Investors hand over £9.5bn in CGT
Investors paid a record £9.5bn in capital gains duties in the 2018/19 tax year. This marked a 6% year-on-year increase, with HMRC’s CGT take climbing two thirds over the past five years as stock markets rose and property values increased. Analysis shows that CGT revenue came from duties levied against almost £63bn of profit made by 276,000 taxpayers – 4% fewer than in 2017/18. The Telegraph’s Harry Brennan notes that the Treasury’s record CGT intake comes as Chancellor Rishi Sunak reviews the levy, with it suggested the tax could be reformed in a bid to balance the nation’s books to help cover its coronavirus bill. Sarah Coles of Hargreaves Lansdown believes CGT is the “ideal candidate for a tax grab”, while Laura Suter of AJ Bell says the level of gains versus the actual tax take after all allowances and reliefs are taken into account is “an area that may pique the Government’s interest”. Ms Suter notes that while there were £63bn of total gains made by individuals in 2018/19, only £9.5bn of tax was taken, representing an average tax rate of 15%.
Source: The Daily Telegraph (15/08/2020) The Times (15/08/2020)
HMRC boosts plea bargain revenue
HMRC has increased its revenue by 25% by agreeing out-of-court settlements with wealthy taxpayers, with the additional tax collected through bargain agreements hitting £119.4m in the 12 months to the end of March, up from £95.8m in the same period the year before. Plea bargain agreements see HMRC contact a taxpayer with the offer of a settlement when it suspects them of tax evasion, while a taxpayer who wants to come clean can apply to HMRC for a plea bargain through its contractual disclosure facility. Law firm Pinsent Masons, which collected the data, said such agreements have been popular with taxpayers as a way of “coming in from the cold” and avoiding much tougher sanctions from HMRC or the courts.
Source: The Times (15/08/2020)
Pension savers overcharged £627m in tax
Data from HMRC show that pension savers have been overcharged £627m in tax since pension freedoms commenced in 2015. The figures show that in Q2 pension savers were owed an average of £3,500. The analysis suggests that many savers overpay tax the first time they withdraw from their pension due to HMRC calculations which are conducted on a Month 1 Basis, which charges savers as though a lump sum withdrawal is the first of monthly withdrawals. Issues can also arise if a pension provider is unaware of a person’s tax code or details of any other income they have, with some defaulting to an emergency tax code, which is set at a higher rate.
Source: Sunday Express (16/08/2020)
Looking into exit taxes
A proposed new law in the Netherlands would see multinationals leaving the country charged an exit tax. With legal opinion sought on whether the plan is compatible with Dutch and EU tax law, the FT says political parties in the Netherlands have indicated that they would back the levy if it is ruled lawful. Matthew Lynn in the Telegraph says exit taxes are proving increasingly popular and may become more common as governments seek ways to balance the books to cover the economic blow dealt by the coronavirus crisis. Mr Lynn argues that while it is “possible to understand the superficial attractions of an exit tax”, they are likely to damage countries that impose them. He says they are “almost certainly” illegal under European law, are essentially a retrospective tax and may deter businesses and entrepreneurs, suggesting firms may opt against operating in a jurisdiction they are not free to step away from without being charged.
Source: The Daily Telegraph (18/08/2020) Financial Times (18/08/2020)
Small businesses face £22k reopening bill
A report from Nucleus Commercial Finance suggests small business owners are spending an average of almost £22,000 to reopen following the coronavirus lockdown, with implementing new health and safety measures and reconfiguring office space the biggest costs. For medium-sized firms, investing in new technology and introducing contactless payment systems were the biggest issues. The study found that a fifth of SMEs have used savings to cover the costs of coming out of the economic shutdown. Chirag Shah, CEO of Nucleus Commercial Finance, said: “Those businesses that are able to reopen in some capacity now face significant costs to ensure they can operate safely.”
Source: Daily Express (17/08/2020) The Sun (17/08/2020)
SMEs optimistic over recovery
Research from digital bank Starling and the Great British Entrepreneur Awards shows that 80% of UK SMEs are confident they will recover from the coronavirus crisis. Optimism has increased among business leaders, with 75% of SME owners polled saying they feel more confident than they did a month ago. Some 68% believe they will return to pre-crisis levels or better by 2021. On the financial hit from the pandemic, it was found that 63% of SMEs have seen a decline in revenue, with 19% making no profit at all during lockdown. Just over a fifth of firms are not confident they can pay their bills each month, while 30% of bosses have used their own money to keep the business afloat. One in five of the 314 small business leaders polled have considered closing as a result of the pandemic.
Source: Accountancy Daily (18/08/2020)
Firms missing out on support grants
Analysis from the British Independent Retailers Association (Bira) shows that small businesses are missing out on millions of pounds of financial support, with £1.5bn of the £12bn allocated for emergency grants to cover coronavirus-related disruption still unclaimed from local authorities. Bira chief executive Andrew Goodacre says some firms may not realise they are eligible, while others may not have been contacted as their local council has outdated information. He has urged firms that have yet to make a claim to “step forward or risk losing out.”
Source: The Mail on Sunday (16/08/2020)
UK suffers deepest recession on record
The UK economy shrunk by a fifth and fell into its deepest recession on record in the second quarter. Official data released last week confirmed a 20.4% fall in GDP quarter on quarter, a decline double that of the US. The contraction followed a 2.2% dip in the first quarter, sending the country into a technical recession. In Germany, GDP fell 11.9% in the first half, Italy shrank 12.4%, France 13.8% while Spain suffered the worst second-quarter slump of any leading economy of 18.5%.
Source: Financial Times (13/08/2020) The Daily Telegraph (13/08/2020) The Times (13/08/2020) The I (13/08/2020) The Guardian (13/08/2020)
Household finances weaken
Household finances fell in August, with rising levels of unemployment hitting average incomes and driving a cutback in spending. The IHS Markit UK household finance index was down following steady increases through May, June and July, dipping from 41.5 in July to 40.8 in August on a scale where a figure above 50 indicates an improvement in household finances. IHS economist Lewis Cooper said the findings point to the “continued strain” on family finances brought about by the coronavirus pandemic. He warned that the report also “hints at some worrying trends when put in the context of the significant recession facing the UK.”
Source: The Guardian (18/08/2020) Daily Mail (18/08/2020)
BoE economist sees signs of rapid recovery
Britain’s economy is on course for a rapid recovery from the coronavirus crisis, Bank of England chief economist Andy Haldane has predicted. Noting that strong consumer spending has already helped claw back as much as half of the losses seen in the wake of the pandemic, Mr Haldane says the economy is expected to expand by more than a fifth in the second half of the year. This, he adds, would be “by far the fastest rise” since quarterly records began. Saying that economic activity is rising “sooner than anyone expected”, he insists that the “foundations for an economic recovery – a rapid one – are already in place, hiding in plain sight.”
Source: The Mail on Sunday (16/08/2020)