Wealthy pay less tax than official rates
Analysis of HMRC records shows a number of the UK’s richest individuals pay less tax on earnings than official headline rates, with the discrepancies amounting to £20bn in lost tax revenue. The study shows that those receiving £10m a year paid an effective average tax of just 21%, while one in ten people taking home more than £1m paid a lower rate than a worker on £15,000. Researchers at the University of Warwick and the London School of Economics say the Government could introduce a version of the US “alternative minimum tax” to stop the rich gaming Britain’s overly complex system. Andy Summers, assistant professor of law at the LSE, and Arun Advani, an assistant professor of economics at Warwick, propose a 35% effective tax rate for people earning more than £100,000 on all income, whether it is taken from wages, dividends or capital gains. Currently, someone earning £100,000 has an effective average rat e of 35%, those on £150,000 see a 40% rate, someone on £500,000 pays 45% and those on more than £2m are subject to a 47% rate.
Source: The Times (15/06/2020) Financial Times (15/06/2020)
IHT refund claims climb
Analysis by insurer NFU Mutual shows that the number of people reclaiming inheritance tax (IHT) due to falling share prices has more than doubled in the past two years. The study shows 1,851 families reclaimed overpaid IHT after falling share values in 2019/20, more than twice the 858 who made such claims in 2017/18. Sean McCann, a chartered financial planner at NFU Mutual, said: “These figures show that more people are becoming aware they can reclaim overpaid IHT. After recent falls in the stock market it’s likely that many more bereaved families will be able to benefit.” He added: “IHT can also be reclaimed when houses are sold at a lower value within four years of the death. If coronavirus affects house prices, it’s important families are aware of this. ”
Source: The Sunday Times (14/06/2020)
SEISS claimants ‘could face significant tax bills’
Self-employed grant claimants may have to consider income tax bills for Self-Employment Income Support Scheme (SEISS) payments, with the government currently working on draft legislation which could see new rules on taxing coronavirus business support grants introduced. Victoria Todd, head of the Low Incomes Tax Reform Group (LITRG), remarked: “Many claimants of SEISS grants might, understandably, use the money as soon as they get it, for example, to catch up on liabilities or to meet essential living costs – but they need to think now about budgeting for income tax and National Insurance on it.” She went on: “We urge HMRC to do as much as they can to publicise that the grants are chargeable to income tax and National Insurance, to reduce the risk of people being surprised by higher-than-expected 2020/21 tax bills.”
Source: Daily Express (12/06/2020)
Small firms concerned over recovery
A poll commissioned by Visa shows that more than half of small business owners fear their firm may not recover from the COVID-19 crisis and lockdown. While 56% said they may not be able to bounce back and a third foresee a sustained reduction in customer numbers, 39% have adapted their business models to continue trading. The poll, of 2,000 consumers and 500 small business owners, found that while consumers have been utilising online services in the lockdown, 31% of enterprises with fewer than 50 staff still do not sell goods or services online.
Source: The Times (16/06/2020) City AM (16/06/2020)
Think-tank suggests share plan to support SMEs
A report for the Social Market Foundation by MP Bim Afolami suggests that the Government should invest £15bn in SMEs in exchange for shares that would one day be sold to the public. The Unlocking Britain report proposes that the Recovery Fund would be floated on the London Stock Exchange. Mr Afolami, who is expected to raise the idea in Parliament today, says the £15bn could be borrowed and invested via the Government’s British Business Bank.
Source: The Daily Telegraph (16/06/2020) The Times (16/06/2020)
Government gives tech start-ups support to expand overseas
The Department for International Trade and the Department for Digital, Culture, Media and Sport have announced new measures to help UK tech start-ups expand overseas. The scheme includes a trade network to help small businesses break into the Asian market and a tech exporting academy to advise firms on issues around expansion.
Source: The Independent (11/06/2020)
SMEs go digital
A study by Hitachi Capital Business Finance shows that almost 80% of SMEs have had to move parts of their business online to stay operational amid the coronavirus pandemic. The report also reveals that more than two-thirds of SMEs that described themselves as offline businesses prior to the pandemic now have an online presence, with payroll and invoicing among functions taken online.
Source: Sunday Express (14/06/2020)
UK businesses seek swift return to work
Analysis from Growth Intelligence shows that around a quarter of UK SMEs halted trading amid the lockdown, with more than a third of these having already reopened.
Source: Financial Times (14/06/2020)
GDP falls by record 20.4%
Figures from the Office for National Statistics (ONS) show that the economy shrank at its fastest pace on record in April, with GDP declining by 20.4%. This follows a 5.8% fall in March and 0.2% dip in February, with GDP down 10.4% over the three-month period. The analysis shows that the economy was 25% smaller in April than in February. All large sectors have been hit by the lockdown rolled out amid the coronavirus crisis, with car manufacturing falling 90.3%, the hospitality sector down 88.1% and private housebuilding dropping 59.1%. Prime Minister Boris Johnson said the while the economy would see “big, big economic knock-on effects” from COVID-19, Britain can “bounce back” from the crisis. He said: “We’re going to work slowly to get the economy back on its feet.” Bank of England governor Andrew Bailey said the ONS figures were “not surprising” and “pretty much in line” with what the Bank expected.