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

Posted by
Danyal Bhatti
01.11.2019

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

1 in 4 small firms yet to review Brexit impact – Research from insolvency trade body R3 shows that almost a quarter of firms with fewer than 50 employees are yet to review the potential impact of Brexit on their suppliers or customers, compared to fewer than 1 in 20 companies with more than 250 workers. The poll of 1,200 senior decision-makers found that across firms of all sizes, one in six had not reviewed their trading partners. On Brexit planning, Mike Cherry, chair of the Federation of Small Businesses, said small firms are being made to wait for an update to the Government’s revised UK tariff schedule that would apply if no Brexit deal is agreed, saying this “must be published as a matter of urgency.” “The continued uncertainty is harming small firms’ ability to plan,” he added. (Source: The Times, 07/10/19)

Brexit workshops get small businesses ready to trade – The Department for International Trade (DIT) has held 130 Brexit workshops for small businesses trading with the EU and will soon launch a new market access database for UK traders, the government has said. To date, 2,047 businesses have attended the workshops and 86% felt more prepared for Brexit as a result. More than 2,700 businesses also attended 30 Brexit readiness events organised by the Department for Business, Energy and Industrial Strategy with a similar proportion saying they were more prepared after having attended. (Source: GOV, 26/10/19)

Business groups warn against fresh Brexit delays – Business leaders have welcomed the fact that a no-deal Brexit at the end of the month has been averted but warned that the extension “also prolongs the agony and uncertainty.” Josh Hardie, CBI deputy director-general, said: “Uncertainty remains high. It is vital — this time — the extra time leads to a deal.” Meanwhile, global FDI contracted sharply in the first half of this year, according to the OECD as trade tensions between the US, Europe and China weighed on the world economy. Although the UK is still a leading destination in Europe for overseas investors, new investment fell from $44bn to $19bn between the second half of 2018 and the first half of 2019. (Source: Financial Times, 29 October 2019)

Investors could reap £240bn Brexit deal dividend – Data giant MSCI predicts that the pound would claw back 8% against the dollar if Boris Johnson secures a deal with the EU while London stocks would rise 10% bringing investors a £240bn “deal dividend”. Peter Garnry, head of equity strategy at Saxo Bank, commented: “Tactically UK stocks could become one of the best equity markets next year if we avoid an ugly global recession and the UK can kick-start growth again.” However, MSCI also forecast that a no-deal Brexit would trigger a 15% plunge in London-listed stocks. (Source: The Sunday Telegraph, 13/10/19)

Quarterly growth calms recession fears – Britain’s estimated GDP increased 0.3% the last three months, ONS data reveals, as weak manufacturing was offset by buoyant TV and film production. The results surprised analysts who had forecast a recession brought on by Brexit-related uncertainty. The data show a return to growth in financial services and professional services with the largest contributions coming from areas such as consultancy, accounting and advertising. (Source: Financial Times, 11/10/19)

No-deal tariffs outlined as Brexit approaches – The Department for International Trade has published a revised list of temporary tariffs which would apply to UK imports in the event of a no-deal Brexit. Some 88% of goods would be exempt from import tariffs for a year, with around 80% of goods entering the country tariff-free under current trading arrangements. Centre for European Reform trade expert Sam Lowe described the plans as “quite an extensive unilateral liberalisation”, noting that: “The rationale is that they want to keep tariffs low on EU imports. On day one they are still going to be our main market. So you don’t want tariffs to shoot up all of a sudden as prices will just shoot up.” (Source: The Times, 09/10/19)

Individuals

Over-50s to get ‘wake-up’ alerts on retirement pots – Pension savers above the age of 50 will receive ‘wake-up’ alerts about their pensions from next Friday, as part of efforts to encourage those who are not saving enough to get their pension pots on track. The short documents will tell savers the current size of their pot, indicate the income it might generate in retirement, what they are being charged, how the pension is invested, and where to turn for help. Separately, the Telegraph highlights analysis by Brewin Dolphin which shows the power of starting to save early. Assuming annual investment returns of 5%, a worker aged 30 with no pension savings would need to put away £440 a month in order to have a pot worth £500,000, capable of providing an income of £20,000, at the age of 65. But a saver who started at 21 would need to save just £261 a month. (Source: The Daily Telegraph, 26/10/19)

