November 2018

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

Hammond: ‘Brexit deal dividend’ would deliver economic boost – Britain could see an economic boost if it successfully negotiates a Brexit deal with the European Union, the chancellor has said. Philip Hammond told the BBC that there has been a “measurable change of pace” in talks, adding to the sense of optimism that a deal could be imminent. He said there were still hurdles, but the “process” was much more positive. (Source: BBC News, 13/10/18)

UK businesses dismissive of immigration plans – Businesses across the UK have strongly rejected the government’s latest proposals to cut “low-skilled” immigration after Brexit, arguing that the changes would mean price hikes leading to lower standards of living. The reaction came after Sajid Javid confirmed that EU and non-EU migrants will be treated the same after Brexit. In response, Mr Javid told firms to wean themselves off cheap foreign labour. (Source: The Daily Telegraph, 3/10/18)

Brexit boom for graduates – The Times’ Rosemary Bennett reports that there will be more jobs in the public sector for graduates next summer than in accounting and professional services for the first time in a generation. The hiring spree is largely down to preparations for Brexit, she adds. (Source: The Times, 3/10/18)

Individuals

HMRC to review 30,000 tax returns – Approximately 30,000 people are to have their tax returns reviewed by HMRC over fears they have been overcharged. An error in the Revenue’s calculations relating to the personal savings allowance and the dividend allowance means thousands of people may have received incorrect tax bills in 2016-17. HMRC will start its investigation on November 19 and individuals affected will receive a new calculation. Those owed money should be given a rebate, although if any additional tax is due people will have just 28 days to pay the bill before interest and late-payment penalties kick in. HMRC said that only about half the returns it has identified for review are likely to need amending. (Source: The Sunday Times, 28/10/18)

Hammond announces tax cuts for 32m people – From next April people will be able earn £12,500 a year tax-free and will not pay 40% tax until they earn more than £50,000. Those earning £12,500 will save £130 a year compared to their current income tax bill thanks to the rise in the personal allowance. Those earning £50,000 will keep an extra £860 compared to their current income tax bill, reduced to £520 once NI is taken into account. The announcement by the Chancellor in his Budget yesterday brings forward the Conservative manifesto pledge to raise the thresholds from 2020. (Source: City AM, 30/10/18)

Name checks to begin on bank payments – As part of plans to combat fraud, the name of someone receiving a payment will be as important as their bank details for the first time from next summer. The plans, which have been revealed by Pay UK, will alert the sender if the name does not match the account. It is designed to combat cases when fraudsters mimic a genuine business and attempt to trick people into sending money to an account controlled by the con-artist. (Source: BBC News, 19/10/18 )

London tops IHT league – Families in west London pay an average of £390,000 inheritance tax per estate – more than people anywhere else in Britain. A freedom of information request by Direct Line shows that 118 estates in the area paid £46m of inheritance in total tax between 2015 and 2016. Estates in northwest London postcodes were liable for the second-highest bills at an average of £381,546. This was followed by southwest London at an average of £346,565. HMRC said that rising house prices contributed to a £17bn increase in the value of estates between 2009-10 and 2015-16. (Source: The Times, 24/10/18)

…meanwhile, Parents give away £227bn to save on IHT – Research from Direct Line reveals a fifth of parents have given money to their children in an attempt to reduce the amount of inheritance tax their families will have to pay when they die. A total of £227bn has been transferred, with the average value of assets given away £32,920. A further 19% of parents have not given their children any money yet, but plan to do so in the future. (Source: Moneywise, 9/10/18)

Consumer borrowing down – British consumers have reined in their borrowing, particularly on car finance deals amid falling vehicle sales, according to new figures. A weaker demand for loans and advances was also highlighted. The Bank of England said overall consumer credit growth dropped to 7.7% in September, the lowest since June 2015. Net new consumer borrowing excluding mortgages fell to £800m in September, from £1.2bn in August. (Source: Financial Times, 30/10/18)

Small business

No delay to MTD plans – Business minister Kelly Tolhurst has told small businesses that there will be no further delay to “making tax digital” despite warnings from the Federation of Small Businesses and others that SMEs are not ready for moving tax compliance online and are having to deal with uncertainties around Brexit at the same time. Last month, the ICAEW said 40% of affected businesses were not aware of the change. Ms Tolhurst said: “We’re making sure the communication is there so small businesses know exactly what they’ve got to do. Digitalisation is the way to go. It’s all about making it easier for business, but it’s rightly down to us to sell it to businesses and make sure they understand what the benefits are.” From April, all VAT-registered companies will have to have digital record-keeping for VAT and file VAT returns directly from third-party software. (Source: The Times, 15/10/18)

