in the spotlight

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

Posted by
Rouse Partners
02.09.2019

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 readiness fund launched – The Business Secretary Andrea Leadsom has launched a £10m grant scheme for business organisations and trade associations to support businesses in preparing for Brexit ahead of October 31. The fund is open to business organisations and trade associations throughout the UK and will support events, training and the production of advice packs to assist businesses in making sure they are fully prepared for a Brexit. Ms Leadsom said: “The funding we are announcing today will mean business organisations from all sectors across the country can stand resolutely behind businesses large and small to support them in preparing for, and seizing the opportunities of, leaving the EU.” (Source: .gov.uk, 30/08/19)

Johnson asks Queen to suspend parliament – The Queen has been asked to suspend parliament for more than a month by Boris Johnson. The request, which asks that the current parliamentary session be ended “in the second sitting week in September”, to return on 14 October for the Queen’s Speech, drew sharp criticism from his opponents. However, the PM told Sky News that claims he was trying to prevent MPs from blocking a no-deal exit were “completely untrue”. He said his plans were about legislating for his domestic priorities such as the NHS and crime, and parliament would have “ample” time to debate Brexit. (Source: The Times, 29/08/19)

HMRC to enrol firms for export licences – The Treasury says HMRC will auto enrol VAT-registered small businesses for Economic Operators Registration and Identification export licences to the EU so they can present the vital paperwork at border control, with concern previously raised that large numbers of firms had not applied for the documentation that will be required if Britain exits the EU with no agreement in place. About 240,000 British companies trading solely with the EU will require the code to carry on importing and exporting, but only 72,000 have applied. The Federation of Small Businesses welcomed “a vital intervention” for many companies, while Adam Marshall, director-general of the British Chambers of Commerce, said the “common sense step” is long overdue and “will prompt more traders to prepare for change and consider what else they need to do to be ready for an unwanted no-deal scenario.” Confederation of British Industry head of EU negotiations Nicole Sykes, however, said that it was “no silver bullet” and is “just one of hundreds of things that need to be done if the very worst effects of a no-deal are to be mitigated.” (Source: Financial Times, 21/08/19)

Industry groups told to prepare business for no-deal – The Government has told industry associations to bid for cash to fund their ideas on how to help businesses prepare for Brexit on October 31st. The initiative comes amid growing concern that small firms in particular are not ready for a no-deal exit from the EU. One person who has seen documents relating to the plans said: “There’s really not a lot more we can do beyond push out our guidance – it’s very hard to connect with small business members.” (Source: The Daily Telegraph, 14/08/19)

Sajid Javid to fast-track spending review – The Chancellor cancelled his debut speech yesterday, less than 24 hours before it was due to take place, igniting speculation that the Government is preparing for a snap general election in October. The Treasury said it was fast-tracking a spending review initially planned for later in the year. Sajid Javid is expected to detail the Spending Round next Wednesday, setting the tone for the Conservatives’ election push. In a piece for the Telegraph, Mr Javid insists the Government will not break its “fiscal rules” on public spending in the run-up to Brexit adding that any Whitehall departments “expecting a blank cheque will be sorely disappointed.” (Source: Financial Times, 28/08/19)

New CBI head wants migrant salary threshold dropped – The incoming boss of the CBI is calling on Boris Johnson’s government to drop Theresa May’s proposed £30,000 minimum salary threshold for skilled European migrants. Lord Bilimoria, president-designate of the business lobby, said the requirement was “impractical” and would hit the construction and leisure sectors hardest, as well as the NHS. “An open economy like Britain has had access to the best talent from around the world – including the European Union,” Bilimoria said. “The public sector wouldn’t survive without them,” he added. (Source: The Times, 26/08/19)

Investors shun London’s blue-chip stocks ahead of no-deal Brexit – Analysis by Goldman Sachs indicates that FTSE 100 shares are trading at their biggest discount to global peers in a decade. The index’s price to earnings ratio trades at a 21% discount compared to the MSCI World Index with housebuilders and domestic-focused banks trading at 38% and 56% less respectively than their global peers. (Source: The Sunday Telegraph, 11/08/19)