Quirk leaves some taxpayers with 62% rate – The Sunday Telegraph considers the impact of a quirk which is leaving some people with an effective tax rate of more than 60%. They reports that a gradual removal of the £12,500 tax-free personal allowance by £1 for every £2 earned over £100,000 a year is leading to people turning down pay rises or quitting the workforce. With National Insurance contributions factored in, the rate can be as high as 62%, with the issue currently affecting around 360,000 taxpayers. Stuart Adam of the Institute for Fiscal Studies describes the spike in the marginal rate of income tax as “silly” and “bizarre”, adding: “Higher rates of tax put people off work. Relative to flattening the spike we are worse off – it is having a disproportionately negative effect on the economy.” The think-tank has called on the Prime Minister to abolish the tapering of the personal allowance. (Source: The Sunday Telegraph, 20/10/19)

Get your ducks in a row, with less than 100 days to go – With less than 100 days to go before the 31 January deadline, HMRC is reminding customers to complete their tax returns early to beat the Christmas and New Year rush. Last year more than 2,000 people sent their tax returns on Christmas Day. (Source: Yorkshire Post, 24/10/19)

HMRC in scam message warning – HMRC has published guidance on the correspondence people may receive from the tax office, advising on how to spot scam attempts. HMRC says it will never ask for personal or financial information in text messages. HMRC’s guidance on phishing emails and bogus messages advises people who receive them to forward the material to a special HMRC phishing email address or phone number before deleting it. (Source: Daily Express, 22/10/19)

HMRC targets online sellers over unpaid VAT – HMRC is chasing Amazon, eBay and overseas sellers who use online marketplaces for £585m in unpaid VAT. While some demands have been sent to the large internet firms, in some cases officials have sent VAT bills directly to foreign sellers who market goods to UK buyers. Firms with a turnover of more than £85,000 a year have to register with HMRC and pay VAT of 20% on goods sold online, with rules introduced in 2016 giving the taxman the power to bill online marketplaces if sellers evade tax. The Revenue has contacted sellers over £315m in tax owed, with Amazon and eBay contacted over a further £270m. (Source: The Mail on Sunday, 20/10/19)

Businesses

Exports boost SME growth – Analysis by UK Export Finance suggests that small firms which export grow twice as fast as domestic-focused businesses. The report found that while SMEs who do not export tend to grow 8.4% a year, those who do export grow 15.2%. It was also found that around half of the firms who sold overseas saw profits boosted by up to 20%, with 10% seeing profits boosted by more than 20% thanks to exports. (Source: Sunday Express, 20/10/19)

…but export trade currently hampered by Brexit uncertainty – A survey of internationally active UK businesses by the British Chambers of Commerce (BCC) and Bibby Financial Services found 35% thought concerns about tariffs were hurting exports while 33% felt an erratic exchange rate was a deterrent. Almost half of those polled cited the lack of clarity on the timing and nature of Brexit as a barrier to export while only 7% of firms said they do not face any obstacles. “Importers and exporters are in limbo, and many are postponing investment decisions, while they await further information,” said Edward Winterton, UK chief executive at Bibby Financial Services. (Source: The Independent, 11/10/19)

UK rises up World Bank business rankings – The UK has climbed to eighth place in the World Bank’s annual rankings, up from ninth a year ago. The report tracks regulations, administration and barriers to establishing and running businesses. The UK has made it easier to start a business, with it now quicker and cheaper for a business to get connected to electricity supply, for example. However, business costs have increased due to a more onerous pensions regime and the extra time required to administer taxes. International trade secretary Liz Truss said the report showed the UK is one of the best places to do business in the world and was why Britain continued to be the number one destination for attracting foreign direct investment in Europe, and third globally after the USA and China. (Source: The Times, 25/10/19)

