT threshold – MPs have warned that thousands of SMEs will face more tax and red tape if European Union rules on VAT are allowed to continue after Brexit. New EU plans would see small and medium-sized enterprises forced to register for VAT when their turnover hits €85,000 (£76,700), below the current British threshold of £85,000. “A reduction in the VAT threshold would be a kick in the teeth for many of our smallest businesses. UK firms are already dealing with rising upfront costs and facing significant changes to their trading conditions in light of Brexit. Lowering the threshold could prove to be a tipping point for many small companies and entrepreneurs,” said Suren Thiru, head of economics at the British Chambers of Commerce. It is estimated that VAT registration takes a working week out of time for a business. Chancellor Philip Hammond announced in his Budget that the threshold would stay at £85,000 until 2022 “to give small businesses certainty”, to the relief of companies. But under the plans for a transition period after Brexit, the UK expects to follow EU rules until at least the end of 2020, and possibly until 2022. As a result, the lower EU threshold would override Britain’s £85,000 cut-off for up to four years. (Source: The Daily Telegraph, 27/12/18)

Brexit will bring only short-term pain – France is expected to become the world’s sixth largest economy in the year ahead as Brexit takes its toll on UK prospects. The Centre for Economics and Business Research (CEBR) predicts an “inevitable” loss of inward investment in 2019 leading to economic disruption, however, Britain should return to 6th place in 2020 and hold it until at least 2033. The CEBR’s deputy chairman Douglas McWilliams said that although Brexit will be disruptive in the short term, “long term it is unlikely to do much damage to the UK economy and might, on some assumptions, boost it.” (Source: Metro, 27/12/18)

Hammond would look at tax changes under ‘no deal’ Brexit – Philip Hammond has confirmed the government would consider tax changes to counter the economic impact of a ‘no deal’ Brexit. Appearing before the Treasury Select Committee yesterday, the chancellor also said the government would be forced to borrow billions more to keep blood in the veins of the economy. Mr Hammond has previously hinted that he could dramatically cut business tax in order to pull in investment in the event of no deal. Meanwhile, The Times’ annual survey of economists has echoed this, suggesting that leaving the EU without a deal would trigger a cut in taxes and interest rates and lead to the return of quantitative easing. The 52 economists surveyed all agreed that a disorderly Brexit would require intervention from the Bank of England and the Treasury. Some 42% of the respondents thought that there was at least a one-in-five chance of Britain leaving the EU without a deal, either by crashing out or on “managed” WTO terms. (Source: The Times, 29/12/18)

Individuals

Tax return time increases – A survey of 4,500 taxpayers by consumer group Which? indicates that those who have already filed their self-assessment tax return spent nearly three-and-a-half hours completing it – longer than the average of two hours and 48 minutes respondents said they spent last year. The poll also saw a third of taxpayers say they have yet to start their tax return ahead of the deadline at the end of January. (Source: Mail on Sunday, 23/12/18)

Thousands file tax returns on Christmas Day – Some 2,616 tax returns were filed on Christmas Day, according to HMRC data, 204 between midnight and 8am, 1,372 between 8am and 4pm and 1,040 from 4pm to midnight. On Boxing Day, 8,465 returns were submitted, with 348 received before 8am, 4,492 between 8am and 4pm and 3,625 over the rest of the evening. HMRC director-general for customer services Angela MacDonald said: “Whether you fit it in while cooking the Christmas turkey, or after the kids have gone to bed, or after the Queen’s Speech, our online service is available for you to file your tax return at a time that suits you.” (Source: 28/12/18)

Tax trap catches out new mums – Royal London has reported that tens of thousands of women have missed out on national insurance credits by failing to register for child benefit because their incomes are too high. Many parents are unaware that simply registering allows a stay-at-home parent to earn national insurance credits for years spent out of work, until their child is 12. However, once parents realise they should be registered, they can claim only three months of backdated credits. The scale of the problem has grown since the introduction of an income cap on child benefit in 2013. (Source: The Sunday Times, 9/12/18)

Tax breaks attract investors to Aim – Leading fund managers say now is a great time to seek out potential bargains on London’s Alternative Investment Market (Aim), after it fell by more than 11% during “Red October”. Aim has seen its popularity surge in recent years, partly because of the generous IHT relief on offer from many Aim-quoted stocks through business relief. (Source: The Sunday Telegraph, 9/12/18)

Charitable Brits missing out on tax breaks – Harry Brennan in the Telegraph says that while the UK is giving more to charity than ever before, those making donations are not making full use of tax breaks. He notes that while the value of declared donations has increased every year since 2011/12 – hitting almost £3bn in 2016/17 – the number of people who declare their donations via self-assessment tax returns has stalled. (Source: The Daily Telegraph, 22/12/18)

Businesses

Small firms advised to get in the cloud – The government’s Business Productivity Review is expected to urge Britain’s 5.7m small businesses to adopt basic technology such as cloud computing software to improve productivity. The consultation was launched in May to address the problem of businesses that lag far behind productivity levels in the rest of the developed world. (Source: The Sunday Times, 9/12/18)

London Mayor to help small firms businesses scrap vans – London Mayor Sadiq Khan has announced plans for a £23m scrappage scheme to help micro-businesses with fewer than 10 employees switch from vans with high emissions to cleaner models as tougher pollution rules are introduced next year. Mr Khan has written to environment secretary Michael Gove asking him to match the funding so scrappage grants can be offered to many more small businesses whose vehicles regularly enter the ultra-low emission zone in central London. (The Times, 19/12/18)

