in the spotlight

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

Posted by
Rouse Partners
01.08.2019

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

Boris in tax pledge to draw investment – Boris Johnson has said he is preparing a package of tax cuts and incentives for businesses to invest in the UK. The Prime Minister said: “We will begin right away on working to change the tax rules to provide extra incentives to invest in capital and research.” “We will prepare an economic package to boost British business and lengthen this country’s lead as the No 1 destination in this continent for overseas investment,” he added. (Source: The Times, 26/07/19)

Britain could be in recession, economists warn – The National Institute of Economic and Social Research (NIESR) has warned that Britain may already be tipping into recession due to the effects of Brexit. It believes there is around a 25% chance that the economy will have shrunk from April to June and will continue to do so in the following quarter, while putting the likelihood of a no-deal exit from the EU at 40%. NIESR forecasts GDP fell by 0.1% in Q2, with a 25% chance that GDP declines again between July and September. However, the think-tank’s central forecast is for growth of 0.2% in Q3. NIESR has cut its forecasts for economic growth in 2019 and 2020 to 1.2% and 1.1%, down from 1.4% and 1.6% previously. (Source: Financial Times, 23/07/19)

Pound falls again on no-deal fears – The pound has continued to fall on currency markets amid fears of a no-deal Brexit, hitting a fresh two-year low of $1.2120 against the dollar on Tuesday before recovering some ground. Sterling also slid against the euro, falling to €1.0881 at one point. (Source: The I, 31/07/19)

Global growth forecast cut by IMF – The IMF has cut its growth forecasts for the global economy for this year and next. It predicts growth of 3.2% in 2019, down from its April forecast of 3.3%. Growth next year is set to pick up to 3.5%, although that is below its earlier forecast of 3.6%. The IMF has raised its growth forecast for the UK this year to 1.3% from 1.2%. The revision for the UK reflects what the report calls a stronger-than-expected first three months of the year, boosted by pre-Brexit stockpiling. However, the IMF’s World Economic Outlook analysis has named a no-deal Brexit among the chief threats to the world economy. (Source: BBC News, 24/07/19)

Individuals

Self-employed face ‘fiasco’ HMRC glitch – Self-employed people potentially face tax bills twice as high as expected next year due to a “glitch” in HM Revenue & Customs’ tax return system not including payment on account information – which is due imminently. HMRC has said that no one would be charged interest for paying late because of its error – though those who can’t pay in January are vulnerable to interest charges. (Source: The Daily Telegraph, 31/07/19)

Shine comes off keeping money offshore – Britons with offshore savings accounts are being urged to declare all their assets now or risk punitive penalties following a crackdown by HMRC. Last year, the taxman collected £560m from offshore tax investigations, up almost three-quarters in just two years, with those found with undeclared offshore income or capital gains facing penalties of up to 200% of the tax owed. Under the Common Reporting Standard, more than 100 countries automatically share financial information on taxpayers, reducing the advantage of keeping money offshore. (Source: Sunday Express, 28/07/19)

HMRC investigates the inheritance tax on 23% of estates – A Freedom of Information request by financial planners Quilter shows that HMRC opens more than 5,000 inheritance tax (IHT) investigations a year, a figure representing 23% of the 22,000 estates that are hit by the tax. The Mail says “notoriously complicated rules” over IHT mean those liable for the levy have a one in four chance of being investigated. Gordon Andrews, tax and financial planning expert at Quilter, said that more often than not, people are not deliberately trying to defraud HMRC, adding that the complexity of the system means the fact there are errors is no surprise. “It can be hard to pinpoint those who intentionally don’t pay any inheritance tax and those who misunderstood the system believing there was no tax to pay,” he added. (Source: Daily Mail, 24/07/19)

Concession can ease inheritance tax hit – The Sunday Telegraph’s Harry Brennan warns that families risk paying too much inheritance tax if the value of a property falls between the initial valuation and the eventual sale. IHT is paid before an estate can be distributed, with the bill calculated on the property’s market value, but families can take a hit if this has fallen by the time they can sell the home. Mr Brennan notes that while IHT typically needs to be paid within six months of death, it often takes a year or more to finalise the distribution of the estate – leaving a window for a potentially substantial price shift. He advises that a little-known rule could help those who see a decline in an inherited property’s value, as it lets them reclaim the tax paid on the loss in value of property – or other assets, such as shares – within four years of the date of death. (Source: The Sunday Telegraph, 21/07/19)