Two fifths of SMEs forced to take legal action over late payments – A survey by Hitachi Capital Business Finance found the proportion of SMEs that were taking legal action chasing late payments from clients had grown from 31% to 40% over the past year. A fifth of SME owners did not pay themselves when they were left with unpaid invoices. Over 60% of SMEs are affected by late payments according to Hitachi, with 35% having to seek short term loans to stay afloat, it said. (Source: Sunday Express, 13/10/19)

UK businesses facing a new credit squeeze – Businesses taking out new loans are being hit with an average interest rate of 3.05% – up from 2.56% at the end of August – the highest in a decade. The hike in the cost of credit is said to be a result of banks becoming more wary ahead of Brexit. Businesses have increasingly been turning to the financial markets rather than banks to raise cash, with £6.5bn raised from issuing bonds last month, the most since October last year. Mike Cherry, chairman of the Federation of Small Businesses, said: “We’ve seen a noticeable spike in borrowing rates. It adds insult to injury that rates for consumer mortgages remain at record lows while viable small firms – engines of job creation and economic growth – struggle to secure a reasonable rate.” (Source: Daily Mail, 30/10/19)

Construction/property

Property listings dip – Figures from Rightmove show that the average number of new property listings each week this month has been 24,539, the lowest October figure in a decade and down 13.5% on last year. The figures also show that the price of property coming to market has seen its lowest monthly rise in an October since 2008, climbing 0.6%. The number of sales agreed in October is down 0.5% year-on-year. Rightmove’s Miles Shipside said a “Brexit-induced paradox” means it is a good time for sellers, saying: “Those who are ignoring the Brexit disruption have less competition from stay-away sellers, and their prospective buyers have less negotiating power, with a reduced choice of suitable alternatives”. (Source: City AM, 21/10/19)

Complicated death taxes and stamp duty killing housing market – The property market is being gummed up by inheritance tax rules with older homeowners put off downsizing so they can benefit from high allowances under the residence nil-rate band exemption. Also known as the family home allowance, the tax break allows homeowners to pass on £150,000 of property wealth, tax free, on top of the existing £325,000 standard IHT allowance (if leaving a home to a direct descendant). In 2020 this increases to £175,000 and means spouses and civil partners, who can share their allowances, will be able to pass on up to £1m free of tax. However, some are deciding not to sell up and move to a smaller, less valuable home or into care, in an effort to pass on as much wealth as possible, exacerbating the supply problem in the market. (Source: Sunday Telegraph, 27/10/19)

Airbnb ban could return as cost of rent-a-room tax break spirals – The most recent data suggests tax relief under the rent-a-room scheme will cost HMRC £230m for the 2018-19 tax year – 53% more than expected. Rent-a-room relief allows people to earn £7,500 a year tax-free by letting a furnished room in their property, or £3,750 per person if the property is jointly owned. The spike in tax relief is thought to be a result of an increasing number of people renting out rooms using Airbnb. A ban on Airbnb landlords profiting from the tax break was proposed last year but scrapped as the government rushed through the Finance Act 2019. (Source: The Times, 26/10/19)

Recruitment

Recruiters warn profits will be dented by global political uncertainty – Global political uncertainty from Brexit, Hong Kong protests and US-China trade friction, will hit profitability this year, two of the UK’s biggest recruiters have warned. PageGroup downgraded its profit outlook, while rival Robert Walters said its full-year profits would be flat compared with last year. Robert Walters insistent the turmoil was simply political adding that continued Brexit uncertainty would be worse than no-deal. Furthermore, data from the Recruitment & Employment Confederation (REC) show employers’ confidence in the UK economy dropped to -31 in October (0 is a neutral reading) – its lowest level since mid-2016 – as firms scale back hiring plans because of Brexit. (Source: The Times and The i, 30/10/19)