UK businesses not ready for Brexit – According to research by Ready For Brexit only 20% of SMEs are prepared for Brexit. The consultancy group said that unlike large multinationals, who have the money, staff and resources to prepare as best they can, the vast majority of Britain’s army of small businesses cannot. Ready For Brexit chairman Paul Hodges said that unlike its European counterparts, the Government did not properly engage with business groups at an early stage to determine what support they needed. (Source: Sunday Express, 16/12/18)

Auto-enrolment loophole to hit low-paid savers – The life insurer Royal London has warned that hundreds of thousands more low-paid workers could be caught out by an anomaly that means it costs them more to save into their work pension pots. Around 1.22m workers who earn enough to be auto-enrolled into a pension by their employer but not enough to pay tax are already losing out on tax relief on their contributions. The Department for Work and Pensions announced last week that the point at which someone qualifies for an auto-enrolled pension would remain at £10,000 in April 2019. However, at the same time the point at which income tax starts being paid is rising from £11,850 to £12,500. (Source: The Sunday Times, 9/12/18)

Construction/property

Tax sting for new-build homeowners – Anyone buying a new home off-plan could be faced with a tax bill for tens of thousands of pounds following a court ruling this week. When Desmond Higgins sold his two-bedroom flat in the former St Pancras Station Hotel, London, HMRC handed him a CGT bill of £61,383, which included the gain made between 2004 and 2010, when the flat had not yet been built. Higgins said that he could not live in the property because it did not exist, but the Upper Tribunal this week ruled in HMRC’s favour. The ruling could have wide tax implications for buyers suffering construction delays. (Source: The Times, 8/12/18)

Londoners turn away from capital in search of cheaper homes – Homebuyers from London have spent £30bn buying property in the provinces over the past year as they seek out better value, says Hamptons International. The number of homes bought by homebuyers originating from the capital was 3.8% higher than last year and more than any other year since 2007 at 74,350. But the agent’s head of research, Aneisha Beveridge, believes that with a slower housing market in 2019 the number of London leavers is likely to have peaked. (Source: The Times, 27/12/18)

UK house prices edge up – Amid large regional variations, British property prices increased 1.02% overall this year according to Zoopla, taking the collective value of UK homes to £8.29trn, up £83bn since January. In Scotland, property values rose 6.43%, in Wales 3.98%, while England saw prices edge up by 0.58%. The seaside town of Ryde on the Isle of Wight was named Britain’s property hotspot, with house prices rising by more than 10% this year to £242,016, while house prices fell the most in Alnwick, Northumberland, where they dropped 6.58% to £238,802. (Source: Daily Mail, 28/12/18)

First-time buyer numbers rise – Homeownership among young families is rising for the first time in 30 years, research has revealed. Around 28% of couples aged between 25 and 34 and who have children now own a home, according to the Resolution Foundation – up 3% from the all-time low of 25% in 2016. The think tank also revealed that the number of young families who rent their homes has risen from 9% to 34% over the past 30 years. (Source: BBC News, 23/12/18)

Buy to let

‘Plan now to beat chancellor’s property relief cuts’ – Landlords and those aiming to sell their homes in the next two years should plan for cuts to CGT relief and a restriction to lettings relief, as announced in the 2018 Budget. (Source: Financial Times, 13/12/18)

Why doing laundry at mum’s can cost you thousands in tax – The Telegraph’s Laura Miller looks at some of the pitfalls facing homeowners with multiple residences who want to avoid CGT on a second property. In a recent court case, Hezi Yechiel lost his legal fight with HMRC over a property on which he was trying to claim a CGT exemption of private residence relief. Even though both sides agreed Mr Yechiel usually slept there, other personal living habits counted against him, including the fact he washed his clothes at his parents’ house. (Source: The Daily Telegraph, 21/12/18)

Property loses its lustre with overseas landlords – Overseas landlords are abandoning Britain’s property market as growth slows and a tighter tax regime combined with a fall in sterling dampens their investment returns.

Recruitment

Record number of British workers switching jobs – Analysis of official figures shows that British workers are switching jobs in numbers not seen since 2004 with employers struggling to hold on to staff as workers seek higher pay. Analysts say this reflects a strong economy and expect average earnings to rise by 3.5% in 2019, up from 2.9% in 2018. However, recruiters say employers are now quicker to offer flexibility as well as more cash, while workplace culture is also a key factor prospective employees are looking for. (Source: Daily Telegraph, 28/12/18)

Technology

HMRC rules crypto investors will pay CGT – HMRC has ruled that crypto investors cannot classify their investments as “gambling”, winnings which would have been tax-free. In a long-awaited policy update, HMRC said cryptoassets counted as “chargeable assets” for capital gains tax “if they were both capable of being owned, and had a value that could be realised.” Experts had warned that the “gambling” loophole, which appeared to allow cryptocurrency investors to reduce their gains to zero, could potentially lead to millions in lost revenue for the Exchequer. (Source: The Daily Telegraph, 20/12/18)

Hospitality

MPs to launch fresh inquiry into business rates – The business rates system will be subject to a new inquiry by the Treasury select committee in the new year, the Telegraph reports. Nicky Morgan MP, chair of the committee, will hold a joint evidence session with the Housing, Communities and Local Government Committee on Wednesday to agree the terms of reference ahead of its inquiry. Amongst other points, the inquiry will consider how to tax the booming digital economy to benefit the UK’s struggling high streets. (Source: The Times, 20/12/18)

Heston cooks up complex tax structure – Heston Blumenthal is facing questions over his tax affairs after it was revealed his restaurants are controlled by a company registered in a Caribbean tax haven. Professor Richard Murphy, a tax expert at the University of London, said: “Heston Blumenthal may be a good cook, but his business affairs are shrouded in a cloud of mystery. Who really owns his restaurants [and] how much they really make is simply not known.” (Source: Daily Mail, 13/12/18)

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