Multi-retiree families to exceed 1m in next 20 years – The number of families with multiple generations in retirement at the same time will exceed one million in the next 20 years, research by St. James’s Place has revealed. The study into intergenerational wealth and retirement planning, which analysed ONS data and included research among 4,000 adults in the UK, forecasts there will be 1.2m families containing more than one retired generation by 2039 – up from 624,000 families today. The study also found that future retirees expect to pass on £50,000 less when they die than their parents’ generation. Those with £50,000 or more in household assets who are not yet retired expect to pass on £74,000 in inheritance, a third of their savings – down from the £125,000 those already retired expect to pass on. (Source: The Daily Telegraph, 11/07/19)

A third of senior medics could be hit by tax rules – Health officials have warned that NHS pensions rules could hit one in three senior medics. Treasury rules mean that high earners can end up paying tax rates of more than 90% on earnings over £110,000 a year – which include rises in the value of pensions. This has led a number of senior doctors to refuse to work overtime so as to avoid passing the threshold. Ministers have opened a consultation in a bid to address the matter, with proposals outlined including a solution that would see consultants and GPs halve their pension contributions in exchange for halving the rate of pension growth and a scenario where doctors could choose the size of their pension contribution in a bid to avoid tax thresholds. The consultation document also outlines ways doctors can defer tax bills so they come out of their pension. Health Secretary Matt Hancock has vowed to help deliver a solution, saying: “We want to make it easier for our hardworking senior doctors to balance their workload, their pension pot and their tax bill.” (Source: The Times, 23/07/19)

Businesses

MTD leniency – As the deadline for Making Tax Digital approaches, HMRC has said that it will be lenient with companies that encounter problems registering for the service providing they act in good faith. “During this first year we won’t be issuing filing or record keeping penalties to businesses doing their best to comply,” Theresa Middleton, Director of Making Tax Digital at HMRC says. (Source: Accountancy Daily, 16/07/19)

Foreign sellers wary of scheme to pay VAT after no-deal exit – Fewer than 400 foreign companies have signed up to HMRC’s online payment service designed to protect VAT revenues on foreign parcels in the result of a no-deal Brexit. (Source: Financial Times, 08/07/19)

Late-payers face ban from government contracts – New rules coming into effect on Sept 1st require firms to pay 95% of their invoices within 60 days or face a ban on applying for public sector contracts worth more than £5m. The crown representative for small businesses Martin Traynor said the Government wants to “set an example” for private businesses as well as reminding schools, hospitals and government departments of their duty to pay their own suppliers within 30 days. (Source: The Daily Telegraph, 17/07/19)

….and tougher sanctions in sight for late payers – A consultation on the future of the Prompt Payment Code (PPC) will be launched by the end of the year after it failed to properly tackle late payments. The PPC is administered by the Chartered Institute of Credit Management but is likely to be transferred to the small business commissioner, sources tell the Sunday Times. The commissioner was last month given the authority to impose fines, which should accelerate compliance with payment standards. (Source: The Sunday Times, 28/07/19)

Construction/property

UK house prices rise 5.7% – Halifax’s latest house price index has revealed that UK house prices rose by 5.7% on an annual basis month in June, taking the average house price to £237,110. That compares to May’s £237,837, when Halifax recorded an annual growth rate of 5.2% – the best in two years until yesterday’s figures. Russell Galley, managing director of Halifax, said: “Recent industry figures show demand looking slightly more stable, with mortgage approvals ticking along just above the long-term average.” However, he warned that a “major restraining factor” for the UK housing market was the lack of houses up for sale. (Source: City AM, 06/07/19)

PM’s property plans – Martina Lees and Anne Ashworth in the Times look at how Boris Johnson being Prime Minister may affect the housing market. They say that Mr Johnson wants to cut stamp duty on homes worth more than £1.5m from 12% to 7%, and could also halve the levy for homes worth more than £500,000 and scrap it for those below £500,000. Mr Johnson, they suggest, could also look to a broader reform that switches the stamp duty burden from buyers to sellers. Elsewhere in the paper, Ms Ashworth says that Mr Johnson must deliver stamp-duty reforms – alongside reassurances on the economy – to “encourage optimism about the outlook for the market”. (Source: The Times, 26/07/19)

Banks set for biggest mortgage lending period since 2007 – High street banks agreed more than £50bn of mortgages to homebuyers in the first half of the year, up 10% on the first six months of 2018 and setting up lenders’ biggest year since 2007, according to data from UK Finance. The loans were offered to almost a quarter of a million homebuyers in the first six months, up 6% on the first half of 2018. (Source: The Daily Telegraph, 25/07/19)

Overseas buyers eye 50% discount on UK homes – Stagnant property prices and a weak pound are luring overseas buyers into the British housing market, the Telegraph reports. Hannah Aykroyd of Aykroyd & Co, a London buying agent, says: “We have had clients flying in from Asia and the Middle East looking to buy very quickly as they believe we’re at the bottom of the market in London. House prices in prime areas are down about 30% since the 2014 high. Combined with the weak pound, this means some buyers – such as those from America – are looking at an effective discount of over 50%.” (Source: The Daily Telegraph, 27/07/19)