Low-paid jobs hit record low – Figures from the Office for National Statistics (ONS) released yesterday show the share of workers in low-paid jobs – defined as no more than two-thirds of the UK median hourly rate of £13.27 – had fallen to 16.2% – the lowest proportion since records began in 1997. The Telegraph suggests the statistics will be a boost to Boris Johnson as they as they are better figures than anything achieved under Labour. Average weekly pay climbed 2.9% to £585 in the year to April, or 0.9% adjusted for inflation. The figures also showed the lowest-paid 30% of the workforce getting average pay rises of more than 4% during the period, more than twice the 1.8% increase seen for the top 5% of earners. The gender pay gap for those aged under 40 is now “close to zero” for staff in full-time jobs, the ONS said, while the overall pay gap is virtually unchanged at 8.9% for all full-timers. (Source: The Daily Telegraph, 30/10/19)

Apprenticeship levy hampering SME training schemes – The Learning and Work Institute has warned that the Government’s apprenticeship levy could actually be contributing to 75,000 fewer training schemes being provided by SMEs. The employment and skills charity found that three-quarters of apprenticeship providers which worked with small businesses reported that there was insufficient funding to meet demand, “with many being forced to reduce or cease recruitment as a result”. The shortfall is due to large employers using more of their levy funds than expected, leaving only half as much money as was thought to help smaller companies to train workers. (Source: The Times, 28/10/19)

Technology

Plans to end rural mobile coverage blackspots – The UK’s four mobile network operators – Vodafone, O2, EE and Three – have agreed to spend £532m between them over 20 years to remove so-called not-spots in the countryside where mobile phone coverage is poor. The deal with the Government is designed to ensure 95% of the UK has 4G coverage by 2025. The Government could contribute a further £500m into the scheme. Mike Cherry, national chairman of the Federation of Small Businesses, said that a shared network “would go some way to help to bridge the widening communication gap in the countryside”, where companies were “blighted on a daily basis” by poor connections. Fifty-seven per cent of small businesses in rural areas report unreliable connections on their mobile phones, according to FSB research. (Source: Financial Times, 26/10/19)

Finance and tech firms targeted to net £9.8bn in unpaid tax – HMRC collected £9.8bn in extra revenue through tax probes into the UK’s largest businesses last year, up 12% from £8.7bn from the previous period. Analysis published by Pinsent Masons showed that the largest proportion of this was £6bn from tax investigations into VAT and £2.6bn in underpaid corporation tax. Major tech and finance businesses were the chief target of HMRC. Stuart Walsh of Pinsents, said: “Bigger UK and foreign businesses are going to find themselves under continued scrutiny from HMRC over the next year. The new government’s spending pledges mean HMRC and the treasury will be under pressure to raise more money.” (Source: City AM, 28/10/19)

Hospitality

Retailers cut 85,000 jobs this year – The past year has seen retailers cut 85,000 jobs with businesses under increasing pressure from weak consumer demand, rising costs and the switch to online shopping along with uncertainty over Brexit. Job losses could increase due to automation too – retail IT bosses expect one in five jobs in their businesses to be replaced by artificial intelligence or automation in five years, according to a survey by the recruitment business Harvey Nash. (Source: The Guardian, 24/10/19)

Charity

Wealthy Britons hold back on philanthropy – Analysis of charity donations on self-assessment tax forms shows that nearly two thirds of people earning more than £250,000 gave nothing to good causes last year. People earning more than £250,000 donated an average of only 1.7% of their income last year compared with 3.1% by those earning less than £50,000. In total, almost one million people earning more than £100,000 made no donations. Donations by the rich are down 12% over the past five years compared with a 4% drop among the least well-off. Campaigners say one reason why donations from the wealthy are falling is because only one in ten financial advisers in the UK asks someone selling their business what they want to do about philanthropy and this may be an opportunity for charities to explore. (Source: The Times, 26/10/19)

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