Private equity says tax rise would drive industry out of UK
The British Private Equity & Venture Capital Association is lobbying the Government not to increase taxes on carried interest – whereby a private equity executive’s share of profits is a carried interest in their fund rather than performance-related pay. This typically enables them to pay capital gains tax at up to 28% rather than income tax at up to 45%. Arun Advani, an academic at the University of Warwick, said: “Private equity is the only part of the UK’s financial industry that gets access to these lower tax rates for individuals. So it would make sense for a government committed to supporting everyone in the financial sector to tax it at the same rate as income.” The Telegraph notes that Nat Rothschild tweeted that it was “indefensible” that carried interest is taxed at a lower rate than traditional stock option awards given to executives at UK companies. “It is another reason why the pool of listed companies is shrinking” he added.
Tens of thousands of potential fraud cases relating to furlough scheme
Some 27,000 potential cases of fraud connected to the Government’s furlough scheme are to be investigated by HMRC, Downing Street has said. The news follows the disclosure on Monday by the head of HMRC, Jim Harra, that the department predicts a loss of £3.5bn resulting from people fraudulently claiming payments under the initiative. A Government spokesman said: “Where genuine mistakes have happened, HMRC will work with employers to correct claims, but if any claim is suspected of fraud or is based on dishonest and inaccurate information payments may be withheld or need to be repaid. HMRC won’t hesitate to take criminal action in the most serious cases.”
Source: The Daily Telegraph (09/09/2020) City AM (09/09/2020) The Times (09/09/2020) Daily Express (09/09/2020)
Bootle: Hiking taxes would prove deeply damaging
Roger Bootle issues a warning against tax rises in the Telegraph, stating that higher taxes would “blunt incentives” and damage economic performance. He says foreign aid is one area of spending that deserves to be trimmed. This should be done in combination with confidence-bolstering measures for the post-Brexit economy. Higher personal and corporate taxes would work against this and “risk an exodus of both talented people and successful businesses.” As for government debt, fears over a rise in interest rates could be ameliorated by the use of perpetual bonds – putting off refinancing state debt for decades or more. Elsewhere, the Mirror cites Doug McWilliams, of the Centre for Economics and Business Research, who agrees with Bootle’s position on debt, saying that running it down over 50 years “seems sensible.”
Source: The Daily Telegraph (07/09/2020) Daily Mirror (07/09/2020)
Higginson tells Chancellor to hit avoiders with windfall tax
Andrew Higginson, chairman of Morrisons, has said companies that shift profits offshore to minimise their corporation tax bills should be hit with a windfall tax to help pay for the COVID-19 crisis. Instead of raising taxes for workers and companies that pay their taxes, multinationals using complex structures to funnel profits overseas should be targeted instead, Mr Higginson wrote in a note for clients of the stockbroker Shore Capital, where he acts as a senior adviser. “The easy cry is to raise taxes on those that already pay. The better choice is to target those who don’t. Windfall taxes should be the Government’s weapon of choice,” Mr Higginson added.
Source: The Times (09/092020)
Investors act on tax shift fears
Harry Brennan in the Telegraph says wealthy individuals are selling off investment portfolios and second homes in fear of tax increases the Chancellor is said to be lining up for his autumn Budget, while others are pumping cash into pensions to take advantage of tax breaks and low rates before changes come into force.
Source: The Daily Telegraph (07/09/2020)
Lloyds forced Bounce Back Loan users to open business accounts
The Competition and Markets Authority has criticised Lloyds Bank for forcing 30,000 small company owners to open fee-paying business accounts to get Bounce Back Loans from the Government’s support scheme. The customers were mostly sole traders running their businesses from their current account. Lloyds said it had no processes in place to lend to businesses through personal accounts and so asked them to open a business account. The bank alerted the CMA and has now agreed to a series of remedies to ensure that customers are not impacted.
FSB calls for ‘transition vouchers’ for small firms
The Federation of Small Businesses has urged the Government to support small businesses, already dealing with the coronavirus pandemic, as they prepare for the end of the Brexit transition period. The FSB has called for “transition vouchers” to be provided to small firms, to help them pay for the “expertise, tech and training” that will ease their “move to a new relationship with the EU.” National chairman Mike Cherry said while the end of the transition period is approaching, “the small firms that make up 99% of our business community still have no clear sense of what they’ll be transitioning to.”
Source: The Times (05/09/2020) The Daily Telegraph (05/09/2020)
Half of SMEs’ and freelancers’ invoices paid late
According to new research by accounting software firm FreeAgent, just 54% of almost 2m invoices sent by its freelance and SME customers between January 2019 and June 2020 were paid on time, highlighting the persistent issue of late payments. The firm’s findings also highlighted the impact of COVID-19, with the number of invoices sent by freelancers and SMEs falling by 33% during the lockdown. FreeAgent’s CEO Ed Molyneux has called for new legislation and stiffer penalties for late-paying firms, with the problem remaining one of the most widespread and damaging concerns facing small firms.
Source: Business Money (04/09/2020)
British Business Bank seeks funding boost to drive UK recovery
Keith Morgan, the outgoing CEO of the British Business Bank, has said the bank should play an “essential role” in supporting small business growth as the country rebuilds after the coronavirus crisis.
Source: Financial Times (09/09/2020)
BoE policymaker: Further QE may be needed to hit inflation target
Senior Bank of England (BoE) policymaker Michael Saunders has warned an economic recovery could stall, pushing the Bank to increase quantitative easing measures. Mr Saunders, who votes on interest rates as a member of the Bank’s Monetary Policy Committee, voiced concern that the end of the furlough scheme will drive an increase in unemployment, while the initial boost from lockdown measures being eased could subside. While the economic rebound has recently exceeded BoE expectations, Mr Saunders said: “I would be cautious about extrapolating much from this apparent outperformance.” He also said he suspects that government support measures – such as the job retention scheme, tax payment deferrals, and mortgage holidays – “turned out to be more powerful than expected in supporting household incomes and spending.” Mr Saunders thinks it is “quite likely” that additional monetary easing will be required for inflation to see a “sustained return” to the 2% target.
Haldane warns against furlough scheme extension
Andy Haldane, the Bank of England’s chief economist has warned the Government against extending the furlough scheme, arguing that it would interrupt the “necessary process of adjustment” that was already underway. Rejecting concerns about a spike in redundancies, Mr Haldane said it was the central bank and Government’s job to support the transition to new ways of working. In a City AM podcast, he said the pandemic has caused “lasting structural damage” to the economy and that “regrettably, some business will not make it through”. His comments come as figures from the Insolvency Service show that employers filed plans in June and July to make more than 300,000 job cuts. This would be in addition to the 730,000 employees already made redundant during the pandemic and the 300,000 self-employed people unable to find work.
Source: The Guardian (09/092020) City AM (09/092020) Daily Mail (09/092020)
UK consumer spending exceeds last year’s level
Data from Barclaycard shows that consumer spending grew 0.2% in August, compared with the same month last year, up from a 2.6% contraction in July and the first expansion since February. Meanwhile, the British Retail Consortium’s retail sales monitor reported retail sales rising at an annual rate of 3.9% in August.