Businesses welcome rates cut – The Chancellor cut business rates by a third for all retailers in England with a rateable value of £51,000 or less in his Budget yesterday. Philip Hammond claimed the move would save up to £8,000 a year for up to 90% of all independent shops, pubs, restaurants and cafes. Mr Hammond also announced a £675m ‘Future High Streets Fund’ to help councils rejuvenate high streets. Hammond’s rates pledge came under fire from the AAT which said it wants to see “fundamental reform of the broken rates system”. (Source: The Times, 30/10/18)

£3.5bn in tax relief paid out last year – New figures reveal that businesses received tax relief on R&D worth £3.5bn last year, with the total number of claims made under programme growing by 22% between the 2015 and 2016 financial years. More than five in every six tax credit applications in the 2016-17 financial year came from SMEs, which filed £1.8bn of claims. (Source: The Times, 1/10/18)

Service exports surge – Service exports increased to £72.3bn in the second quarter of 2018, up from £66.9bn in the first quarter, and up from £68.6bn during the same period in 2017, according to the ONS. Exports to the EU increased by more than any other region between the first and second quarter. However, the US remained the UK’s largest single country trade partner, buying £15.2bn of British services in the second quarter. ‘Other business services’ – including legal, accounting and advertising – was the biggest type of exported services, followed by financial services. (Source: The Times, 25/10/18)

Asset seizures rocket in tax clampdown – Nearly 3,000 businesses had assets seized by HMRC last year for not paying tax on time. The increasingly aggressive debt collection policy has led to calls for a review of the approach. The number of firms facing asset seizures jumped 45% from 2016-17 and has increased more than fourfold since 2014-15. (Source: City AM, 15/10/18)

Construction/property

Stamp Duty scrapped for some first-time buyers – Stamp Duty is to be abolished for all first-time buyers of shared ownership properties valued up to £500,000, applied retrospectively to the date of the last Budget, Philip Hammond announced yesterday. The Chancellor also said that a further £500m will be added to the Housing Infrastructure Fund, bringing the total up to £5.5bn. (Source: The Daily Telegraph, 30/10/18)

Estate agents must report suspected money launderers – Launching the latest phase of the government’s Flag It Up campaign, security minister Ben Wallace warned estate agents they have “a moral and legal duty” to report clients they suspect are using illicit gains to buy property. Last year just 710 reports were submitted by estate agents, while 5,036 reports were submitted by accountants and 2,660 were provided by legal professionals. (Source: Evening Standard, 27/10/18)

London developers hit by new stamp duty tax on overseas buyers – Shares in developers reliant on overseas investors to fund new luxury apartment blocks in London fell yesterday after the government announced plans to tax foreign buyers of UK property. (Source: Financial Times, 3/10/18)

Buy to let

Lenders attempt to galvanise B2L market as tax changes bite – Lenders are improving their offer to buy-to-let landlords after changes to the tax rules cut demand for borrowing. Landlords were being discouraged by the stamp duty surcharge on second homes and were slowly losing the ability to offset mortgage interest against profits, experts said. (Source: The Daily Telegraph, 3/10/18)

Accidental landlords could face more tax – Thousands of “accidental landlords” could find themselves facing CGT from April 2020 as valuable tax reliefs are withdrawn. Phillip Hammond announced that he intends to abolish the so-called “letting relief” meaning some property owners could pay thousands of pounds in additional tax. Lettings relief will only apply if the owner of the property lives in the same home as the tenant. (Source: Daily Mail, 30/10/18)

Landlords ‘navigating around’ buy-to-let tax rules – According to data from Mortgages for Business, landlords are increasingly choosing to own properties through companies to get around new tax rules. Research shows that 44% of completed buy-to-let mortgages are now done through limited companies, up 42% from the previous quarter, while the amount of limited company buy-to-let deals rose from 263 in the third quarter of 2017 to 628 in the same quarter this year. (Source: The Daily Telegraph, 25/10/18)

Manufacturing

Manufacturing investment held back – A survey by the EEF manufacturing industry body has found that Brexit was hampering investment, with two thirds of companies intending to hold off increasing investment in the next two years. Only a third of British manufacturers were planning to invest more, the report said. EEF chief economist Lee Hopley commented: “These figures put into sharp focus the widening gap between the investment manufacturers know they need to make to capitalise on growth opportunities and to adopt productivity-enhancing technologies and the hurdles they face in getting those decisions over the line.” (Source: The Times, 1/10/18)

Brexit bites into manufacturing orders – British manufacturing orders fell at their fastest pa ce since October 2015 in the third quarter, according to the latest statistics from the CBI, amid continuing uncertainty over a Brexit deal. (Source: Financial Times, 24/10/18)