Individuals

Tax rate sees pension overpayments – Tax overpayments by people dipping into their pension pots have hit record levels, with around 17,000 people clawing back nearly £47m between April and June – up from the £29m claimed by 14,000 savers in the same period for 2018. Analysis shows that over-55s have reclaimed almost £500m since pension freedoms were introduced in 2015. Much of the overpayment comes from HMRC charging the savers an emergency rate of tax on their initial withdrawal, with the average overpayment of £2,355 the first time these people dip into their pot. Figures from the Financial Conduct Authority suggest more than 200,000 people a year risk being overtaxed on their first pension withdrawals. (Source: Daily Mail, 07/08/19)

Doctors consider taking cash to avoid pension trap – The Sunday Times picks up on news reported in the British Medical Journal that doctors at 16 NHS trusts are being offered cash instead of pension contributions as a way to avoid the tapered annual allowance, which has led to punitive tax bills. Meanwhile, some NHS trusts are increasing doctors’ salaries in response to concern over the large tax bills some medics are facing. The change has seen some senior doctors facing tax bills of £80,000 after they paid too much into their pension. This has prompted some to refuse to work extra shifts in fear that it will push them above the threshold. A recent survey suggests three-quarters of GPs and consultants are planning to cut their hours to avoid penalties. With this in mind, some trusts are allowing doctors to opt out of the NHS pension and receive employer contributions as additional salary instead. (Source: The Times, 22/08/19 and The Sunday Times, 25/08/19)

Probate delays push up IHT bills – The Telegraph reports that delays in the courts mean families are being charged punitive rates of interest on their inheritance tax (IHT) bills. This comes as overdue IHT attracts interest rates of 3.25% a year. While bills have to be settled before someone’s assets can be passed on, and payment is due six months after the date of death, system failures and a backlog of cases have led to delays at the Probate Registry. The Ministry of Justice says the process is currently taking four to six weeks on average, but lawyers say they are having to wait as long as 12 weeks for the grants to arrive. A spokesman for HM Courts & Tribunals Service said: “Probate applications are only processed when the relevant IHT form has been completed, so, even with current delays of four to six weeks on average, those who apply in good time should be able to pay IHT well within the six-month window.” HMRC said: “When a customer knows their HMRC IHT reference they may make a payment on account to avoid interest.” (Source: The Sunday Telegraph, 04/08/19)

Over £31m deposited in Help to Save – Over 132,000 people have signed up to the Government-backed savings account Help to Save – depositing more than £31.4m. The account offers working people on low incomes a 50% bonus on what they save – rewarding them with 50p for every £1 they put away. The scheme allows those in receipt of working tax credit and universal credit to save up to £50 a month for four years with a maximum bonus of £1,200 available on savings of up to £2,400. However, the Telegraph points out that 3.5m people are eligible so 96% are missing out. Anna Bowes of the specialist comparison site Savings Champion says the low take-up is unsurprising: “A lot of this group will not have any spare money to save.” (Source: The Daily Telegraph, 31/08/19)

Families allowed to make tax decisions for incapacitated relatives – A judge has ruled that a family may make tax exempt gifts on behalf of a wealthy relative who has been in a coma for several years. District judge Sarah Ellington ruled in the Court of Protection that millions of pounds of gifts to family, charities and political organisations, which would reduce tax payable on death, were in the best interests of the man. This potentially sets a precedent for carers to cut tax bills after someone has lost the ability to look after their own money, even if they had never previously expressed a wish to do so – and therefore leading to huge implications for inheritance tax. (Source: The Daily Telegraph, 08/08/19)

Warning issued over ‘heir hunter’ firms – Experts have said cases of mistaken identity surrounding family tracing firms or so-called “heir hunters” are common, warning anyone approached by such firms that they are financially liable to pay back the full amounts of any awarded inheritance moneys if someone with a superior claim later becomes known. One case of a Pembrokeshire man called Peter Chinnery, who was formally granted access to the estate of his first cousin four years after she died without leaving a will after being alerted to the legacy by a heir tracing firm. The firm took almost a third of the estate as a fee, before a number of nieces and nephews were subsequently identified, with Mr Chinnery only able to return the £28,000 left over. Hector Birchwood of genealogy firm Celtic Research advised: “It is unfortunate that many people who are contacted by heir tracing companies may not realise that when they are put forward to act as the administrator to an estate, such a position confers a number of legal responsibilities for which they will be held to be personally liable.” (Source: The Daily Telegraph, 29/08/19)

Johnson to cut fuel duty – Boris Johnson is lining up the first cut to fuel duty in nearly a decade in a move designed to “help hard-working hauliers, commuters and parents on the school run.” The plans will allegedly be announced in Chancellor Sajid Javid’s Autumn Budget, with cuts to VAT and stamp duty reforms also mooted. (Source: The Mail on Sunday, 25/08/19)

