Boris pulls back on tax plan
Boris Johnson has backed away from contentious plans for tax cuts for the rich. Speaking in his first TV debate of the Conservative leadership campaign, the former Foreign Secretary said a proposal to raise the thresholds for the top rate of income tax was an “ambition” which was open to “debate”. Mr Johnson also said it was “very sensible to have an ambition to raise the threshold for the highest rate of tax for middle income earners”. Commenting on plans for tax, Foreign Secretary Jeremy Hunt said: “People say we are the party of the rich. We must never fall into the trap of doing tax cuts for the rich.” The discussion also saw Rory Stewart comment on promises made by leadership rivals, describing them as “the thing that slightly depresses me in this debate.” He offered: “I’m going to be very straight with people. I don’t think this is the time to be cutting taxes – I would be spending the money not on tax cuts but on investing in our public services.”
Source: The Times (19/06/2019) Financial Times (19/06/2019) The Guardian (19/06/2019)
Labour’s shock lifetime gifts tax plan
According to the Times, Labour is considering a “lifetime gifts tax” which would reduce the inheritance tax allowance to £125,000. The Labour-commissioned Land for the Many report claimed the move would raise £9.2bn more than the present system. But the party was accused of planning a massive tax raid on middle-class parents who help their children get on the housing ladder. Paul Scully, vice chairman of the Conservative Party, said: “This is yet another Labour tax raid in Corbyn’s war on homeowners.” Former Cabinet minister Priti Patel added: “Corbyn’s Labour have no respect for the millions of people across the country who work hard to provide economic security for themselves and their families. Labour’s disregard of people, their rights and freedoms is exactly why socialism never works and it will never work in Britain.”
Source: The Times (17/06/2019)
Think tank calls for corporation tax cuts for those who boost wages
The cross-party think tank the Social Market Foundation (SMF) is to call on Conservative Party leadership hopefuls to go further than the corporation tax cuts so far proposed and only offer corporate tax cuts to firms that increase pay or training for young and low-paid staff. A report from the SMF cites a Japanese programme which saw companies raising wages by 3% or more paying corporation tax at 20% rather than 30%. The SMF said other options could include reducing business rates for firms promising to pay staff the living wage or more – £10.55 an hour in London or £9 elsewhere in the UK – or offering employers additional tax reliefs when they train low-paid staff.
Source: The Daily Telegraph (17/06/2019)
Complacency and under-claiming on R&D tax credits ‘stifling innovation’
Financial Director features a report on how 70% of UK firms are significantly under-claiming R&D tax credit claims each year. It is noted that the commitment and approach of the businesses’ advisors must be questioned, considering that the UK government plans to increase the rate of UK R&D investment to 2.4% of GDP, a rise from the current rate of 1.6%. It is suggested that one reason why the majority of generic firms take a risk-averse approach, minimising claims and choosing to avoid HMRC questions where possible, is that the process of claiming R&D tax credits is complex, and that a “lack of confidence or the latest knowledge results in a risk averse culture leading to endemic under-claiming.”
Source: Financial Director (14/06/2019)
SMEs remain confused about MTD
A survey has found that 11% of SMEs are unaware of new rules on keeping digital tax records. More than one million firms with an annual taxable income of in excess of £85,000 are now legally required to submit VAT returns online. But nearly half of those polled who thought they were compliant were found not to be. HMRC has said it will take a “light touch” approach to penalties in the first year of implementation. However, this is only where businesses are doing their best to comply. Chris Evans, VP and country manager at Intuit QuickBooks UK, advises businesses to read up on Making Tax Digital or try QuickBooks’ free MTD Checker tool.
Source: The Independent (18/06/2019)
Equity investment in small businesses hits record high
The British Business Bank’s annual Small Business Equity Tracker report showed a record £6.7bn in equity investment went to small businesses in 2018 – a 5% increase on the year before and the highest amount recorded. Although London still dominates, the value of equity finance investment outside the capital increased by 29%, and now stands at £2.8bn. The East of England, North East and West Midlands are the three regions driving this increase. Keith Morgan, chief executive of the British Business Bank, commented: “This is a clear sign of investor confidence in British smaller businesses and their potential for growth.” The tech sector won the most investment, increasing by 24% last year – the highest amount to date.
Source: Financial Times (14/06/2019) Daily Express (14/06/2019)
Business investment expected to contract
The British Chambers of Commerce (BCC) has forecast 1.3% growth for the UK economy in 2019, up marginally from the 1.2% it predicted earlier, due to what it described as “exceptionally rapid stock-building early in the year”. However, the BCC has downgraded its growth forecast for 2020 to 1% from 1.3% and to 1.2% from 1.4% in 2021 as the unwinding of historically-high inventory levels coupled with weaker business investment weigh on economic activity. “The continued Brexit impasse, including the growing possibility of a no-deal exit, together with the high upfront cost of doing business in the UK and the running down of excess stock, is expected to suffocate investment activity over the near term,” the business group warned.
Source: City AM (17/06/2019)
Stockpiling hampering growth
New research from Lloyds Banking Group has revealed that British businesses have close to £600bn tied up in excess working capital, potentially stifling growth and leaving them exposed to economic uncertainty. Lloyds blamed increased inventories on political and economic uncertainty, with stockpiling at larger UK firms rising by a third in three years. Ed Thurman, Lloyds’ managing director of global transaction banking, said stockpiling “can be risky as cash invested in inventory is rarely easy to release, meaning firms are less able to invest in growth or respond to unexpected changes in demand”.
Source: The Independent (18/06/2019)