Recruitment

Firms struggling to fill roles – As many as 80% of SMEs say that they are struggling to attract staff with the relevant skills, according to recruitment consultancy Robert Half, with employers forced to offer increased salaries in an attempt to attract talented candidates. Matt Weston, UK managing director at Robert Half, said: “Technology and digitalisation is rapidly changing the UK business landscape. This, coupled with Brexit uncertainty, means businesses must adapt their recruitment strategies to ensure they are equipped with the right talent to keep up. However, the skills desired within certain roles remain specialist and unobtainable without presenting a competitive offer. The skills required are changing at a faster pace than their adoption among the mainstream UK workforce.” (Source: The Times, 18/10/18)

No-deal Brexit poses risk to jobs – The Federation of Small Businesses has warned that a no-deal Brexit would result in small companies postponing investments and cutting their workforce. The FSB found that more than one in three SMEs would postpone big business decisions or investment in research and development if Britain left without a deal. Meanwhile, one in five firms said they were likely to make redundancies or cut spending. Separate research from Citibase found that 60% of SMEs have started or are about to start making Brexit contingency plans. (Source: The Times, 19/10/18)

Wages expected to rise – Economists are expecting pay to rise by 3% next year while inflation will slow to 2%, meaning that real incomes will rise by 1% in 2019. When a fuller picture of living standards is included, economists predict real household disposable income growth of 1.4% next year, almost three Economists are expecting pay to rise by 3% next year while inflation will slow to 2%, meaning that real incomes will rise by 1% in 2019. When a fuller picture of living standards is included, economists predict real household disposable income growth of 1.4% next year, almost three times the OBR’s forecast of 0.5%. Peter Dixon at Commerzbank commented: “Personal incomes were remarkably weak through 2016 and 2017, growing [in cash terms] by 2.25%. We think this year that will be closer to 4% and similar next year.” The Telegraph explains that the recovery has been caused by a strong jobs market, with very low unemployment, which has pushed employers to raise wages. (Source: The Sunday Telegraph, 21/10/18)

Technology

EU agrees to cut VAT on digital publications – The Government has been urged to scrap VAT on e-books after EU finance ministers agreed to allow member states to apply for reduced or zero-VAT rates for electronic publications. In the UK, readers of online newspapers, e-books, journals and magazines pay a 20% sales tax, while their print equivalents are zero-rated for VAT. (Source: The Times, 3/10/18)

Tech giants threaten to cut investment – Technology companies have threatened to pull post-Brexit investment from the UK if Philip Hammond goes ahead with a tax on digital sales in the Budget. Multinationals including Facebook, Amazon and Uber have written to the chancellor warning that they will reduce spending if he makes a “smash and grab raid” on their earnings. They have also warned that any attempt to impose a specific tax on mainly American digital multinationals would result in retaliation from President Trump. The CIOT has also urged caution from the chancellor on his suggestion to go it alone with a temporary new sales tax on digital multinational companies. Separately, economist Dr Jeffrey Sachs has told the Guardian that a “tech tax” is necessary if the world is to avoid a dystopian future in which AI leads. He also backed calls for taxation aimed at the largest tech companies, arguing that new technologies were dramatically shifting the income distribution worldwide “from labour to intellectual property (IP) and other capital income.” (Source: The Times, 24/10/18)

Germany proposes global minimum tax for tech giants – Germany’s finance minister Olaf Scholz has suggested a global minimum corporate tax for multinationals such as Amazon, Apple and Facebook. Mr Scholz said the internet economy “was exacerbating” the problem of companies piling their profits into tax havens, and that coordinated mechanisms were needed to force companies to pay domestic taxes in proportion to their profits. (Source: The Daily Telegraph, 23/10/18)

New Digital Services Tax announced – Philip Hammond detailed a new UK Digital Services Tax in his Budget that will target tech giants generating £500m or more a year in global revenues by 2020. The Chancellor said he would have preferred a “global agreement” but reaching it was proving painfully slow. However, industry leaders warned that firms could pull their investment as a result of the move. Firms will be taxed 2% on the revenue they make from advertising and online marketplaces from April 2020. Julian David, CEO of TechUK said it “risks undermining the UK’s reputation as the best place to start a tech business or to invest” while Labour’s deputy leader, Tom Watson, said the levy was not enough and lacked ambition. “The new tax isn’t even set to be implemented until 2020, at which time the tech giants will start to enjoy a 2% cut in their corporation tax rate,” he added. (Source: The Guardian, 30/10/18)

Hospitality

Food sales down – Food sales saw their steepest drop in three years in September as consumers tightened their belts after the unusually hot summer, the ONS has said. Sales of food were down 1.5% in the month, contributing to a 0.8% fall in total UK retail sales. (Source: The Times, 19/10/18)


This information has been produced by Rouse Partners LLP for general interest. No responsibility for loss occasioned to any person acting or refraining from action as a result of this information is accepted by Rouse Partners LLP. In all cases appropriate advice should be sought before making a decision.

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