Britons who left US as children risk having UK bank accounts frozen – Thousands of so-called accidental Americans, who were born in the US but left when only a few months or years old, are being chased by UK banks for an American tax identification number that they never had, the Guardian reports. The 2010 Foreign Account Tax Compliance Act (Fatca) requires foreign financial firms with US operations – including UK banks – to report information about US taxpayers to the Internal Revenue Service via HMRC. Britons born in the US face having their accounts frozen by British banks fearful of large fines if they fail to hand over details to US tax authorities. (Source: The Guardian, 26/08/19)

Hoard of Norman coins is an early example of tax avoidance – Experts from the British Museum have said that the largest hoard of coins ever discovered from the post-Norman Conquest period are an early example of tax avoidance. The hoard of 2,528 coins dating back to the Battle of Hastings, which was found by an amateur during a metal detecting lesson, included rare examples of “mules”, which have the face of one king on the head and another on the tail to allow coin-makers to avoid paying extra tax. It has been reported to be worth up to £5m, though experts have indicated this is likely to be an overestimate once the condition of coins and the sudden flooding of the market they would cause are taken into account. (Source: The Times, 29/08/19)

Businesses

HMRC resists penalising MTD late filers – One in four companies failed to comply with new Making Tax Digital (MTD) filing rules by the deadline of August 7th, the Times reports, but HMRC has said it will show leniency as businesses may be “fully focused” on preparing for a no-deal Brexit. About 490,000 companies with sales above the VAT threshold of £85,000 were supposed to comply with new online filing rules but roughly 120,000 businesses missed the deadline. Richard Wild, head of the tax technical team at the Chartered Institute of Taxation, said that some businesses had faced “significant” difficulty complying. (Source: The Times, 15/08/19)

UK business not chasing up outstanding payment – Research from Lloyds Bank Commercial Banking reveals a third of UK businesses who were paid late in the last year did not chase outstanding payments. Fear of damaging valuable customer relationships was cited by 62% of businesses, while capacity and time constraints were cited by 27%. (Source: Yorkshire Post, 30/08/19)

10k cyber-attacks a day on small firms – The Federation of Small Businesses (FSB) has said that the UK’s small companies are collectively subject to almost 10,000 cyber-attacks a day. In a report, the FSB said that one in five small firms had been the victim of a cyber-attack in the two years to January, with an average of 9,741 incidents reported daily in that period. Phishing attempts are the most frequently reported form of cyber-attack, affecting 530,000 small firms over the past two years. Malware (374,000 firms), fraudulent payment requests (301,000) and ransomware (260,000) incidents were also frequently reported. (Source: The Times, 05/08/19)

Living wage increases impact bottom line – A survey from the Federation of Small Businesses (FSB) reveals that four in 10 SMEs are raising their prices as a result of having to pay higher wages. The FSB said business owners were also forced to pay themselves less, hold back investment and reduce staff hours in an attempt to absorb inflation-beating wage rises. “More than half were paying all staff the current national living wage before they were obliged to do so – an even greater proportion were doing so in the smallest firms,” said Mike Cherry, FSB national chairman. He added: “We’re now seeing more small business owners than ever saying that living wage increases are impacting the bottom line. Their first instinct is usually to take the hit personally, paying themselves less rather than cutting staff.” (Source: The Times, 13/08/19)

Small companies hit by “air-con tax” -The Federation of Small Businesses (FSB) is calling for the Government to change the rules which mean small business pay higher business rates for installing air conditioning, fire alarms or CCTV cameras, as these are counted as “plant and machinery” assets which add value to a property. Mike Cherry, the FSB national chairman, said: “It’s ludicrous that doing something as simple as trying to keep your employees and customers cool with an air conditioning unit can cause your business rates to spiral.” (Source: The Daily Telegraph, 27/08/19)

Construction/property

Stamp duty rethink could be CGT by another name – The Times considers calls for a reform of stamp duty that would see the burden move from buyers to sellers. Critics suggest that such a move would mean those buying a larger, more expensive house would save money while downsizers would face a bill that could be perceived as “capital gains tax by another name”. Elsewhere, City AM considers the subject, suggesting that switching liability for stamp duty would probably see property prices climb as sellers look to cover the cost and buyers without the levy to factor into their budget have more to spend. (Source: The Times, City AM, 23/08/19)