Buy to let

145% increase in landlords declaring unpaid tax – Analysis of HMRC figures has shown that the number of buy-to-let landlords failing to pay what they owe in tax has risen by more than 10,000 in a year. The Revenue saw a 145% increase in the number of landlords coming forward to declare unpaid tax on rental income, with 16,110 doing so in 2018/19 compared to 6,600 in 2017/18. The £42m underpaid last year is double the total recorded the year before. The increase is partly down to HMRC’s Let Property campaign, which mailshots buy-to-let landlords that are suspected of avoiding paying tax on their rental income warning them of the consequences of tax evasion. (Source: The Independent, 06/07/19)

Manufacturing

British services exports climb – Office for National Statistics figures show that exports of British services have risen by almost a fifth in the past three years, with firms in the sector – including accountants – selling £68.7bn of services overseas in the first quarter. This marks a 19% increase on the total recorded in Q1 2016. Non-EU countries accounted for £41.3bn of Q1 exports – with the US buying £16bn of services, making it the biggest market for UK firms. Some £27.4bn of exports went to EU countries. (Source: Daily Mail, 25/07/19)

…but CBI says manufacturing output lowest since financial crisis – The Confederation of British Industry has published figures showing that British manufacturing output shrank at the fastest pace since the financial crisis over the last quarter. With 19% of manufacturers reporting that output increased and 30% saying it fell, this gave output a minus 11% balance for the three months to July. CBI chief economist Rain Newton-Smith remarked that the sector is “being hit by the double-blow of Brexit uncertainty and slower global growth.” (Source: The Times, 24/07/19)

Recruitment

Wage growth at highest rate since 2008 – Wage growth in the UK rose to 3.6% in the year to May 2019, the highest growth rate since 2008, according to ONS figures. Wages have been outpacing inflation since March 2018. A record high of 32.75m people were in employment up to the end of May, while 1.29m were out of work, the lowest since at least 1992. However, James Reed, chairman of Britain’s biggest recruiter Reed, has revealed that the company saw the biggest fall in job vacancies since 2010 in June, an indication that “worrying storm clouds are forming around the UK’s job market.” (BBC News, 17/07/19)

Technology

Rebate delays hitting innovation – Tax advisors have warned that delays in processing R&D tax claims – and the resulting delay in rebate payments – are hampering business’ innovation and expansion. Analysis shows that SMEs face a wait of more than 90 days, while larger companies claiming research and development expenditure credit are having to wait at least seven months. (Source: Scotsman, 25/07/19)

Trump: Macron’s digital services tax “foolish” – US President Donald Trump has accused French President Emmanuel Macron of “foolishness” over the imposition of a 3% tax on the revenue of technology giants, adding that the US would “announce substantial reciprocal action”. Mr Trump added: “I’ve always said American wine is better than French wine!” French Finance Minister Bruno Le Maire responded on Friday by saying that France would stick to its digital tax plans. “Universal taxation of digital operations is a challenge that affects us all,” he said. (Source: BBC News, 27/07/19)

Hospitality

Sales slide continues – Retail sales have fallen for the longest period in eight years, according to the Confederation of British Industry’s (CBI) monthly sector survey, with sales volumes down for the third consecutive month in July. Out of 46 retailers that responded, 26% said their sales were up compared with a year ago and 42% said sales were down, giving a balance of -16%. Rain Newton-Smith, chief economist at the CBI, voiced concern over the figures, commenting: “The UK economy has reached a fork in the road. The new Prime Minister must now do everything in his power to achieve a good Brexit deal, thus protecting jobs and our economy.” (Source: City AM, 26/07/19)

Small retailers hand out 2m plastic bags a day – Figures reveal that 2m plastic bags a day are handed out as the Government continues to delay proposals to force small retailers to impose the bag levy. Although the Government estimates that the 5p charge imposed in supermarkets and larger businesses has taken 15bn carrier bags out of circulation, thousands of retailers are still allowed to give plastic bags away for free because they have fewer than 250 employees. (Source: The Independent, 07/07/19)

Charity

Government urged to extend Gift Aid to higher-rate taxpayers – A report from the Charity Tax Commission (CTC) calls on the Government to allow higher-rate taxpayers to pass their tax relief on to good causes, a move it claims could be worth £250m a year. Charities can boost donations by claiming back tax the donor has paid from HMRC – via the Gift Aid scheme – but only at the basic rate. Higher rate taxpayers are able to claim the difference themselves but the CTC wants all the higher-rate tax relief to be automatically redirected to charities, with an opt-out if the donor wants it. (Source: The Daily Telegraph, 18/07/19)

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