FRC sets out company reporting expectations
The Financial Reporting Council (FRC) has published its annual end of year letter to CEOs, CFOs and Audit Committee Chairs setting out its reporting expectations for preparers of reports and accounts for the year ahead. The FRC said this year’s letter is of particular significance given the continuing backdrop of economic uncertainty and the impact of COVID-19 on the scope and timing of company reporting, while companies are also dealing with commercial and operational change associated with the UK’s exit from the EU. The letter covers what disclosures should be made to understand the impact of particular events on the company’s position and financial performance, as well as any judgements involving significant estimation uncertainty. The FRC expects increased disclosure of relevant sensitivities or ranges of possible outcomes to help users understand the assumptions underlying those estimates and the extent of the changes that might be reasonably possible in the next twelve months. The regulator also outlines its expectations of companies’ climate disclosures including the impact of climate change on their activities, their own environmental impact as well as explanations of how directors are discharging their section 172 duties.
Think tank demands steep tax rises
The Resolution Foundation has proposed the most stark increase in taxes since 1993 as a means to balance public finances. The think tank says a new health and social care levy, placing a 4% tax on all incomes above £12,500 coupled with cuts to national insurance, would generate a total of £17bn, of which £6bn should address social care funding shortfalls. Employees earning less than £19,500 and self-employed workers with income of less than £17,000 would be better off but the majority of the workforce would face tax hikes. Thresholds would be frozen, corporation tax would rise to 22% and CGT and inheritance tax reliefs would be cut. The Foundation suggested waiting until 2023 before raising taxes. But Syed Kamall, research director at the Institute of Economic Affairs, said: “The Treasury should be turning its attention to ensuring the economy can bounce back from coronavirus by considering a radical package of measures to reduce the tax and regulatory burden on businesses to allow them to sustain existing jobs and create new ones.”
HMRC warns firms over shifting profit
HMRC has issued warning letters to multinational companies, saying those shifting profits to other jurisdictions to cut their British tax bill must review their operations and change incorrect practices. The letters, which mark the return of a clampdown that had been paused because of the coronavirus pandemic, say that investigations often find that “profits do not reflect the value created in the UK”, with tax investigators seeing “indications of careless or deliberate behaviour requiring penalties to be considered”. Firms have been given 90 days to review their operations and submit any relevant information to HMRC. The Revenue estimates that 2,000 large businesses with operations in the UK may owe a total of £34.8bn in taxes for 2019/20 financial year, up from £29.9bn in 2018/19.
Source: The Times (17/11/2020)
Think-tank warns Chancellor over CGT increase
The Centre for Policy Studies has urged the Treasury to ignore proposals that call for an increase in capital gains tax. The think-tank issued the warning to Chancellor Rishi Sunak after the Office for Tax Simplification suggested that doubling rates and reducing exemptions could raise around £14bn. Centre for Policy Studies tax expert Tom Clougherty has questioned the proposals, saying: “Fully aligning CGT with income tax would be a big mistake.” He added: “Doubling the tax paid on capital gains would deter investment, punish saving, and leave us with a very uncompetitive system internationally.” Mr Clougherty said minsters should look to simplify the tax system but added that the Government “needs to make sure it also supports entrepreneurs, savers, and economic growth.”
Source: Sunday Express (15/11/2020)
Taxing of private equity needs a rethink
The FT looks at tax and private equity, saying reform of capital gains tax proposed in a government-commissioned review could help address concerns centred on taxation of the industry. The paper’s Jonathan Ford says that with buyout groups’ executives paying a lower rate of CGT, it is “fiscal perk” that has helped create many billionaires in the private equity sphere.
Record number of firms see BBI investment
The annual report of British Business Investments (BBI), the consumer arm of the government-backed British Business Bank, reveals an additional 15 commitments of £547m in the year to 31 March 2020. The BBI has supported over 37,000 SMEs this year, representing an increase of almost 9% year-on-year, with investments including a £15m commitment to Assetz Capital, a Manchester-headquartered property-focused marketplace lender. BBI chair Francis Small commented: “Excluding the exceptional impact of COVID-19 on our financial return, British Business Investments has once again delivered on its overall objectives. The COVID-19 pandemic has had a devastating impact on many of the UK’s small and medium-sized businesses. We have worked closely with our delivery partners and have increased our commitments to them, as they have continued to provide essential finance to the UK’s SMEs.”
Source: City AM (12/11/2020)
Firms hit by U-turn on job retention bonus
Businesses have warned that Chancellor Rishi Sunak’s decision to scrap a bonus scheme for firms that retain formerly furloughed workers has hit budgets, with the money having been factored into cashflow forecasts. Mr Sunak replaced the Job Retention Bonus – which pledged £1,000 for every worker kept on the payroll by the end of January – with an extension to the furlough scheme when England’s second national lockdown was announced. Craig Beaumont, external affairs chief at the Federation of Small Businesses, said: “Small businesses that have got lots of revenue issues were looking forward to a bit of guaranteed income in January.” He added: “That one little bit of light at the end of the tunnel has gone.”
Source: The Sunday Times (15/11/2020)
Economy grows by record 15.5%
Official data shows that the UK economy grew at a record pace in the third quarter of the year. The country’s emergence from the first lockdown saw GDP rise by 15.5% between July and September. However, growth was weaker in September than in the preceding months, while the country’s economy is still 8.2% smaller than before the virus struck. Despite the rebound in July to September, analysts warned that the economy was likely to shrink again in the final three months of the year because of the impact of renewed lockdowns in different parts of the country.
Source: Financial Times (13/11/2020) The Guardian (13/11/2020) Daily Mail (13/11/2020) Daily Mirror (13/11/2020)
Bailey: Pandemic is changing the economy
Andrew Bailey, governor of the Bank of England (BoE), says positive results from trials of coronavirus vaccines could trigger a surge in investment by removing some of the uncertainty that has held back spending. Development of successful vaccines, he added, would be a “a big step forward” for the economy. Mr Bailey told a TheCityUK conference that while nobody was sure how permanent any economic changes would be, his “best guess” was that there will be “lasting changes”. Elsewhere, BoE deputy governor Dave Ramsden has warned of the economic impact of the crisis, saying as much as £490bn would be lost to the economy over the next three years.
Source: The Guardian (18/11/2020) The (18/11/2020) Financial Times (18/11/2020) City AM (18/11/2020)