UK mortgage approvals soaring – The number of mortgage approvals in Britain rose to its highest level since early 2017, as buyers took advantage of increasingly competitive rates, according to financial services body UK Finance. Banks approved 43,300 mortgages in July, higher than the 42,800 in June and 10.6% more than in July last year, while re-mortgaging approvals saw a 15% year-on-year rise to 30,200 in July, the fastest increase since May 2018. (Source: Financial Times, 28/08/19)

Buy to let

Landlords face tax hit as they exit the sector – The Telegraph’s Adam Williams says that property investors being driven out of the sector by “punishing tax” reforms are taking a further tax hit as they look to sell their additional properties. He says that some landlords hit by a restriction on relief offered on mortgage interest are facing large capital gains and inheritance tax bills as they pull out of the rental sector. David Smith of the Residential Landlords Association comments: “It is completely illogical to have a tax system which encourages investors to pull their money from the sector but then hits them with a massive tax penalty when they do.” (Source: The Daily Telegraph, 10/08/19)

Holiday homes now a good ‘tax hack’ – With the Government discouraging buy-to-let investments, The Daily Telegraph’s Mike Warburton describes how furnished holiday lets are currently a good investment. Normal business expenses incurred in the running your property attract tax relief, he says, and also costs including insurance, repairs, cleaning, management charges, mortgage interest, utility bills and even travel expenses to and from the property. Take care if you buy several properties because it is possible that the combined income could exceed £85,000, Mr Warburton notes, which would mean that one would need to register for VAT. (Source: The Daily Telegraph, 21/08/19)

Council joins campaign to close tax loophole for second homes – Scarborough Council is pushing the Government to change the rules on second homes, in a joint initiative with authorities in resorts in Devon and Cornwall, the Scilly Isles and the Lake District. Steve Siddons, leader of the council, said the region was missing out on £2.56m a year because second home owners were letting out their properties and using a loophole to pay no council tax at all. He added: “People can let out their house and classify it as a business which means they don’t pay council tax and instead pay business rates. But as they likely have a rateable value below £12,000, they can claim relief on that and pay nothing at all.” (Source: Yorkshire Post, 29/08/19)

Landlords reminded of CGT change – Landlords and property investors are being urged to look into their tax matters ahead of the April 2020 change to Capital Gains Tax (CGT) which will see taxpayers given 30 days to file their return and make an advance payment towards their tax bill, with current rules allowing people to pay CGT on the disposal of a property up to 22 months after the sale. (Source: Yorkshire Post, 17/08/19)

Manufacturing

Survey reveals skills shortage is holding back manufacturing – A Lloyds bank survey of 200 of the UK’s largest manufacturers has revealed that 88% suffer from a skills shortage, of which 49% aid the problem was most acute at the management levels of their organisation. When asked about their own investment decisions, employers were more likely to prioritise creating new products than funding training. Around half of respondents believe further and higher education courses would help, while others called for manufacturing to be included in the national curriculum. It has been suggested that the skills shortage is harming UK productivity. (Source: The Times, 27/08/19)

Only three in 10 exporters ready for no-deal Brexit – Only 27% of the 245,000 businesses HMRC says would need an Economic Operator Registration and Identification number to export to the EU in the event of no-deal Brexit have applied for one. (Source: Financial times, 05/08/19)

Recruitment

Shortages of skilled staff triggering pay rises – New research from the Recruitment and Employment Confederation has found that workers are in high demand and are taking home a bigger chunk of the economy’s earnings than thought – about 10% more hours of work than a decade ago. Official data showed regular pay in June was up 3.6% on the year – the fastest rise in 11 years. The REC research suggested that this could continue to rise as employers have to pay more to attract staff. The IT and computing industry has the most vacancies for permanent jobs, followed by hotels and catering, engineering, and the accounting and financial sector. (Source: The Daily Telegraph, 08/08/19)

UK’s largest firms spend £2bn on ‘key management personnel’ – A report from the High Pay Centre think-tank and the Chartered Institute of Personnel and Development shows that FTSE 100 businesses spent £2bn on pay for 1,394 individuals described as “key management personnel” last year. The figures show that the median pay for CEOs fell 13% to £3.46m as chief executives shared a pot of £465.4m, meaning a pay ratio between FTSE 100 CEOs and their employees of 114:1. The report also highlights the gender gap across large firms, with only six female bosses across FTSE 100 companies in 2018, down from seven in 2017. The analysis also looked at FTSE 250 companies, noting that pay averaged £1.58m in 2016 and 2018, climbing 2% to £1.61m in 2017. (Source: Financial Times, 21/08/19)

Technology

Taxman targets crypto for CGT – Bitcoin investors could be set to see a tax crackdown, with HMRC writing to a number of major brokers to request details about their customers. The Telegraph says that while profit made on the coins’ increase in value since purchase should incur capital gains tax (CGT), their anonymous nature makes it hard for any tax liabilities to be tracked. It adds that the letters sent to exchanges such a Coinbase and Etoro are similar to measures taken by US tax authorities looking to tax gains made through the acquisition of digital coins. Iqbal Gandham, UK managing director of Etoro, said the request was “no surprise”, with taxing crypto “the first step to bringing it in line with other investments, solidifying its position as an emerging asset class.” He added that he expects regulation will follow, saying this would be good for “the industry and for mass adoption.” (Source: The Daily Telegraph, 07/08/19)

Tax threat contributes to tech deal slowdown – A slowdown in technology mergers and acquisitions across Europe has been blamed on the threat of digital taxes and increased regulatory scrutiny. Data released by PitchBook shows Europe is on track for its quietest year since 2009 with IT M&A slipping 18% to a five-year-low of 655 in the first six months of 2019. In the UK, deal numbers hit historic lows, slipping 37% across all sectors with just €18.6bn worth of deals taking place compared with €50bn the year before. A wait and see approach related to Brexit is also dampening activity in the UK. (Source: The Daily Telegraph, 28/08/19)

Trump and Macron strike accord on digital tax plans – Emmanuel Macron agreed with Donald Trump at the G7 summit that tech companies subject to the French digital tax will be able to deduct the amount they pay once a new international deal on how to tax internet companies is decided later next year. The US President had threatened to slap a tariff on French wines in retaliation for the tax on tech groups. (Source: City AM, 27/08/19)

Hospitality

Industry voices fears of rates reform delay – A total of 10 trade bodies have written to the Treasury Select Committee to express concern that the recent ministerial reshuffle has risked delaying urgent business rates reform. The industry groups, including the British Retail Consortium, have urged the MPs to publish the results of their business rates inquiry before the autumn Budget, with the committee having started its investigation in February. Four out of 12 committee members have left in the past month. (Source: The Times, 27/08/19)

Meanwhile, over 100,000 SMEs appeal rates rise – More than 100,000 small businesses in England have appealed against their business rates since a revaluation two years ago, according to figures from the Valuation Office Agency. The revaluation in 2017 led to thousands of businesses being hit by a hike of more than 50%, especially in the south, where property values have soared since the previous valuation in 2010. (Source: The Sunday Times, 25/08/19)

Deliveroo to challenge tech tax – Deliveroo is preparing for a campaign against Britain’s forthcoming digital services tax, hiring a number of political specialists and appointing Giles Derrington from lobby group techUK as the head of its public affairs operations across the UK and Ireland. The takeaway app firm is one of the British businesses considered to be most at risk of the planned digital services tax in the long term. The new levy will see a 2% tax on the fees delivery companies charge. Deliveroo currently loses money and so is exempt, with firms having to have total revenues of more than £500m and make profits to be liable. (Source: The Sunday Telegraph, 18/08/19)

Prices driven lower in August – Prices in Britain’s shops fell by 0.4% in August driven by a 1.5% decline in prices for clothes, consumer goods and other non-food items. The BRC blamed the slowdown on weak consumer spending and a rise in discounting among retailers. (Source: The Times, 28/08/19)

Economy boosted by staycation rise – The economy is set to see a £2.1bn boost from staycations over the Bank Holiday weekend, with 8.6m Brits having booked UK-based getaways – the highest number since 2012. A survey by VisitBritain shows that the number of Britons opting for trips within the UK for the weekend far exceeds the 6.9m who did so in 2017 and the 7.3m who chose a UK holiday last year. Tourism Minister Rebecca Pow said: “Tourism makes a massive contribution to the UK economy,” with figures showing it is worth £127bn. (Source: Daily Express, 24/08/19)

Ailing high streets to get £1bn boost to revitalise town centres – The Prime Minister has unveiled an expansion of the Future High Streets Fund, an initiative designed to boost town centres and level up regional economies. (Source: Financial Times, 26/08/19)

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